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 June 30, 2013
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 July 31, 2013, there were 94,425,537 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 June 30, 2013 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. As a result, each such individual beneficial owner became an individual limited partner of the Operating Partnership (collectively the "Family Limited Partners").

As of June 30, 2013, the Company, through its ownership of Tanger GP Trust and Tanger LP Trust, owned 23,606,384 units of the Operating Partnership and the Family Limited Partners collectively owned 1,186,921 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 December 28, 2004 and January 24, 2011, 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 of the Company and the Operating Partnership;
Shareholders' Equity and Partners' Equity;
Share-Based Compensation of the Company and Equity-Based Compensation of the Operating Partnership;
Earnings Per Share and Earnings Per Unit;
Accumulated Other Comprehensive Income of the Company and the Operating Partnership
Liquidity and Capital Resources in the Management's Discussion and Analysis of Financial Condition and Results of Operations.

4



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.

5



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 June 30, 2013 and December 31, 2012
Consolidated Statements of Operations - for the three and six months ended June 30, 2013 and 2012
Consolidated Statements of Comprehensive Income - for the three and six months ended June 30, 2013 and 2012
Consolidated Statements of Equity - for the six months ended June 30, 2013 and the year ended December 31, 2012
Consolidated Statements of Cash Flows - for the six months ended June 30, 2013 and 2012
 
 
FINANCIAL STATEMENTS OF TANGER PROPERTIES LIMITED PARTNERSHIP (Unaudited)
 
Consolidated Balance Sheets - as of June 30, 2013 and December 31, 2012
Consolidated Statements of Operations - for the three and six months ended June 30, 2013 and 2012
Consolidated Statements of Comprehensive Income - for the three and six months ended June 30, 2013 and 2012
Consolidated Statements of Equity - for the six months ended June 30, 2013 and the year ended December 31, 2012
Consolidated Statements of Cash Flows - for the six months ended June 30, 2013 and 2012
 
 
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 4. Mine Safety Disclosure
 
 
Item 6. Exhibits
 
 
Signatures

6



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)
 
 
June 30,
2013
 
December 31,
2012
ASSETS
 
 

 
 

Rental property
 
 

 
 

Land
 
$
148,003

 
$
148,002

Buildings, improvements and fixtures
 
1,821,404

 
1,796,042

Construction in progress
 
2,531

 
3,308

 
 
1,971,938

 
1,947,352

Accumulated depreciation
 
(618,644
)
 
(582,859
)
Total rental property, net
 
1,353,294

 
1,364,493

Cash and cash equivalents
 
5,450

 
10,335

Investments in unconsolidated joint ventures
 
162,094

 
126,632

Deferred lease costs and other intangibles, net
 
94,192

 
101,040

Deferred debt origination costs, net
 
7,921

 
9,083

Prepaids and other assets
 
69,205

 
60,842

Total assets
 
$
1,692,156

 
$
1,672,425

LIABILITIES AND EQUITY
 
 
 
 
Liabilities
 
 

 
 

Debt
 
 

 
 

Senior, unsecured notes (net of discount of $1,826 and $1,967, respectively)
 
$
548,174

 
$
548,033

Unsecured term loans (net of discount of $472 and $547, respectively)
 
259,528

 
259,453

Mortgages payable (including premiums of $5,816 and $6,362, respectively)
 
104,237

 
107,745

Unsecured lines of credit
 
213,100

 
178,306

Total debt
 
1,125,039

 
1,093,537

Construction trade payables
 
5,595

 
7,084

Accounts payable and accrued expenses
 
34,806

 
41,149

Other liabilities
 
16,422

 
16,780

Total liabilities
 
1,181,862

 
1,158,550

Commitments and contingencies
 


 


Equity
 
 

 
 

Tanger Factory Outlet Centers, Inc.
 
 

 
 

Common shares, $.01 par value, 300,000,000 shares authorized, 94,425,537 and 94,061,384 shares issued and outstanding at June 30, 2013 and December 31, 2012, respectively
 
944

 
941

Paid in capital
 
771,265

 
766,056

Accumulated distributions in excess of net income 
 
(294,237
)
 
(285,588
)
Accumulated other comprehensive income
 
1,343

 
1,200

Equity attributable to Tanger Factory Outlet Centers, Inc.
 
