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 September 30, 2012
OR
 
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 x   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).
Tanger Factory Outlet Centers, Inc.
 
 
 
 
x Large accelerated filer
 
o Accelerated filer
 
o Non-accelerated filer
 
o Smaller reporting company
Tanger Properties Limited Partnership
 
 
 
 
o Large accelerated filer
 
o Accelerated filer
 
x Non-accelerated filer
 
o Smaller reporting company





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 October 31, 2012, there were 93,907,284 common shares of Tanger Factory Outlet Centers, Inc. outstanding, $.01 par value.




EXPLANATORY NOTE
This report combines the quarterly reports on Form 10-Q for the quarter ended September 30, 2012 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, Tanger GP Trust and Tanger LP Trust. Tanger GP Trust controls the Operating Partnership as its sole general partner. Tanger LP Trust holds a limited partnership interest. Through May 31, 2011, the Tanger family, through its ownership of the Tanger Family Limited Partnership, held the remaining units as a limited partner. On June 1, 2011, the Tanger Family Limited Partnership was dissolved, and the units of the Operating Partnership owned by the Tanger Family Limited Partnership were distributed to the individual beneficial owners of the Tanger Family Limited Partnership, making each such individual beneficial owner an individual limited partner of the Operating Partnership (collectively the "Family Limited Partners").

As of September 30, 2012, the Company, through its ownership of Tanger GP Trust and Tanger LP Trust, owned 23,473,147 units of the Operating Partnership and the Family Limited Partners collectively owned 1,230,490 units. Each unit held by the Family Limited Partners 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.

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.

3



There are a 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, 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 consolidated and 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 required to be contributed to the Operating Partnership in exchange for partnership units, the Operating Partnership generates the capital required through its operations, its 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 Family Limited Partners 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;
Share-Based Compensation of the Company and Equity-Based Compensation 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.

4



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 September 30, 2012 and December 31, 2011
Consolidated Statements of Operations - for the three and nine months ended September 30, 2012 and 2011
Consolidated Statements of Comprehensive Income - for the three and nine months ended September 30, 2012 and 2011
Consolidated Statements of Equity - for the nine months ended September 30, 2012 and the year ended December 31, 2011
Consolidated Statements of Cash Flows - for the nine months ended September 30, 2012 and 2011
 
 
FINANCIAL STATEMENTS OF TANGER PROPERTIES LIMITED PARTNERSHIP (Unaudited)
 
Consolidated Balance Sheets - as of September 30, 2012 and December 31, 2011
Consolidated Statements of Operations - for the three and nine months ended September 30, 2012 and 2011
Consolidated Statements of Comprehensive Income - for the three and nine months ended September 30, 2012 and 2011
Consolidated Statements of Equity - for the nine months ended September 30, 2012 and the year ended December 31, 2011
Consolidated Statements of Cash Flows - for the nine months ended September 30, 2012 and 2011
 
 
Notes to Consolidated Financial Statements of Tanger Factory Outlet Centers, Inc. and Tanger Properties Limited Partnership
 
 
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
 
 
Item 3. Quantitative and Qualitative Disclosures about Market Risk
 
 
Item 4. Controls and Procedures (Tanger Factory Outlet Centers, Inc. and Tanger Properties Limited Partnership)
 
Part II. Other Information
 
 
Item 1. Legal Proceedings
 
 
Item 1A. Risk Factors
 
 
Item 6. Exhibits
 
 
Signatures


5



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)
 
 
September 30, 2012
 
December 31,
2011
ASSETS
 
 

 
 

Rental property
 
 

 
 

Land
 
$
148,002

 
$
148,002

Buildings, improvements and fixtures
 
1,793,963

 
1,764,494

Construction in progress
 

 
3,549

 
 
1,941,965

 
1,916,045

Accumulated depreciation
 
(565,521
)
 
(512,485
)
Total rental property, net
 
1,376,444

 
1,403,560

Cash and cash equivalents
 
9,511

 
7,894

Investments in unconsolidated joint ventures, net
 
82,676

 
28,481

Deferred lease costs and other intangibles, net
 
104,496

 
120,636

Deferred debt origination costs, net
 
9,619

 
8,861

Prepaids and other assets
 
56,211

 
52,383

Total assets
 
$
1,638,957

 
$
1,621,815

LIABILITIES AND EQUITY
 
 
 
 
Liabilities
 
 

 
 

Debt
 
 

 
 

Senior, unsecured notes (net of discount of $2,036 and $2,237, respectively)
 
$
547,964

 
$
547,763

Unsecured term loans (net of discount of $584 and $692, respectively)
 
259,416

 
9,308

Mortgages payable (including premiums of $6,631 and $7,434, respectively)
 
108,672

 
111,379

Unsecured lines of credit
 
136,769

 
357,092

Total debt
 
1,052,821

 
1,025,542

Construction trade payables
 
10,525

 
13,656

Accounts payable and accrued expenses
 
46,087

 
37,757

Other liabilities
 
16,429

 
16,428

Total liabilities
 
1,125,862

 
1,093,383

Commitments and contingencies
 


 


Equity
 
 

 
 

Tanger Factory Outlet Centers, Inc.
 
 

 
 

Common shares, $.01 par value, 300,000,000 shares authorized, 93,892,588 and 86,727,656 shares issued and outstanding at September 30, 2012 and December 31, 2011, respectively
 
939

 
867

Paid in capital
 
762,821

 
720,073

Accumulated distributions in excess of net income 
 
(283,943
)
 
(261,913
)
Accumulated other comprehensive income
 
1,252

 
1,535

Equity attributable to Tanger Factory Outlet Centers, Inc.
 
