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Tanger Factory Outlet Centers, Inc.

x Large accelerated filer

o Accelerated filer

o Non-accelerated filer

o Smaller reporting company

United States

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q



	x	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2011



	o	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from _________ to _________

Commission file number 1-11986 (Tanger Factory Outlet Centers, Inc.)

Commission file number 333-3526-01 (Tanger Properties Limited Partnership)

TANGER FACTORY OUTLET CENTERS, INC.

TANGER PROPERTIES LIMITED PARTNERSHIP

(Exact name of Registrant as specified in its charter)



North Carolina (Tanger Factory Outlet Centers, Inc.)	56-1815473
North Carolina (Tanger Properties Limited Partnership)	56-1822494
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

3200 Northline Avenue, Suite 360, Greensboro, NC 27408
(Address of principal executive offices)

(336) 292-3010
(Registrant's telephone number)

Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.



Tanger Factory Outlet Centers, Inc.	Yes x No o
Tanger Properties Limited Partnership	Yes x No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).



Tanger Factory Outlet Centers, Inc.	Yes x No o
Tanger Properties Limited Partnership	Yes o No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the definitions of “large accelerated filer”, “accelerated filer: and “smaller reporting company” (as defined in Rule 12b-2 of the Securities and Exchange Act of 1934).

Indicate by check mark whether the registrant is a shell company (as defined by Rule 12b-2 of the Act).



Tanger Factory Outlet Centers, Inc.	Yes o No x
Tanger Properties Limited Partnership	Yes o No x

As of April 28, 2011, there were 81,311,041 shares of Tanger Factory Outlet Centers, Inc. common stock outstanding, $.01 par value.

EXPLANATORY NOTE

This report combines the quarterly reports on Form 10-Q for the quarter ended March 31, 2011 of Tanger Factory Outlet Centers, Inc. and Tanger Properties Limited Partnership. Unless the context indicates otherwise, the term, Company, refers to Tanger Factory Outlet Centers, Inc. and subsidiaries and the term, Operating Partnership, refers to Tanger Properties Limited Partnership and subsidiaries. The terms "we", "our" and "us" refer to the Company or the Company and the Operating Partnership together, as the text requires.

Tanger Factory Outlet Centers, Inc. and subsidiaries is one of the largest owners and operators of outlet centers in the United States. The Company is a fully-integrated, self-administered and self-managed real estate investment trust ("REIT") which, through its controlling interest in the Operating Partnership, focuses exclusively on developing, acquiring, owning, operating and managing outlet shopping centers. The outlet centers and other assets are held by, and all of the operations are conducted by, the Operating Partnership and its subsidiaries. Accordingly, the descriptions of the business, employees and properties of the Company are also descriptions of the business, employees and properties of the Operating Partnership.

The Company owns the majority of the units of partnership interest issued by the Operating Partnership through its two wholly-owned subsidiaries, the Tanger GP Trust and the Tanger LP Trust. The Tanger GP Trust controls the Operating Partnership as its sole general partner. The Tanger LP Trust holds a limited partnership interest. The Tanger family, through its ownership of the Tanger Family Limited Partnership, holds the remaining units as a limited partner.

As of March 31, 2011, the Company, through its ownership of the GP Trust and LP Trust, owned 20,328,985 units of the Operating Partnership and the Tanger Family Limited Partnership owned 3,033,305 units. Each Tanger Family Limited Partnership unit is exchangeable for four of the Company's common shares, subject to certain limitations to preserve the Company's REIT status. Prior to the Company's 2 for 1 splits of its common shares on January 24, 2011 and December 28, 2004, respectively, the exchange ratio was one for one.

The Tanger family has informed the Company of their intention to dissolve the Tanger Family Limited Partnership in connection with the settling of the estate of our founder, Stanley Tanger. Upon dissolution of the Tanger Family Limited Partnership, the units of the Operating Partnership currently owned by the Tanger Family Limited Partnership would be distributed to the individual beneficial owners of the Tanger Family Limited Partnership, who are primarily the descendants of Stanley Tanger (including Steven Tanger, our Chief Executive Officer), their spouses or former spouses or their children and/or trusts for their benefit. Each such holder would then become a limited partner of the Operating Partnership, and each such partner would have the ability to exchange their Operating Partnership units for the Company's common shares in the ratio described above, and will continue to have rights which may require the Company to register the shares with the United States Securities and Exchange Commission (the "SEC") for sale under the Securities Act of 1933, as amended. The Company anticipates that some of the individuals will request that some or all of their Operating Partnership units be exchanged for the Company's common shares and to request the Company to register such shares for sale. At this time, our Chief Executive Officer has not indicated any present intention to exchange the Operating Partnership Units that he will receive upon the dissolution of the Tanger Family Limited Partnership.

Management operates the Company and the Operating Partnership as one enterprise. The management of the Company consists of the same members as the management of the Operating Partnership. These individuals are officers of the Company and employees of the Operating Partnership. The individuals that comprise the Company's Board of Directors are also the same individuals that make up the Tanger GP Trust's Board of Trustees.

We believe combining the quarterly reports on Form 10-Q of the Company and the Operating Partnership into this single report results in the following benefits:


•	enhancing investors' understanding of the Company and the Operating Partnership by enabling investors to view the business as a whole in the same manner as management views and operates the business;


•	eliminating duplicative disclosure and providing a more streamlined and readable presentation since a substantial portion of the disclosure applies to both the Company and the Operating Partnership; and


•	creating time and cost efficiencies through the preparation of one combined report instead of two separate reports.

There are few differences between the Company and the Operating Partnership, which are reflected in the disclosure in this report. We believe it is important to understand the differences between the Company and the Operating Partnership in the context of how the Company and the Operating Partnership operate as an interrelated consolidated company. As stated above, the Company is a REIT, whose only material asset is its ownership of partnership interests of the Operating Partnership through its wholly-owned subsidiaries, the Tanger GP Trust and Tanger LP Trust. As a result, the Company does not conduct business itself, other than issuing public equity from time to time and incurring expenses required to operate as a public company. However, all operating expenses incurred by the Company are reimbursed by the Operating Partnership, thus the only material item on the Company's income statement is its equity in the earnings of the Operating Partnership. Therefore, the assets and liabilities and the revenues and expenses of the Company and the Operating Partnership are the same on their respective financial statements, except for immaterial differences related to cash, other assets and accrued liabilities that arise from public company expenses paid by the Company. The Company itself does not hold any indebtedness but does guarantee certain debt of the Operating Partnership, as disclosed in this report. The Operating Partnership holds substantially all the assets of the Company and holds the ownership interests in the Company's unconsolidated joint ventures. The Operating Partnership conducts the operations of the business and is structured as a partnership with no publicly traded equity. Except for net proceeds from public equity issuances by the Company, which are contributed to the Operating Partnership in exchange for partnership units, the Operating Partnership generates the capital required through its operations, by the Operating Partnership's incurrence of indebtedness or through the issuance of partnership units.

Noncontrolling interests, shareholder's equity and partners' capital are the main areas of difference between the consolidated financial statements of the Company and those of the Operating Partnership. The limited partnership interests in the Operating Partnership held by the Tanger Family Limited Partnership are accounted for as partners' capital in the Operating Partnership's financial statements and as noncontrolling interests in the Company's financial statements.

To help investors understand the significant differences between the Company and the Operating Partnership, this report presents the following separate sections for each of the Company and the Operating Partnership:


•	consolidated financial statements;


•	the following notes to the consolidated financial statements;


•	Debt;


•	Shareholders' Equity of the Company and Partners' Equity of the Operating Partnership;


•	Share-based compensation of the Company and equity-based compensation of the Operating Partnership;


•	Other Comprehensive Income of the Company and Other Comprehensive Income of the Operating Partnership;


•	Earnings Per Share and Earnings Per Unit and


•	Liquidity and Capital Resources in the Management's Discussion and Analysis of Financial condition and Results of Operations.