479,315

 
482,609

Equity attributable to noncontrolling interests
 
 
 
 
Noncontrolling interests in Operating Partnership
 
24,100

 
24,432

Noncontrolling interests in other consolidated partnerships
 
6,879

 
6,834

Total equity
 
510,294

 
513,875

Total liabilities and equity
 
$
1,692,156

 
$
1,672,425


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

7



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

 
 
Three months ended June 30,
 
Six months ended June 30,
 
 
2013
 
2012
 
2013
 
2012
Revenues
 
 
 
 
 
 

 
 
Base rentals
 
$
61,046

 
$
58,583

 
$
120,290

 
$
115,802

Percentage rentals
 
1,855

 
1,618

 
3,872

 
3,362

Expense reimbursements
 
25,824

 
25,196

 
51,130

 
48,869

Other income
 
2,290

 
1,938

 
4,412

 
3,545

Total revenues
 
91,015

 
87,335

 
179,704

 
171,578

Expenses
 
 
 


 
 
 
 

Property operating
 
28,821

 
27,977

 
56,956

 
54,065

General and administrative
 
9,914

 
8,699

 
19,486

 
18,719

Acquisition costs
 
252

 

 
431

 

Depreciation and amortization
 
22,172

 
24,923

 
44,460

 
50,438

Total expenses
 
61,159

 
61,599

 
121,333

 
123,222

Operating income
 
29,856

 
25,736


58,371


48,356

Interest expense
 
12,583

 
12,411

 
25,459

 
24,745

Income before equity in earnings (losses) of unconsolidated joint ventures
 
17,273

 
13,325

 
32,912

 
23,611

Equity in earnings (losses) of unconsolidated joint ventures
 
503

 
(867
)
 
1,093

 
(2,319
)
Net income
 
17,776

 
12,458


34,005


21,292

Noncontrolling interests in Operating Partnership
 
(859
)
 
(766
)
 
(1,648
)
 
(1,479
)
Noncontrolling interests in other consolidated partnerships
 
(29
)
 
25

 
(30
)
 
32

Net income attributable to Tanger Factory Outlet Centers, Inc.
 
$
16,888

 
$
11,717


$
32,327


$
19,845

 
 
 
 
 
 
 
 
 
Basic earnings per common share
 
 
 
 
 
 

 
 

Net income
 
$
0.18

 
$
0.13

 
$
0.34

 
$
0.21

Diluted earnings per common share
 
 
 
 
 
 
 
 
Net income
 
$
0.18

 
$
0.12

 
$
0.34

 
$
0.21

 
 
 
 
 
 
 
 
 
Dividends paid per common share
 
$
0.225

 
$
0.210

 
$
0.435

 
$
0.410

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

8



TANGER FACTORY OUTLET CENTERS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(In thousands, unaudited)
 
 
Three months ended
 
Six months ended
 
 
June 30,
 
June 30,
 
 
2013
 
2012
 
2013
 
2012
Net income
 
$
17,776

 
$
12,458

 
$
34,005

 
$
21,292

Other comprehensive income (loss)
 
 
 
 
 
 
 

Reclassification adjustments for amounts recognized in net income
 
37

 
(87
)
 
(53
)
 
(173
)
Foreign currency translation adjustments
 
135

 
39

 
203

 
34

Other comprehensive income (loss)
 
172

 
(48
)
 
150

 
(139
)
Comprehensive income
 
17,948

 
12,410

 
34,155

 
21,153

Comprehensive income attributable to noncontrolling interests
 
(896
)
 
(738
)
 
(1,685
)
 
(1,438
)
Comprehensive income attributable to Tanger Factory Outlet Centers, Inc.
 
$
17,052

 
$
11,672

 
$
32,470

 
$
19,715

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


9



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, 2011
 
$
867

$
720,073

$
(261,913
)
$
1,535

$
460,562

$
61,027

$
6,843

$
528,432

Net income
 


53,228


53,228

3,267

(19
)
56,476

Other comprehensive loss
 



(335
)
(335
)
(21
)

(356
)
Compensation under Incentive Award Plan
 

10,676



10,676



10,676

Issuance of 37,700 common shares upon exercise of options
 

481



481



481

Grant of 566,000 restricted shares, net of forfeitures
 
6

(6
)






Adjustment for noncontrolling interests in Operating Partnership
 

34,910



34,910

(34,910
)


Adjustment for noncontrolling interests in other consolidated partnerships
 

(10
)


(10
)

10


Exchange of 1,682,507 Operating Partnership units for 6,730,028 common shares
 
68

(68
)






Common dividends ($0.8300 per share)
 


(76,903
)

(76,903
)


(76,903
)
Distributions to noncontrolling interest in Operating Partnership
 





(4,931
)

(4,931
)
Balance, December 31, 2012
 
$
941

$
766,056

$
(285,588
)
$
1,200

$
482,609

$
24,432

$
6,834

$
513,875

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 











 
 








 
 








 
 
 
 
 
 
 
 
 
 
 
 










