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, 2014
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, 2014, there were 95,881,645 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, 2014 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 June 30, 2014, the Company, through its ownership of Tanger GP Trust and Tanger LP Trust, owned 95,881,645 units of the Operating Partnership and other limited partners (the "Non-Company LPs") collectively owned 5,101,681 Class A common limited partnership units. Each Class A common limited partnership unit held by the Non-Company LPs is exchangeable for one of the Company's common shares, subject to certain limitations to preserve the Company's REIT status. Class B common limited partnership units, which are held by Tanger LP Trust, are not exchangeable for common shares of the Company.

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.


2



There are only a few differences between the Company and the Operating Partnership, which are reflected in the disclosure in this report. We believe it is important, however to understand these differences between the Company and the Operating Partnership in the context of how the Company and the Operating Partnership operate as an interrelated consolidated company. As stated above, the Company is a REIT, whose only material asset is its ownership of partnership interests of the Operating Partnership through its wholly-owned subsidiaries, the Tanger GP Trust and Tanger LP Trust. As a result, the Company does not conduct business itself, other than issuing public equity from time to time and incurring expenses required to operate as a public company. However, all operating expenses incurred by the Company are reimbursed by the Operating Partnership, thus the only material item on the Company's income statement is its equity in the earnings of the Operating Partnership. Therefore, the assets and liabilities and the revenues and expenses of the Company and the Operating Partnership are the same on their respective financial statements, except for immaterial differences related to cash, other assets and accrued liabilities that arise from public company expenses paid by the Company. The Company itself does not hold any indebtedness but does guarantee certain debt of the Operating Partnership, as disclosed in this report. The Operating Partnership holds all of the outlet centers and other assets, including the ownership interests in 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 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 Non-Company LPs 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;
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.
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.

3



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, 2014 and December 31, 2013
Consolidated Statements of Operations - for the three and six months ended June 30, 2014 and 2013
Consolidated Statements of Comprehensive Income - for the three and six months ended June 30, 2014 and 2013
Consolidated Statements of Shareholders' Equity - for the six months ended June 30, 2014 and the year ended December 31, 2013
Consolidated Statements of Cash Flows - for the six months ended June 30, 2014 and 2013
 
 
FINANCIAL STATEMENTS OF TANGER PROPERTIES LIMITED PARTNERSHIP (Unaudited)
 
Consolidated Balance Sheets - as of June 30, 2014 and December 31, 2013
Consolidated Statements of Operations - for the three and six months ended June 30, 2014 and 2013
Consolidated Statements of Comprehensive Income - for the three and six months ended June 30, 2014 and 2013
Consolidated Statements of Equity - for the six months ended June 30, 2014 and the year ended December 31, 2013
Consolidated Statements of Cash Flows - for the six months ended June 30, 2014 and 2013
 
 
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

4



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,
 2014
 
December 31,
2013
ASSETS
 
 

 
 

Rental property
 
 

 
 

Land
 
$
230,415

 
$
230,415

Buildings, improvements and fixtures
 
2,029,321

 
2,009,971

Construction in progress
 
37,553

 
9,433

 
 
2,297,289

 
2,249,819

Accumulated depreciation
 
(691,339
)
 
(654,631
)
Total rental property, net
 
1,605,950

 
1,595,188

Cash and cash equivalents
 
13,240

 
15,241

Investments in unconsolidated joint ventures
 
210,131

 
140,214

Deferred lease costs and other intangibles, net
 
151,738

 
163,581

Deferred debt origination costs, net
 
9,652

 
10,818

Prepaids and other assets
 
77,905

 
81,414

Total assets
 
$
2,068,616

 
$
2,006,456

LIABILITIES AND EQUITY
 
 
 
 
Liabilities
 
 

 
 

Debt
 
 

 
 

Senior, unsecured notes (net of discount of $5,433 and $5,752, respectively)
 
$
794,567

 
$
794,248

Unsecured term loans (net of discount of $320 and $396, respectively)
 
267,180

 
267,104

Mortgages payable (including premiums of $3,418 and $3,799, respectively)
 
248,336

 
250,497

Unsecured lines of credit
 
91,200

 
16,200

Total debt
 
1,401,283

 
1,328,049

Construction trade payables
 
15,352

 
9,776

Accounts payable and accrued expenses
 
39,411

 
49,686

Deferred financing obligation
 
28,388

 
28,388

Other liabilities
 
30,024

 
32,962

Total liabilities
 
1,514,458

 
1,448,861

Commitments and contingencies
 

 

Equity
 
 

 
 

Tanger Factory Outlet Centers, Inc.
 