This report also includes separate Item 4. Controls and Procedures sections and separate Exhibit 31 and 32 certifications for each of the Company and the Operating Partnership in order to establish that the Chief Executive Officer and the Chief Financial Officer of each entity have made the requisite certifications and that the Company and Operating Partnership are compliant with Rule 13a-15 or Rule 15d-15 of the Securities Exchange Act of 1934 and 18 U.S.C. §1350.

In order to highlight the differences between the Company and the Operating Partnership, the separate sections in this report for the Company and the Operating Partnership specifically refer to the Company and the Operating Partnership. In the sections that combine disclosure of the Company and the Operating Partnership, this report refers to actions or holdings as being actions or holdings of the Company. Although the Operating Partnership is generally the entity that enters into contracts and joint ventures and holds assets and debt, reference to the Company is appropriate because the business is one enterprise and the Company operates the business through the Operating Partnership.

As the 100% owner of Tanger GP Trust, the general partner with control of the Operating Partnership, the Company consolidates the Operating Partnership for financial reporting purposes. The separate discussions of the Company and the Operating Partnership in this report should be read in conjunction with each other to understand the results of the Company on a consolidated basis and how management operates the Company.

TANGER FACTORY OUTLET CENTERS, INC. AND TANGER PROPERTIES LIMITED PARTNERSHIP

Index



	Page Number
Part I. Financial Information
Item 1.
FINANCIAL STATEMENTS OF TANGER FACTORY OUTLET CENTERS, INC (Unaudited)
Consolidated Balance Sheets - as of March 31, 2011 and December 31, 2010	7
Consolidated Statements of Operations - for the three months ended March 31, 2011 and 2010	8
Consolidated Statements of Cash Flows - for the three months ended March 31, 2011 and 2010	9

FINANCIAL STATEMENTS OF TANGER PROPERTIES LIMITED PARTNERSHIP (Unaudited)
Consolidated Balance Sheets - as of March 31, 2011 and December 31, 2010	10
Consolidated Statements of Operations - for the three months ended March 31, 2011 and 2010	11
Consolidated Statements of Cash Flows - for the three months ended March 31, 2011 and 2010	12

Notes to Consolidated Financial Statements of Tanger Factory Outlet Centers, Inc and Tanger Properties Limited Partnership	13

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations	29

Item 3. Quantitative and Qualitative Disclosures about Market Risk	43

Item 4. Controls and Procedures (Tanger Factory Outlet Centers, Inc. and Tanger Properties Limited Partnership)	43

Part II. Other Information

Item 1. Legal Proceedings	44

Item 1A. Risk Factors	44

Item 5. Other Information	44

Item 6. Exhibits	45

Signatures	46

PART I. - FINANCIAL INFORMATION

Item 1 - Financial Statements of Tanger Factory Outlet Centers, Inc.

TANGER FACTORY OUTLET CENTERS, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(In thousands, except share and per share data)

(Unaudited)



	March 31, 2011			December 31, 2010
ASSETS:
Rental property
Land	$	141,577		$	141,577
Buildings, improvements and fixtures	1,441,260			1,411,404
Construction in progress	2,590			23,233
	1,585,427			1,576,214
Accumulated depreciation	(462,942		)	(453,145		)
Rental property, net	1,122,485			1,123,069
Cash and cash equivalents	731			5,758
Rental property held for sale	—			723
Investments in unconsolidated joint ventures	5,861			6,386
Deferred lease costs and other intangibles, net	28,090			29,317
Deferred debt origination costs, net	7,165			7,593
Prepaids and other assets	53,912			44,088
Total assets	$	1,218,244		$	1,216,934
LIABILITIES AND EQUITY
Liabilities
Debt
Senior, unsecured notes (net of discount of $2,490 and $2,594 respectively)	$	554,670		$	554,616
Unsecured lines of credit	166,300			160,000
Total debt	720,970			714,616
Construction trade payables	30,984			31,831
Accounts payable and accrued expenses	33,503			31,594
Other liabilities	16,409			16,998
Total liabilities	801,866			795,039
Commitments and contingencies
Equity
Tanger Factory Outlet Centers, Inc.
Common shares, $.01 par value, 150,000,000 shares authorized, 81,315,938 and 80,996,068 shares issued and outstanding at March 31, 2011 and December 31, 2010, respectively	813			810
Paid in capital	606,121			604,359
Distributions in excess of net income	(246,372		)	(240,024		)
Accumulated other comprehensive income	1,754			1,784
Equity attributable to Tanger Factory Outlet Centers, Inc.	362,316			366,929
Equity attributable to noncontrolling interest in Operating Partnership	54,062			54,966
Total equity	416,378			421,895
Total liabilities and equity	$	1,218,244		$	1,216,934

The accompanying notes are an integral part of these consolidated financial statements.

TANGER FACTORY OUTLET CENTERS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share data)

(Unaudited)



	Three months ended March 31,
	2011			2010
Revenues
Base rentals	$	46,219		$	43,497
Percentage rentals	1,391			1,305
Expense reimbursements	21,205			19,519
Other income	1,924			1,721
Total revenues	70,739			66,042
Expenses
Property operating	24,108			22,349
General and administrative	6,767			5,466
Acquisition costs	567			—
Abandoned development costs	158			—
Impairment charges	—			735
Depreciation and amortization	17,965			26,474
Total expenses	49,565			55,024
Operating income	21,174			11,018
Interest expense	10,325			7,948
Income before equity in losses of unconsolidated joint ventures and discontinued operations	10,849			3,070
Equity in losses of unconsolidated joint ventures	(32		)	(68		)
Income from continuing operations	10,817			3,002
Discontinued operations	—			1
Net income	10,817			3,003
Noncontrolling interest	(1,419		)	(210		)
Net income attributable to Tanger Factory Outlet Centers, Inc.	$	9,398		$	2,793

Basic earnings per common share:
Income from continuing operations	$	0.11		$	0.02
Net income	$	0.11		$	0.02
Diluted earnings per common share:
Income from continuing operations	$	0.11		$	0.02
Net income	$	0.11		$	0.02

Dividends paid per common share	$	0.1938		$	0.1913

The accompanying notes are an integral part of these consolidated financial statements.

TANGER FACTORY OUTLET CENTERS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)



	Three Months Ended March 31,
	2011			2010
OPERATING ACTIVITIES
Net income	$	10,817		$	3,003
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization (including discontinued operations)	17,965			26,527
Impairment charges (including discontinued operations)	—			735
Gain on sale of outparcels of land	—			(161		)
Amortization of deferred financing costs	466			342
Equity in losses of unconsolidated joint ventures	32			68
Share-based compensation expense	1,798			1,227
Amortization of debt (premiums) and discount, net	24			(214		)
Distributions of cumulative earnings from unconsolidated joint ventures	62			301
Net accretion of market rent rate adjustment	(155		)	(165		)
Straight-line base rent adjustment	(794		)	(734		)
Changes in other assets and liabilities:
Other assets	(495		)	1,250
Accounts payable and accrued expenses	1,319			(3,451		)
Net cash provided by operating activities	31,039			28,728
INVESTING ACTIVITIES
Additions to rental property	(15,251		)	(10,235		)
Distributions in excess of cumulative earnings from unconsolidated joint ventures	238			349
Increases in escrow deposits	(8,350		)	—
Net proceeds from the sale of real estate	724			602
Additions to deferred lease costs	(1,531		)	(881		)
Net cash used in investing activities	(24,170		)	(10,165		)
FINANCING ACTIVITIES
Cash dividends paid	(15,746		)	(16,872		)
Distributions to noncontrolling interest in Operating Partnership	(2,351		)	(2,320		)
Proceeds from debt issuances	67,950			103,100
Repayments of debt	(61,700		)	(103,200		)
Additions to deferred financing costs	(49		)	(14		)
Proceeds from exercise of options	—			673
Net cash used in financing activities	(11,896		)	(18,633		)
Net decrease in cash and cash equivalents	(5,027		)	(70		)
Cash and cash equivalents, beginning of period	5,758			3,267
Cash and cash equivalents, end of period	$	731		$	3,197

The accompanying notes are an integral part of these consolidated financial statements.

