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, 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 October 31, 2013, there were 94,478,785 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, 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. As of September 30, 2013, the Company, through its ownership of Tanger GP Trust and Tanger LP Trust, owned 94,478,785 units of the Operating Partnership and other limited partners collectively owned 5,145,012 units. Each unit held by the other limited partners is exchangeable for one common share of the Company, subject to certain limitations to preserve the Company's REIT status.

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' equity 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 limited partners other than Tanger LP Trust are accounted for as partners' equity 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;
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.
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, 2013 and December 31, 2012
Consolidated Statements of Operations - for the three and nine months ended September 30, 2013 and 2012
Consolidated Statements of Comprehensive Income - for the three and nine months ended September 30, 2013 and 2012
Consolidated Statements of Equity - for the nine months ended September 30, 2013 and the year ended December 31, 2012
Consolidated Statements of Cash Flows - for the nine months ended September 30, 2013 and 2012
 
 
FINANCIAL STATEMENTS OF TANGER PROPERTIES LIMITED PARTNERSHIP (Unaudited)
 
Consolidated Balance Sheets - as of September 30, 2013 and December 31, 2012
Consolidated Statements of Operations - for the three and nine months ended September 30, 2013 and 2012
Consolidated Statements of Comprehensive Income - for the three and nine months ended September 30, 2013 and 2012
Consolidated Statements of Equity - for the nine months ended September 30, 2013 and the year ended December 31, 2012
Consolidated Statements of Cash Flows - for the nine months ended September 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

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, 2013
 
December 31,
2012
ASSETS
 
 

 
 

Rental property
 
 

 
 

Land
 
$
230,417

 
$
148,002

Buildings, improvements and fixtures
 
2,004,882

 
1,796,042

Construction in progress
 
4,375

 
3,308

 
 
2,239,674

 
1,947,352

Accumulated depreciation
 
(636,035
)
 
(582,859
)
Total rental property, net
 
1,603,639

 
1,364,493

Cash and cash equivalents
 
10,482

 
10,335

Investments in unconsolidated joint ventures
 
136,922

 
126,632

Deferred lease costs and other intangibles, net
 
171,702

 
107,415

Deferred debt origination costs, net
 
7,275

 
9,083

Prepaids and other assets
 
71,943

 
60,842

Total assets
 
$
2,001,963

 
$
1,678,800

LIABILITIES AND EQUITY
 
 
 
 
Liabilities
 
 

 
 

Debt
 
 

 
 

Senior, unsecured notes (net of discount of $1,753 and $1,967, respectively)
 
$
548,247

 
$
548,033

Unsecured term loans (net of discount of $435 and $547, respectively)
 
267,065

 
259,453

Mortgages payable (including premiums of $3,963 and $6,362, respectively)
 
251,533

 
107,745

Unsecured lines of credit
 
259,000

 
178,306

Total debt
 
1,325,845

 
1,093,537

Construction trade payables
 
5,272

 
7,084

Accounts payable and accrued expenses
 
48,400

 
41,149

Deferred financing obligation
 
28,388

 

Other liabilities
 
33,101

 
23,155

Total liabilities
 
1,441,006

 
1,164,925

Commitments and contingencies
 


 


Equity
 
 

 
 

Tanger Factory Outlet Centers, Inc.
 
 

 
 

Common shares, $.01 par value, 300,000,000 shares authorized, 94,478,785 and 94,061,384 shares issued and outstanding at September 30, 2013 and December 31, 2012, respectively
 
945

 
941

Paid in capital
 
785,515

 
766,056

Accumulated distributions in excess of net income 
 
(262,173
)
 
(285,588
)
Accumulated other comprehensive income
 
1,179

 
1,200

Equity attributable to Tanger Factory Outlet Centers, Inc.
 
525,466

 
482,609

Equity attributable to noncontrolling interests
 
 
 
 
Noncontrolling interests in Operating Partnership
 
28,615

 
24,432

Noncontrolling interests in other consolidated partnerships
 
6,876

 
6,834

Total equity
 
560,957

 
513,875

Total liabilities and equity
 
$
2,001,963

 
$
1,678,800


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,
 
 
2013
 
2012
 
2013
 
2012
Revenues
 
 
 
 
 
 

 
 