 

 
 

Common shares, $.01 par value, 300,000,000 shares authorized, 95,881,645 and 94,505,685 shares issued and outstanding at June 30, 2014 and December 31, 2013, respectively
 
959

 
945

Paid in capital
 
797,286

 
788,984

Accumulated distributions in excess of net income 
 
(276,224
)
 
(265,242
)
Accumulated other comprehensive loss
 
(3,265
)
 
(2,428
)
Equity attributable to Tanger Factory Outlet Centers, Inc.
 
518,756

 
522,259

Equity attributable to noncontrolling interests
 
 
 
 
Noncontrolling interests in Operating Partnership
 
27,602

 
28,432

Noncontrolling interests in other consolidated partnerships
 
7,800

 
6,904

Total equity
 
554,158

 
557,595

Total liabilities and equity
 
$
2,068,616

 
$
2,006,456


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

5



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,
 
 
2014
 
2013
 
2014
 
2013
Revenues
 
 
 
 
 
 

 
 
Base rentals
 
$
68,160

 
$
61,046

 
$
135,136

 
$
120,290

Percentage rentals
 
1,915

 
1,855

 
3,998

 
3,872

Expense reimbursements
 
29,452

 
25,824

 
60,994

 
51,130

Other income
 
2,749

 
2,290

 
4,990

 
4,412

Total revenues
 
102,276

 
91,015

 
205,118

 
179,704

Expenses
 
 
 


 
 
 
 

Property operating
 
33,629

 
28,821

 
69,656

 
56,956

General and administrative
 
10,761

 
9,914

 
21,483

 
19,486

Acquisition costs
 

 
252

 
7

 
431

Abandoned pre-development costs
 

 

 
1,596

 

Depreciation and amortization
 
25,197

 
22,172

 
51,260

 
44,460

Total expenses
 
69,587

 
61,159

 
144,002

 
121,333

Operating income
 
32,689

 
29,856


61,116


58,371

Interest expense
 
(14,582
)
 
(12,583
)
 
(29,502
)
 
(25,459
)
Income before equity in earnings of unconsolidated joint ventures
 
18,107

 
17,273

 
31,614

 
32,912

Equity in earnings of unconsolidated joint ventures
 
1,788

 
503

 
3,721

 
1,093

Net income
 
19,895

 
17,776


35,335


34,005

Noncontrolling interests in Operating Partnership
 
(1,028
)
 
(859
)
 
(1,831
)
 
(1,648
)
Noncontrolling interests in other consolidated partnerships
 
(17
)
 
(29
)
 
(38
)
 
(30
)
Net income attributable to Tanger Factory Outlet Centers, Inc.
 
$
18,850

 
$
16,888


$
33,466


$
32,327

 
 
 
 
 
 
 
 
 
Basic earnings per common share
 
 
 
 
 
 

 
 

Net income
 
$
0.20

 
$
0.18

 
$
0.35

 
$
0.34

Diluted earnings per common share
 
 
 
 
 
 
 
 
Net income
 
$
0.20

 
$
0.18

 
$
0.35

 
$
0.34

 
 
 
 
 
 
 
 
 
Dividends paid per common share
 
$
0.240

 
$
0.225

 
$
0.465

 
$
0.435

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

6



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,
 
 
2014
 
2013
 
2014
 
2013
Net income
 
$
19,895

 
$
17,776

 
$
35,335

 
$
34,005

Other comprehensive income (loss)
 
 
 
 
 
 
 

Reclassification adjustments for amounts recognized in net income
 
(98
)
 
37

 
(194
)
 
(53
)
Foreign currency translation adjustments
 
3,488

 
135

 
648

 
203

Change in fair value of cash flow hedges
 
(1,018
)
 

 
(1,338
)
 

Other comprehensive income (loss)
 
2,372

 
172

 
(884
)
 
150

Comprehensive income
 
22,267

 
17,948

 
34,451

 
34,155

Comprehensive income attributable to noncontrolling interests
 
(1,167
)
 
(896
)
 
(1,822
)
 
(1,685
)
Comprehensive income attributable to Tanger Factory Outlet Centers, Inc.
 
