Net misadventure leads to loss of $11.7 million for Prime Retail

Company discontinued plans for


May 17, 2000|By Rona Kobell | Rona Kobell,SUN STAFF

Prime Retail Inc., the beleaguered, Baltimore-based outlet mall owner, lost $11.7 million in the first quarter of this year, up from a $9.3 million loss in the first quarter of 1999.

The company, which released its earnings report Monday, attributed its numbers to a nonrecurring $13 million loss incurred by discontinuing its wholly owned e-commerce subsidiary,

Prime abandoned plans to launch eOutlets when it could not find outside investors for the project.

Prime's funds from operations also dropped in this year's first quarter to $19 million, down 34 percent from $28 million for the first quarter a year earlier. Funds from operations are a key measure of performance for real estate companies.

Prime had other bad news to report: Outlet-center occupancy decreased 5 percent to 90 percent in the first quarter.

David M. Fick, managing director of Legg Mason Wood Walker, called Prime's situation "a capital crisis." Decreasing occupancy is a problem that will worsen, Fick predicted. He has identified 20 outlets where, he said, the company faces "serious long-term viability."

Fick, an analyst who follows Prime Retail for Legg Mason, had been critical of Prime's foray into e-commerce, particularly because some tenants said they would not participate in the online venture. He said the company lost about $16.5 million in exploring the venture.

Prime also reported that it is not in compliance with financial covenants in three of its credit facilities. Fick said that, unless the company gets waivers from its lenders, it will continue to flirt with bankruptcy.

The company also needs to turn around the tenants' perception of too many vacancies, Fick said."A lot of the tenants feel like there's nobody there," he said.

The dismal earnings were expected, Fick said, because of Prime's continuing problems. There was, though, a silver lining: Same-space sales increased 5 percent over the first quarter of 1999.

Shares of Prime Retail lost 6.25 cents yesterday to close at $1.8125.

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