Item 1 - Financial Statements of Tanger Properties Limited Partnership

TANGER PROPERTIES LIMITED PARTNERSHIP AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(In thousands)

(Unaudited)



	March 31, 2011			December 31, 2010
ASSETS:
Rental property
Land	$	141,577		$	141,577
Buildings, improvements and fixtures	1,441,260			1,411,404
Construction in progress	2,590			23,233
	1,585,427			1,576,214
Accumulated depreciation	(462,942		)	(453,145		)
Rental property, net	1,122,485			1,123,069
Cash and cash equivalents	699			5,671
Rental property held for sale	—			723
Investments in unconsolidated joint ventures	5,861			6,386
Deferred lease costs and other intangibles, net	28,090			29,317
Deferred debt origination costs, net	7,165			7,593
Prepaids and other assets	53,471			43,717
Total assets	$	1,217,771		$	1,216,476
LIABILITIES AND PARTNERS' EQUITY
Liabilities
Debt
Senior, unsecured notes (net of discount of $2,490 and $2,594, respectively)	$	554,670		$	554,616
Unsecured lines of credit	166,300			160,000
Total debt	720,970			714,616
Construction trade payables	30,984			31,831
Accounts payable and accrued expenses	33,030			31,136
Other liabilities	16,409			16,998
Total liabilities	801,393			794,581
Commitments and contingencies
Partners' Equity
General partner	5,151			5,221
Limited partners	409,514			414,926
Accumulated other comprehensive income	1,713			1,748
Total partners' equity	416,378			421,895
Total liabilities and partners' equity	$	1,217,771		$	1,216,476

The accompanying notes are an integral part of these consolidated financial statements.

TANGER PROPERITES LIMITED PARTNERSHIP AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per unit data)

(Unaudited)



	Three months ended March 31,
	2011			2010
Revenues
Base rentals	$	46,219		$	43,497
Percentage rentals	1,391			1,305
Expense reimbursements	21,205			19,519
Other income	1,924			1,721
Total revenues	70,739			66,042
Expenses
Property operating	24,108			22,349
General and administrative	6,767			5,466
Acquisition costs	567			—
Abandoned development costs	158			—
Impairment charges	—			735
Depreciation and amortization	17,965			26,474
Total expenses	49,565			55,024
Operating income	21,174			11,018
Interest expense	10,325			7,948
Income before equity in losses of unconsolidated joint ventures and discontinued operations	10,849			3,070
Equity in losses of unconsolidated joint ventures	(32		)	(68		)
Income from continuing operations	10,817			3,002
Discontinued operations	—			1
Net income	10,817			3,003
Net income available to limited partners	10,706			2,987
Net income available to general partner	$	111		$	16
Basic earnings per common unit:
Income from continuing operations	$	0.46		$	0.06
Net income	$	0.46		$	0.06
Diluted earnings per common unit:
Income from continuing operations	$	0.46		$	0.06
Net income	$	0.46		$	0.06

Distribution paid per common unit	$	0.775		$	0.765

The accompanying notes are an integral part of these consolidated financial statements.

TANGER PROPERTIES LIMITED PARTNERSHIP AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)



	Three Months Ended March 31,
	2011			2010
OPERATING ACTIVITIES
Net income	$	10,817		$	3,003
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization (including discontinued operations)	17,965			26,527
Impairment charge (including discontinued operations)	—			735
Gain on sale of outparcels of land	—			(161		)
Amortization of deferred financing costs	466			342
Equity in losses of unconsolidated joint ventures	32			68
Equity-based compensation expense	1,798			1,227
Amortization of debt premiums and discount, net	24			(214		)
Distributions of cumulative earnings from unconsolidated joint ventures	62			301
Net accretion of market rent rate adjustment	(155		)	(165		)
Straight-line base rent adjustment	(794		)	(734		)
Changes in other assets and liabilities:
Other assets	(425		)	1,104
Accounts payable and accrued expenses	1,304			(3,419		)
Net cash provided by operating activities	31,094			28,614
INVESTING ACTIVITIES
Additions to rental property	(15,251		)	(10,235		)
Distributions in excess of cumulative earnings from unconsolidated joint ventures	238			349
Increase in escrow deposits	(8,350		)	—
Net proceeds from the sale of real estate	724			602
Additions to deferred lease costs	(1,531		)	(881		)
Net cash used in investing activities	(24,170		)	(10,165		)
FINANCING ACTIVITIES
Cash distributions paid	(18,097		)	(19,192		)
Proceeds from debt issuances	67,950			103,100
Repayments of debt	(61,700		)	(103,200		)
Additions to deferred financing costs	(49		)	(14		)
Proceeds from exercise of options	—			673
Net cash used in financing activities	(11,896		)	(18,633		)
Net decrease in cash and cash equivalents	(4,972		)	(184		)
Cash and cash equivalents, beginning of period	5,671			3,214
Cash and cash equivalents, end of period	$	699		$	3,030

The accompanying notes are an integral part of these consolidated financial statements.

TANGER FACTORY OUTLET CENTERS INC. AND SUBSIDIARIES

TANGER PROPERTIES LIMITED PARTNERSHIP AND SUBSIDIAIRES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. Business

Tanger Factory Outlet Centers, Inc. and subsidiaries is one of the largest owners and operators of outlet centers in the United States. We are a fully-integrated, self-administered and self-managed real estate investment trust, or REIT, which, through our controlling interest in the Operating Partnership, focuses exclusively on developing, acquiring, owning, operating and managing outlet shopping centers. As of March 31, 2011, we owned and operated 32 outlet centers, with a total gross leasable area of approximately 9.4 million square feet. We also operated and had partial ownership interests in two outlet centers totaling approximately 948,000 square feet.

Our outlet centers and other assets are held by, and all of our operations are conducted by, Tanger Properties Limited Partnership and subsidiaries. Accordingly, the descriptions of our business, employees and properties are also descriptions of the business, employees and properties of the Operating Partnership. Unless the context indicates otherwise, the term, "Company", refers to Tanger Factory Outlet Centers, Inc. and subsidiaries and the term, "Operating Partnership", refers to Tanger Properties Limited Partnership and subsidiaries. The terms "we", "our" and "us" refer to the Company or the Company and the Operating Partnership together, as the text requires.

2. Basis of Presentation

The unaudited consolidated financial statements included herein have been prepared pursuant to accounting principles generally accepted in the United States of America and should be read in conjunction with the consolidated financial statements and notes thereto of the Company's and the Operating Partnership's separate Annual Reports on Form 10-K for the year ended December 31, 2010. The December 31, 2010 balance sheet data in this Form 10-Q was derived from audited financial statements. Certain information and note disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted pursuant to the SEC's rules and regulations, although management believes that the disclosures are adequate to make the information presented not misleading.