$
21,100

 
$
17,052

 
$
32,629

 
$
32,470

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


7



TANGER FACTORY OUTLET CENTERS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' 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, 2012
 
$
941

$
766,056

$
(285,588
)
$
1,200

$
482,609

$
24,432

$
6,834

$
513,875

Net income
 


107,557


107,557

5,643

121

113,321

Other comprehensive loss
 



(3,628
)
(3,628
)
(200
)

(3,828
)
Compensation under Incentive Award Plan
 

11,743



11,743



11,743

Issuance of 44,500 common shares upon exercise of options
 

635



635



635

Issuance of 450,676 Operating Partnership limited partner units
 





13,981


13,981

Issuance of 332,373 restricted shares, net of forfeitures
 
3

(3
)






Adjustment for noncontrolling interests in Operating Partnership
 

11,130



11,130

(11,130
)


Adjustment for noncontrolling interests in other consolidated partnerships
 

(576
)


(576
)

576


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 ($0.885 per share)
 


(87,211
)

(87,211
)


(87,211
)
Distributions to noncontrolling interests
 





(4,294
)
(102
)
(4,396
)
Balance, December 31, 2013
 
$
945

$
788,984

$
(265,242
)
$
(2,428
)
$
522,259

$
28,432

$
6,904

$
557,595

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 











 
 








 
 









8



TANGER FACTORY OUTLET CENTERS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' 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, 2013
 
$
945

$
788,984

$
(265,242
)
$
(2,428
)
$
522,259

$
28,432

$
6,904

$
557,595

Net income
 


33,466


33,466

1,831

38

35,335

Other comprehensive loss
 



(837
)
(837
)
(47
)

(884
)
Compensation under Incentive Award Plan
 

7,461



7,461



7,461

Issuance of 29,900 common shares upon exercise of options
 

628



628



628

Issuance of 1,302,729 restricted common shares, net of forfeitures
 
13

(13
)






Adjustment for noncontrolling interests in Operating Partnership
 

226



226

(226
)


Adjustment for noncontrolling interests in other consolidated partnerships
 

1



1


902

903

Exchange of 43,331 Operating Partnership units for 43,331 common shares
 
1

(1
)






Common dividends ($.465 per share)
 


(44,448
)

(44,448
)


(44,448
)
Distributions to noncontrolling interests in Operating Partnership
 





(2,388
)
(44
)
(2,432
)
Balance,
June 30, 2014
 
$
959

$
797,286

$
(276,224
)
$
(3,265
)
$
518,756

$
27,602

$
7,800

$
554,158


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




9



TANGER FACTORY OUTLET CENTERS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands, unaudited)
 
 
Six months ended
 
 
June 30,
 
 
2014
 
2013
OPERATING ACTIVITIES
 
 
 
 

Net income
 
$
35,335

 
$
34,005

Adjustments to reconcile net income to net cash provided by operating activities:
 
 
 
 
Depreciation and amortization
 
51,260

 
44,460

Amortization of deferred financing costs
 
1,107

 
1,201

Abandoned pre-development costs
 
1,596

 

Equity in earnings of unconsolidated joint ventures
 
(3,721
)
 
(1,093
)
Distributions of cumulative earnings from unconsolidated joint ventures
 
2,699

 
2,129

Share-based compensation expense
 
7,120

 
5,399

Amortization of debt (premiums) and discounts, net
 
(181
)
 
(513
)
Net amortization (accretion) of market rent rate adjustments
 
1,527

 
154

Straight-line rent adjustments
 
(3,361
)
 
(2,480
)
Changes in other assets and liabilities:
 
 
 
 
Other assets
 
2,258

 
(1,401
)
Accounts payable and accrued expenses
 
(11,530
)
 
(6,481
)
Net cash provided by operating activities
 
84,109

 
75,380

INVESTING ACTIVITIES
 
 
 
 
Additions to rental property
 
(45,750
)
 
(26,146
)
Additions to investments in unconsolidated joint ventures
 
(69,698
)
 
(40,964
)
Proceeds from insurance reimbursements
 
550

 

Additions to non-real estate assets
 
(803
)
 
(6,562
)
Distributions in excess of cumulative earnings from unconsolidated joint ventures
 
3,033

 
4,711

Additions to deferred lease costs
 
(2,541
)
 
(1,661
)
Net cash used in investing activities
 
(115,209
)
 
(70,622
)
FINANCING ACTIVITIES
 
 
 
 
Cash dividends paid
 
(44,448
)
 
(40,976
)
Distributions to noncontrolling interests in Operating Partnership
 
(2,388
)
 
(2,068
)
Proceeds from debt issuances
 
271,600

 
300,203

Repayments of debt
 
(198,380
)
 
(266,553
)
Acquisition of noncontrolling interests in other consolidated partnerships
 

 
(525
)
Distributions to noncontrolling interests in other consolidated partnerships
 
(44
)
 
(38
)
Proceeds from tax increment financing
 
2,047

 

Additions to deferred financing costs
 
(21
)
 
