Prime Retail Sells Joint Venture Interest in Prime Outlets at Hagerstown; Transaction Generates $23.2 Million of Net Proceeds For Debt Reduction
BALTIMORE, Jan. 16 /PRNewswire-FirstCall/ -- Prime Retail, Inc. (the ``Company'') (OTC Bulletin Board: PMRE - news, PMREP - news, PMREO - news) today announced the completion on January 11, 2002 of the sale of a 70% interest in Prime Outlets at Hagerstown (the ``Hagerstown Center'') to an affiliate of Estein & Associates USA, Ltd. (``Estein''), a real estate investment company, for $23.5 million. The Hagerstown Center is now owned by an existing joint venture partnership (the ``Venture'') between affiliates of the Company and Estein which have 30% and 70% ownership interests, respectively. In connection with the sale transaction, the Venture assumed first mortgage indebtedness of $46.9 million on the Hagerstown Center (the ``Assumed Mortgage Indebtedness'').
The Hagerstown Center, located in Hagerstown, Maryland, contains approximately 487,000 square feet of gross leasable area (``GLA'') and was 99.4% occupied as of December 31, 2001. Under the terms of the transaction, the Company will continue to manage and lease the Hagerstown Center. The Venture also owns Prime Outlets at Birch Run, located in Birch Run, Michigan, and Prime Outlets at Williamsburg, located in Williamsburg, Virginia.
The Company received net cash proceeds from the sale transaction of $23.2 million which were used to pay down $11.1 million of existing mortgage indebtedness on the Hagerstown Center and $12.1 million of a $90.0 million mezzanine loan obtained from Fortress Investment Fund LLC and Greenwich Capital Financial Products, Inc. (the ``Mezzanine Loan'') in December 2000. As a result, the outstanding principal balance of the Mezzanine Loan is currently $49.0 million.
The Company is obligated to refinance the Assumed Mortgage Indebtedness on behalf of the Venture on or before June 1, 2004, its maturity date. Additionally, pursuant to certain Venture-related documents to which affiliates of the Company are parties, the Venture's cost of the Assumed Mortgage Indebtedness and any refinancing of it are fixed at an annual rate of 7.75% for a period of 10 years. If the actual cost of such indebtedness should exceed 7.75% during the ten-year period, the Company will be obligated to pay the difference to the Venture. However, if the actual cost of such indebtedness is less than 7.75% during the ten-year period, the Venture will be obligated to pay the difference to the Company. The actual cost of the Assumed Mortgage Indebtedness is currently 30-day LIBOR plus 1.50%, or 3.37%. |