Investments in real estate joint ventures that we do not control are accounted for using the equity method of accounting. These investments are recorded initially at cost and subsequently adjusted for our equity in the venture's net income (loss), cash contributions, distributions and other adjustments required under the equity method of accounting. These investments are evaluated for impairment when necessary. Control is determined using an evaluation based on accounting standards related to the consolidation of voting interest entities and variable interest entities. For joint ventures that are determined to be variable interest entities, the primary beneficiary consolidates the entity.

Certain amounts in the consolidated balances sheet as of December 31, 2010 have been reclassified to conform with the presentations made as of March 31, 2011 related to deferred lease and intangible costs, net and deferred debt origination costs, net. These reclassifications had no impact on previously reported total assets.

3. Development of Rental Properties

Redevelopment at Existing Outlet Centers

During the first quarter of 2011, we completed the redevelopment of our Hilton Head I, SC center and celebrated a grand re-opening on March 31, 2011. As of April 27, 2011, the 177,000 square foot center had leases signed or out for signature on 94% of the leasable square feet. In addition, the property features four pad sites, three of which are currently leased. The total incremental cost for the redeveloped center, including development and leasing costs, are expected to be approximately $43.0 million.

Commitments to complete construction of our redevelopment and other capital expenditure requirements amounted to approximately $5.0 million at March 31, 2011. Commitments for construction represent only those costs contractually required to be paid by us.

Interest costs capitalized during the three months ended March 31, 2011 and 2010 amounted to $230,000 and $200,000, respectively.

Impairment Charges

Rental property held and used by us is reviewed for impairment in the event that facts and circumstances indicate the carrying amount of an asset may not be recoverable. In such an event, we compare the estimated future undiscounted cash flows associated with the asset to the asset's carrying amount, and if less, recognize an impairment loss in an amount by which the carrying amount exceeds its fair value.

Land Outparcel Sales

Gains on sale of outparcels are included in other income in the consolidated statements of operations. Cost is allocated to the outparcels based on the relative market value method. Below is a summary of outparcel sales that we completed during the three months ended March 31, 2011 and 2010, respectively. (in thousands, except number of outparcels):



	Three Months Ended March 31,
	2011		2010
Number of outparcels	—		3
Net proceeds	$	—	$	602
Gains on sales included in other income	$	—	$	161

4. Investments in Unconsolidated Real Estate Joint Ventures

Our investments in unconsolidated joint ventures as of March 31, 2011 and December 31, 2010 aggregated $5.9 million and $6.4 million, respectively. We have evaluated the accounting treatment for each of the joint ventures and have concluded based on the current facts and circumstances that the equity method of accounting should be used to account for the individual joint ventures. At March 31, 2011, we were members of the following unconsolidated real estate joint ventures:



Joint Venture	Center Location	Ownership %		Square Feet	Carrying Value of Investment (in millions)		Total Joint Venture Debt (in millions)
Deer Park ⁽¹⁾	Deer Park, Long Island, New York	33.3	%	683,033	$	1.3	$	269.3
Wisconsin Dells	Wisconsin Dells, Wisconsin	50.0	%	265,061	$	4.5	$	24.8

(1) Includes a 29,253 square foot warehouse adjacent to the shopping center with a mortgage note of approximately $2.3 million.

These investments are recorded initially at cost and subsequently adjusted for our equity in the venture's net income (loss), cash contributions, distributions and other adjustments required by the equity method of accounting as discussed below.

The following management, leasing and marketing fees were recognized from services provided to Wisconsin Dells and Deer Park (in thousands):



	Three Months Ended March 31,
	2011		2010
Fee:
Management and leasing	$	505	$	464
Marketing	44		41
Total Fees	$	549	$	505

Our carrying value of investments in unconsolidated joint ventures differs from our share of the assets reported in the "Summary Balance Sheets – Unconsolidated Joint Ventures" shown below due to adjustments to the book basis, including intercompany profits on sales of services that are capitalized by the unconsolidated joint ventures. Our investments in real estate joint ventures are reduced by 50% of the profits earned for leasing services provided to Wisconsin Dells and by 33.3% of the profits earned for leasing services provided to Deer Park. The differences in basis are amortized over the various useful lives of the related assets.

On a periodic basis, we assess whether there are any indicators that the value of our investments in unconsolidated joint ventures may be impaired. An investment is impaired only if management's estimate of the value of the investment is less than the carrying value of the investments, and such decline in value is deemed to be other than temporary. To the extent impairment has occurred, the loss shall be measured as the excess of the carrying amount of the investment over the fair value of the investment. Our estimates of fair value for each joint venture investment are based on a number of assumptions that are subject to economic and market uncertainties including, among others, demand for space, competition for tenants, changes in market rental rates and operating costs of the property. As these factors are difficult to predict and are subject to future events that may alter our assumptions, the values estimated by us in our impairment analysis may not be realized. As of March 31, 2011, we do not believe that any of our equity investments were impaired.

In accordance with amended guidance related to the consolidation of variable interest entities which became effective January 1, 2010, we performed an analysis of all of our real estate joint ventures to determine whether they would qualify as variable interest entities ("VIE"), and whether the joint venture should be consolidated or accounted for as an equity method investment in an unconsolidated joint venture. As a result of our qualitative assessment, we concluded that Deer Park is a VIE and Wisconsin Dells is not a VIE. Deer Park is considered a VIE because it does not meet the criteria of the members having a sufficient equity investment at risk.

After making the determination that Deer Park was a VIE, we performed an assessment to determine if we would be considered the primary beneficiary and thus be required to consolidate Deer Park's balance sheets and results of operations. This assessment was based upon whether we had the following:

a. The power to direct the activities of the variable interest entity that most significantly impact the entity's economic performance

b. The obligation to absorb losses of the entity that could potentially be significant to the variable interest entity or the right to receive benefits from the entity that could potentially be significant to the variable interest entity

Based on the provisions of the operating and management agreements of Deer Park, we determined that no one member alone has the power to direct the significant activities that affect the economic performance of Deer Park.

We have determined that all three partners share power in the decisions that most significantly impact Deer Park, as well as the financial rights and obligations, and therefore we are not required to consolidate Deer Park. Our equity method investment in Deer Park as of March 31, 2011 was approximately $1.3 million. We are unable to estimate our maximum exposure to loss at this time because our guarantees are limited and based on the future operating performance of Deer Park. Our maximum exposure consists of the following components: our investment, our completion guarantee which is currently estimated to be up to $15.0 million and our other operating performance guarantees.

Condensed combined summary financial information of joint ventures accounted for using the equity method is as follows (in thousands):



Summary Balance Sheets - Unconsolidated Joint Ventures	As of March 31, 2011		As of December 31, 2010
Assets
Investment properties at cost, net	$	285,332	$	283,902
Cash and cash equivalents	14,697		13,838
Deferred lease costs, net	3,011		2,562
Deferred debt origination costs, net	1,172		1,428
Prepaids and other assets	7,349		6,291
Total assets	$	311,561	$	308,021
Liabilities and Owners' Equity
Mortgages payable	$	294,034	$	294,034
Construction trade payables	4,710		341
Accounts payable and other liabilities	4,281		4,810
Total liabilities	303,025		299,185
Owners' equity	8,536		8,836
Total liabilities and owners' equity	$	311,561	$	308,021



	Three Months Ended
Summary Statements of Operations -	March 31,
Unconsolidated Joint Ventures	2011			2010
Revenues	$	9,562		$	9,274
Expenses
Property operating	4,101			4,210
General and administrative	187			287
Depreciation and amortization	3,611			3,497
Total expenses	7,899			7,994
Operating income	1,663			1,280
Interest expense	1,803			1,674
Net loss	$	(140	)	$	(394	)

The Company and Operating Partnership's share of:
Net loss	$	(32	)	$	(68	)
Depreciation (real estate related)	1,306			1,265

5. Discontinued Operations

In May 2010, the Company's Board of Directors approved the plan for our management to sell our Commerce I, Georgia center. The majority of the center was sold in July 2010 for net proceeds of approximately $1.4 million. The remaining portion of the center, classified as held for sale in the consolidated balance sheet as of December 31, 2010, was sold in January 2011 for net proceeds of approximately $724,000. During the third quarter of 2010, we recorded an impairment of approximately $111,000 to lower the basis on the remaining portion of the center to its approximate fair value which was based on the actual sales contracts related to the remaining portion of the center.