481,069

 
460,562

Equity attributable to noncontrolling interests
 
 
 
 
Noncontrolling interests in Operating Partnership
 
25,218

 
61,027

Noncontrolling interests in other consolidated partnerships
 
6,808

 
6,843

Total equity
 
513,095

 
528,432

Total liabilities and equity
 
$
1,638,957

 
$
1,621,815


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

6



TANGER FACTORY OUTLET CENTERS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data, unaudited)

 
 
Three months ended September 30,
 
Nine months ended September 30,
 
 
2012
 
2011
 
2012
 
2011
Revenues
 
 
 
 
 
 

 
 
Base rentals
 
$
59,662

 
$
55,018

 
$
175,464

 
$
149,630

Percentage rentals
 
3,180

 
2,684

 
6,542

 
5,212

Expense reimbursements
 
24,646

 
22,973

 
73,111

 
64,794

Other income
 
2,995

 
2,568

 
6,944

 
6,447

Total revenues
 
90,483

 
83,243

 
262,061

 
226,083

Expenses
 
 
 


 
 
 
 

Property operating
 
27,614

 
25,181

 
81,679

 
73,054

General and administrative
 
9,018

 
7,943

 
27,737

 
21,895

Acquisition costs
 

 
978

 

 
2,519

Abandoned development costs
 

 

 

 
158

Depreciation and amortization
 
24,809

 
22,964

 
75,247

 
58,787

Total expenses
 
61,441

 
57,066

 
184,663

 
156,413

Operating income
 
29,042

 
26,177


77,398


69,670

Interest expense
 
12,317

 
11,958

 
37,062

 
32,996

Income before equity in losses of unconsolidated joint ventures
 
16,725

 
14,219

 
40,336

 
36,674

Equity in losses of unconsolidated joint ventures
 
(555
)
 
(27
)
 
(2,874
)
 
(823
)
Net income
 
16,170

 
14,192


37,462


35,851

Noncontrolling interests in Operating Partnership
 
(836
)
 
(1,730
)
 
(2,315
)
 
(4,569
)
Noncontrolling interests in other consolidated partnerships
 
(7
)
 
2

 
25

 
2

Net income attributable to Tanger Factory Outlet Centers, Inc.
 
$
15,327

 
$
12,464


$
35,172


$
31,284

 
 
 
 
 
 
 
 
 
Basic earnings per common share:
 
 
 
 
 
 

 
 

Net income
 
$
0.16

 
$
0.14

 
$
0.38

 
$
0.38

Diluted earnings per common share:
 
 
 
 
 
 
 
 
Net income
 
$
0.16

 
$
0.14

 
$
0.37

 
$
0.37

 
 
 
 
 
 
 
 
 
Dividends paid per common share
 
$
0.2100

 
$
0.2000

 
$
0.6200

 
$
0.5938

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

7



TANGER FACTORY OUTLET CENTERS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(In thousands, unaudited)
 
 
Three months ended September 30,
 
Nine months ended September 30,
 
 
2012
 
2011
 
2012
 
2011
Net income
 
$
16,170

 
$
14,192

 
$
37,462

 
$
35,851

Other comprehensive loss
 
 
 
 
 
 
 

Reclassification adjustment for amortization of gain on settlement of US treasury rate lock included in net income
 
(88
)
 
(83
)
 
(261
)
 
(246
)
Foreign currency translation adjustments
 
(73
)
 
(107
)
 
(39
)
 
(107
)
Changes in fair value of our portion of our unconsolidated joint ventures' cash flow hedges
 

 

 

 
46

Other comprehensive loss
 
(161
)
 
(190
)
 
(300
)
 
(307
)
Comprehensive income
 
16,009

 
14,002

 
37,162

 
35,544

Comprehensive income attributable to noncontrolling interests
 
(835
)
 
(1,705
)
 
(2,273
)
 
(4,528
)
Comprehensive income attributable to Tanger Factory Outlet Centers, Inc.
 
$
15,174

 
$
12,297

 
$
34,889

 
$
31,016

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


8



TANGER FACTORY OUTLET CENTERS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EQUITY
(In thousands, except share and per share data, unaudited)


 
 
Common shares
Paid in capital
Accumulated distributions in excess of earnings
Accumulated other comprehensive income
Total Tanger Factory Outlet Centers, Inc. equity
Noncontrolling interests in Operating Partnership
Noncontrolling
interests in
other consolidated partnerships
Total
 equity
Balance,
December 31, 2010
 
$
810

$
604,359

$
(240,024
)
$
1,784

$
366,929

$
54,966

$

$
421,895

Net income
 


44,641


44,641

6,356

(8
)
50,989

Other comprehensive loss
 



(249
)
(249
)
(36
)

(285
)
Compensation under Incentive Award Plan
 

7,291



7,291



7,291

Issuance of 4,600,000 common shares, net of issuance costs of $670,000
 
46

117,329



117,375



117,375

Issuance of 36,500 common shares upon exercise of options
 

353



353



353

Grant of 317,400 restricted shares, net of forfeitures
 
3

(3
)






Adjustment for noncontrolling interests in Operating Partnership
 

(9,242
)


(9,242
)
9,242



Adjustment for noncontrolling interests in other consolidated partnerships
 

(6
)


(6
)

6,851

6,845

Exchange of 160,332 Operating Partnership units for 641,328 common shares
 
7

(7
)






Issuance of 136,360 common shares upon exchange of exchangeable notes
 
1

(1
)






Common dividends ($0.7938 per share)
 


(66,530
)

(66,530
)


(66,530
)
Distributions to noncontrolling interest in Operating Partnership
 





(9,501
)

