Prime Retail is iffy on future

Cash shortage woes must be solved, says outlet center owner

November 16, 2001|By Meredith Cohn | Meredith Cohn,SUN STAFF

Outlet center owner Prime Retail Inc. said yesterday that the future of the company is uncertain unless the company can solve its severe cash shortage.

Robert A. Brvenik, the real estate investment trust's chief financial officer, said Prime Retail did not have enough money to pay its debt, and repeated a line from the company's third-quarter earnings report that said if cash cannot be raised then "there would be substantial risk as to whether the company would be able to continue during 2002 as a going concern."

One option is bankruptcy, Brvenik said. To avoid that, he said, the company will cut expenses, sell or refinance centers and restructure some debt.

"Management has a business plan for the next year, and there are three main components to make that work," he said. "If we're successful, we'll close the gap. If we aren't we'll have some issues."

The company has undertaken cost-saving measures including layoffs and office space reductions. Prime Retail also does not plan to pay distributions this year.

Spokesman Steven A. Sless said Prime Retail has about 100 employees remaining at its Baltimore headquarters, down about 25 over the last couple of months. Sless said he did not know how many of those cuts were layoffs, and how many came through attrition.

Prime Retail's third-quarter earnings report, released Wednesday night, said funds from operations (FFO) for the quarter were affected by a one-time charge associated with refinancing its debt.

FFO, a key measure for real estate investment trusts, was $5.5 million in the quarter that ended Sept. 30.

The FFO was zero per share after allocations to minority interests and preferred shareholders.

Excluding the charge, Prime Retail's third quarter FFO stood at $6.5 million, or 2 cents per diluted share, compared with $13.9 million, or 15 cents a diluted share, in the third quarter of last year.

The company said funds from operations were down this year because of the December sale of four outlet centers.

Also blamed were higher borrowing costs, tenant bankruptcies and reduced occupancy in its centers.

For the first nine months of the year, FFO was $19.9 million, or 16 cents a diluted share. That compares with $44.5 million, or 51 cents a diluted share, for the sale for the same period of last year.

Total revenue for the third quarter of 2001 was $35.2 million, down 31 percent from $46.1 million in the third quarter of last year.

Shares of Prime Retail lost 2 cents yesterday to close at 11 cents.

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