10



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
Balance, December 31, 2012
 
$
941

$
766,056

$
(285,588
)
$
1,200

$
482,609

$
24,432

$
6,834

$
513,875

Net income
 


32,327


32,327

1,648

30

34,005

Other comprehensive income
 



143

143

7


150

Compensation under Incentive Award Plan
 

5,534



5,534



5,534

Issuance of 17,600 common shares upon exercise of options
 

337



337



337

Grant of 337,373 restricted shares, net of forfeitures
 
3

(3
)






Adjustment for noncontrolling interests in Operating Partnership
 

(81
)


(81
)
81



Adjustment for noncontrolling interests in other consolidated partnerships
 

(578
)


(578
)

578


Acquisition of noncontrolling interests in other consolidated partnerships
 






(525
)
(525
)
Exchange of 3,545 Operating Partnership units for 14,180 common shares
 








Common dividends ($.435 per share)
 


(40,976
)

(40,976
)


(40,976
)
Distributions to noncontrolling interests in Operating Partnership
 





(2,068
)
(38
)
(2,106
)
Balance,
June 30, 2013
 
$
944

$
771,265

$
(294,237
)
$
1,343

$
479,315

$
24,100

$
6,879

$
510,294


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




11



TANGER FACTORY OUTLET CENTERS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands, unaudited)
 
 
Six months ended
 
 
June 30,
 
 
2013
 
2012
OPERATING ACTIVITIES
 
 
 
 

Net income
 
$
34,005

 
$
21,292

Adjustments to reconcile net income to net cash provided by operating activities:
 
 
 
 
Depreciation and amortization
 
44,460

 
50,438

Amortization of deferred financing costs
 
1,201

 
1,146

Equity in (earnings) losses of unconsolidated joint ventures
 
(1,093
)
 
2,319

Distributions of cumulative earnings from unconsolidated joint ventures
 
2,129

 
466

Share-based compensation expense
 
5,399

 
5,797

Amortization of debt (premiums) and discounts, net
 
(513
)
 
(499
)
Net amortization (accretion) of market rent rate adjustments
 
154

 
(430
)
Straight-line rent adjustments
 
(2,480
)
 
(1,789
)
Changes in other assets and liabilities:
 
 
 
 
Other assets
 
(1,401
)
 
3,956

Accounts payable and accrued expenses
 
(6,447
)
 
113

Net cash provided by operating activities
 
75,414

 
82,809

INVESTING ACTIVITIES
 
 
 
 
Additions to rental property
 
(26,146
)
 
(19,945
)
Additions to investments in unconsolidated joint ventures
 
(40,964
)
 
(46,893
)
Additions to non-real estate assets
 
(6,562
)
 

Distributions in excess of cumulative earnings from unconsolidated joint ventures
 
4,711

 
310

Additions to deferred lease costs
 
(1,661
)
 
(2,531
)
Net cash used in investing activities
 
(70,622
)
 
(69,059
)
FINANCING ACTIVITIES
 
 
 
 
Cash dividends paid
 
(40,976
)
 
(37,589
)
Distributions to noncontrolling interests in Operating Partnership
 
(2,068
)
 
(2,782
)
Proceeds from debt issuances
 
300,203

 
432,732

Repayments of debt
 
(266,553
)
 
(399,864
)
Acquisition of noncontrolling interests in other consolidated partnerships
 
(525
)
 

Distributions to noncontrolling interests in other consolidated partnerships
 
(38
)
 

Additions to deferred financing costs
 
(57
)
 
(2,527
)
Proceeds from exercise of options
 
337

 
241

Net cash used in financing activities
 
(9,677
)
 
(9,789
)
Net increase (decrease) in cash and cash equivalents
 
(4,885
)
 
3,961

Cash and cash equivalents, beginning of period
 
10,335

 
7,894

Cash and cash equivalents, end of period
 
$
5,450

 
$
11,855

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

12



Item 1 - Financial Statements of Tanger Properties Limited Partnership

TANGER PROPERTIES LIMITED PARTNERSHIP AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands, unaudited)
 
 
June 30,
 2013
 
December 31,
2012
ASSETS
 
 

 
 

Rental property
 
 

 
 

Land
 
$
148,003

 
$
148,002

Buildings, improvements and fixtures
 
1,821,404

 
1,796,042

Construction in progress
 
2,531

 
3,308

 
 
1,971,938

 
1,947,352

Accumulated depreciation
 
(618,644
)
 