(9,501
)
Balance, December 31, 2011
 
$
867

$
720,073

$
(261,913
)
$
1,535

$
460,562

$
61,027

$
6,843

$
528,432

Net income
 


35,172


35,172

2,315

(25
)
37,462

Other comprehensive loss
 



(283
)
(283
)
(17
)

(300
)
Compensation under Incentive Award Plan
 

8,231



8,231



8,231

Issuance of 29,000 common shares upon exercise of options
 

372



372



372


9



TANGER FACTORY OUTLET CENTERS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EQUITY
(In thousands, except share and per share data, unaudited)
(Continued)
 
 
Common shares
Paid in capital
Accumulated distributions in excess of earnings
Accumulated other comprehensive income
Total Tanger Factory Outlet Centers, Inc. equity
Noncontrolling interests in Operating Partnership
Noncontrolling
interests in
other consolidated partnerships
Total
 equity
Grant of 566,000 restricted shares, net of forfeitures
 
6

(6
)






Adjustment for noncontrolling interests in Operating Partnership
 

34,207



34,207

(34,207
)


Adjustment for noncontrolling interests in other consolidated partnerships
 

10



10


(10
)

Exchange of 1,642,483 Operating Partnership units for 6,569,932 common shares
 
66

(66
)






Common dividends ($.62 per share)
 


(57,202
)

(57,202
)


(57,202
)
Distributions to noncontrolling interests in Operating Partnership
 





(3,900
)

(3,900
)
Balance,
September 30, 2012
 
$
939

$
762,821

$
(283,943
)
$
1,252

$
481,069

$
25,218

$
6,808

$
513,095


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




10



TANGER FACTORY OUTLET CENTERS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands, unaudited)
 
 
Nine months ended September 30,
 
 
2012
 
2011
OPERATING ACTIVITIES
 
 
 
 

Net income
 
$
37,462

 
$
35,851

Adjustments to reconcile net income to net cash provided by operating activities:
 
 
 
 
Depreciation and amortization
 
75,247

 
58,787

Amortization of deferred financing costs
 
1,722

 
1,540

Equity in losses of unconsolidated joint ventures
 
2,874

 
823

Share-based compensation expense
 
8,231

 
5,458

Amortization of debt (premiums) and discounts, net
 
(753
)
 
(54
)
Distributions of cumulative earnings from unconsolidated joint ventures
 
740

 
315

Net accretion of market rent rate adjustments
 
(489
)
 
(278
)
Straight-line rent adjustments
 
(2,866
)
 
(3,041
)
Changes in other assets and liabilities:
 
 
 
 
Other assets
 
(1,336
)
 
(6,377
)
Accounts payable and accrued expenses
 
8,331

 
11,786

Net cash provided by operating activities
 
129,163

 
104,810

INVESTING ACTIVITIES
 
 
 
 
Additions to rental property
 
(31,157
)
 
(44,911
)
Acquisition of rental property
 

 
(262,488
)
Additions to investments in unconsolidated joint ventures
 
(57,810
)
 
(5,424
)
Distributions in excess of cumulative earnings from unconsolidated joint ventures
 
336

 
585

Increases in escrow deposits
 

 
(1,500
)
Net proceeds from sale of real estate
 

 
723

Additions to deferred lease costs
 
(3,430
)
 
(9,570
)
Net cash used in investing activities
 
(92,061
)
 
(322,585
)
FINANCING ACTIVITIES
 
 
 
 
Cash dividends paid
 
(57,202
)
 
(49,192
)
Distributions to noncontrolling interests in Operating Partnership
 
(3,900
)
 
(7,203
)
Proceeds from issuance of common shares
 

 
117,539

Proceeds from debt issuances
 
491,477

 
485,350

Repayments of debt
 
(463,705
)
 
(330,566
)
Additions to deferred financing costs
 
(2,527
)
 
(289
)
Proceeds from exercise of options
 
372

 
72

Net cash (used in) provided by financing activities
 
(35,485
)
 
215,711

Net increase in cash and cash equivalents
 
1,617

 
(2,064
)
Cash and cash equivalents, beginning of period
 
7,894

 
5,758

Cash and cash equivalents, end of period
 
$
9,511

 
$
3,694

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

11



Item 1 - Financial Statements of Tanger Properties Limited Partnership

TANGER PROPERTIES LIMITED PARTNERSHIP AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands, unaudited)
 
 
September 30, 2012
 
December 31,
2011
ASSETS
 
 

 
 

Rental property
 
 

 
 

Land
 
$
148,002

 
$
148,002

Buildings, improvements and fixtures
 
1,793,963

 
1,764,494

Construction in progress
 

 
3,549

 
 
1,941,965

 
1,916,045

Accumulated depreciation
 
(565,521
)
 
(512,485
)
Total rental property, net
 
1,376,444

 
1,403,560

Cash and cash equivalents
 
9,504

 
7,866

Investments in unconsolidated joint ventures, net
 
82,676

 
28,481

Deferred lease costs and other intangibles, net
 
104,496

 
120,636

Deferred debt origination costs, net
 
9,619

 
8,861

Prepaids and other assets
 
55,825

 
52,059

Total assets
 
$
1,638,564

 
$
1,621,463

LIABILITIES AND EQUITY
 
 
 
 
Liabilities
 
 
 
 
Debt
 
 
 
 
Senior, unsecured notes (net of discount of $2,036 and $2,237, respectively)
 
$
547,964

 
$
547,763

Unsecured term loans (net of discount of $584 and $692, respectively)
 
259,416

 
9,308

Mortgages payable (including premiums of $6,631 and $7,434, respectively)
 