Summary of results of operations for the property whose results of operations are considered discontinued operations for the three months ended March 31, 2011 and 2010, respectively (in thousands):



	Three Months Ended March 31,
	2011		2010
Revenues:
Base rentals	$	—	$	150
Expense reimbursements	—		17
Other income	—		10
Total revenues	—		177
Expenses:
Property operating	—		123
Depreciation and amortization	—		53
Total expenses	—		176
Discontinued operations	$	—	$	1

6. Debt of the Company

All of the Company's debt is held directly by the Operating Partnership.

The Company guarantees the Operating Partnership's obligations with respect to its unsecured lines of credit which have a total borrowing capacity of $400.0 million. As of March 31, 2011 and December 31, 2010, the Operating Partnership had $166.3 million and $160.0 million, respectively, outstanding in total on these lines.

In addition, the Company also guarantees the Operating Partnership's obligations with respect to its $7.2 million of outstanding senior exchangeable notes due in 2026. August 18, 2011 is the first date that the noteholders can require us to repurchase the notes without occurrence of specified events. However, because the Company's common share price exceeded the "Exchange Trigger Price", as defined in the supplemental indenture relating to the senior exchangeable notes, holders of the the notes may presently exercise their exchange rights.

7. Debt of the Operating Partnership

As of March 31, 2011 and December 31, 2010, the debt of the Operating Partnership consisted of the following (in thousands):



	March 31, 2011		December 31, 2010
Senior, unsecured notes:
6.15% Senior notes, maturing November 2015, net of discount of $486 and $510, respectively	$	249,514	$	249,490
3.75% Senior exchangeable notes, maturing August 2026, net of discount of $62 and $103, respectively	7,098		7,107
6.125% Senior notes, maturing in June 2020, net of discount of $1,942 and $1,981, respectively	298,058		298,019
Unsecured lines of credit with a weighted average interest rates of 2.14% and 2.16%, respectively ⁽¹⁾	166,300		160,000
	$	720,970	$	714,616


(1)	Our unsecured lines of credit as of March 31, 2011 bear interest at a rate of LIBOR + 1.90% and expire in November 2013. These lines require a facility fee payment of .40% annually based on the total amount of the commitment. The credit spread and facility fee can vary depending on our investment grade rating.

Debt Maturities

Maturities of the existing long-term debt as of March 31, 2011 are as follows (in thousands):



Year	Amount
2011 ⁽¹⁾	$	7,160
2012	—
2013	166,300
2014	—
2015	250,000
Thereafter	300,000
Subtotal	723,460
Discounts	(2,490		)
Total	$	720,970

(1) Includes expiration of $7.2 million of senior exchangeable notes shown in 2011 because that is the first date that the noteholders can require us to repurchase the notes without the occurrence of specified events.

8. Shareholders' Equity of the Company

The Company's Board of Directors declared a 2 for 1 split of the Company's common shares on January 13, 2011, effective in the form of a share dividend, payable on January 24, 2011. The Company retained the current par value of $.01 per share on all common shares. All references to the number of shares outstanding, per share amounts and share options data of the Company's common shares have been restated to reflect the effect of the split for all periods presented. Shareholders' equity as of December 31, 2010 reflects the split by reclassifying from additional paid in capital to common shares an amount equal to the par value of the additional shares arising from the split. While the number of Operating Partnership units did not change as a result of the split, each Operating Partnership unit owned by the Tanger Family Limited Partnership is now exchangeable for four of the Company's common shares. Prior to the 2011 split, the exchange ratio was one unit for two common shares.

Changes in Equity

The following table provides a reconciliation of the beginning and ending carrying amounts of total equity, equity attributable to common shareholders and equity attributable to noncontrolling interests:



															Noncontrolling
						Distributions			Accumulated other			Total			interest in
	Common		Paid in			in excess			comprehensive			shareholders'			Operating			Total
	shares		capital			of earnings			income			equity			Partnership			equity
December 31, 2010	$	810	$	604,359		$	(240,024	)	$	1,784		$	366,929		$	54,966		$	421,895
Comprehensive income:
Net income	—		—			9,398			—			9,398			1,419			10,817
Other comprehensive income	—		—			—			(30		)	(30		)	(5		)	(35		)
Total comprehensive income	—		—			9,398			(30		)	9,368			1,414			10,782
Compensation under Incentive Award Plan	—		1,798			—			—			1,798			—			1,798
Grant of 319,000 restricted shares	3		(3		)	—			—			—			—			—
Adjustment for noncontrolling interest in Operating Partnership	—		(33		)	—			—			(33		)	33			—
Common dividends ($.19375 per share)	—		—			(15,746		)	—			(15,746		)	—			(15,746		)
Distributions to noncontrolling interest in Operating Partnership	—		—			—			—			—			(2,351		)	(2,351		)
March 31, 2011	$	813	$	606,121		$	(246,372	)	$	1,754		$	362,316		$	54,062		$	416,378

9. Partners' Equity of the Operating Partnership

When the Company issues common shares upon exercise of options or issues restricted share awards, the Operating Partnership issues one corresponding unit to the Company for every four common shares issued. At March 31, 2011 and December 31, 2010, the ownership interests of the Operating Partnership consisted of the following:



	March 31, 2011	December 31, 2010
Common units:
General partner	237,000	237,000
Limited partners	23,125,290	23,045,322
Total common units	23,362,290	23,282,322

10. Other Comprehensive Income of the Company

Total comprehensive income for the three months ended March 31, 2011 and 2010 is as follows (in thousands):



	Three Months Ended March 31,
	2011			2010
Net income	$	10,817		$	3,003
Other comprehensive income:
Reclassification adjustment for amortization of gain on 2005 settlement of US treasury rate lock included in net income	(81		)	(76		)
Change in fair value of cash flow hedges	—			852
Change in fair value of our portion of our unconsolidated joint ventures' cash flow hedges	46			(39		)
Other comprehensive income (loss)	(35		)	737
Total comprehensive income	10,782			3,740
Comprehensive income attributable to the noncontrolling interest	(1,414		)	(307		)
Total comprehensive income attributable to the Company	$	9,368		$	3,433

11. Other Comprehensive Income of the Operating Partnership

Total comprehensive income for the three months ended March 31, 2011 and 2010 is as follows (in thousands):



	Three Months Ended March 31,
	2011			2010
Net income	$	10,817		$	3,003
Other comprehensive income:
Reclassification adjustment for amortization of gain on 2005 settlement of US treasury rate lock included in net income	(81		)	(76		)
Change in fair value of cash flow hedges	—			852
Change in fair value of our portion of our unconsolidated joint ventures' cash flow hedges	46			(39		)
Other comprehensive income (loss)	(35		)	737
Total comprehensive income	$	10,782		$	3,740

12. Share-Based Compensation of the Company

We have a shareholder approved share-based compensation plan, the Amended and Restated Incentive Award Plan of Tanger Factory Outlet Centers, Inc. and Tanger Properties Limited Partnership (the "Plan"), which covers our independent directors, officers and our employees. During the first quarter of 2011, the Company's Board of Directors approved grants of 319,000 restricted common shares to the Company's independent directors and the Company's senior executive officers. The grant date fair value of the awards ranged from $25.245 to $26.85 per share and was determined based upon the closing market price of our common shares on the day prior to the grant date in accordance with the terms of the Plan. The independent directors' restricted common shares vest ratably over a three year period and the senior executive officers' restricted shares vest ratably over a five year period. Compensation expense related to the amortization of the deferred compensation amount is being recognized in accordance with the vesting schedule of the restricted shares.