(582,859
)
Total rental property, net
 
1,353,294

 
1,364,493

Cash and cash equivalents
 
5,390

 
10,295

Investments in unconsolidated joint ventures
 
162,094

 
126,632

Deferred lease costs and other intangibles, net
 
94,192

 
101,040

Deferred debt origination costs, net
 
7,921

 
9,083

Prepaids and other assets
 
68,732

 
60,408

Total assets
 
$
1,691,623

 
$
1,671,951

LIABILITIES AND EQUITY
 
 
 
 
Liabilities
 
 
 
 
Debt
 
 
 
 
Senior, unsecured notes (net of discount of $1,826 and $1,967, respectively)
 
$
548,174

 
$
548,033

Unsecured term loans (net of discount of $472 and $547, respectively)
 
259,528

 
259,453

Mortgages payable (including premiums of $5,816 and $6,362, respectively)
 
104,237

 
107,745

Unsecured lines of credit
 
213,100

 
178,306

Total debt
 
1,125,039

 
1,093,537

Construction trade payables
 
5,595

 
7,084

Accounts payable and accrued expenses
 
34,273

 
40,675

Other liabilities
 
16,422

 
16,780

Total liabilities
 
1,181,329

 
1,158,076

Commitments and contingencies
 


 


Equity
 
 
 
 
Partners' Equity
 
 
 
 
General partner
 
4,632

 
4,720

Limited partners
 
497,526

 
501,214

Accumulated other comprehensive income
 
1,257

 
1,107

Total partners' equity
 
503,415

 
507,041

Noncontrolling interests in consolidated partnerships
 
6,879

 
6,834

Total equity
 
510,294

 
513,875

Total liabilities and equity
 
$
1,691,623

 
$
1,671,951

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

13



TANGER PROPERITES LIMITED PARTNERSHIP AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per unit data, unaudited)
 
 
Three months ended June 30,
 
Six months ended June 30,
 
 
2013
 
2012
 
2013
 
2012
Revenues
 
 
 
 
 
 

 
 
Base rentals
 
$
61,046

 
$
58,583

 
$
120,290

 
$
115,802

Percentage rentals
 
1,855

 
1,618

 
3,872

 
3,362

Expense reimbursements
 
25,824

 
25,196

 
51,130

 
48,869

Other income
 
2,290

 
1,938

 
4,412

 
3,545

Total revenues
 
91,015

 
87,335


179,704


171,578

Expenses
 


 


 


 
 
Property operating
 
28,821

 
27,977

 
56,956

 
54,065

General and administrative
 
9,914

 
8,699

 
19,486

 
18,719

Acquisition costs
 
252

 

 
431

 

Depreciation and amortization
 
22,172

 
24,923

 
44,460

 
50,438

Total expenses
 
61,159

 
61,599


121,333


123,222

Operating income
 
29,856

 
25,736


58,371


48,356

Interest expense
 
12,583

 
12,411

 
25,459

 
24,745

Income before equity in earnings (losses) of unconsolidated joint ventures
 
17,273

 
13,325


32,912


23,611

Equity in earnings (losses) of unconsolidated joint ventures
 
503

 
(867
)
 
1,093

 
(2,319
)
Net income
 
17,776

 
12,458


34,005


21,292

Noncontrolling interests in consolidated partnerships
 
(29
)
 
25

 
(30
)
 
32

Net income available to partners
 
17,747

 
12,483


33,975


21,324

Net income available to limited partners
 
17,566

 
12,355

 
33,628

 
21,105

Net income available to general partner
 
$
181

 
$
128


$
347


$
219

 
 
 
 
 
 
 
 
 
Basic earnings per common unit:
 
 
 
 
 
 
 
 

Net income
 
$
0.71

 
$
0.50

 
$
1.37

 
$
0.86

Diluted earnings per common unit:
 
 
 
 
 
 
 
 

Net income
 
$
0.71

 
$
0.50

 
$
1.36

 
$
0.85

 
 
 
 
 
 
 
 
 
Distribution paid per common unit
 
$
0.90

 
$
0.84

 
$
1.74

 
$
1.64

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

14



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

 
 
Three months ended
 
Six months ended
 
 
June 30,
 
June 30,
 
 
2013
 
2012
 
2013
 
2012
Net income
 
$
17,776

 
$
12,458

 
$
34,005

 
$
21,292

Other comprehensive income (loss)
 
 
 
 
 
 
 
 
Reclassification adjustments for amounts recognized in net income
 
37

 
(87
)
 
(53
)
 
(173
)
Foreign currency translation adjustments
 
135

 
39

 
203

 
34

Other comprehensive income (loss)
 
172

 
(48
)
 
150

 
(139
)
Comprehensive income
 
17,948

 
12,410

 
34,155

 
21,153

Comprehensive income attributable to noncontrolling interests in consolidated partnerships
 
(29
)
 