108,672

 
111,379

Unsecured lines of credit
 
136,769

 
357,092

Total debt
 
1,052,821

 
1,025,542

Construction trade payables
 
10,525

 
13,656

Accounts payable and accrued expenses
 
45,694

 
37,405

Other liabilities
 
16,429

 
16,428

Total liabilities
 
1,125,469

 
1,093,031

Commitments and contingencies
 


 


Equity
 
 
 
 
Partners' Equity
 
 
 
 
General partner
 
4,736

 
4,972

Limited partners
 
500,388

 
515,154

Accumulated other comprehensive income
 
1,163

 
1,463

Total partners' equity
 
506,287

 
521,589

Noncontrolling interests in consolidated partnerships
 
6,808

 
6,843

Total equity
 
513,095

 
528,432

Total liabilities and equity
 
$
1,638,564

 
$
1,621,463

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

12



TANGER PROPERITES LIMITED PARTNERSHIP AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per unit data, unaudited)
 
 
Three months ended September 30,
 
Nine months ended September 30,
 
 
2012
 
2011
 
2012
 
2011
Revenues
 
 
 
 
 
 

 
 
Base rentals
 
$
59,662

 
$
55,018

 
$
175,464

 
$
149,630

Percentage rentals
 
3,180

 
2,684

 
6,542

 
5,212

Expense reimbursements
 
24,646

 
22,973

 
73,111

 
64,794

Other income
 
2,995

 
2,568

 
6,944

 
6,447

Total revenues
 
90,483

 
83,243


262,061


226,083

Expenses
 


 


 


 
 
Property operating
 
27,614

 
25,181

 
81,679

 
73,054

General and administrative
 
9,018

 
7,943

 
27,737

 
21,895

Acquisition costs
 

 
978

 

 
2,519

Abandoned development costs
 

 

 

 
158

Depreciation and amortization
 
24,809

 
22,964

 
75,247

 
58,787

Total expenses
 
61,441

 
57,066


184,663


156,413

Operating income
 
29,042

 
26,177


77,398


69,670

Interest expense
 
12,317

 
11,958

 
37,062

 
32,996

Income before equity in losses of unconsolidated joint ventures
 
16,725

 
14,219


40,336


36,674

Equity in losses of unconsolidated joint ventures
 
(555
)
 
(27
)
 
(2,874
)
 
(823
)
Net income
 
16,170

 
14,192


37,462


35,851

Noncontrolling interests in consolidated partnerships
 
(7
)
 
2

 
25

 
2

Net income available to partners
 
16,163

 
14,194


37,487


35,853

Net income available to limited partners
 
15,998

 
14,048

 
37,103

 
35,485

Net income available to general partner
 
$
165

 
$
146


$
384


$
368

 
 
 
 
 
 
 
 
 
Basic earnings per common unit:
 
 
 
 
 
 
 
 

Net income
 
$
0.65

 
$
0.58

 
$
1.51

 
$
1.50

Diluted earnings per common unit:
 
 
 
 
 
 
 
 

Net income
 
$
0.65

 
$
0.57

 
$
1.50

 
$
1.49

 
 
 
 
 
 
 
 
 
Distribution paid per common unit
 
$
0.8400

 
$
0.8000

 
$
2.4800

 
$
2.3750

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

13



TANGER PROPERITES LIMITED PARTNERSHIP AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(In thousands, unaudited)

 
 
Three months ended September 30,
 
Nine months ended September 30,
 
 
2012
 
2011
 
2012
 
2011
Net income
 
$
16,170

 
$
14,192

 
$
37,462

 
$
35,851

Other comprehensive loss
 
 
 
 
 
 
 
 
Reclassification adjustment for amortization of gain on settlement of US treasury rate lock included in net income
 
(88
)
 
(83
)
 
(261
)
 
(246
)
Foreign currency translation adjustments
 
(73
)
 
(107
)
 
(39
)
 
(107
)
Changes in fair value of our portion of our unconsolidated joint ventures' cash flow hedges
 

 

 

 
46

Other comprehensive loss
 
(161
)
 
(190
)
 
(300
)
 
(307
)
Comprehensive income
 
16,009

 
14,002

 
37,162

 
35,544

Comprehensive income attributable to noncontrolling interests in consolidated partnerships
 
(7
)
 

 
25

 

Comprehensive income attributable to the Operating Partnership
 
$
16,002

 
$
14,002

 
$
37,187

 
$
35,544

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


14



TANGER PROPERITES LIMITED PARTNERSHIP AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EQUITY
(In thousands, except unit and per unit data, unaudited)

 
 
General partner
Limited partners
Accumulated other comprehensive income
Total partners' equity
Noncontrolling interests in consolidated partnerships
Total equity
Balance, December 31, 2010
 
$
5,221

$
414,926

$
1,748

$
421,895

$

$
421,895

Net income
 
524

50,473


50,997

(8
)
50,989

Other comprehensive loss
 


(285
)
(285
)

(285
)
Compensation under Incentive Award Plan
 

7,291


7,291


7,291

Issuance of 13,000 general partner common units and 1,137,000 limited partner common units, net of issuance costs of $670,000
 

117,375


117,375


117,375

Issuance of 9,125 common units upon exercise of options
 

353


353


353

Grant of 79,350 restricted units, net of forfeitures
 






Adjustments for noncontrolling interests in consolidated partnerships
 

(6
)

(6
)
6,851

6,845

Common distributions ($3.175 per unit)
 
(773
)
(75,258
)

(76,031
)

(76,031
)
Balance, December 31, 2011
 
4,972

515,154

1,463

521,589

6,843

528,432

Net income
 
384

37,103


37,487

(25
)
37,462

Other comprehensive loss
 


(300
)
(300
)