Base rentals
 
$
64,301

 
$
59,662

 
$
184,591

 
$
175,464

Percentage rentals
 
3,084

 
3,180

 
6,956

 
6,542

Expense reimbursements
 
27,414

 
24,908

 
78,544

 
73,777

Other income
 
3,104

 
2,733

 
7,516

 
6,278

Total revenues
 
97,903

 
90,483

 
277,607

 
262,061

Expenses
 
 
 


 
 
 
 

Property operating
 
29,863

 
27,614

 
86,819

 
81,679

General and administrative
 
9,754

 
9,018

 
29,240

 
27,737

Acquisition costs
 
532

 

 
963

 

Depreciation and amortization
 
24,223

 
24,809

 
68,683

 
75,247

Total expenses
 
64,372

 
61,441

 
185,705

 
184,663

Operating income
 
33,531

 
29,042


91,902


77,398

Interest expense
 
(12,367
)
 
(12,317
)
 
(37,826
)
 
(37,062
)
Gain on previously held interest in acquired joint venture
 
26,002

 

 
26,002

 

Income before equity in earnings (losses) of unconsolidated joint ventures
 
47,166

 
16,725

 
80,078

 
40,336

Equity in earnings (losses) of unconsolidated joint ventures
 
9,014

 
(555
)
 
10,107

 
(2,874
)
Net income
 
56,180

 
16,170


90,185


37,462

Noncontrolling interests in Operating Partnership
 
(2,787
)
 
(836
)
 
(4,435
)
 
(2,315
)
Noncontrolling interests in other consolidated partnerships
 
(99
)
 
(7
)
 
(129
)
 
25

Net income attributable to Tanger Factory Outlet Centers, Inc.
 
$
53,294

 
$
15,327


$
85,621


$
35,172

 
 
 
 
 
 
 
 
 
Basic earnings per common share
 
 
 
 
 
 

 
 

Net income
 
$
0.56

 
$
0.16

 
$
0.91

 
$
0.38

Diluted earnings per common share
 
 
 
 
 
 
 
 
Net income
 
$
0.56

 
$
0.16

 
$
0.90

 
$
0.37

 
 
 
 
 
 
 
 
 
Dividends paid per common share
 
$
0.225

 
$
0.210

 
$
0.660

 
$
0.620

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
 
Nine months ended
 
 
September 30,
 
September 30,
 
 
2013
 
2012
 
2013
 
2012
Net income
 
$
56,180

 
$
16,170

 
$
90,185

 
$
37,462

Other comprehensive income (loss)
 
 
 
 
 
 
 

Reclassification adjustments for amounts recognized in net income
 
(94
)
 
(88
)
 
(147
)
 
(261
)
Foreign currency translation adjustments
 
(79
)
 
(73
)
 
124

 
(39
)
Other comprehensive income (loss)
 
(173
)
 
(161
)
 
(23
)
 
(300
)
Comprehensive income
 
56,007

 
16,009

 
90,162

 
37,162

Comprehensive income attributable to noncontrolling interests
 
(2,877
)
 
(835
)
 
(4,562
)
 
(2,273
)
Comprehensive income attributable to Tanger Factory Outlet Centers, Inc.
 
$
53,130

 
$
15,174

 
$
85,600

 
$
34,889

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, 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 6,730,028 Operating Partnership units for 6,730,028 common shares
 
68

(68
)






Common dividends ($0.83 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

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 











 
 








 
 








 
 
 
 
 
 
 
 
 
 
 
 










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
Balance, December 31, 2012
 
$
941

$
766,056

$
(285,588
)
$
1,200

$
482,609

$
24,432

$
6,834

$
513,875

Net income
 


85,621


85,621

4,435

129

90,185

Other comprehensive loss
 



(21
)
(21
)
(2
)

(23
)
Compensation under Incentive Award Plan
 

8,614



8,614



8,614

Issuance of 17,600 common shares upon exercise of options
 

332



332



332

Issuance of 450,576 Operating Partnership limited partner units
 





13,981


13,981

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

(3
)






Adjustment for noncontrolling interests in Operating Partnership
 

11,095



11,095

(11,095
)


Adjustment for noncontrolling interests in other consolidated partnerships
 

(578
)


(578
)

578


Acquisition of noncontrolling interests in other consolidated partnerships
 






(525
)
(525
)
Exchange of 67,428 Operating Partnership units for 67,428 common shares
 
1

(1
)






Common dividends ($.66 per share)
 


(62,206
)

(62,206
)