25

 
(30
)
 
32

Comprehensive income attributable to the Operating Partnership
 
$
17,919

 
$
12,435

 
$
34,125

 
$
21,185

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


15



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, 2011
 
$
4,972

$
515,154

$
1,463

$
521,589

$
6,843

$
528,432

Net income
 
578

55,917


56,495

(19
)
56,476

Other comprehensive loss
 


(356
)
(356
)

(356
)
Compensation under Incentive Award Plan
 

10,676


10,676


10,676

Issuance of 9,425 common units upon exercise of options
 

481


481


481

Grant of 141,500 restricted units, net of forfeitures
 






Adjustments for noncontrolling interests in consolidated partnerships
 

(10
)

(10
)
10


Common distributions ($3.32 per common unit)
 
(830
)
(81,004
)

(81,834
)

(81,834
)
Balance, December 31, 2012
 
4,720

501,214

1,107

507,041

6,834

513,875

Net income
 
347

33,628


33,975

30

34,005

Other comprehensive income
 


150

150


150

Compensation under Incentive Award Plan
 

5,534


5,534


5,534

Issuance of 4,400 common units upon exercise of options
 

337


337


337

Grant of 84,343 restricted units, net of forfeitures
 






Adjustment for noncontrolling interests in other consolidated partnerships
 

(578
)

(578
)
578


Acquisition of noncontrolling interests in other consolidated partnerships
 




(525
)
(525
)
Common distributions ($1.74 per common unit)
 
(435
)
(42,609
)

(43,044
)
(38
)
(43,082
)
Balance, June 30, 2013
 
$
4,632

$
497,526

$
1,257

$
503,415

$
6,879

$
510,294

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



16



TANGER PROPERTIES LIMITED PARTNERSHIP AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands, unaudited)
 
 
Six months ended
 
 
June 30,
 
 
2013
 
2012
OPERATING ACTIVITIES
 
 

 
 

Net income
 
$
34,005

 
$
21,292

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


Depreciation and amortization
 
44,460

 
50,438

Amortization of deferred financing costs
 
1,201

 
1,146

Equity in (earnings) losses of unconsolidated joint ventures
 
(1,093
)
 
2,319

Distributions of cumulative earnings from unconsolidated joint ventures
 
2,129

 
466

Equity-based compensation expense
 
5,399

 
5,797

Amortization of debt (premiums) and discounts, net
 
(513
)
 
(499
)
Net amortization (accretion) of market rent rate adjustments
 
154

 
(430
)
Straight-line rent adjustments
 
(2,480
)
 
(1,789
)
Changes in other assets and liabilities:
 
 
 
 
Other assets
 
(1,362
)
 
3,854

Accounts payable and accrued expenses
 
(6,506
)
 
111

Net cash provided by operating activities
 
75,394

 
82,705

INVESTING ACTIVITIES
 
 
 
 
Additions to rental property
 
(26,146
)
 
(19,945
)
Additions to investments in unconsolidated joint ventures
 
(40,964
)
 
(46,893
)
Additions to non-real estate assets
 
(6,562
)
 

Distributions in excess of cumulative earnings from unconsolidated joint ventures
 
4,711

 
310

Additions to deferred lease costs
 
(1,661
)
 
(2,531
)
Net cash used in investing activities
 
(70,622
)
 
(69,059
)
FINANCING ACTIVITIES
 
 
 
 
Cash distributions paid
 
(43,044
)
 
(40,371
)
Proceeds from debt issuances
 
300,203

 
432,732

Repayments of debt
 
(266,553
)
 
(399,864
)
Acquisition of noncontrolling interests in consolidated partnerships
 
(525
)
 

Distributions to noncontrolling interests in consolidated partnerships
 
(38
)
 

Additions to deferred financing costs
 
(57
)
 
(2,527
)
Proceeds from exercise of options
 
337

 
241

Net cash used in financing activities
 
(9,677
)
 
(9,789
)
Net increase (decrease) in cash and cash equivalents
 
(4,905
)
 
3,857

Cash and cash equivalents, beginning of period
 
10,295

 
7,866

Cash and cash equivalents, end of period
 
$
5,390

 
$
11,723

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

17



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 June 30, 2013, we owned and operated 36 outlet centers, with a total gross leasable area of approximately 10.8 million square feet. We also had partial ownership interests in 7 outlet centers totaling approximately 2.1 million square feet, including 3 outlet centers in 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, 2012. The December 31, 2012 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, we consolidate the entity where we are deemed to be the primary beneficiary.