(300
)
Compensation under Incentive Award Plan
 

8,231


8,231


8,231

Issuance of 7,250 common units upon exercise of options
 

372


372


372

Grant of 141,500 restricted units, net of forfeitures
 






Adjustments for noncontrolling interests in consolidated partnerships
 

10


10

(10
)

Common distributions ($2.48 per unit)
 
(620
)
(60,482
)

(61,102
)

(61,102
)
Balance, September 30, 2012
 
$
4,736

$
500,388

$
1,163

$
506,287

$
6,808

$
513,095

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



15



TANGER PROPERTIES LIMITED PARTNERSHIP AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands, unaudited)
 
 
Nine months ended September 30,
 
 
2012
 
2011
OPERATING ACTIVITIES
 
 

 
 

Net income
 
$
37,462

 
$
35,851

Adjustments to reconcile net income to net cash provided by operating activities:
 
 
 


Depreciation and amortization
 
75,247

 
58,787

Amortization of deferred financing costs
 
1,722

 
1,540

Equity in losses of unconsolidated joint ventures
 
2,874

 
823

Equity-based compensation expense
 
8,231

 
5,458

Amortization of debt (premiums) and discounts, net
 
(753
)
 
(54
)
Distributions of cumulative earnings from unconsolidated joint ventures
 
740

 
315

Net accretion of market rent rate adjustments
 
(489
)
 
(278
)
Straight-line rent adjustments
 
(2,866
)
 
(3,041
)
Changes in other assets and liabilities:
 
 
 
 
Other assets
 
(1,274
)
 
(6,460
)
Accounts payable and accrued expenses
 
8,290

 
11,888

Net cash provided by operating activities
 
129,184

 
104,829

INVESTING ACTIVITIES
 
 
 
 
Additions to rental property
 
(31,157
)
 
(44,911
)
Acquisition of rental property
 

 
(262,488
)
Additions to investments in unconsolidated joint ventures
 
(57,810
)
 
(5,424
)
Distributions in excess of cumulative earnings from unconsolidated joint ventures
 
336

 
585

Increase in escrow deposits
 

 
(1,500
)
Net proceeds from the sale of real estate
 

 
723

Additions to deferred lease costs
 
(3,430
)
 
(9,570
)
Net cash used in investing activities
 
(92,061
)
 
(322,585
)
FINANCING ACTIVITIES
 
 
 
 
Cash distributions paid
 
(61,102
)
 
(56,395
)
Contributions from partners
 

 
117,539

Proceeds from debt issuances
 
491,477

 
485,350

Repayments of debt
 
(463,705
)
 
(330,566
)
Additions to deferred financing costs
 
(2,527
)
 
(289
)
Proceeds from exercise of options
 
372

 
72

Net cash (used in) provided by financing activities
 
(35,485
)
 
215,711

Net increase in cash and cash equivalents
 
1,638

 
(2,045
)
Cash and cash equivalents, beginning of period
 
7,866

 
5,671

Cash and cash equivalents, end of period
 
$
9,504

 
$
3,626

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

16



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 ("REIT") which, through our controlling interest in the Operating Partnership, focuses exclusively on developing, acquiring, owning, operating and managing outlet shopping centers. As of September 30, 2012, we owned and operated 36 outlet centers, with a total gross leasable area of approximately 10.7 million square feet. We also had partial ownership interests in 3 outlet centers totaling approximately 1.2 million square feet, including one outlet center in Ontario, Canada.
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.
The Company owns the majority of the units of partnership interest issued by the Operating Partnership through its two wholly-owned subsidiaries, Tanger GP Trust and Tanger LP Trust. Tanger GP Trust controls the Operating Partnership as its sole general partner. Tanger LP Trust holds a limited partnership interest. The Family Limited Partners own the remaining Operating Partnership units.

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 combined Annual Report on Form 10-K for the year ended December 31, 2011. The December 31, 2011 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.

17



3. Investments in Unconsolidated Real Estate Joint Ventures
Our investments in unconsolidated joint ventures as of September 30, 2012 and December 31, 2011 aggregated $82.7 million and $28.5 million, respectively. We have concluded based on the current facts and circumstances that the equity method of accounting should be used to account for each of the individual joint ventures below. At September 30, 2012, 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
 
Deer Park, Long Island NY
 
33.3
%
 
741,981

 
$
3.5

 
$
246.9

Deer Park Warehouse
 
Deer Park, Long Island NY
 
33.3
%
 
29,253

 

 
1.8

Galveston/Houston (1)
 
Texas City, Texas
 
50.0
%
 
352,705

 
28.5

 

National Harbor
 
Washington D.C. Metro Area
 
50.0
%
 

 
1.2

 

RioCan Canada
 
Various
 
50.0
%
 
155,522

 
25.9

 

Westgate
 
Glendale, Arizona
 
58.0
%
 

 
19.5

 
15.9

Wisconsin Dells
 
Wisconsin Dells, Wisconsin
 
50.0
%
 
265,086

 
3.9

 
24.3

Other
 
 
 


 

 
0.2

 

Total
 
 
 
 
 
 
 
$
82.7

 
$
288.9

(1) Outlet center opened on October 19, 2012.
Management, leasing and marketing fees earned from services provided to our unconsolidated joint ventures were recognized in other income as follows (in thousands):
 
 
Three months ended September 30,
 
Nine months ended September 30,
 
 
2012
 
2011
 
2012
 
2011
Fee:
 
 
 
 
 
 

 
 

Management and leasing
 
$
571

 
$
716

 
$
1,524

 
$
1,689

Marketing
 
61

 
37

 
161

 
125

Total Fees
 
$
632

 
$
753

 
$
1,685

 
$
1,814

Our investments in real estate joint ventures are reduced by the percentage of the profits earned for leasing and development services associated with our ownership interest in each joint venture. 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. The differences in basis are amortized over the various useful lives of the related assets.