(57
)
Proceeds from exercise of options
 
628

 
337

Net cash provided by (used in) financing activities
 
28,994

 
(9,677
)
Effect of foreign currency rate changes on cash and cash equivalents
 
105

 
34

Net decrease in cash and cash equivalents
 
(2,001
)
 
(4,885
)
Cash and cash equivalents, beginning of period
 
15,241

 
10,335

Cash and cash equivalents, end of period
 
$
13,240

 
$
5,450

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

10



Item 1 - Financial Statements of Tanger Properties Limited Partnership

TANGER PROPERTIES LIMITED PARTNERSHIP AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands, unaudited)
 
 
June 30,
 2014
 
December 31,
2013
ASSETS
 
 

 
 

Rental property
 
 

 
 

Land
 
$
230,415

 
$
230,415

Buildings, improvements and fixtures
 
2,029,321

 
2,009,971

Construction in progress
 
37,553

 
9,433

 
 
2,297,289

 
2,249,819

Accumulated depreciation
 
(691,339
)
 
(654,631
)
Total rental property, net
 
1,605,950

 
1,595,188

Cash and cash equivalents
 
13,194

 
14,984

Investments in unconsolidated joint ventures
 
210,131

 
140,214

Deferred lease costs and other intangibles, net
 
151,738

 
163,581

Deferred debt origination costs, net
 
9,652

 
10,818

Prepaids and other assets
 
77,432

 
81,165

Total assets
 
$
2,068,097

 
$
2,005,950

LIABILITIES AND EQUITY
 

 
 
Liabilities
 
 
 
 
Debt
 
 
 
 
Senior, unsecured notes (net of discount of $5,433 and $5,752, respectively)
 
$
794,567

 
$
794,248

Unsecured term loans (net of discount of $320 and $396, respectively)
 
267,180

 
267,104

Mortgages payable (including premiums of $3,418 and $3,799, respectively)
 
248,336

 
250,497

Unsecured lines of credit
 
91,200

 
16,200

Total debt
 
1,401,283

 
1,328,049

Construction trade payables
 
15,352

 
9,776

Accounts payable and accrued expenses
 
38,892

 
49,180

Deferred financing obligation
 
28,388

 
28,388

Other liabilities
 
30,024

 
32,962

Total liabilities
 
1,513,939

 
1,448,355

Commitments and contingencies
 

 

Equity
 
 
 
 
Partners' Equity
 
 
 
 
General partner, 1,000,000 units outstanding at June 30, 2014 and December 31, 2013
 
4,880

 
4,988

Limited partners, 5,101,681 and 5,145,012 Class A units and 94,881,645 and 93,505,685 Class B units outstanding at June 30,2014 and December 31, 2013, respectively
 
545,083

 
548,424

Accumulated other comprehensive loss
 
(3,605
)
 
(2,721
)
Total partners' equity
 
546,358

 
550,691

Noncontrolling interests in consolidated partnerships
 
7,800

 
6,904

Total equity
 
554,158

 
557,595

Total liabilities and equity
 
$
2,068,097

 
$
2,005,950

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

11



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,
 
 
2014
 
2013
 
2014
 
2013
Revenues
 
 
 
 
 
 

 
 
Base rentals
 
$
68,160

 
$
61,046

 
$
135,136

 
$
120,290

Percentage rentals
 
1,915

 
1,855

 
3,998

 
3,872

Expense reimbursements
 
29,452

 
25,824

 
60,994

 
51,130

Other income
 
2,749

 
2,290

 
4,990

 
4,412

Total revenues
 
102,276

 
91,015


205,118


179,704

Expenses
 


 


 


 
 
Property operating
 
33,629

 
28,821

 
69,656

 
56,956

General and administrative
 
10,761

 
9,914

 
21,483

 
19,486

Acquisition costs
 

 
252

 
7

 
431

Abandoned pre-development costs
 

 

 
1,596

 

Depreciation and amortization
 
25,197

 
22,172

 
51,260

 
44,460

Total expenses
 
69,587

 
61,159


144,002


121,333

Operating income
 
32,689

 
29,856


61,116


58,371

Interest expense
 
(14,582
)
 
(12,583
)
 
(29,502
)
 
(25,459
)
Income before equity in earnings of unconsolidated joint ventures
 
18,107

 
17,273


31,614


32,912

Equity in earnings of unconsolidated joint ventures
 
1,788

 
503

 
3,721

 
1,093

Net income
 
19,895

 
17,776


35,335


34,005

Noncontrolling interests in consolidated partnerships
 
(17
)
 
(29
)
 
(38
)
 
(30
)
Net income available to partners
 
19,878

 
17,747


35,297


33,975

Net income available to limited partners
 
19,677

 
17,566

 
34,940

 
33,628

Net income available to general partner
 
$
201

 
$
181


$
357


$
347

 
 
