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, 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 October 30, 2014, there were 95,898,445 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, 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 September 30, 2014, the Company, through its ownership of Tanger GP Trust and Tanger LP Trust, owned 95,898,445 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 September 30, 2014 and December 31, 2013
Consolidated Statements of Operations - for the three and nine months ended September 30, 2014 and 2013
Consolidated Statements of Comprehensive Income - for the three and nine months ended September 30, 2014 and 2013
Consolidated Statements of Shareholders' Equity - for the nine months ended September 30, 2014 and 2013
Consolidated Statements of Cash Flows - for the nine months ended September 30, 2014 and 2013
 
 
FINANCIAL STATEMENTS OF TANGER PROPERTIES LIMITED PARTNERSHIP (Unaudited)
 
Consolidated Balance Sheets - as of September 30, 2014 and December 31, 2013
Consolidated Statements of Operations - for the three and nine months ended September 30, 2014 and 2013
Consolidated Statements of Comprehensive Income - for the three and nine months ended September 30, 2014 and 2013
Consolidated Statements of Equity - for the nine months ended September 30, 2014 and 2013
Consolidated Statements of Cash Flows - for the nine months ended September 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)
 
 
September 30, 2014
 
December 31,
2013
ASSETS
 
 

 
 

Rental property
 
 

 
 

Land
 
$
230,415

 
$
230,415

Buildings, improvements and fixtures
 
2,043,583

 
2,009,971

Construction in progress
 
75,000

 
9,433

 
 
2,348,998

 
2,249,819

Accumulated depreciation
 
(708,515
)
 
(654,631
)
Total rental property, net
 
1,640,483

 
1,595,188

Cash and cash equivalents
 
10,824

 
15,241

Investments in unconsolidated joint ventures
 
249,659

 
140,214

Deferred lease costs and other intangibles, net
 
146,642

 
163,581

Deferred debt origination costs, net
 
9,794

 
10,818

Prepaids and other assets
 
82,715

 
81,414

Total assets
 
$
2,140,117

 
$
2,006,456

LIABILITIES AND EQUITY
 
 
 
 
Liabilities
 
 

 
 

Debt
 
 

 
 

Senior, unsecured notes (net of discount of $5,271 and $5,752, respectively)
 
$
794,729

 
$
794,248

Unsecured term loans (net of discount of $281 and $396, respectively)
 
267,219

 
267,104

Mortgages payable (including premiums of $3,224 and $3,799, respectively)
 
247,240

 
250,497

Unsecured lines of credit
 
139,800

 
16,200

Total debt
 
1,448,988

 
1,328,049

Construction trade payables
 
23,216

 
9,776

Accounts payable and accrued expenses
 
56,011

 
49,686

Deferred financing obligation
 
28,388

 
28,388

Other liabilities
 
29,300

 
32,962

Total liabilities
 
1,585,903

 
1,448,861

Commitments and contingencies
 

 

Equity
 
 

 
 

Tanger Factory Outlet Centers, Inc.
 
 

 
 

Common shares, $.01 par value, 300,000,000 shares authorized, 95,898,445 and 94,505,685 shares issued and outstanding at September 30, 2014 and December 31, 2013, respectively
 
959

 
945

Paid in capital
 
801,363

 
788,984

Accumulated distributions in excess of net income 
 
(276,218
)
 
(265,242
)
Accumulated other comprehensive loss
 
(7,382
)
 
(2,428
)
Equity attributable to Tanger Factory Outlet Centers, Inc.
 
518,722

 
522,259

Equity attributable to noncontrolling interests
 
 
 
 
Noncontrolling interests in Operating Partnership
 
27,595

 
28,432

Noncontrolling interests in other consolidated partnerships
 
7,897

 
6,904

Total equity
 
554,214

 
557,595

Total liabilities and equity
 
$
2,140,117

 
$
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 September 30,
 
Nine months ended September 30,
 
 
2014
 
2013
 
2014
 
2013
Revenues
 
 
 
 
 
 

 
 