In February 2011, the Company's Board of Directors approved the grant of 191,500 stock options to non-executive employees of the Company. The exercise price of the options granted during the first quarter of 2011 is $26.06 which equaled the market price of the Company's common shares as of the close on the day prior to the grant date. The options expire ten years from the date of grant and 20% of the options become exercisable in each of the first five years commencing one year from the date of grant. The fair value of each option grant is estimated on the date of grant using the Black-Scholes option pricing model with the following weighted-average assumptions used for the 2011 grant: expected dividend yield 3.0%; expected life of 7 years; expected volatility of 32.8%; a risk-free rate of 2.9%; and forfeiture rates of 3.0% to 20.0% dependent upon the employee's position within the Company.

We recorded share-based compensation expense in our statements of operations as follows (in thousands):



	Three Months Ended March 31,
	2011		2010
Restricted shares	$	1,266	$	959
Notional unit performance awards	507		268
Options	25		—
Total share-based compensation	$	1,798	$	1,227

Options outstanding at March 31, 2011 had the following weighted average exercise prices and weighted average remaining contractual lives:



	Options Outstanding				Options Exercisable
Exercise prices	Options	Weighted average exercise price		Weighted remaining contractual life in years	Options	Weighted average exercise price
$9.6900	10,000	$	9.69	3.07	10,000	$	9.69
$9.7075	98,200	9.71		3.08	98,200	9.71
$11.8125	12,000	11.81		3.59	12,000	11.81
$26.0600	191,500	$	26.06	9.91	—	—
	311,700	$	19.83	7.29	120,200	$	9.92

A summary of option activity under our Amended and Restated Incentive Award Plan as of March 31, 2011 and changes during the year then ended is presented below (aggregate intrinsic value amount in thousands):



Options	Shares	Weighted-average exercise price		Weighted-average remaining contractual life in years	Aggregate intrinsic value
Outstanding as of December 31, 2010	120,200	$	9.92
Granted	191,500	26.06
Exercised	—	—
Forfeited	—	—
Outstanding as of March 31, 2011	311,700	$	19.83	7.29	$	1,920

Vested and Expected to Vest as of
March 31, 2011	269,028	$	18.85	6.88	$	1,920

Exercisable as of March 31, 2011	120,200	$	9.92	3.13	$	1,920

The total intrinsic value of options exercised during the three months ended March 31, 2011 was $0 as no options were exercised during the period.

The following table summarizes information related to unvested restricted shares outstanding as of March 31, 2011:



Unvested Restricted Shares	Number of shares		Weighted average grant date fair value
Unvested at December 31, 2010	717,760		$	17.95
Granted	319,000		25.42
Vested	(207,600	)	17.87
Forfeited	—		—
Unvested at March 31, 2011	829,160		$	20.85

The total value of restricted shares vested during the three months ended March 31, 2011 was $5.4 million.

As of March 31, 2011, there was $25.3 million of total unrecognized compensation cost related to unvested share-based compensation arrangements granted under the Plan. That cost is expect to be recognized over a weighted-average period of 3.8 years.

13. Equity-Based Compensation of the Operating Partnership

As discussed in Note 12, the Operating Partnership and the Company have a joint plan whereby equity based and performance based awards may be granted to directors, officers and employees. When shares are issued by the Company, the Operating Partnership issues corresponding units to the Company based on the current exchange ratio as provided by the Operating Partnership agreement. Based on the current exchange ratio, each unit in the Operating Partnership is equivalent to four common shares of the Company. Therefore, when the Company grants an equity based award, the Operating Partnership treats each award as having been granted by the Operating Partnership.

The tables below set forth the unit based compensation expense and other related information as recognized in the Operating Partnership's consolidated financial statements.

We recorded equity-based compensation expense in our statements of operations as follows (in thousands):



	Three Months Ended March 31,
	2011		2010
Restricted units	$	1,266	$	959
Notional unit performance awards	507		268
Options	25		—
Total equity-based compensation	$	1,798	$	1,227

Options outstanding at March 31, 2011 had the following weighted average exercise prices and weighted average remaining contractual lives:



	Options Outstanding				Options Exercisable
Range of exercise prices	Options	Weighted average exercise price		Weighted remaining contractual life in years	Options	Weighted average exercise price
$38.76	2,500	$	38.76	3.07	2,500	$	38.76
$38.83	24,550	38.83		3.08	24,550	38.83
$47.25	3,000	47.25		3.59	3,000	47.25
$104.24	47,875	104.24		9.91	—	—
	77,925	$	79.34	7.29	30,050	$	19.83



Options	Units	Weighted-average exercise price		Weighted-average remaining contractual life in years	Aggregate intrinsic value
Outstanding as of December 31, 2010	30,050	$	39.66
Granted	47,875	104.24
Exercised	—	—
Forfeited	—	—
Outstanding as of March 31, 2011	77,925	$	79.34	7.29	$	1,920

Vested and Expected to Vest as of
March 31, 2011	67,257	$	75.39	6.88	$	1,920

Exercisable as of March 31, 2011	30,050	$	39.66	3.13	$	1,920

The total intrinsic value of options exercised during the three months ended March 31, 2011 was $0 as no options were exercised during the period.

The following table summarizes information related to unvested restricted units outstanding as of March 31, 2011:



Unvested Restricted Units	Number of units		Weighted average grant date fair value
Unvested at December 31, 2010	179,440		$	71.81
Granted	79,750		101.68
Vested	(51,900	)	71.47
Forfeited	—		—
Unvested at March 31, 2011	207,290		$	83.38

The total value of restricted units vested during the three months ended March 31, 2011 was $5.4 million.

14. Earnings Per Share of the Company

The following table sets forth a reconciliation of the numerators and denominators in computing the Company's earnings per share (in thousands, except per share amounts):



	Three Months Ended March 31,
	2011			2010
Numerator
Income from continuing operations attributable to the Company	$	9,398		$	2,792
Less applicable preferred share dividends	—			(1,406		)
Less allocation of earnings to participating securities	(192		)	(169		)
Income from continuing operations available to common shareholders of the Company	9,206			1,217
Discontinued operations attributable to the Company	—			1
Net income available to common shareholders of the Company	$	9,206		$	1,218
Denominator
Basic weighted average common shares	80,353			80,060
Effect of senior exchangeable notes	125			66
Effect of outstanding options	74			110
Diluted weighted average common shares	80,552			80,236
Basic earnings per common share:
Income from continuing operations	$	0.11		$	0.02
Discontinued operations	—			—
Net income	$	0.11		$	0.02
Diluted earnings per common share:
Income from continuing operations	$	0.11		$	0.02
Discontinued operations	—			—
Net income	$	0.11		$	0.02

The senior, exchangeable notes are included in the diluted earnings per share computation, if the effect is dilutive, using the treasury stock method. In applying the treasury stock method, the effect will be dilutive if the average market price of our common shares for at least 20 trading days in the 30 consecutive trading days at the end of each quarter is higher than the exchange price of $17.85 per share.