(62,206
)
Distributions to noncontrolling interests in Operating Partnership
 





(3,136
)
(140
)
(3,276
)
Balance,
September 30, 2013
 
$
945

$
785,515

$
(262,173
)
$
1,179

$
525,466

$
28,615

$
6,876

$
560,957


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,
 
 
2013
 
2012
OPERATING ACTIVITIES
 
 
 
 

Net income
 
$
90,185

 
$
37,462

Adjustments to reconcile net income to net cash provided by operating activities:
 
 
 
 
Depreciation and amortization
 
68,683

 
75,247

Amortization of deferred financing costs
 
1,795

 
1,722

Gain on previously held interest in acquired joint venture
 
(26,002
)
 

Equity in (earnings) losses of unconsolidated joint ventures
 
(10,107
)
 
2,874

Distributions of cumulative earnings from unconsolidated joint ventures
 
4,415

 
740

Share-based compensation expense
 
8,363

 
8,231

Amortization of debt (premiums) and discounts, net
 
(767
)
 
(753
)
Net amortization (accretion) of market rent rate adjustments
 
389

 
(489
)
Straight-line rent adjustments
 
(4,068
)
 
(2,866
)
Changes in other assets and liabilities:
 
 
 
 
Other assets
 
236

 
(1,336
)
Accounts payable and accrued expenses
 
3,947

 
8,331

Net cash provided by operating activities
 
137,069

 
129,163

INVESTING ACTIVITIES
 
 
 
 
Additions to rental property
 
(40,578
)
 
(31,157
)
Acquisition of interest in unconsolidated joint venture, net of cash acquired
 
(11,271
)
 

Additions to investments in and notes receivable from unconsolidated joint ventures
 
(140,373
)
 
(57,810
)
Additions to non-real estate assets
 
(7,768
)
 

Distributions in excess of cumulative earnings from unconsolidated joint ventures
 
45,891

 
336

Additions to deferred lease costs
 
(3,381
)
 
(3,430
)
Net cash used in investing activities
 
(157,480
)
 
(92,061
)
FINANCING ACTIVITIES
 
 
 
 
Cash dividends paid
 
(62,206
)
 
(57,202
)
Distributions to noncontrolling interests in Operating Partnership
 
(3,136
)
 
(3,900
)
Proceeds from debt issuances
 
500,003

 
491,477

Repayments of debt
 
(413,806
)
 
(463,705
)
Acquisition of noncontrolling interests in other consolidated partnerships
 
(525
)
 

Distributions to noncontrolling interests in other consolidated partnerships
 
(67
)
 

Additions to deferred financing costs
 
(37
)
 
(2,527
)
Proceeds from exercise of options
 
332

 
372

Net cash provided by (used in) financing activities
 
20,558

 
(35,485
)
Net increase in cash and cash equivalents
 
147

 
1,617

Cash and cash equivalents, beginning of period
 
10,335

 
7,894

Cash and cash equivalents, end of period
 
$
10,482

 
$
9,511

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, 2013
 
December 31,
2012
ASSETS
 
 

 
 

Rental property
 
 

 
 

Land
 
$
230,417

 
$
148,002

Buildings, improvements and fixtures
 
2,004,882

 
1,796,042

Construction in progress
 
4,375

 
3,308

 
 
2,239,674

 
1,947,352

Accumulated depreciation
 
(636,035
)
 
(582,859
)
Total rental property, net
 
1,603,639

 
1,364,493

Cash and cash equivalents
 
10,458

 
10,295

Investments in unconsolidated joint ventures
 
136,922

 
126,632

Deferred lease costs and other intangibles, net
 
171,702

 
107,415

Deferred debt origination costs, net
 
7,275

 
9,083

Prepaids and other assets
 
71,531

 
60,408

Total assets
 
$
2,001,527

 
$
1,678,326

LIABILITIES AND EQUITY
 

 
 
Liabilities
 
 
 
 
Debt
 
 
 
 
Senior, unsecured notes (net of discount of $1,753 and $1,967, respectively)
 
$
548,247

 
$
548,033

Unsecured term loans (net of discount of $435 and $547, respectively)
 
267,065

 
259,453

Mortgages payable (including premiums of $3,963 and $6,362, respectively)
 
251,533

 
107,745

Unsecured lines of credit
 
259,000

 
178,306

Total debt
 
1,325,845

 
1,093,537

Construction trade payables
 
5,272

 
7,084

Accounts payable and accrued expenses
 
47,964

 
40,675

Deferred financing obligation
 
28,388

 

Other liabilities
 
33,101

 
23,155

Total liabilities
 
1,440,570

 
1,164,451

Commitments and contingencies
 


 


