"This is not your father's old Prime," says Bob Brvenik, president of Baltimore-based Prime Retail, Lightstone's retail subsidiary. He says average occupancy in the outlet segment has risen from a mid-80%-level to above 90% since Lightstone acquired it.

When Lightstone acquired the PREIT "instant portfolio," its CEO, David Lichtenstein, told GSR, "there's a vacancy issue," which he put at about 15%. He anticipates reducing that to "between 5% to 10% within 18 months," he says and has passed that task along with the a very aggressive expansion plan for both the outlet and full-price segments to Brvenik.

The doubling of the outlet segment will come "through expansion, acquisition, and ground-up development," Brvenik tells GSR, reiterating that the company plans to build one to two outlet centers a year. "We're looking at sites now," he says, declining to identify potential locations. The added full-price centers will come through acquisition. "It doesn't matter where they are," he says. "We have a national network in place, and Prime has product all over the country." The additions are also likely to be under-performing centers.

To accomplish Lightstone's goals, three months ago, while the PREIT acquisition was still under negotiation, Brvenik assembled a "full-price team," headed by Scott Benjamin, formerly of Syracuse, NY-based Pyramid Management Group, Brvenik's old stomping ground. It is in addition to the already established "outlet team," and both report to Nick King, who heads all of Lightstone's retail leasing efforts.

The teams are separate, but equal entities. "Absolutely there is synergy between the full-price and outlet leasing efforts," Brvenik says, "but there is no intention to merge or blend the two segments. We like to build long-term relationships and partner with great brands. Gap, for example, has both full-price and outlet retail. Now we can show them our portfolios of both types of properties."

PREIT deemed the five centers non-core assets it gained from its recent merger with Crown Realty. They are Bradley Square in Cleveland, TN; Martinsburg Mall in Martinsburg, WV; Mount Barry Square in Rome, GA; Shenango Valley Mall in Hermitage, PA, and West Manchester Mall in York, PA.

"They have not had TLC for the past five years," Brvenik says, "but we like the markets in which they're located. We got our team ready to attack as soon as the deal closed and have already had a number of tenant meetings. We're looking for unique situations that mesh with each of the individual markets. We've analyzed each market and drawn up a clean sheet of what will do best in each location.

"We're not limiting our search to traditional department stores, but to tenants like Best Buy, Dick's Sporting Goods, Barnes & Nobel, and Old Navy, for example. We want some better restaurants, too," he says, adding, "I love cinemas in malls with a good restaurant, so people can have a great evening out."

At the time Lightstone bought the portfolio, sales averaged $237 per sf, which is $75 per sf below the average in PREIT's other properties. Asked where Brvenik is heading, he says, "a heck of a lot better than that. We expect to add $100-per-sf or more to that average within the next two years. We like to apply sweat, focus and capital into making significant improvements in properties that haven't been marketed or operated well," he says, declining to put a dollar figure on Lightstone's planned investment in the full-price portfolio.

Another $100 million will be reinvested in the existing outlet mall portfolio over the next 18 months, according to Brvenik. This comes on top of several improvements that have already been accomplished. Among them is a $20-million renovation of Prime Outlets San Marcos in San Marcos, TX, which he says "amounts to about $500 per sf." Such high-end luxury brand retailers as Neiman Marcus Last Call recently inked a lease there.

An $8-million renovation was just completed at Prime Outlets Birch Run outside Detroit, which gained Coach and a 30,000-sf Pottery Barn. The company's Williamsburg, VA outlet center was recently expanded by 50,000 sf. While Brvenik would not reveal the portfolio's average sales per sf, he said, "we're expecting double-digit increases over the next two years." It will come, he says, "from watering the flowers and a remix of tenants.

Of outlet centers in general, Roger Lowenthal, SVP of Hewlett, NY-based Greenberg Group, a retail real estate advisory firm, says, "the rich are getting richer and the poor are getting poorer." He notes that the number of centers has declined over the past decade, "but the good ones are getting bigger and better and averaging higher sales per sf." He predicts a future with between 25 and 50 very strong outlet centers and a handful that make money. Success depends, he says, on a strong, large permanent population, plus a tourist destination and a mix of good, strong brands.

He cites Woodbury Commons in Central Valley, NY, which Simon acquired with its Chelsea merger, as "the benchmark. It has New York City and the surrounding area's permanent, high-income population; tour busses, and lots of brands that people want." Lowenthal also mentioned Prime's San Marcos and Williamsburg centers among those with the factors for success in place. Las Vegas, Myrtle Beach, Florida and Southern California are areas that also meet the criteria, he says. "Centers without those factors are unable to get premium-brand retailers, because they don't draw enough traffic to make them profitable, and, without those brands, they languish and disappear."

"Outlet centers go through phases; they become mature, then boring," Brvenik acknowledges. "We want to turn them into an exciting experience for our shopper, the savvy woman who likes style and value. We want her to say, 'Hey, this is the place for me.' We feel there's opportunity for excitement on the outlet center side of retail."