 
 
 
 
 
 
 
Basic earnings per common unit:
 
 
 
 
 
 
 
 

Net income
 
$
0.20

 
$
0.18

 
$
0.35

 
$
0.34

Diluted earnings per common unit:
 
 
 
 
 
 
 
 
Net income
 
$
0.20

 
$
0.18

 
$
0.35

 
$
0.34

 
 
 
 
 
 
 
 
 
Distribution paid per common unit
 
$
0.240

 
$
0.225

 
$
0.465

 
$
0.435

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

12



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

 
 
Three months ended
 
Six months ended
 
 
June 30,
 
June 30,
 
 
2014
 
2013
 
2014
 
2013
Net income
 
$
19,895

 
$
17,776

 
$
35,335

 
$
34,005

Other comprehensive income (loss)
 
 
 
 
 
 
 
 
Reclassification adjustments for amounts recognized in net income
 
(98
)
 
37

 
(194
)
 
(53
)
Foreign currency translation adjustments
 
3,488

 
135

 
648

 
203

Changes in fair value of cash flow hedges
 
(1,018
)
 

 
(1,338
)
 

Other comprehensive income (loss)
 
2,372

 
172

 
(884
)
 
150

Comprehensive income
 
22,267

 
17,948

 
34,451

 
34,155

Comprehensive income attributable to noncontrolling interests in consolidated partnerships
 
(17
)
 
(29
)
 
(38
)
 
(30
)
Comprehensive income attributable to the Operating Partnership
 
$
22,250

 
$
17,919

 
$
34,413

 
$
34,125

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


13



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 (loss)
Total partners' equity
Noncontrolling interests in consolidated partnerships
Total equity
Balance, December 31, 2012
 
$
4,720

$
501,214

$
1,107

$
507,041

$
6,834

$
513,875

Net income
 
1,153

112,047


113,200

121

113,321

Other comprehensive loss
 


(3,828
)
(3,828
)

(3,828
)
Compensation under Incentive Award Plan
 

11,743


11,743


11,743

Issuance of 44,500 common units upon exercise of options
 

635


635


635

Issuance of 450,676 limited partner units
 

13,981


13,981


13,981

Issuance of 332,373 restricted units, net of forfeitures
 






Adjustments for noncontrolling interests in consolidated partnerships
 

(576
)

(576
)
576


Acquisition of noncontrolling interests in consolidated partnerships
 




(525
)
(525
)
Common distributions ($.885 per common unit)
 
(885
)
(90,620
)

(91,505
)

(91,505
)
Distributions to noncontrolling interests in consolidated partnerships
 




(102
)
(102
)
Balance, December 31, 2013
 
4,988

548,424

(2,721
)
550,691

6,904

557,595

Net income
 
357

34,940


35,297

38

35,335

Other comprehensive loss
 


(884
)
(884
)

(884
)
Compensation under Incentive Award Plan
 

7,461


7,461


7,461

Issuance of 29,900 common units upon exercise of options
 

628


628


628

Issuance of 1,302,729 restricted common units, net of forfeitures
 






Adjustment for noncontrolling interests in other consolidated partnerships
 

1


1

902

903

Common distributions ($.465 per common unit)
 
(465
)
(46,371
)

(46,836
)
(44
)
(46,880
)
Balance, June 30, 2014
 
$
4,880

$
545,083

$
(3,605
)
$
546,358

$
7,800

$
554,158

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



14



TANGER PROPERTIES LIMITED PARTNERSHIP AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands, unaudited)
 
 
Six months ended
 
 
June 30,
 
 
2014
 
2013
OPERATING ACTIVITIES
 
 

 
 

Net income
 
$
35,335

 
$
34,005

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


Depreciation and amortization
 
51,260

 
44,460

Amortization of deferred financing costs
 
1,107

 
1,201

Abandoned pre-development costs
 
1,596

 

Equity in earnings of unconsolidated joint ventures
 
(3,721
)
 
(1,093
)
Distributions of cumulative earnings from unconsolidated joint ventures
 
2,699

 
2,129

Equity-based compensation expense
 
7,120

 
5,399

Amortization of debt (premiums) and discounts, net
 
(181
)
 
(513
)
Net amortization (accretion) of market rent rate adjustments
 
1,527

 
154

Straight-line rent adjustments
 
(3,361
)
 
(2,480
)
Changes in other assets and liabilities:
 
 
 
 
Other assets
 
2,482

 
(1,362
)
Accounts payable and accrued expenses
 
(11,543
)
 