18



Deer Park Warehouse, Long Island, New York
In June 2008, we, along with our partners in Deer Park, entered into a joint venture to purchase a warehouse adjacent to the Tanger Outlet Center located in Deer Park, NY for a total purchase price of $3.3 million and obtained mortgage financing of $2.3 million. The interest only mortgage loan secured by the warehouse matured on May 17, 2011 and the joint venture did not qualify for the one year extension option. As a result, on June 1, 2012 the joint venture reduced the outstanding principal balance by $500,000 to $1.8 million and entered into a Loan Forbearance Agreement with the lender whereby the lender agreed that it would not enforce its rights under the loan documents until the trigger date of October 1, 2012 unless extended. Extension of the trigger date was contingent among other things upon delivering a fully executed contract to sell the property to an unaffiliated third-party purchaser. Although the joint venture did not meet all of the requirements for extending the trigger date, it has delivered a fully executed contract to sell the property which has been approved by the lender. Through closing, the joint venture is committed to make monthly debt service payments at an interest rate of LIBOR + 1.85%. Additional interest accrues at a rate of Prime + 5.5% less the amount paid.
Galveston/Houston, Texas

In June 2011, we announced the formation of a joint venture for the development of a Tanger Outlet Center south of Houston in Texas City, TX. The center grand opening occurred on October 19, 2012 and featured over 85 brand name and designer outlet stores in the first phase of approximately 353,000 square feet, with room for expansion for a total build out of approximately 470,000 square feet. In July 2011, the joint venture acquired the land underlying the site for approximately $5.6 million. As of September 30, 2012, we and our partner had each contributed $27.8 million in cash to the joint venture to fund development activities. The joint venture's remaining commitments to complete construction of the outlet center amounted to approximately $17.0 million at September 30, 2012. We provide property management and marketing services to the center; and with our partner, are jointly providing development and leasing services.

National Harbor, Washington, D.C. Metro Area

In May 2011, we announced the formation of a joint venture for the development of a Tanger Outlet Center at National Harbor in the Washington, D.C. Metro area. The resulting Tanger Outlet Center is expected to contain approximately 80 brand name and designer outlet stores in a center measuring up to 350,000 square feet. The project is currently in the pre-development phase and both parties have made initial equity contributions of $1.2 million to fund certain pre-development costs. We will provide property management, leasing and marketing services to the joint venture. We and our partner will jointly provide site development and construction supervision services to the joint venture.

RioCan Canada

On December 9, 2011, the RioCan Canadian Joint Venture purchased the Cookstown Outlet Mall. The existing outlet center was acquired for $47.4 million, plus an additional $13.8 million for excess land upon the seller meeting certain conditions, for an aggregate purchase price of $61.2 million. RioCan is providing development and property management services to this existing outlet center and we are providing leasing and marketing services. In connection with the purchase, the joint venture assumed the in place financing of $29.6 million which carried an interest rate of 5.10% and had an original maturity date of June 21, 2014. In March 2012, the joint venture retired the outstanding loan and we contributed an additional $15.1 million to the joint venture to fund our portion of the payment.

During the first quarter of 2012, the joint venture terminated an option contract to develop a center in Halton Hills, Ontario and accordingly wrote-off pre-development costs of approximately $1.3 million.

Westgate, Glendale, Arizona

On May 4, 2012, we closed on the formation of a joint venture for the development of a Tanger Outlet Center in Glendale, Arizona. Construction of the center began in February 2012. Situated on 38-acres, the outlet center is located on Loop 101 and Glendale Avenue in Western Phoenix. We currently expect this center to be completed in time for a November 15, 2012 grand opening and will have approximately 80 brand name and designer outlet stores in the first phase which will contain approximately 330,000 square feet. As of September 30, 2012, we had contributed $19.4 million in cash to the joint venture to fund development activities. The joint venture's remaining commitments to complete construction of the outlet center amounted to approximately $17.6 million at September 30, 2012. We are providing property management, construction supervision, leasing and marketing services to the joint venture.
 

19



On June 27, 2012, the joint venture closed on a construction loan with the ability to borrow up to $43.8 million, which carries an interest rate of LIBOR + 1.75%. As of September 30, 2012, the joint venture's balance on the loan was $15.9 million.

We evaluate our real estate joint ventures in accordance with the Consolidation guidance of the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC"). As a result of our qualitative assessment, we concluded that our Westgate and Deer Park joint ventures are Variable Interest Entities ("VIEs") and all of our other joint ventures are not VIEs. Westgate is considered a VIE because the voting rights are disproportionate to the economic interests. Deer Park is considered a VIE because it does not meet the criteria of the members having a sufficient equity investment at risk. Investments in real estate joint ventures in which we have a non-controlling ownership interest are accounted for using the equity method of accounting.

After making the determination that Westgate and Deer Park were VIEs, we performed an assessment to determine if we would be considered the primary beneficiary and thus be required to consolidate their 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 VIE 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 VIE or the right to receive benefits from the entity that could potentially be significant to the VIE

Based on the provisions of the operating, development, leasing, and management agreements of Westgate and Deer Park, we determined that neither member has the power to direct the significant activities that affect the economic performance of the ventures and therefore, we are not required to consolidate Westgate or Deer Park. Our equity method investments in Westgate and Deer Park as of September 30, 2012 were approximately $19.5 million and $3.5 million, respectively. 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 Westgate and Deer Park.