Noncontrolling interests relate to the interests in the Operating Partnership owned by Family Limited Partners 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 not wholly owned by the Company or the Operating Partnership that are consolidated with the financial results of the Company and Operating Partnership because the Operating Partnership exercises control over the entities that own the properties.

Certain amounts related to reimbursements of payroll related expenses from unconsolidated joint ventures in the statement of operations for the three and six months ended June 30, 2012 have been reclassified to the caption “expense reimbursements” from the caption “other income” to conform to the presentation of the consolidated statement of operations presented for the three months and six months ended June 30, 2013.  


18





3. Investments in Unconsolidated Real Estate Joint Ventures
Our investments in unconsolidated joint ventures as of June 30, 2013 and December 31, 2012 aggregated $162.1 million and $126.6 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 June 30, 2013 and December 31, 2012, we were members of the following unconsolidated real estate joint ventures:
As of June 30, 2013
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

 
$
2.0

 
$
246.9

Galveston/Houston
 
Texas City, Texas
 
50.0
%
 
352,705

 
40.1

 

National Harbor
 
Washington D.C. Metro Area
 
50.0
%
 

 
17.3

 
4.2

RioCan Canada
 
Various
 
50.0
%
 
434,162

 
82.3

 
18.7

Westgate
 
Glendale, Arizona
 
58.0
%
 
331,739

 
16.8

 
42.2

Wisconsin Dells
 
Wisconsin Dells, Wisconsin
 
50.0
%
 
265,086

 
2.5

 
24.3

Other
 
 
 


 

 
1.1

 

 
 
 
 
 
 
 
 
$
162.1

 
$
336.3

As of December 31, 2012
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

 
$
3.0

 
$
246.9

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

 

 
1.9

Galveston/Houston
 
Texas City, TX
 
50.0
%
 
352,705

 
36.7

 

National Harbor
 
Washington D.C. Metro Area
 
50.0
%
 

 
2.6

 

RioCan Canada
 
Various
 
50.0
%
 
434,562

 
62.2

 
20.1

Westgate
 
Glendale, AZ
 
58.0
%
 
332,234

 
19.1

 
32.0

Wisconsin Dells
 
Wisconsin Dells, WI
 
50.0
%
 
265,086

 
2.8

 
24.3

Other
 
 
 
 
 

 
0.2

 

 
 
 
 
 
 
 
 
$
126.6

 
$
325.2


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 described below.


19



The following management, development, leasing and marketing fees were recognized from services provided to our unconsolidated joint ventures (in thousands):
 
 
Three months ended
 
Six months ended
 
 
June 30,
 
June 30,
 
 
2013
 
2012
 
2013
 
2012
Fee:
 
 
 
 
 
 

 
 

Development
 
$
(8
)
 
$

 
$
63

 
$

Loan Guarantee
 
40

 

 
80

 

Management and leasing
 
786

 
474

 
1,631

 
953

Marketing
 
100

 
47

 
209

 
100

Total Fees
 
$
918

 
$
521

 
$
1,983

 
$
1,053


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.

Deer Park, Long Island, New York

In December 2011, the joint venture refinanced its mortgage and mezzanine loans, totaling $246.9 million. The non-default interest rates for the mortgage and mezzanine loans are LIBOR + 3.50% and LIBOR + 5.00%, respectively with a maturity date of May 17, 2014. The loans require certain financial covenants, such as debt service coverage and loan to value ratios, to be met at various measurement dates. Based on the administrative agent bank's calculation of Deer Park's debt service coverage ratio utilizing financial information as of December 31, 2012, the joint venture was not in compliance with the coverage ratio. As a result, on March 22, 2013, the lender group placed Deer Park in default and also notified Deer Park that the default interest rates would accrue from April 1, 2013 until the default is cured. The default interest rates for the mortgage and mezzanine loans are PRIME + 7.5% and LIBOR + 9%, respectively.

On July 25, 2013, the lenders for both the mortgage and the mezzanine loans and Deer Park entered into forbearance agreements whereby the lenders and Deer Park agreed, among other things, that (1) the partners would make an immediate principal reduction of $10.0 million toward the mortgage on the date of the agreement, (2) default interest on the mortgage through June 30, 2013 would be permanently waived, (3) default interest from July 2013 forward on the mortgage and mezzanine loan would continue to accrue but shall be waived subject to the loan being repaid in full by August 30, 2013, and (4) the managing member would rescind its notice dated February 25, 2013 purporting to terminate the Company as property manager effective September 1, 2013. On July 25, 2013, the partners of Deer Park funded the principal payment of $10.0 million, of which we paid $5.0 million, and delivered the required cancellation of the termination notice.