Equity
 
 
 
 
Partners' Equity
 
 
 
 
General partner
 
4,978

 
4,720

Limited partners
 
548,019

 
501,214

Accumulated other comprehensive income
 
1,084

 
1,107

Total partners' equity
 
554,081

 
507,041

Noncontrolling interests in consolidated partnerships
 
6,876

 
6,834

Total equity
 
560,957

 
513,875

Total liabilities and equity
 
$
2,001,527

 
$
1,678,326

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,
 
 
2013
 
2012
 
2013
 
2012
Revenues
 
 
 
 
 
 

 
 
Base rentals
 
$
64,301

 
$
59,662

 
$
184,591

 
$
175,464

Percentage rentals
 
3,084

 
3,180

 
6,956

 
6,542

Expense reimbursements
 
27,414

 
24,908

 
78,544

 
73,777

Other income
 
3,104

 
2,733

 
7,516

 
6,278

Total revenues
 
97,903

 
90,483


277,607


262,061

Expenses
 


 


 


 
 
Property operating
 
29,863

 
27,614

 
86,819

 
81,679

General and administrative
 
9,754

 
9,018

 
29,240

 
27,737

Acquisition costs
 
532

 

 
963

 

Depreciation and amortization
 
24,223

 
24,809

 
68,683

 
75,247

Total expenses
 
64,372

 
61,441


185,705


184,663

Operating income
 
33,531

 
29,042


91,902


77,398

Interest expense
 
(12,367
)
 
(12,317
)
 
(37,826
)
 
(37,062
)
Gain on previously held interest in acquired joint venture
 
26,002

 

 
26,002

 

Income before equity in earnings (losses) of unconsolidated joint ventures
 
47,166

 
16,725


80,078


40,336

Equity in earnings (losses) of unconsolidated joint ventures
 
9,014

 
(555
)
 
10,107

 
(2,874
)
Net income
 
56,180

 
16,170


90,185


37,462

Noncontrolling interests in consolidated partnerships
 
(99
)
 
(7
)
 
(129
)
 
25

Net income available to partners
 
56,081

 
16,163


90,056


37,487

Net income available to limited partners
 
55,510

 
15,998

 
89,138

 
37,103

Net income available to general partner
 
$
571

 
$
165


$
918


$
384

 
 
 
 
 
 
 
 
 
Basic earnings per common unit:
 
 
 
 
 
 
 
 

Net income
 
$
0.56

 
$
0.16

 
$
0.91

 
$
0.38

Diluted earnings per common unit:
 
 
 
 
 
 
 
 

Net income
 
$
0.56

 
$
0.16

 
$
0.90

 
$
0.37

 
 
 
 
 
 
 
 
 
Distribution paid per common unit
 
$
0.225

 
$
0.210

 
$
0.660

 
$
0.620

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
 
Nine months ended
 
 
September 30,
 
September 30,
 
 
2013
 
2012
 
2013
 
2012
Net income
 
$
56,180

 
$
16,170

 
$
90,185

 
$
37,462

Other comprehensive income (loss)
 
 
 
 
 
 
 
 
Reclassification adjustments for amounts recognized in net income
 
(94
)
 
(88
)
 
(147
)
 
(261
)
Foreign currency translation adjustments
 
(79
)
 
(73
)
 
124

 
(39
)
Other comprehensive income (loss)
 
(173
)
 
(161
)
 
(23
)
 
(300
)
Comprehensive income
 
56,007

 
16,009

 
90,162

 
37,162

Comprehensive income attributable to noncontrolling interests in consolidated partnerships
 
(99
)
 
(7
)
 
(129
)
 
25

Comprehensive income attributable to the Operating Partnership
 
$
55,908

 
$
16,002

 
$
90,033

 
$
37,187

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, 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 37,700 common units upon exercise of options
 

481


481


481

Grant of 566,000 restricted units, net of forfeitures
 






Adjustments for noncontrolling interests in consolidated partnerships
 

(10
)

(10
)
10


Common distributions ($.83 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
 
918

89,138


90,056

129

90,185

Other comprehensive income
 


(23
)
(23
)

(23
)
Compensation under Incentive Award Plan
 

8,614


8,614


8,614

Issuance of 17,600 common units upon exercise of options
 

332


332


332

Issuance of 450,576 limited partner units
 

13,981


13,981


13,981

Grant of 337,373 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 ($.66 per common unit)
 