Base rentals
 
$
69,612

 
$
64,301

 
$
204,748

 
$
184,591

Percentage rentals
 
2,634

 
3,084

 
6,632

 
6,956

Expense reimbursements
 
29,463

 
27,414

 
90,457

 
78,544

Other income
 
3,588

 
3,104

 
8,578

 
7,516

Total revenues
 
105,297

 
97,903

 
310,415

 
277,607

Expenses
 
 
 


 
 
 
 

Property operating
 
32,798

 
29,863

 
102,454

 
86,819

General and administrative
 
11,334

 
9,754

 
32,817

 
29,240

Acquisition costs
 

 
532

 
7

 
963

Abandoned pre-development costs
 

 

 
1,596

 

Depreciation and amortization
 
25,774

 
24,223

 
77,034

 
68,683

Total expenses
 
69,906

 
64,372

 
213,908

 
185,705

Operating income
 
35,391

 
33,531


96,507


91,902

Interest expense
 
(13,902
)
 
(12,367
)
 
(43,404
)
 
(37,826
)
Casualty gain
 
329

 

 
329

 

Gain on previously held interest in acquired joint venture
 

 
26,002

 

 
26,002

Income before equity in earnings of unconsolidated joint ventures
 
21,818

 
47,166

 
53,432

 
80,078

Equity in earnings of unconsolidated joint ventures
 
2,479

 
9,014

 
6,200

 
10,107

Net income
 
24,297

 
56,180


59,632


90,185

Noncontrolling interests in Operating Partnership
 
(1,252
)
 
(2,787
)
 
(3,083
)
 
(4,435
)
Noncontrolling interests in other consolidated partnerships
 
(42
)
 
(99
)
 
(80
)
 
(129
)
Net income attributable to Tanger Factory Outlet Centers, Inc.
 
$
23,003

 
$
53,294


$
56,469


$
85,621

 
 
 
 
 
 
 
 
 
Basic earnings per common share
 
 
 
 
 
 

 
 

Net income
 
$
0.24

 
$
0.56

 
$
0.59

 
$
0.91

Diluted earnings per common share
 
 
 
 
 
 
 
 
Net income
 
$
0.24

 
$
0.56

 
$
0.59

 
$
0.90

 
 
 
 
 
 
 
 
 
Dividends paid per common share
 
$
0.240

 
$
0.225

 
$
0.705

 
$
0.660

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
 
Nine months ended
 
 
September 30,
 
September 30,
 
 
2014
 
2013
 
2014
 
2013
Net income
 
$
24,297

 
$
56,180

 
$
59,632

 
$
90,185

Other comprehensive loss
 
 
 
 
 
 
 

Reclassification adjustments for amounts recognized in net income
 
(99
)
 
(94
)
 
(293
)
 
(147
)
Foreign currency translation adjustments
 
(5,194
)
 
(79
)
 
(4,546
)
 
124

Change in fair value of cash flow hedges
 
952

 

 
(386
)
 

Other comprehensive loss
 
(4,341
)
 
(173
)
 
(5,225
)
 
(23
)
Comprehensive income
 
19,956

 
56,007

 
54,407

 
90,162

Comprehensive income attributable to noncontrolling interests
 
(1,070
)
 
(2,877
)
 
(2,892
)
 
(4,562
)
Comprehensive income attributable to Tanger Factory Outlet Centers, Inc.
 
$
18,886

 
$
53,130

 
$
51,515

 
$
85,600

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
 


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

Issuance 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 ($0.66 per share)
 


(62,206
)

(62,206
)


(62,206
)
Distributions to noncontrolling interests
 





(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.


8



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, 2013
 
$
945

$
788,984

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

$
28,432

$
6,904

$
557,595

Net income
 


56,469


56,469

3,083

80

59,632

Other comprehensive loss
 



(4,954
)
(4,954
)
(271
)

(5,225
)
Compensation under Incentive Award Plan
 

11,458



11,458



11,458

Issuance of 46,700 common shares upon exercise of options
 

895



895



895

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

(13
)






Adjustment for noncontrolling interests in Operating Partnership
 

37



37

(37
)


Adjustment for noncontrolling interests in other consolidated partnerships
 

3



3


1,001

1,004

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

(1
)