The computation of diluted earnings per share excludes options to purchase common shares when the exercise price is greater than the average market price of the common shares for the period. For the three months ended March 31, 2011, 191,500 options were excluded from the computation. No options were excluded from the computation for the three months ended March 31, 2010. The assumed exchange of the partnership units held by the noncontrolling interest limited partner as of the beginning of the year, which would result in the elimination of earnings allocated to the noncontrolling interest in the Operating Partnership, would have no impact on earnings per share since the allocation of earnings to a partnership unit, as if exchanged, is equivalent to earnings allocated to a common share.

The Company's unvested restricted share awards contain non-forfeitable rights to dividends or dividend equivalents. The impact of the unvested restricted share awards on earnings per share has been calculated using the two-class method whereby earnings are allocated to the unvested restricted share awards based on dividends declared and the unvested restricted shares' participation rights in undistributed earnings.

The notional units are considered contingently issuable common shares and are included in earnings per share if the effect is dilutive using the treasury stock method. The notional units were issued in January 2010 and all have been excluded from the computation of diluted earnings per share for the three months ended March 31, 2011 and 2010, respectively, as none of the contingent conditions were satisfied as of the end of the reporting period.

15. Earnings Per Unit of the Operating Partnership

The following table sets forth a reconciliation of the numerators and denominators in computing the Operating Partnership's earnings per unit (in thousands, except per unit amounts):



	Three Months Ended March 31,
	2011			2010
Numerator
Income from continuing operations	$	10,817		$	3,002
Less applicable preferred unit distributions	—			(1,406		)
Less allocation of earnings to participating securities	(192		)	(169		)
Income from continuing operations available to common unitholders of the Operating Partnership	10,625			1,427
Discontinued operations	—			1
Net income available to common unitholders of the Operating Partnership	$	10,625		$	1,428
Denominator
Basic weighted average common units	23,121			23,048
Effect of senior exchangeable notes	31			17
Effect of outstanding options	19			27
Diluted weighted average common units	23,171			23,092
Basic earnings per common unit:
Income from continuing operations	$	0.46		$	0.06
Discontinued operations	—			—
Net income	$	0.46		$	0.06
Diluted earnings per common unit:
Income from continuing operations	$	0.46		$	0.06
Discontinued operations	—			—
Net income	$	0.46		$	0.06

When the Company issues common shares upon exercise of options or issues restricted share awards, the Operating Partnership issues one corresponding unit to the Company for every four common shares issued. The senior, exchangeable notes are included in the diluted earnings per unit computation, if the effect is dilutive, using the treasury stock method. In applying the treasury stock method, the effect will be dilutive if the average market price of the Company's common shares for at least 20 trading days in the 30 consecutive trading days at the end of each quarter is higher than the exchange price of $17.85 per common share.

The computation of diluted earnings per unit excludes options to purchase common units when the exercise price is greater than the average market price of the common units for the period. The market price of a common unit is considered to be equivalent to four times the market price of a Company common share. For the three months ended March 31, 2011, 47,875 options were excluded from the computation. No options were excluded from the computation for the three months ended March 31, 2010.

The Company's unvested restricted share awards contain non-forfeitable rights to distributions or distribution equivalents. The impact of the unvested restricted unit awards on earnings per unit has been calculated using the two-class method whereby earnings are allocated to the unvested restricted unit awards based on distributions declared and the unvested restricted units' participation rights in undistributed earnings.

The notional units are considered contingently issuable common units and are included in earnings per unit if the effect is dilutive using the treasury stock method. The notional units were issued in January 2010 and all have been excluded from the computation of diluted earnings per unit for the three months ended March 31, 2011 and 2010, respectively, as none of the contingent conditions were satisfied as of the end of the reporting period.

16. Fair Value Measurements

Fair value guidance establishes a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value. These tiers are defined as follows:



Tier		Description
Level 1		Defined as observable inputs such as quoted prices in active markets

Level 2		Defined as inputs other than quoted prices in active markets that are either directly or indirectly observable

Level 3		Defined as unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions

The estimated fair value of our debt, consisting of senior unsecured notes, senior exchangeable notes and unsecured lines of credit, at March 31, 2011 and December 31, 2010, respectively, was $771.1 million and $770.1 million, respectively, and its recorded value was $721.0 million and $714.6 million, respectively. Fair values were determined, based on level 2 inputs, using discounted cash flow analysis with an interest rate or credit spread similar to that of current market borrowing arrangements.

17. Related Party Transactions

Tanger Family Limited Partnership is a related party which holds a limited partnership interest in and is the noncontrolling interest of the Operating Partnership. The only material related party transaction with the Tanger Family Limited Partnership is the payment of quarterly distributions of earnings which were $2.4 million and $2.3 million for the three months ended March 31, 2011 and 2010 respectively.

During the third quarter of 2010, Stanley K. Tanger, our founder, transferred his general partnership interest in the Tanger Family Limited Partnership, to the Stanley K. Tanger Marital Trust. As discussed in Note 1 and Note 12, the Tanger Family Limited Partnership is the noncontrolling interest in the Company's consolidated financial statements. The sole trustee of the Stanley K. Tanger Marital Trust, and thus effectively the general partner of Tanger Family Limited Partnership, is John H. Vernon. Mr. Vernon is a partner at the law firm of Vernon, Vernon, Wooten, Brown, Andrews & Garrett, or the Vernon Law Firm, which has served as the principal outside counsel of the Company and Operating Partnership since their inception in 1993. Based on Mr. Vernon's position as trustee of the Stanley K. Tanger Marital Trust, the general partner of the Tanger Family Limited Partnership, he is now considered a related party. However, Mr. Vernon has neither ownership rights nor economic interests in either the Tanger Family Limited Partnership or the Stanley K. Tanger Marital Trust.

Fees paid to the Vernon Law Firm were approximately $417,000 and $457,000 for the three months ended March 31, 2011 and 2010. In addition, as of March 31, 2011 and December 31, 2010, there were $290,000 and $0, respectively, outstanding in accounts payable and accrued expenses for amounts owed the Vernon Law Firm.

18. Non-Cash Activities

We purchase capital equipment and incur costs relating to construction of facilities, including tenant finishing allowances. Expenditures included in construction trade payables as of March 31, 2011 and 2010 amounted to $31.0 million and $22.4 million, respectively.

19. Subsequent Events

On April 28, 2011, the Federal Trade Commission (“FTC”) issued a release announcing that Simon Property Group, Inc. (“Simon”) has filed an application for approval of the divestiture of its outlet center located in Jeffersonville, Ohio to the Operating Partnership and that it is accepting public comments on the application until May 30, 2011. Simon has requested a decision on the application by the FTC by June 24, 2011. The Operating Partnership has signed an agreement to purchase the Jeffersonville outlet center from Simon. The closing of the transaction is subject to FTC approval as well as other customary conditions.

On May 6, 2011, the Operating Partnership entered into agreements with OCF Holdings LLC, Cordish AC-1 Associates LLC, Cordish AC-2 Associates LLC and Atlantic City Associates Number Three Manager LLC (the "Agreements") to acquire substantially all of the economic interests in two outlet centers representing approximately 694,000 square feet for a combined purchase price of approximately $125.0 million in cash and the assumption of indebtedness of approximately $75.0 million. The debt being assumed consists of three mortgages with various lenders that bear interest at fixed rates ranging from 5.14% to 7.65% per annum and have maturity dates ranging from 2016 to 2026. The centers are located in Atlantic City, New Jersey and Ocean City Maryland. The Operating Partnership paid a cash deposit of approximately $11.8 million on May 9, 2011 to secured its obligations under the Agreements, which will be credited against the purchase price for these interests at closing. The closing for both properties, which is subject to approval by the current mortgage holders, is expected to take place during the third quarter of 2011.