(6,540
)
Net cash provided by operating activities
 
84,320

 
75,360

INVESTING ACTIVITIES
 
 
 
 
Additions to rental property
 
(45,750
)
 
(26,146
)
Additions to investments in unconsolidated joint ventures
 
(69,698
)
 
(40,964
)
Proceeds from insurance reimbursements
 
550

 

Additions to non-real estate assets
 
(803
)
 
(6,562
)
Distributions in excess of cumulative earnings from unconsolidated joint ventures
 
3,033

 
4,711

Additions to deferred lease costs
 
(2,541
)
 
(1,661
)
Net cash used in investing activities
 
(115,209
)
 
(70,622
)
FINANCING ACTIVITIES
 
 
 
 
Cash distributions paid
 
(46,836
)
 
(43,044
)
Proceeds from debt issuances
 
271,600

 
300,203

Repayments of debt
 
(198,380
)
 
(266,553
)
Acquisition of noncontrolling interests in other consolidated partnerships
 

 
(525
)
Distributions to noncontrolling interests in consolidated partnerships
 
(44
)
 
(38
)
Proceeds from tax increment financing
 
2,047

 

Additions to deferred financing costs
 
(21
)
 
(57
)
Proceeds from exercise of options
 
628

 
337

Net cash provided by (used in) financing activities
 
28,994

 
(9,677
)
Effect of foreign currency on cash and cash equivalents
 
105

 
34

Net decrease in cash and cash equivalents
 
(1,790
)
 
(4,905
)
Cash and cash equivalents, beginning of period
 
14,984

 
10,295

Cash and cash equivalents, end of period
 
$
13,194

 
$
5,390

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

15



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, 2014, 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 7 outlet centers totaling approximately 1.7 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 June 30, 2014, the Company, through its ownership of Tanger GP Trust and Tanger LP Trust, owned 95,881,645 units of the Operating Partnership and other limited partners (the "Non-Company LPs") collectively owned 5,101,681 Class A common limited partnership units. Each Class A common limited partnership unit held by the Non-Company LPs is exchangeable for one of the Company's common shares, subject to certain limitations to preserve the Company's REIT status. Class B common limited partnership units, which are held by Tanger LP Trust, are not exchangeable for common shares of the Company.

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, 2013. The December 31, 2013 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.



16



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 Savannah joint ventures are Variable Interest Entities ("VIE") and all of our other joint ventures are not a VIE. Westgate and Savannah are each 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 and Savannah are VIEs, we performed an assessment to determine if we would be considered the primary beneficiary and thus be required to consolidate the 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

The operating, development, leasing, and management agreements of Westgate and Savannah provide that the activities that most significantly impact the economic performance of the ventures 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. Our investment in Westgate was approximately $15.7 million and in Savannah was approximately $33.1 million as of June 30, 2014. 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 Savannah.

"Noncontrolling interests in the Operating Partnership" reflects the Non-Company LP's percentage ownership of the Operating Partnership's units. "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. Noncontrolling interests are initially recorded in the consolidated balance sheets at fair value based upon purchase price allocations. Income is allocated to the noncontrolling interests based on their respective ownership interest.

 
3. Acquisition of Rental Property

In October 2003, we and two other owners each having a 33.3% ownership interest, established a joint venture to develop and own a shopping center in Deer Park, New York ("Deer Park"). In August 2013, 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 Deer Park representing the remaining amount necessary to repay the previous mortgage and mezzanine loans.

Subsequent to the debt extinguishment, we acquired an additional one-third interest in the Deer Park property from one of the other owners, 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 Class A 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. The fair value of the net assets acquired totaled $83.8 million, consisting of $319.4 million in rental property and lease related intangibles, $2.3 million in other identifiable assets and liabilities, and $237.9 million in debt. 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 as of August 30, 2013.


17



Following the acquisition, we and the remaining owner restructured certain aspects of our ownership of the property, whereby we receive substantially all of the economics generated by the property and have substantial control over the property's financial activities. Under the new structure, we serve as property manager and control the management, leasing, marketing and other operations of the property. In addition, we and the remaining 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 remaining owner'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 consolidated balance sheet.

4. New Developments of Consolidated Outlet Centers

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 purposes. To date, we have contributed approximately $29.4 million to the project for construction and development activities. The approximately 314,000 square foot project will be suspended above ground to join the casino floors of the two major hotels located within the resort, which attract millions of visitors each year. We currently expect the property to open in the second quarter of 2015.