Common dividends ($.705 per share)
 


(67,445
)

(67,445
)


(67,445
)
Distributions to noncontrolling interests
 





(3,612
)
(88
)
(3,700
)
Balance,
September 30, 2014
 
$
959

$
801,363

$
(276,218
)
$
(7,382
)
$
518,722

$
27,595

$
7,897

$
554,214


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)

 
 
Nine months ended
 
 
September 30,
 
 
2014
 
2013
OPERATING ACTIVITIES
 
 
 
 

Net income
 
$
59,632

 
$
90,185

Adjustments to reconcile net income to net cash provided by operating activities:
 
 
 
 
Depreciation and amortization
 
77,034

 
68,683

Amortization of deferred financing costs
 
1,654

 
1,795

Abandoned pre-development costs
 
1,596

 

Casualty gain
 
(329
)
 

Gain on previously held interest in acquired joint venture
 

 
(26,002
)
Equity in earnings of unconsolidated joint ventures
 
(6,200
)
 
(10,107
)
Distributions of cumulative earnings from unconsolidated joint ventures
 
4,166

 
4,415

Share-based compensation expense
 
10,933

 
8,363

Amortization of debt (premiums) and discounts, net
 
(273
)
 
(767
)
Net amortization (accretion) of market rent rate adjustments
 
2,250

 
389

Straight-line rent adjustments
 
(5,027
)
 
(4,068
)
Changes in other assets and liabilities:
 
 
 
 
Other assets
 
(1,784
)
 
236

Accounts payable and accrued expenses
 
4,854

 
3,857

Net cash provided by operating activities
 
148,506

 
136,979

INVESTING ACTIVITIES
 
 
 
 
Additions to rental property
 
(92,500
)
 
(40,578
)
Acquisition of interest in unconsolidated joint venture, net of cash acquired
 

 
(11,271
)
Additions to investments in and notes receivable from unconsolidated joint ventures
 
(114,476
)
 
(140,373
)
Proceeds from insurance reimbursements
 
1,784

 

Additions to non-real estate assets
 
(933
)
 
(7,768
)
Distributions in excess of cumulative earnings from unconsolidated joint ventures
 
5,374

 
45,891

Additions to deferred lease costs
 
(4,109
)
 
(3,381
)
Net cash used in investing activities
 
(204,860
)
 
(157,480
)
FINANCING ACTIVITIES
 
 
 
 
Cash dividends paid
 
(67,445
)
 
(62,206
)
Distributions to noncontrolling interests in Operating Partnership
 
(3,612
)
 
(3,136
)
Proceeds from debt issuances
 
410,300

 
500,003

Repayments of debt
 
(289,381
)
 
(413,806
)
Acquisition of noncontrolling interests in other consolidated partnerships
 

 
(525
)
Distributions to noncontrolling interests in other consolidated partnerships
 
(88
)
 
(67
)
Proceeds from tax increment financing
 
2,246

 

Additions to deferred financing costs
 
(778
)
 
(37
)
Proceeds from exercise of options
 
895

 
332

Net cash provided by financing activities
 
52,137

 
20,558

Effect of foreign currency rate changes on cash and cash equivalents
 
(200
)
 
90

Net increase (decrease) in cash and cash equivalents
 
(4,417
)
 
147

Cash and cash equivalents, beginning of period
 
15,241

 
10,335

Cash and cash equivalents, end of period
 
$
10,824

 
$
10,482

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)
 
 
September 30, 2014
 
December 31,
2013
ASSETS
 
 

 
 

Rental property
 
 

 
 

Land
 
$
230,415

 
$
230,415

Buildings, improvements and fixtures
 
2,043,583

 
2,009,971

Construction in progress
 
75,000

 
9,433

 
 
2,348,998

 
2,249,819

Accumulated depreciation
 
(708,515
)
 
(654,631
)
Total rental property, net
 
1,640,483

 
1,595,188

Cash and cash equivalents
 
10,816

 
14,984

Investments in unconsolidated joint ventures
 
249,659

 
140,214

Deferred lease costs and other intangibles, net
 
146,642

 
163,581

Deferred debt origination costs, net
 
9,794

 
10,818

Prepaids and other assets
 
82,121

 
81,165

Total assets
 
$
2,139,515

 
$
2,005,950

LIABILITIES AND EQUITY
 

 
 