20



Condensed combined summary financial information of unconsolidated joint ventures accounted for using the equity method is as follows (in thousands):
Summary Balance Sheets - Unconsolidated Joint Ventures
 
As of September 30, 2012
 
As of
December 31,
2011
Assets
 
 

 
 

Land
 
$
78,531

 
$
77,864

Buildings, improvements and fixtures
 
295,593

 
288,934

Construction in progress, including land
 
113,169

 
23,545

 
 
487,293

 
390,343

Accumulated depreciation
 
(57,067
)
 
(46,245
)
Total rental property, net
 
430,226

 
344,098

Assets held for sale (1)
 
1,821

 

Cash and cash equivalents
 
10,778

 
7,582

Deferred lease costs, net
 
13,586

 
14,815

Deferred debt origination costs, net
 
5,773

 
7,566

Prepaids and other assets
 
21,396

 
11,687

Total assets
 
$
483,580

 
$
385,748

Liabilities and Owners' Equity
 
 

 
 

Mortgages payable
 
$
288,978

 
$
303,230

Construction trade payables
 
14,506

 
2,669

Accounts payable and other liabilities
 
26,125

 
27,246

Total liabilities
 
329,609

 
333,145

Owners' equity
 
153,971

 
52,603

Total liabilities and owners' equity
 
$
483,580

 
$
385,748

(1) Assets related to our Deer Park Warehouse joint venture, which is currently under contract to be sold.
 
 
Three months ended
 
Nine months ended
Summary Statements of Operations
 
September 30,
 
September 30,
 - Unconsolidated Joint Ventures
 
2012
 
2011
 
2012
 
2011
Revenues
 
$
11,985

 
$
9,488

 
$
35,249

 
$
28,802

Expenses
 
 
 


 
 

 
 

Property operating
 
5,521

 
4,718

 
15,495

 
13,292

General and administrative
 
365

 
58

 
765

 
114

Acquisition costs
 

 

 
704

 

Abandoned development costs
 

 

 
1,390

 

Impairment charge
 

 

 
420

 

Depreciation and amortization
 
4,283

 
3,534

 
13,191

 
10,772

Total expenses
 
10,169

 
8,310

 
31,965

 
24,178

Operating income
 
1,816

 
1,178

 
3,284

 
4,624

Interest expense
 
3,540

 
1,381

 
10,967

 
7,310

Net loss
 
$
(1,724
)
 
$
(203
)
 
$
(7,683
)
 
$
(2,686
)
 
 
 
 
 
 
 
 
 
The Company and Operating Partnership's share of:
 
 

 
 

Net loss
 
$
(555
)
 
$
(27
)
 
$
(2,874
)
 
$
(823
)
Depreciation and impairment charge (real estate related)
 
$
1,641

 
$
1,280

 
$
5,249

 
$
3,922



21



4. 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 $520.0 million. As of September 30, 2012 and December 31, 2011, the Operating Partnership had amounts outstanding on these lines totaling $136.8 million and $357.1 million, respectively.
The Company also guarantees the Operating Partnership's unsecured term loan in the amount of $250.0 million as well as its obligation with respect to the mortgage assumed in connection with the acquisition of the outlet center in Ocean City, Maryland in July 2011, which at September 30, 2012 had a balance of $18.3 million including the debt premium.
5. Debt of the Operating Partnership
The debt of the Operating Partnership consisted of the following (in thousands):
 
 
 
 
 
 
As of
 
As of
 
 
 
 
 
 
September 30, 2012
 
December 31, 2011
 
 
Stated Interest Rate(s)
 
Maturity Date
 
Principal
 
Premium
 (Discount)
 
Principal
 
Premium
 (Discount)
Senior, unsecured notes:
 
 
 
 
 
 

 
 
 
 
 
 

Senior notes
 
6.15%
 
November 2015
 
$
250,000

 
$
(343
)
 
$
250,000

 
$
(417
)
Senior notes
 
6.125%
 
June 2020
 
300,000

 
(1,693
)
 
300,000

 
(1,820
)
 
 
 
 
 
 
 
 
 
 
 
 
 
Mortgages payable (1):
 
 
 
 
 
 
 
 
 
 
 
 
Atlantic City
 
5.14%-7.65%
 
November 2021- December 2026
 
52,624

 
4,596

 
53,826

 
4,894

Ocean City
 
5.24%
 
January 2016
 
18,625

 
308

 
18,867

 
375

Hershey
 
5.17%-8.00%
 
August 2015
 
30,792

 
1,727

 
31,252

 
2,165

Note payable (1)
 
1.50%
 
June 2016
 
10,000

 
(584
)
 
10,000

 
(692
)
Unsecured term loan (2)
 
LIBOR + 1.80%
 
February 2019
 
250,000

 

 

 

Unsecured lines of credit (3)
 
LIBOR + 1.25%
 
November 2015
 
136,769

 

 
357,092

 

 
 
 
 
 
 
$
1,048,810

 
$
4,011

 
$
1,021,037

 
$
4,505

(1)
The effective interest rates assigned during the purchase price allocation to these assumed mortgages and note payable during acquisitions in 2011 were as follows: Atlantic City 5.05%, Ocean City 4.68%, Hershey 3.40% and note payable 3.15%.

(2)
Our term loan is pre-payable without penalty beginning in February of 2015.

(3)
We have the option to extend the lines for one additional year to November 10, 2016. These lines require a facility fee payment of 0.25% annually based on the total amount of the commitment. The credit spread and facility fee can vary depending on our investment grade rating.
2012 Transactions
On February 24, 2012, the Operating Partnership closed on a seven-year $250.0 million unsecured term loan. The term loan is interest only, matures in the first quarter of 2019 and is pre-payable without penalty beginning in February of 2015. Based on our current credit ratings, the loan has an interest rate of LIBOR + 1.80%. We used the net proceeds of the term loan to reduce the outstanding balances on our unsecured lines of credit.