The Company and its two joint venture partners have each, jointly and severally, guaranteed the payment of interest (but not principal) on the current loans. The operations from Deer Park, together with cash on hand in the joint venture, have been sufficient in the past to pay interest on the loans, although the historical operations would not have generated sufficient cash flow to pay fully the monthly interest at the additional default interest rate. Deer Park is currently in discussions with various lending institutions to provide refinancing for the property.

Deer Park Warehouse, Long Island, New York

In March 2013, in connection with a loan forbearance agreement signed in 2012 with the lender to the joint venture, the warehouse property was sold for approximately $1.2 million. The proceeds were used to satisfy the terms of the forbearance agreement. There was no impact to the net income of the joint venture as a result of this sale and the retirement of the associated mortgage debt.





20



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 planned Tanger Outlet Center is expected to open in time for the 2013 holiday shopping season and contain approximately 80 brand name and designer outlet stores in a center containing approximately 340,000 square feet. In November 2012, the joint venture broke ground and began development. Both parties have made equity contributions of $17.2 million to fund certain development costs. In May 2013, the joint venture closed on a construction loan with the ability to borrow up to $62.0 million and carries an interest rate of LIBOR + 1.65%. As of June 30, 2013 the balance on the loan was $4.2 million. We provide property management, leasing and marketing services to the joint venture; and with our partner, are jointly providing site development and construction supervision services.

RioCan Canada

We have entered into a 50/50 co-ownership agreement with RioCan Real Estate Investment Trust ("RioCan Joint Venture") to develop and acquire outlet centers in Canada. Any projects developed or acquired will be branded as Tanger Outlet Centers. We have agreed to provide leasing and marketing services to the venture and RioCan will provide development and property management services.

In March of 2013 the RioCan Joint Venture acquired the land adjacent to the existing Cookstown Outlet Mall for $13.9 million. The land is being used for the joint venture's expansion of the Cookstown Outlet Mall which began in May 2013. The expansion, which is expected to open in the third quarter of 2014, will add approximately 153,000 square feet to the center and will add approximately 35 new brand name and designer outlet stores to the center.

Also, during the second quarter of 2013, the joint venture purchased land for $28.7 million and broke ground on Tanger Outlets Ottawa, the first ground up development of a Tanger Outlet Center in Canada. Located in suburban Kanata off the TransCanada Highway (Highway 417) at Palladium Drive, this center will contain approximately 303,000 square feet and will feature approximately 80 brand name and designer outlet stores. The center is currently expected to open in the third quarter of 2014.

Additionally, the RioCan Joint Venture partners have decided not to proceed with the proposed development at Mississauga’s Heartland Town Centre, west of Toronto, at the current time.

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


21



The operating, development, leasing, and management agreements of Westgate and Deer Park provide that the activities that most significantly impact the economic performance of the ventures require either unanimous consent or, for certain activities related to Deer Park, majority consent. Accordingly, we determined that we do not have the power to direct the significant activities that affect the economic performance of the ventures and therefore, have applied the equity method of accounting for both Westgate and Deer Park. Our equity method investments in Westgate and Deer Park as of June 30, 2013 were approximately $16.8 million and $2.0 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.

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
 
June 30,
2013
 
December 31,
2012
Assets
 
 

 
 

Land
 
$
94,961

 
$
96,455

Buildings, improvements and fixtures
 
493,100

 
493,424

Construction in progress, including land
 
90,413

 
16,338

 
 
678,474

 
606,217

Accumulated depreciation
 
(74,642
)
 
(62,547
)
Total rental property, net
 
603,832

 
543,670

Assets held for sale (1)
 

 
1,828

Cash and cash equivalents
 
16,511

 
21,879

Deferred lease costs, net
 
21,285

 
24,411

Deferred debt origination costs, net
 
4,025

 
5,213

Prepaids and other assets
 
26,181

 
25,350

Total assets
 
$
671,834

 
$
622,351

Liabilities and Owners' Equity
 
 

 
 

Mortgages payable
 
$
336,338

 
$
325,192

Construction trade payables
 
10,842

 
21,734

Accounts payable and other liabilities
 
14,830

 
31,944

Total liabilities
 
362,010

 
378,870

Owners' equity
 
309,824

 
243,481

Total liabilities and owners' equity
 
$
671,834

 
$
622,351

(1) Assets related to our Deer Park Warehouse joint venture that were sold in March 2013.