Liabilities
 
 
 
 
Debt
 
 
 
 
Senior, unsecured notes (net of discount of $5,271 and $5,752, respectively)
 
$
794,729

 
$
794,248

Unsecured term loans (net of discount of $281 and $396, respectively)
 
267,219

 
267,104

Mortgages payable (including premiums of $3,224 and $3,799, respectively)
 
247,240

 
250,497

Unsecured lines of credit
 
139,800

 
16,200

Total debt
 
1,448,988

 
1,328,049

Construction trade payables
 
23,216

 
9,776

Accounts payable and accrued expenses
 
55,409

 
49,180

Deferred financing obligation
 
28,388

 
28,388

Other liabilities
 
29,300

 
32,962

Total liabilities
 
1,585,301

 
1,448,355

Commitments and contingencies
 

 

Equity
 
 
 
 
Partners' Equity
 
 
 
 
General partner, 1,000,000 units outstanding at September 30, 2014 and December 31, 2013
 
4,883

 
4,988

Limited partners, 5,101,681 and 5,145,012 Class A units and 94,898,445 and 93,505,685 Class B units outstanding at September 30,2014 and December 31, 2013, respectively
 
549,380

 
548,424

Accumulated other comprehensive loss
 
(7,946
)
 
(2,721
)
Total partners' equity
 
546,317

 
550,691

Noncontrolling interests in consolidated partnerships
 
7,897

 
6,904

Total equity
 
554,214

 
557,595

Total liabilities and equity
 
$
2,139,515

 
$
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 September 30,
 
Nine months ended September 30,
 
 
2014
 
2013
 
2014
 
2013
Revenues
 
 
 
 
 
 

 
 
Base rentals
 
$
69,612

 
$
64,301

 
$
204,748

 
$
184,591

Percentage rentals
 
2,634

 
3,084

 
6,632

 
6,956

Expense reimbursements
 
29,463

 
27,414

 
90,457

 
78,544

Other income
 
3,588

 
3,104

 
8,578

 
7,516

Total revenues
 
105,297

 
97,903


310,415


277,607

Expenses
 


 


 


 
 
Property operating
 
32,798

 
29,863

 
102,454

 
86,819

General and administrative
 
11,334

 
9,754

 
32,817

 
29,240

Acquisition costs
 

 
532

 
7

 
963

Abandoned pre-development costs
 

 

 
1,596

 

Depreciation and amortization
 
25,774

 
24,223

 
77,034

 
68,683

Total expenses
 
69,906

 
64,372


213,908


185,705

Operating income
 
35,391

 
33,531


96,507


91,902

Interest expense
 
(13,902
)
 
(12,367
)
 
(43,404
)
 
(37,826
)
Casualty gain
 
329

 

 
329

 

Gain on previously held interest in acquired joint venture
 

 
26,002

 

 
26,002

Income before equity in earnings of unconsolidated joint ventures
 
21,818

 
47,166


53,432


80,078

Equity in earnings of unconsolidated joint ventures
 
2,479

 
9,014

 
6,200

 
10,107

Net income
 
24,297

 
56,180


59,632


90,185

Noncontrolling interests in consolidated partnerships
 
(42
)
 
(99
)
 
(80
)
 
(129
)
Net income available to partners
 
24,255

 
56,081


59,552


90,056

Net income available to limited partners
 
24,012

 
55,510

 
58,952

 
89,138

Net income available to general partner
 
$
243

 
$
571


$
600


$
918

 
 
 
 
 
 
 
 
 
Basic earnings per common unit:
 
 
 
 
 
 
 
 

Net income
 
$
0.24

 
$
0.56

 
$
0.59

 
$
0.91

Diluted earnings per common unit:
 
 
 
 
 
 
 
 
Net income
 
$
0.24

 
$
0.56

 
$
0.59

 
$
0.90

 
 
 
 
 
 
 
 