22



Debt Maturities
Maturities of the existing long-term debt as of September 30, 2012 are as follows (in thousands):
Calendar Year
 
Amount

2012
 
$
657

2013
 
4,633

2014
 
3,600

2015
 
419,108

2016
 
30,279

Thereafter
 
590,533

Subtotal
 
1,048,810

Net premiums
 
4,011

Total
 
$
1,052,821

  
6. Shareholders' Equity of the Company

Throughout the first nine months of 2012, various Family Limited Partners exchanged a total of 1,642,483 Operating Partnership units for 6,569,932 common shares of the Company. After the above described exchanges, the Family Limited Partners owned 1,230,490 Operating Partnership units which were exchangeable for 4,921,960 common shares of the Company.

7. Partners' Equity of the Operating Partnership
The ownership interests of the Operating Partnership consisted of the following:
 
 
As of
 
As of
 
 
September 30, 2012
 
December 31,
2011
Common units:
 
 

 
 

General partner
 
250,000

 
250,000

Limited partners
 
24,453,637

 
24,304,887

Total common units
 
24,703,637

 
24,554,887


When the Company issues common shares upon exercise of options or issues restricted share awards, the Operating Partnership issues one corresponding unit of partnership interest to the Company for every four common shares issued.

8. Noncontrolling Interests
Noncontrolling interests relate to the interests in the Operating Partnership owned by Family Limited Partners, as discussed in Note 1, and interests in consolidated partnerships not wholly-owned by the Company or the Operating Partnership. Family Limited Partners are holders of Operating Partnership units that may be exchanged for the Company's common shares in a ratio of one unit for four common shares. The noncontrolling interests in other consolidated partnerships consist of outside equity interests in partnerships that are consolidated with the financial results of the Company and Operating Partnership because the Operating Partnership exercises control over the partnerships.


23



As discussed in Note 6, various Family Limited Partners exchanged during the first nine months of 2012 a total of 1,642,483 Operating Partnership units for 6,569,932 common shares of the Company. Therefore, the Company recorded an increase to additional paid-in capital of $34.2 million during the first nine months of 2012 related to these exchanges. The changes in the Company's ownership interests in the subsidiaries impacted consolidated equity during the periods shown as follows:
 
 
Three months ended September 30,
 
Nine months ended September 30,
 
 
2012
 
2011
 
2012
 
2011
Net income attributable to Tanger Factory Outlet Centers, Inc.
 
$
15,327

 
$
12,464

 
$
35,172

 
$
31,284

Increase (decrease) in Tanger Factory Outlet Centers, Inc. paid-in-capital adjustments to noncontrolling interests (1) 
 
1,878

 
(8,792
)
 
34,207

 
(9,053
)
Changes from net income attributable to Tanger Factory Outlet Centers, Inc. and transfers from noncontrolling interest
 
$
17,205

 
$
3,672

 
$
69,379

 
$
22,231

1) In 2012 and 2011, adjustments of the noncontrolling interest were made as a result of increases in the Company's ownership of the Operating Partnership from additional units received in connection with the Company's issuance of common shares upon exercise of options, share-based compensation and the issuance of common shares upon exchange of Operating Partnership units by Family Limited Partners.

9. 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 three months of 2012, the Company's Board of Directors approved grants of 346,000 restricted common shares to the Company's independent directors and the Company's senior executive officers. The grant date fair value of the awards was $29.50 per share. 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 is being recognized in accordance with the vesting schedule of the restricted shares.
In addition, the Board of Directors approved the grant of 225,000 restricted common shares with a grant date fair value of $25.44 to Steven B. Tanger, our President and Chief Executive Officer, under the terms of his amended and restated Employment Agreement (the "Employment Agreement") signed on February 28, 2012. Under the terms of the Employment Agreement, the Company granted Mr. Tanger the following: 45,000 fully-vested common shares; 90,000 restricted common shares that vest ratably over five years based on Mr. Tanger's continued employment with the Company and 90,000 restricted common shares that vest ratably over five years based on Mr. Tanger's continued employment with the Company and the Company achieving certain minimum total returns to shareholders.
We recorded share-based compensation expense in general and administrative expenses in our consolidated statements of operations as follows (in thousands):
 
 
Three months ended September 30,
 
Nine months ended September 30,
 
 
2012
 
2011
 
2012
 
2011
Restricted common shares (1)
 
$
1,886

 
$
1,410

 
$
6,600

 
$
3,942

Notional unit performance awards
 
495

 
377

 
1,475

 
1,390

Options
 
53

 
53

 
156

 
126

Total share-based compensation
 
$
2,434

 
$
1,840

 
$
8,231

 
$
5,458

(1) For the nine months ended September 30, 2012, includes approximately $1.3 million of compensation expense related to 45,000 shares that vested immediately upon grant related to the Employment Agreement described above.


24



The following table summarizes information related to unvested restricted common shares outstanding as of September 30, 2012:
Unvested Restricted Common Shares
 
Number of shares
 
Weighted-average grant date fair value
Unvested at December 31, 2011
 
791,337

 
$
20.93

Granted
 
571,000

 
27.90

Vested
 
(275,800
)
 
21.44

Forfeited
 
(5,000
)
 
29.50

Unvested at September 30, 2012
 
1,081,537

 
$
24.43


The total value of restricted common shares vested during the nine months ended September 30, 2012 and September 30, 2011 was $8.0 million and $5.7 million, respectively.
As of September 30, 2012, there w