The Lightstone Group LLC, a private New Jersey-based real estate company, has entered into an agreement to buy Baltimore-based Prime Retail for $638 million, including $115 million cash to be paid to share and unit holders and $523 million in assumed debt.

Prime Retail's board of directors approved the deal, and shareholders are expected to approve it by the third or fourth quarter. Should the deal fall through, Prime Retail has agreed to pay Lightstone a termination fee of $4.5 million, plus expenses up to $1.5 million.

"For our tenants, the relationship with a well-capitalized real estate organization such as The Lightstone Group will provide us with the access to capital we need to finish the rehab of our centers and refine and expand our marketing efforts aimed at improving sales," said Glenn Reschke, chairman and CEO of Prime Retail, in a press release on the transaction. "For our employees, the buyer's commitment to maintain the Company's headquarters in Baltimore will be good news to the over 90 employees based here."

The Lightstone Group, which owns and manages an 8.5 million-square-foot portfolio of office, multifamily, industrial and retail projects, plans to use the acquisition to gain a foothold in the retail sector. Prime Retail currently owns and/or manages 10.4 million square feet of GLA, including 37 outlet centers.