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations

The discussion of our results of operations reported in the unaudited, consolidated statements of operations compares the three months ended March 31, 2011 with the three months ended March 31, 2010. The results of operations discussion is combined for Tanger Factory Outlet Centers, Inc. and Tanger Properties Limited Partnership because the results are virtually the same for both entities. The following discussion should be read in conjunction with the unaudited consolidated financial statements appearing elsewhere in this report. Historical results and percentage relationships set forth in the unaudited, consolidated statements of operations, including trends which might appear, are not necessarily indicative of future operations. Unless the context indicates otherwise, the term, "Company", refers to Tanger Factory Outlet Centers, Inc. and subsidiaries and the term, "Operating Partnership", refers to Tanger Properties Limited Partnership and subsidiaries. The terms "we", "our" and "us" refer to the Company or the Company and the Operating Partnership together, as the text requires.

Cautionary Statements

Certain statements made below are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. We intend for such forward-looking statements to be covered by the safe harbor provisions for forward-looking statements contained in the Private Securities Reform Act of 1995 and included this statement for purposes of complying with these safe harbor provisions. Forward-looking statements, which are based on certain assumptions and describe our future plans, strategies, beliefs and expectations, are generally identifiable by use of the words "believe", "expect", "intend", "anticipate", "estimate", "project", or similar expressions. You should not rely on forward-looking statements since they involve known and unknown risks, uncertainties and other factors which are, in some cases, beyond our control and which could materially affect our actual results, performance or achievements. Factors which may cause actual results to differ materially from current expectations include, but are not limited to, those set forth under Item 1A - "Risk Factors" in the Company's and the Operating Partnership's Annual Reports on Form 10-K for the year ended December 31, 2010. There have been no material changes to the risk factors listed there through March 31, 2011.

General Overview

At March 31, 2011, our consolidated portfolio included 32 wholly owned outlet centers in 21 states totaling 9.4 million square feet compared to 31 wholly owned outlet centers in 21 states totaling 9.1 million square feet at March 31, 2010. The changes in the number of outlet centers, square feet and number of states are due to the following events:



	No. of Centers		Square Feet (000's		States
As of March 31, 2010	31		9,057		21
New development:
Mebane, North Carolina	1		319		—
Center redevelopment:
Hilton Head I, South Carolina	1		177		—
Center disposition:
Commerce I, Georgia	(1	)	(186	)	—
Other	—		1		—
As of March 31, 2011	32		9,368		21

The following table summarizes certain information for our existing outlet centers in which we have an ownership interest as of March 31, 2011. Except as noted, all properties are fee owned.



Location	Square	%
Wholly Owned Properties	Feet	Occupied
Riverhead, New York ⁽¹⁾	729,475	98
Rehoboth Beach, Delaware ⁽¹⁾	568,900	99
Foley, Alabama	557,288	98
San Marcos, Texas	441,929	95
Myrtle Beach Hwy 501, South Carolina	426,417	92
Sevierville, Tennessee ⁽¹⁾	419,038	100
Myrtle Beach Hwy 17, South Carolina ⁽¹⁾	403,161	96
Washington, Pennsylvania	372,972	99
Commerce II, Georgia	370,512	99
Charleston, South Carolina	352,315	92
Howell, Michigan	324,632	99
Mebane, North Carolina	318,910	99
Branson, Missouri	302,922	98
Park City, Utah	298,379	100
Locust Grove, Georgia	293,868	99
Westbrook, Connecticut	291,051	92
Gonzales, Louisiana	282,403	95
Williamsburg, Iowa	277,230	96
Lincoln City, Oregon	270,212	99
Lancaster, Pennsylvania	255,152	98
Tuscola, Illinois	250,439	86
Tilton, New Hampshire	245,698	99
Hilton Head II, South Carolina	206,586	98
Fort Myers, Florida	198,950	90
Terrell, Texas	177,800	94
Hilton Head I, South Carolina	177,199	82
Barstow, California	171,300	100
West Branch, Michigan	112,120	98
Blowing Rock, North Carolina	104,185	100
Nags Head, North Carolina	82,178	95
Kittery I, Maine	59,694	89
Kittery II, Maine	24,619	100
Totals	9,367,534	97 ⁽²⁾

Unconsolidated Joint Ventures
Deer Park, New York ⁽³⁾	683,033	85
Wisconsin Dells, Wisconsin	265,061	98


(1)	These properties or a portion thereof are subject to a ground lease.


(2)	Excludes the Hilton Head I, SC property which opened on March 31, 2011 and is not yet stabilized.


(3)	Includes a 29,253 square foot warehouse adjacent to the shopping center.

RESULTS OF OPERATIONS

Comparison of the three months ended March 31, 2011 to the three months ended March 31, 2010

BASE RENTALS

Base rentals increased $2.7 million, or 6%, in the 2011 period compared to the 2010 period. The following table sets forth the changes in various components of base rentals from the 2011 and 2010 periods (in thousands):



	2011		2010		Change
Existing property base rentals	$	44,291	$	42,444	$	1,847
Incremental base rentals from new developments	1,607		259		1,348
Termination fees	166		621		(455		)
Amortization of net above and below market rent adjustments	155		173		(18		)
	$	46,219	$	43,497	$	2,722

Base rental income generated from existing properties in our portfolio increased due to increases in rental rates on lease renewals and incremental rents from re-tenanting vacant spaces.

During the fourth quarter of 2010, we opened a 319,000 square foot outlet center in Mebane, North Carolina.

Termination fees decreased due to the 2010 period containing several tenants that terminated their leases prior to the contractual obligation.

At March 31, 2011, the net liability representing the amount of unrecognized combined above and below market lease values totaled approximately $1.3 million. If a tenant vacates its space prior to the contractual termination of the lease and no rental payments are being made on the lease, any unamortized balance of the related above or below market lease value will be written off and could materially impact our net income positively or negatively.

PERCENTAGE RENTALS

Percentage rentals, which represent revenues based on a percentage of tenants' sales volume above predetermined levels, the breakpoint, increased $86,000, or 7%, from the 2010 period to the 2011 period. The increase in percentage rentals is directly related to the strength of our tenants' sales. Reported tenant comparable sales for our wholly owned properties for the rolling twelve months ended March 31, 2011 increased 5.9% to $359 per square foot. Reported tenant comparable sales is defined as the weighted average sales per square foot reported in space open for the full duration of each comparison period.

EXPENSE REIMBURSEMENTS

Expense reimbursements increased $1.7 million, or 9%, in the 2011 period compared to the 2010 period. The following table sets forth the changes in various components of expense reimbursements from the 2011 and 2010 periods (in thousands):



	2011		2010		Change
Existing property expense reimbursements	$	20,240	$	19,052	$	1,188
Incremental expense reimbursements from new developments	870		132		738
Termination fees allocated to expense reimbursements	95		335		(240		)
	$	21,205	$	19,519	$	1,686

Expense reimbursements, which represent the contractual recovery from tenants of certain common area maintenance, insurance, property tax, promotional, advertising and management expenses, generally fluctuate consistently with the reimbursable property operating expenses to which they relate.

OTHER INCOME

Other income increased $203,000, or 12%, in the 2011 period compared to the 2010 period. The following table sets forth the changes in various components of other income from the 2011 and 2010 periods (in thousands):



	2011		2010		Change
Existing property other income	$	1,807	$	1,547	$	260
Incremental other income from new developments	117		13		104
Gain on sale of land outparcel	—		161