(660
)
(64,682
)

(65,342
)
(140
)
(65,482
)
Balance, September 30, 2013
 
$
4,978

$
548,019

$
1,084

$
554,081

$
6,876

$
560,957

 
 
 
 
 
 
 
 
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,
 
 
2013
 
2012
OPERATING ACTIVITIES
 
 

 
 

Net income
 
$
90,185

 
$
37,462

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


Depreciation and amortization
 
68,683

 
75,247

Amortization of deferred financing costs
 
1,795

 
1,722

Gain on previously held interest in acquired joint venture
 
(26,002
)
 

Equity in (earnings) losses of unconsolidated joint ventures
 
(10,107
)
 
2,874

Distributions of cumulative earnings from unconsolidated joint ventures
 
4,415

 
740

Equity-based compensation expense
 
8,363

 
8,231

Amortization of debt (premiums) and discounts, net
 
(767
)
 
(753
)
Net amortization (accretion) of market rent rate adjustments
 
389

 
(489
)
Straight-line rent adjustments
 
(4,068
)
 
(2,866
)
Changes in other assets and liabilities:
 
 
 
 
Other assets
 
214

 
(1,274
)
Accounts payable and accrued expenses
 
3,985

 
8,290

Net cash provided by operating activities
 
137,085

 
129,184

INVESTING ACTIVITIES
 
 
 
 
Additions to rental property
 
(40,578
)
 
(31,157
)
Acquisition of interest in unconsolidated joint venture, net of cash acquired
 
(11,271
)
 

Additions to investments in and notes receivable from unconsolidated joint ventures
 
(140,373
)
 
(57,810
)
Additions to non-real estate assets
 
(7,768
)
 

Distributions in excess of cumulative earnings from unconsolidated joint ventures
 
45,891

 
336

Additions to deferred lease costs
 
(3,381
)
 
(3,430
)
Net cash used in investing activities
 
(157,480
)
 
(92,061
)
FINANCING ACTIVITIES
 
 
 
 
Cash distributions paid
 
(65,342
)
 
(61,102
)
Proceeds from debt issuances
 
500,003

 
491,477

Repayments of debt
 
(413,806
)
 
(463,705
)
Acquisition of noncontrolling interests in consolidated partnerships
 
(525
)
 

Distributions to noncontrolling interests in consolidated partnerships
 
(67
)
 

Additions to deferred financing costs
 
(37
)
 
(2,527
)
Proceeds from exercise of options
 
332

 
372

Net cash provided by (used in) financing activities
 
20,558

 
(35,485
)
Net increase in cash and cash equivalents
 
163

 
1,638

Cash and cash equivalents, beginning of period
 
10,295

 
7,866

Cash and cash equivalents, end of period
 
$
10,458

 
$
9,504

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, 2013, we owned and operated 37 outlet centers, with a total gross leasable area of approximately 11.5 million square feet. We also had partial ownership interests in 6 outlet centers totaling approximately 1.4 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. As of September 30, 2013, the Company, through its ownership of Tanger GP Trust and Tanger LP Trust, owned 94,478,785 units of the Operating Partnership and other limited partners collectively owned 5,145,012 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. In the opinion of management, all adjustments (consisting only of normal recurring adjustments) necessary for a fair presentation of the financial statements for the interim periods have been made. The results of interim periods are not necessarily indicative of the results for a full year.

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 in the Operating Partnership relate to the interests owned by limited partners other than Tanger LP Trust. In August 2013, the Operating Partnership's operating agreement was amended to, among other things, effect a four-for-one split by issuing to its existing holders four units of partnership interest for every one unit outstanding. After the effect of the split, each unit of partnership interest held by limited partners not wholly owned by the Company may be exchanged for one common share of the Company. Prior to the split, each unit held by the limited partners not wholly owned by the Company was exchangeable for four common shares of the Company. All references to the number of units outstanding and per unit amounts reflect the effect of the split for all periods presented.


17



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 nine months ended September 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 nine months ended September 30, 2013.  

In addition, we have corrected the classification of certain amounts related to above and below market lease contracts in the consolidated balance sheet of the Company and Operating Partnership as of December 31, 2012. The amounts were previously reported net within the deferred lease costs and other intangibles, net line item. Below market lease values, net of accumulated amortization, in the amount of $6.4 million have been reclassified into the other liabilities line item in the consolidated balance sheet as of December 31, 2012. These revisions were not considered material to the previously issued financial statements.