 
Distribution paid per common unit
 
$
0.240

 
$
0.225

 
$
0.705

 
$
0.660

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
 
Nine months ended
 
 
September 30,
 
September 30,
 
 
2014
 
2013
 
2014
 
2013
Net income
 
$
24,297

 
$
56,180

 
$
59,632

 
$
90,185

Other comprehensive loss
 
 
 
 
 
 
 
 
Reclassification adjustments for amounts recognized in net income
 
(99
)
 
(94
)
 
(293
)
 
(147
)
Foreign currency translation adjustments
 
(5,194
)
 
(79
)
 
(4,546
)
 
124

Changes in fair value of cash flow hedges
 
952

 

 
(386
)
 

Other comprehensive loss
 
(4,341
)
 
(173
)
 
(5,225
)
 
(23
)
Comprehensive income
 
19,956

 
56,007

 
54,407

 
90,162

Comprehensive income attributable to noncontrolling interests in consolidated partnerships
 
(42
)
 
(99
)
 
(80
)
 
(129
)
Comprehensive income attributable to the Operating Partnership
 
$
19,914

 
$
55,908

 
$
54,327

 
$
90,033

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
 
918

89,138


90,056

129

90,185

Other comprehensive loss
 


(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 partnership units
 

13,981


13,981


13,981

Issuance of 332,373 restricted units, net of forfeitures
 






Adjustments for noncontrolling interests in consolidated partnerships
 

(578
)

(578
)
578


Acquisition of noncontrolling interests in consolidated partnerships
 




(525
)
(525
)
Common distributions ($.66 per common unit)
 
(660
)
(64,682
)

(65,342
)

(65,342
)
Distributions to noncontrolling interests
 




(140
)
(140
)
Balance, September 30, 2013
 
$
4,978

$
548,019

$
1,084

$
554,081

$
6,876

$
560,957

 
 
 
 
 
 
 
 
 
 
General partner
Limited partners
Accumulated other comprehensive income (loss)
Total partners' equity
Noncontrolling interests in consolidated partnerships
Total equity
Balance, December 31, 2013
 
$
4,988

$
548,424

$
(2,721
)
$
550,691

$
6,904

$
557,595

Net income
 
600

58,952


59,552

80

59,632

Other comprehensive loss
 


(5,225
)
(5,225
)

(5,225
)
Compensation under Incentive Award Plan
 

11,458


11,458


11,458

Issuance of 46,700 common units upon exercise of options
 

895


895


895

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






Adjustment for noncontrolling interests in other consolidated partnerships
 

3


3

1,001

1,004

Common distributions ($.705 per common unit)
 
(705
)
(70,352
)

(71,057
)

(71,057
)
Distributions to noncontrolling interests
 




$
(88
)
(88
)
Balance, September 30, 2014
 
$
4,883

$
549,380

$
(7,946
)
$
546,317

$
7,897

$
554,214

 
 
 
 
 
 
 
 
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)
 
 
Nine months ended
 
 
September 30,
 
 
2014
 
2013
OPERATING ACTIVITIES
 
 

 
 

Net income
 
$
59,632

 
$
90,185

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


Depreciation and amortization
 
77,034

 
68,683

Amortization of deferred financing costs
 
1,654

 
1,795

Abandoned pre-development costs
 
1,596

 

Casualty gain
 
(329
)
 

Gain on previously held interest in acquired joint venture
 

 
(26,002
)
Equity in earnings of unconsolidated joint ventures
 
(6,200
)
 
(10,107
)
Distributions of cumulative earnings from unconsolidated joint ventures
 
4,166

 
4,415

Equity-based compensation expense
 
10,933

 
8,363

Amortization of debt (premiums) and discounts, net
 
(273
)
 
(767
)
Net amortization (accretion) of market rent rate adjustments
 
2,250

 
389

Straight-line rent adjustments
 
(5,027
)
 
(4,068
)
Changes in other assets and liabilities:
 
 
 
 
Other assets
 
(1,439
)
 
214

Accounts payable and accrued expenses
 
4,758

 
3,895

Net cash provided by operating activities
 
148,755

 
136,995

INVESTING ACTIVITIES
 
 
 