5. Investments in Unconsolidated Real Estate Joint Ventures
Our investments in unconsolidated joint ventures as of June 30, 2014 and December 31, 2013 aggregated $210.1 million and $140.2 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, 2014 and December 31, 2013, we were members of the following unconsolidated real estate joint ventures:
As of June 30, 2014
Joint Venture
 
Center Location
 
Ownership %
 
Square Feet
(in 000's)
 
Carrying Value of Investment
 (in millions)
 
Total Joint Venture Debt
 (in millions)
Charlotte
 
Charlotte, NC
 
50.0
%
 

 
$
30.8

 
$

Galveston/Houston
 
Texas City, TX
 
50.0
%
 
353

 
6.7

 
65.0

National Harbor
 
National Harbor, MD
 
50.0
%
 
339

 
19.3

 
62.0

RioCan Canada
 
Various
 
50.0
%
 
432

 
101.4

 
17.5

Savannah (1)
 
Savannah, GA
 
50.0
%
 

 
33.1

 

Westgate
 
Glendale, AZ
 
58.0
%
 
332

 
15.7

 
45.8

Wisconsin Dells
 
Wisconsin Dells, WI
 
50.0
%
 
265

 
2.4

 
24.3

Other
 
 
 


 

 
0.7

 

 
 
 
 
 
 
 
 
$
210.1

 
$
214.6

(1)
Based on capital contribution and distribution provisions in the joint venture agreement, we expect our economic interest in the venture's cash flow to be greater than the ownership percentage indicated above, which in this case, states our legal interest in this venture. Our economic interest may fluctuate based on a number of factors, including mortgage financing, partnership capital contributions and distributions, and proceeds from gains or losses of asset sales.


18



As of December 31, 2013
Joint Venture
 
Center Location
 
Ownership %
 
Square Feet
(in 000's)
 
Carrying Value of Investment
(in millions)
 
Total Joint Venture Debt
(in millions)
Charlotte
 
Charlotte, NC
 
50.0
%
 

 
$
11.6

 
$

Galveston/Houston
 
Texas City, TX
 
50.0
%
 
353

 
7.4

 
65.0

National Harbor
 
National Harbor, MD
 
50.0
%
 
336

 
16.7

 
52.4

RioCan Canada
 
Various
 
50.0
%
 
433

 
85.7

 
17.9

Westgate
 
Glendale, AZ
 
58.0
%
 
332

 
16.1

 
43.1

Wisconsin Dells
 
Wisconsin Dells, WI
 
50.0
%
 
265

 
2.5

 
24.3

Other
 
 
 
 
 

 
0.2

 

 
 
 
 
 
 
 
 
$
140.2

 
$
202.7


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.

Fees we received for various services provided to our unconsolidated joint ventures were recognized in other income as follows (in thousands):
 
 
Three months ended

Six months ended
 
 
June 30,

June 30,
 
 
2014
 
2013

2014

2013
Fee:
 
 
 
 
 
 

 
 

Development and leasing
 
$
70

 
$
(81
)
 
$
78

 
$
(12
)
Loan guarantee
 
146

 
40

 
187

 
80

Management
 
438

 
504

 
846

 
1,001

Marketing
 
104

 
99

 
213

 
208

Total Fees
 
$
758

 
$
562

 
$
1,324

 
$
1,277


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 (totaling $3.2 million and $1.6 million as of June 30, 2014 and December 31, 2013) 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, which features approximately 90 brand name and designer stores, opened on July 31, 2014.

As of June 30, 2014, we and our partner had each contributed approximately $30.2 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.


19



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. Under the agreement, 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 has agreed to 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 an 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 and 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 316,000 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. As of June 30, 2014, we and our co-owner had each contributed $29.9 million in cash to fund development activities on these two projects.

Savannah, Georgia

In January 2014, we announced our plans to develop Tanger Outlets Savannah through a joint venture arrangement. The center will include approximately 385,000 square feet. The site is located on I-95, just north of I-16 in Pooler, Georgia, adjacent to the City of Savannah, and near the Savannah International Airport. As of June 30, 2014, our equity contributions totaled $33.3 million and our partner's equity contribution totaled $7.4 million. Contributions we make in excess of $7.4 million will earn a preferred rate of return equal to 8% from the date the contributions are made until the outlet center’s grand opening date, and then 10% annually thereafter.

In May 2014, the joint venture closed on a $97.7 million interest only mortgage loan with a rate of LIBOR + 1.65% and a maturity date of May 21, 2017, with the option for two, one year extensions.

Westgate, Glendale, Arizona

During the second quarter of 2014, Westgate began a 65,000 square foot expansion of the existing property which is expected to open in time for the 2014 holiday season. The expansion is being substantially funded by amounts available under the amended Westgate mortgage loan which had its maximum borrowing capacity increased from $48.3 million to $62.0 million in May 2014.