3. Acquisition of Rental Property

In August 2013, Deer Park completed a refinancing of its existing debt and then immediately restructured the ownership whereby we acquired an additional ownership interest in the property from one of the partners which gave us a controlling interest. With the acquisition of this additional interest, we have consolidated the property for financial reporting purposes since the acquisition date, and remeasured our previously held interest that was accounted for as an equity method investment.

Prior to the acquisition, Deer Park successfully negotiated new financing of the debt obligations for the previous mortgage and mezzanine loans totaling approximately $238.5 million, with a $150.0 million mortgage loan. The new five year mortgage loan bears interest at a 150 basis point spread over LIBOR. The previous mortgage and mezzanine loans were in default, and as part of the refinancing, all default interest associated with the loans was waived. Utilizing funding from our existing unsecured lines of credit, we loaned approximately $89.5 million at a rate of LIBOR plus 3.25% and due on August 30, 2020 to the Deer Park joint venture representing the remaining amount necessary to repay the previous mortgage and mezzanine loans. As a result of the refinancing, Deer Park recorded a gain on early extinguishment of debt of approximately $13.8 million. Our share of this gain and the income from the settlement of a lawsuit with a third party was approximately $7.8 million and has been included in equity in earnings (losses) of unconsolidated joint ventures in the consolidated statement of operations for the three and nine months ended September 30, 2013.

Subsequent to the debt extinguishment, we acquired an additional one-third interest in the Deer Park property from one of the partners, bringing our total ownership to a two-thirds interest, for total consideration of approximately $27.9 million, including $13.9 million in cash and 450,576 in common limited partnership units of Tanger Properties Limited Partnership, which are exchangeable for an equivalent number of the Company's common shares. This transaction was accounted for as a business combination resulting in the assets acquired and liabilities assumed being recorded at fair value as a result of the step acquisition. Prior to the acquisition, the joint venture was considered a variable interest entity and was accounted for under the equity method of accounting since we did not have the ability to direct the significant activities that affect the economic performance of the venture as a one-third owner. Upon acquiring an additional one-third interest, we determined, based on the acquisition agreement and other transaction documents which amended our rights with respect to the property and our obligations with respect to the additional one-third interest, that we control the property assets and direct the propertys significant activities and therefore, consolidate the propertys assets and liabilities.
 

18



The following table illustrates the fair value of the total consideration transferred and the amounts of the identifiable assets acquired and liabilities assumed at the acquisition date (in thousands):

Cash transferred
$
13,939

Common limited partnership units issued
13,981

Fair value of total consideration transferred to acquire one-third interest
27,920

Fair value of our previously held one-third interest
27,920

Fair value of one-third interest owned by the remaining partner
27,920

Fair value of net assets acquired
$
83,760





The aggregate purchase price of the property has been allocated as follows:

 
 
Fair Value
 (in thousands)
 
Weighted-Average Amortization Period (in years)
Land
 
$
82,413

 
 
Buildings, improvements and fixtures
 
172,694

 
 
Deferred lease costs and other intangibles
 
 
 
 
Above market lease value
 
18,807

 
11.9
Below market lease value
 
(12,658
)
 
18.5
Lease in place value
 
28,846

 
7.6
Tenant relationships
 
27,594

 
19.0
Lease and legal costs
 
1,724

 
8.9
Total deferred lease costs and other intangibles, net
 
64,313

 
 
Other identifiable assets and liabilities assumed, net
 
2,265

 
 
Debt
 
(237,925
)
 
 
Total fair value of net assets acquired
 
$
83,760

 
 

There was no contingent consideration associated with this acquisition. We incurred approximately $772,000 in third-party acquisition costs which were expensed as incurred. As a part of the acquisition accounting, we recorded a gain of $26.0 million which represented the difference between the carrying book value and the fair value of our previously held equity method investment in Deer Park.

Although we do not anticipate any changes in the fair value measurements of the acquisitions, the measurements may be subject to change within 12 months of the business combination date if new facts or circumstances are brought to our attention that were previously unknown but existed as of the business combination date.