 
Additions to rental property
 
(92,500
)
 
(40,578
)
Acquisition of interest in unconsolidated joint venture, net of cash acquired
 

 
(11,271
)
Additions to investments in and notes receivable from unconsolidated joint ventures
 
(114,476
)
 
(140,373
)
Proceeds from insurance reimbursements
 
1,784

 

Additions to non-real estate assets
 
(933
)
 
(7,768
)
Distributions in excess of cumulative earnings from unconsolidated joint ventures
 
5,374

 
45,891

Additions to deferred lease costs
 
(4,109
)
 
(3,381
)
Net cash used in investing activities
 
(204,860
)
 
(157,480
)
FINANCING ACTIVITIES
 
 
 
 
Cash distributions paid
 
(71,057
)
 
(65,342
)
Proceeds from debt issuances
 
410,300

 
500,003

Repayments of debt
 
(289,381
)
 
(413,806
)
Acquisition of noncontrolling interests in other consolidated partnerships
 

 
(525
)
Distributions to noncontrolling interests in consolidated partnerships
 
(88
)
 
(67
)
Proceeds from tax increment financing
 
2,246

 

Additions to deferred financing costs
 
(778
)
 
(37
)
Proceeds from exercise of options
 
895

 
332

Net cash provided by financing activities
 
52,137

 
20,558

Effect of foreign currency on cash and cash equivalents
 
(200
)
 
90

Net increase (decrease) in cash and cash equivalents
 
(4,168
)
 
163

Cash and cash equivalents, beginning of period
 
14,984

 
10,295

Cash and cash equivalents, end of period
 
$
10,816

 
$
10,458

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 September 30, 2014, we owned and operated 37 outlet centers, with a total gross leasable area of approximately 11.6 million square feet. We also had partial ownership interests in 8 outlet centers totaling approximately 2.1 million square feet, including 3 outlet centers in Canada.

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

The Company owns the majority of the units of partnership interest issued by the Operating Partnership through its two wholly-owned subsidiaries, Tanger GP Trust and Tanger LP Trust. Tanger GP Trust controls the Operating Partnership as its sole general partner. Tanger LP Trust holds a limited partnership interest. As of September 30, 2014, the Company, through its ownership of Tanger GP Trust and Tanger LP Trust, owned 95,898,445 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.

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 $14.8 million and in Savannah was approximately $46.1 million as of September 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 is consolidated for financial reporting purposes. To date, we have contributed approximately $45.8 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. We currently expect the property to open in the second quarter of 2015.

Grand Rapids

In July 2014, we purchased land to develop an outlet center in Grand Rapids, Michigan for approximately $8.0 million. We expect this development to be approximately 358,000 square feet with an opening during the second half of 2015.

5. Investments in Unconsolidated Real Estate Joint Ventures
Our investments in unconsolidated joint ventures as of September 30, 2014 and December 31, 2013 aggregated $249.7 million and $140.2 million, respectively. The equity method of accounting is used to account for each of the individual joint ventures. We have the following unconsolidated real estate joint ventures:
As of September 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
%
 
398

 
$
38.8

 
$

Galveston/Houston
 
Texas City, TX
 
50.0
%
 
353

 
6.2

 
65.0

National Harbor
 
National Harbor, MD
 
50.0
%
 
339

 
19.8

 
62.0

RioCan Canada
 
Various
 
50.0
%
 
432

 
119.8

 
16.6

Savannah (1)
 
Savannah, GA
 
50.0
%
 

 
46.1

 
3.4

Westgate
 
Glendale, AZ
 
58.0
%
 
332

 
14.8

 
49.8

Wisconsin Dells
 
Wisconsin Dells, WI
 
50.0
%
 
265

 
2.4

 
24.3

Other
 
 
 


 

 
1.8

 

 
 
 
 
 
 
 
 
$
249.7

 
$
221.1

(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

Nine months ended
 
 
September 30,

September 30,
 
 
2014
 
2013

2014

2013
Fee:
 
 
 
 
 
 

 
 

Development and leasing
 
$
624

 
$
(6
)
 
$
702

 
$
57

Loan guarantee
 
23

 
40

 
209

 
121

Management
 
470

 
761

 
1,316

 
2,391

Marketing
 
108

 
93

 
321

 
301

Total Fees
 
$
1,225

 
$
888

 
$
2,548

 
$
2,870


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 $4.0 million and $1.6 million as of September 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 is 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 September 30, 2014, we and our partner had each contributed approximately $38.0 million in cash to the joint venture to fund development activities. We provided development services to the project; and with our partner, are jointly providing leasing services. Our partner is providing property management and marketing services to the center.