20



Condensed combined summary financial information of unconsolidated joint ventures accounted for using the equity method is as follows (in thousands):
Condensed Combined Balance Sheets - Unconsolidated Joint Ventures
 
June 30,
 2014
 
December 31,
2013
Assets
 
 

 
 

Land
 
$
66,076

 
$
66,020

Buildings, improvements and fixtures
 
329,918

 
327,972

Construction in progress, including land
 
205,831

 
86,880

 
 
601,825

 
480,872

Accumulated depreciation
 
(37,457
)
 
(29,523
)
Total rental property, net
 
564,368

 
451,349

Cash and cash equivalents
 
28,399

 
22,704

Deferred lease costs, net
 
22,533

 
19,281

Deferred debt origination costs, net
 
2,701

 
1,737

Prepaids and other assets
 
9,618

 
9,107

Total assets
 
$
627,619

 
$
504,178

Liabilities and Owners' Equity
 
 

 
 

Mortgages payable
 
$
214,616

 
$
202,688

Construction trade payables
 
24,409

 
19,370

Accounts payable and other liabilities
 
13,803

 
8,540

Total liabilities
 
252,828

 
230,598

Owners' equity
 
374,791

 
273,580

Total liabilities and owners' equity
 
$
627,619

 
$
504,178


 
 
Three months ended
 
Six months ended
Condensed Combined Statements of Operations
 
June 30,
 
June 30,
 - Unconsolidated Joint Ventures
 
2014
 
2013
 
2014
 
2013
Revenues
 
$
16,079

 
$
20,553

 
$
32,834

 
$
41,948

Expenses
 
 
 
 
 
 

 
 
Property operating
 
6,624

 
8,546

 
13,270

 
17,686

General and administrative
 
27

 
166

 
156

 
314

Acquisition costs
 

 
53

 

 
474

Abandoned development costs
 

 
134

 

 
134

Depreciation and amortization
 
4,564

 
7,584

 
9,538

 
14,968

Total expenses
 
11,215

 
16,483

 
22,964

 
33,576

Operating income
 
4,864

 
4,070

 
9,870

 
8,372

Interest expense
 
(1,383
)
 
(3,514
)
 
(2,609
)
 
(7,566
)
Net income
 
$
3,481

 
$
556

 
$
7,261

 
$
806

 
 
 
 
 
 
 
 
 
The Company and Operating Partnership's share of:
 
 

 
 

Net income
 
$
1,788

 
$
503

 
$
3,721

 
$
1,093

Depreciation and impairment charge (real estate related)
 
$
2,403

 
$
3,431

 
$
5,008

 
$
6,604




21



6. Debt of the Company

All of the Company's debt is held by the Operating Partnership and its consolidated subsidiaries.

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, 2014 and December 31, 2013, the Operating Partnership had amounts outstanding on these lines of credit totaling $91.2 million and $16.2 million, respectively.

The Company also guarantees the Operating Partnership's unsecured term loan 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. As of June 30, 2014, the amounts outstanding on the term loan and mortgage were $250.0 million and $18.0 million, respectively.

7. Debt of the Operating Partnership

The debt of the Operating Partnership consisted of the following (in thousands):
 
 
 
 
 
 
As of
 
As of
 
 
 
 
 
 
June 30, 2014
 
December 31, 2013
 
 
Stated Interest Rate(s)
 
Maturity Date
 
Principal
 
Premium
 (Discount)
 
Principal
 
Premium
 (Discount)
Senior, unsecured notes:
 
 
 
 
 
 

 
 
 
 
 
 

Senior notes
 
6.15
%
 
November 2015
 
$
250,000

 
$
(156
)
 
$
250,000

 
$
(211
)
Senior notes
 
6.125
%
 
June 2020
 
300,000

 
(1,374
)
 
300,000

 
(1,469
)
Senior notes
 
3.875
%
 
December 2023
 
250,000

 
(3,903
)
 
250,000

 
(4,072
)
 
 
 
 
 
 
 
 
 
 
 
 
 
Mortgages payable:
 
 
 
 
 
 
 
 
 
 
 
 
Atlantic City (1)
 
5.14%-7.65%

 
November 2021- December 2026
 
47,284

 
3,893

 
48,535

 
4,091

Deer Park
 
LIBOR + 1.50%

 
August 2018
 
150,000

 
(1,319
)
 
150,000

 
(1,478
)
Hershey (1)
 
5.17%-8.00%

 
August 2015
 
29,623

 
698

 
29,970

 
993

Ocean City (1)
 
5.24
%
 
January 2016
 
18,011

 
146

 
18,193

 
193

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