19



Following the acquisition, we and the remaining one-third owner of the Deer Park property restructured certain aspects of our ownership of the property, whereby we receive substantially all of the economics generated by the property and would have substantial control over the property's financial activities. We and the remaining one-third owner of the Deer Park property entered into a triple net lease agreement with a different wholly-owned subsidiary of ours which operates the property as lessee. Under the new structure, we will serve as property manager and control the management, leasing, marketing and other operations of the property. We and the remaining one-third property owner will receive, in proportion to our respective ownership interests, fixed annual lease payments of approximately $2.5 million, plus an amount necessary to pay the interest expense on debt related to the property. In addition, we and the remaining property owner have entered into an agreement whereby they may require us to acquire their ownership interest in the property on the second anniversary of the acquisition date for a price of $28.4 million, and we have the option to acquire their ownership interest on the fourth anniversary of the acquisition date at the same price. Due to the other partner's ability to require us to purchase their interest, we have recorded an obligation to redeem their interest at the redemption price as a deferred financing obligation in the other liabilities section of the balance sheet.

The results of operations from the property are included in the consolidated statements of operations beginning on the acquisition date. The aggregate revenues and net loss from the property from the acquisition date through September 30, 2013, were $3.2 million and $337,000, respectively. The following unaudited condensed pro forma financial information for the three and nine months ended September 30, 2013 is presented as if the acquisition had been consummated as of January 1, 2012, the beginning of the previous reporting period (in thousands, except per share data):
 
 
(Pro forma)
 
(Pro forma)
 
 
Three months ended
 
Nine months ended
 
 
September 30,
 
September 30,
 
 
2013

2012
 
2013

2012
Total Revenue
 
$
104,326

 
$
98,905

 
$
300,931

 
$
286,452

Income from continuing operations
 
29,417

 
15,041

 
61,700

 
60,333

Net income attributable to Tanger Factory Outlet Centers, Inc.
 
27,861

 
14,257

 
58,466

 
58,102

Basic earnings per common share
 
0.30

 
0.15

 
0.62

 
0.63

Diluted earnings per common share
 
0.29

 
0.15

 
0.61

 
0.62




4. Investments in Unconsolidated Real Estate Joint Ventures
Our investments in unconsolidated joint ventures as of September 30, 2013 and December 31, 2012 aggregated $136.9 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 September 30, 2013 and December 31, 2012, we were members of the following unconsolidated real estate joint ventures:
As of September 30, 2013
Joint Venture
 
Center Location
 
Ownership %
 
Square Feet
 
Carrying Value of Investment
 (in millions)
 
Total Joint Venture Debt
 (in millions)
Charlotte
 
Charlotte, NC
 
50.0
%
 

 
$
5.9

 
$

Galveston/Houston
 
Texas City, TX
 
50.0
%
 
347,930

 
7.7

 
65.0

National Harbor
 
Washington D.C. Metro Area
 
50.0
%
 

 
17.5

 
28.1

RioCan Canada
 
Various
 
50.0
%
 
434,162

 
86.7

 
18.8

Westgate
 
Glendale, AZ
 
58.0
%
 
331,739

 
16.4

 
43.0

Wisconsin Dells
 
Wisconsin Dells, WI
 
50.0
%
 
265,086

 
2.5

 
24.3

Other
 
 
 


 

 
0.2

 

 
 
 
 
 
 
 
 
$
136.9

 
$
179.2


20



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.

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

Nine months ended
 
 
September 30,

September 30,
 
 
2013

2012

2013

2012
Fee:
 
 
 
 
 
 

 
 

Development
 
$
(6
)
 
$
8

 
$
57

 
$
8

Loan Guarantee
 
40

 
16

 
121

 
16

Management and leasing
 
761

 
554

 
2,391

 
1,507

Marketing
 
93

 
61

 
301

 
161

Total Fees
 
$
888

 
$
639

 
$
2,870

 
$
1,692


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.

Charlotte, North Carolina

In May 2013, we formed a 50/50 joint venture for the development of an outlet center in the Charlotte, NC market. Subsequently, during the third quarter of 2013, the joint venture began construction on the outlet center which will be located eight miles southwest of uptown Charlotte at the interchange of I-485 and Steele Creek Road (NC Highway 160), the two major thoroughfares for the city. The approximately 400,000 square foot project will feature approximately 90 brand name and designer stores and is expected to open during the third quarter of 2014.

As of September 30, 2013, we and our partner had each contributed approximately $5.9 million in cash to the joint venture to fund development activities. We are providing development services to the project; and with our partner, are jointly providing leasing services. Our partner will provide property management and marketing services to the center once open.

21




Deer Park, Long Island, New York

As described in Note 3, we acquired an additional one-third ownership interest in Deer Park and have consolidated the property for financial reporting purposes since the acquisition date.

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.