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 opened on October 17, 2014 and contains approximately 316,000 square feet and features approximately 80 brand name and designer outlet stores. As of September 30, 2014, we and our co-owner had each contributed $51.3 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 377,000 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 September 30, 2014, our equity contributions totaled $45.4 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. We are providing development, management and marketing services to the joint venture; and with our partner, are jointly providing leasing services to the center.

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. As of September 30, 2014 the balance on the loan was $3.4 million.

Westgate, Glendale, Arizona

During the second quarter of 2014, Westgate began a 78,000 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. We provide property management, construction supervision, leasing and marketing services to the joint venture.




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
 
September 30, 2014
 
December 31,
2013
Assets
 
 

 
 

Land
 
$
73,864

 
$
66,020

Buildings, improvements and fixtures
 
394,399

 
327,972

Construction in progress, including land
 
198,694

 
86,880

 
 
666,957

 
480,872

Accumulated depreciation
 
(42,011
)
 
(29,523
)
Total rental property, net
 
624,946

 
451,349

Cash and cash equivalents
 
34,926

 
22,704

Deferred lease costs, net
 
22,021

 
19,281

Deferred debt origination costs, net
 
2,746

 
1,737

Prepaids and other assets
 
11,558

 
9,107

Total assets
 
$
696,197

 
$
504,178

Liabilities and Owners' Equity
 
 

 
 

Mortgages payable
 
$
221,079

 
$
202,688

Construction trade payables
 
19,343

 
19,370

Accounts payable and other liabilities
 
19,611

 
8,540

Total liabilities
 
260,033

 
230,598

Owners' equity
 
436,164

 
273,580

Total liabilities and owners' equity
 
$
696,197

 
$
504,178


 
 
Three months ended
 
Nine months ended
Condensed Combined Statements of Operations
 
September 30,
 
September 30,
 - Unconsolidated Joint Ventures
 
2014
 
2013
 
2014
 
2013
Revenues
 
$
19,969

 
$
29,013

 
$
52,803

 
$
70,961

Expenses
 
 
 
 
 
 

 
 
Property operating
 
7,292

 
7,808

 
20,562

 
25,440

General and administrative
 
198

 
629

 
354

 
962

Acquisition costs
 

 
19

 

 
474

Abandoned development costs
 
472

 
19

 
472

 
153

Depreciation and amortization
 
5,831

 
6,232

 
15,369

 
21,200

Total expenses
 
13,793

 
14,707

 
36,757

 
48,229

Operating income
 
6,176

 
14,306

 
16,046

 
22,732

Gain on early extinguishment of debt
 

 
13,820

 

 
13,820

Interest expense
 
(1,316
)
 
(2,840
)
 
(3,925
)
 
(10,406
)
Net income
 
$
4,860

 
$
25,286

 
$
12,121

 
$
26,146

 
 
 
 
 
 
 
 
 
The Company and Operating Partnership's share of:
 
 

 
 

Net income
 
$
2,479

 
$
9,014

 
$
6,200

 
$
10,107

Depreciation and impairment charge (real estate related)
 
$
3,040

 
$
2,861

 
$
8,048

 
$
9,465




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 September 30, 2014 and December 31, 2013, the Operating Partnership had amounts outstanding on these lines of credit totaling $139.8 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 September 30, 2014, the amounts outstanding on the term loan and mortgage were $250.0 million and $17.9 million, respectively.

7. Debt of the Operating Partnership

The debt of the Operating Partnership consisted of the following (in thousands):
 
 
 
 
 
 
As of
 
As of
 
 
 
 
 
 
September 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