22



 
 
Three months ended
 
Six months ended
Summary Statements of Operations
 
June 30,
 
June 30,
 - Unconsolidated Joint Ventures
 
2013
 
2012
 
2013
 
2012
Revenues
 
$
20,553

 
$
11,606

 
$
41,948

 
$
23,264

Expenses
 
 
 
 
 
 

 
 
Property operating
 
8,546

 
5,083

 
17,686

 
9,974

General and administrative
 
166

 
237

 
314

 
400

Acquisition costs
 
53

 

 
474

 
704

Abandoned development costs
 
134

 
436

 
134

 
1,310

Impairment Charge
 

 
420

 

 
420

Depreciation and amortization
 
7,584

 
4,300

 
14,968

 
8,908

Total expenses
 
16,483

 
10,476

 
33,576

 
21,716

Operating income
 
4,070

 
1,130

 
8,372

 
1,548

Interest expense
 
3,514

 
3,598

 
7,566

 
7,427

Net income (loss)
 
$
556

 
$
(2,468
)
 
$
806

 
$
(5,879
)
 
 
 
 
 
 
 
 
 
The Company and Operating Partnership's share of:
 
 

 
 

Net income (loss)
 
$
503

 
$
(867
)
 
$
1,093

 
$
(2,319
)
Depreciation and impairment charge (real estate related)
 
$
3,431

 
$
1,793

 
$
6,604

 
$
3,608



23



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 June 30, 2013 and December 31, 2012, the Operating Partnership had amounts outstanding on these lines totaling $213.1 million and $178.3 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.

5. Debt of the Operating Partnership

The debt of the Operating Partnership consisted of the following (in thousands):
 
 
 
 
 
 
As of
 
As of
 
 
 
 
 
 
June 30, 2013
 
December 31, 2012
 
 
Stated Interest Rate(s)
 
Maturity Date
 
Principal
 
Premium
 (Discount)
 
Principal
 
Premium
 (Discount)
Senior, unsecured notes:
 
 
 
 
 
 

 
 
 
 
 
 

Senior notes
 
6.15
%
 
November 2015
 
$
250,000

 
$
(265
)
 
$
250,000

 
$
(317
)
Senior notes
 
6.125
%
 
June 2020
 
300,000

 
(1,561
)
 
300,000

 
(1,650
)
 
 
 
 
 
 
 
 
 
 
 
 
 
Mortgages payable (1):
 
 
 
 
 
 
 
 
 
 
 
 
Atlantic City
 
5.14%-7.65%

 
November 2021- December 2026
 
49,751

 
4,287

 
52,212

 
4,495

Ocean City
 
5.24
%
 
January 2016
 
18,367

 
240

 
18,540

 
285

Hershey
 
5.17%-8.00%

 
August 2015
 
30,303

 
1,289

 
30,631

 
1,581

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

 
(472
)
 
10,000

 
(546
)
Unsecured term loan (2)
 
LIBOR + 1.60%

 
February 2019
 
250,000

 

 
250,000

 

Unsecured lines of credit (3)
 
LIBOR + 1.10%

 
November 2015
 
213,100

 

 
178,306

 

 
 
 
 
 
 
$
1,121,521

 
$
3,518

 
$
1,089,689

 
$
3,848

(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 unsecured 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 0.175% annually based on the total amount of the commitment. The credit spread and facility fee can vary depending on our investment grade rating.

The unsecured lines of credit and senior unsecured notes include covenants that require the maintenance of certain ratios, including debt service coverage and leverage, and limit the payment of dividends such that dividends and distributions will not exceed funds from operations, as defined in the agreements, for the prior fiscal year on an annual basis or 95% of funds from operations on a cumulative basis. As of June 30, 2013 we were in compliance with all of our debt covenants.


24



Debt Maturities

Maturities of the existing long-term debt as of June 30, 2013 are as follows (in thousands):
Calendar Year
 
Amount

2013
 
$
1,723

2014
 
3,603

2015
 
495,443

2016
 
30,283

2017
 
3,008

Thereafter
 
587,461

Subtotal
 
1,121,521

Net premiums
 
3,518

Total
 
$
1,125,039

  
6. Shareholders' Equity of the Company

Throughout the first six months of 2013, Family Limited Partners exchanged a total of 3,545 Operating Partnership units for 14,180 common shares of the Company. After the above described exchanges, the Family Limited Partners owned 1,186,921 Operating Partnership units which were exchangeable for 4,747,684 common shares of the Company.

7. Partners' Equity of the Operating Partnership

The ownership interests of the Operating Partnership as of June 30, 2013 and December 31, 2012, consisted of the following:
 
 
June 30,
2013
 
December 31,
2012
Common units:
 
 

 
 

General partner
 
250,000

 
250,000

Limited partners
 
24,543,305

 
24,455,812

Total common units
 
24,793,305

 
24,705,812


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. 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 February 2013, the Company's Board of Directors approved grants of 349,373 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 $28.84 to $36.05 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. For the grants to certain senior executive