Galveston/Houston, Texas

Tanger Outlets Texas City, which opened on October 19, 2012, was initially fully funded with equal equity contributions to the joint venture by us and our 50/50 joint venture partner. In July 2013, the joint venture closed on a mortgage loan with the ability to borrow up to $70.0 million with a rate of LIBOR + 1.50% and a maturity date of July 1, 2017, and with the option to extend the maturity for one additional year. The joint venture received total loan proceeds of $65.0 million and distributed the proceeds equally to the partners.


22



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 with 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 which carries an interest rate of LIBOR + 1.65%. As of September 30, 2013 the balance on the loan was $28.1 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 fourth 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 fourth 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 joint venture is a Variable Interest Entity ("VIE") and all of our other joint ventures are not a VIE. Westgate is considered a VIE because the voting rights are disproportionate to the economic interests. 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 was a VIE, we performed an assessment to determine if we would be considered the primary beneficiary and thus be required to consolidate its balance sheet 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

The operating, development, leasing, and management agreement of Westgate provides that the activities that most significantly impact the economic performance of the venture require unanimous 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 Westgate. Our equity method investment in Westgate as of September 30, 2013 was approximately $16.4 million. We are unable to estimate our maximum exposure to loss at this time because our guarantees are limited and based on the future operating performance of Westgate.

23




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
 
September 30, 2013
 
December 31,
2012
Assets
 
 

 
 

Land
 
$
49,184

 
$
96,455

Buildings, improvements and fixtures
 
256,652

 
493,424

Construction in progress, including land
 
138,615

 
16,338

 
 
444,451

 
606,217

Accumulated depreciation
 
(25,561
)
 
(62,547
)
Total rental property, net
 
418,890

 
543,670

Assets held for sale (1)
 

 
1,828

Cash and cash equivalents
 
13,727

 
21,879

Deferred lease costs, net
 
20,012

 
24,411

Deferred debt origination costs, net
 
1,970

 
5,213

Prepaids and other assets
 
8,167

 
25,350

Total assets
 
$
462,766

 
$
622,351

Liabilities and Owners' Equity
 
 

 
 

Mortgages payable
 
$
179,212

 
$
325,192

Construction trade payables
 
13,950

 
21,734

Accounts payable and other liabilities
 
6,253

 
31,944

Total liabilities
 
199,415

 
378,870

Owners' equity
 
263,351

 
243,481

Total liabilities and owners' equity
 
$
462,766

 
$
622,351

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

24



 
 
Three months ended
 
Nine months ended
Summary Statements of Operations
 
September 30,
 
September 30,
 - Unconsolidated Joint Ventures
 
2013
 
2012
 
2013
 
2012
Revenues (a)
 
$
29,013

 
$
11,985

 
$
70,961

 
$
35,249

Expenses
 
 
 
 
 
 

 
 
Property operating
 
7,808

 
5,521

 
25,440

 
15,495

General and administrative
 
629

 
365

 
962

 
765

Acquisition costs
 
19

 

 
474

 
704

Abandoned development costs
 
19

 

 
153

 
1,390

Impairment Charge
 

 

 

 
420

Depreciation and amortization
 
6,232

 
4,283

 
21,200

 
13,191

Total expenses
 
14,707

 
10,169

 
48,229

 
31,965

Operating income
 
14,306

 
1,816

 
22,732

 
3,284

Gain on early extinguishment of debt
 
13,820

 

 
13,820

 

Interest expense
 
(2,840
)
 
(3,540
)
 
(10,406
)
 
(10,967
)
Net income (loss)
 
$
25,286

 
$
(1,724
)
 
$
26,146

 
$
(7,683
)
 
 
 
 
 
 
 
 
 
The Company and Operating Partnership's share of:
 
 

 
 

Net income (loss)
 
$
9,014

 
$
(555
)
 
$
10,107

 
$
(2,874
)
Depreciation and impairment charge (real estate related)
 
$
2,861

 
$
1,641

 
$
9,465

 
$
5,249


a) Note that revenues for the three and nine months ended September 30, 2013 include approximately $9.5 million of other income from the settlement of a lawsuit at Deer Park prior to our acquisition of an additional one-third interest in and the consolidation of the property.

5. New Developments

Foxwoods, Connecticut

In September 2013, we broke ground at Foxwoods Resort Casino in Mashantucket, Connecticut on Tanger Outlets at Foxwoods. We own a two-thirds controlling interest in the joint venture, which will be consolidated for financial reporting purpose