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, 2015
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, including area code)
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, 2015, there were 95,842,047 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, 2015 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 and Canada. 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, 2015, the Company, through its ownership of Tanger GP Trust and Tanger LP Trust, owned 95,842,047 units of the Operating Partnership and other limited partners (the "Non-Company LPs") collectively owned 5,078,406 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 status as a REIT. 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 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.


3



As the 100% owner of Tanger GP Trust, the general partner with control of the Operating Partnership, the Company consolidates the Operating Partnership for financial reporting purposes. The separate discussions of the Company and the Operating Partnership in this report should be read in conjunction with each other to understand the results of the Company on a consolidated basis and how management operates the Company.

4



TANGER FACTORY OUTLET CENTERS, INC. AND TANGER PROPERTIES LIMITED PARTNERSHIP
Index
 
Page Number
Part I. Financial Information
Item 1.
 
FINANCIAL STATEMENTS OF TANGER FACTORY OUTLET CENTERS, INC. (Unaudited)
 
Consolidated Balance Sheets - as of June 30, 2015 and December 31, 2014
Consolidated Statements of Operations - for the three and six months ended June 30, 2015 and 2014
Consolidated Statements of Comprehensive Income - for the three and six months ended June 30, 2015 and 2014
Consolidated Statements of Shareholders' Equity - for the six months ended June 30, 2015 and 2014
Consolidated Statements of Cash Flows - for the six months ended June 30, 2015 and 2014
 
 
FINANCIAL STATEMENTS OF TANGER PROPERTIES LIMITED PARTNERSHIP (Unaudited)
 
Consolidated Balance Sheets - as of June 30, 2015 and December 31, 2014
Consolidated Statements of Operations - for the three and six months ended June 30, 2015 and 2014
Consolidated Statements of Comprehensive Income - for the three and six months ended June 30, 2015 and 2014
Consolidated Statements of Equity - for the six months ended June 30, 2015 and 2014
Consolidated Statements of Cash Flows - for the six months ended June 30, 2015 and 2014
 
 
Notes to Consolidated Financial Statements of Tanger Factory Outlet Centers, Inc. and Tanger Properties Limited Partnership
 
 
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
 
 
Item 3. Quantitative and Qualitative Disclosures about Market Risk
 
 
Item 4. Controls and Procedures (Tanger Factory Outlet Centers, Inc. and Tanger Properties Limited Partnership)
 
Part II. Other Information
 
 
Item 1. Legal Proceedings
 
 
Item 1A. Risk Factors
 
 
Item 4. Mine Safety Disclosure
 
 
Item 6. Exhibits
 
 
Signatures

5



PART I. - FINANCIAL INFORMATION

Item 1 - Financial Statements of Tanger Factory Outlet Centers, Inc.

TANGER FACTORY OUTLET CENTERS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands, except share data, unaudited)
 
 
June 30, 2015
 
December 31, 2014
ASSETS
 
 

 
 

Rental property
 
 

 
 

Land
 
$
217,994

 
$
217,994

Buildings, improvements and fixtures
 
2,078,946

 
1,947,083

Construction in progress
 
95,167

 
98,526

 
 
2,392,107

 
2,263,603

Accumulated depreciation
 
(699,836
)
 
(662,236
)
Total rental property, net
 
1,692,271

 
1,601,367

Cash and cash equivalents
 
16,949

 
16,875

Rental property held for sale
 
46,862

 
46,005

Investments in unconsolidated joint ventures
 
212,939

 
208,050

Deferred lease costs and other intangibles, net
 
133,909

 
140,883

Deferred debt origination costs, net
 
11,417

 
12,126

Prepaids and other assets
 
74,393

 
72,354

Total assets
 
$
2,188,740

 
$
2,097,660

LIABILITIES AND EQUITY
 
 
 
 
Liabilities
 
 

 
 

Debt
 
 

 
 

Senior, unsecured notes (net of discount of $6,090 and $6,426, respectively)
 
$
793,910

 
$
793,574

Unsecured term loans (net of discount of $162 and $241, respectively)
 
267,338

 
267,259

Mortgages payable (including premiums of $2,542 and $3,031, respectively)
 
276,942

 
271,361

Unsecured lines of credit
 
176,300

 
111,000

Total debt
 
1,514,490

 
1,443,194

Accounts payable and accrued expenses
 
83,787

 
69,558

Deferred financing obligation
 
28,388

 
28,388

Other liabilities
 
30,639

 
32,634

Total liabilities
 
1,657,304

 
1,573,774

Commitments and contingencies
 

 

Equity
 
 

 
 

Tanger Factory Outlet Centers, Inc.
 
 

 
 

Common shares, $.01 par value, 300,000,000 shares authorized, 95,842,047 and 95,509,781 shares issued and outstanding at June 30, 2015 and December 31, 2014, respectively
 
958

 
955

Paid in capital
 
798,587

 
791,566

Accumulated distributions in excess of net income 
 
(272,948
)
 
(281,679
)
Accumulated other comprehensive loss
 
(22,470
)
 
(14,023
)
Equity attributable to Tanger Factory Outlet Centers, Inc.
 
504,127

 
496,819

Equity attributable to noncontrolling interests
 
 
 
 
Noncontrolling interests in Operating Partnership
 
26,712

 
26,417

Noncontrolling interests in other consolidated partnerships
 
597

 
650

Total equity
 
531,436

 
523,886

Total liabilities and equity
 
$
2,188,740

 
$
2,097,660


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

6



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

 
 
Three months ended June 30,
 
Six months ended June 30,
 
 
2015
 
2014
 
2015
 
2014
Revenues
 
 
 
 
 
 

 
 
Base rentals
 
$
72,329

 
$
68,160

 
$
139,958

 
$
135,136

Percentage rentals
 
2,042

 
1,915

 
4,271

 
3,998

Expense reimbursements
 
29,909

 
29,452

 
63,273

 
60,994

Management, leasing and other services
 
1,727

 
758

 
3,010

 
1,324

Other income
 
1,729

 
1,927

 
3,150

 
3,543

Total revenues
 
107,736

 
102,212

 
213,662

 
204,995

Expenses
 
 
 


 
 
 
 

Property operating
 
34,958

 
33,629

 
72,690

 
69,656

General and administrative
 
11,612

 
10,761

 
22,917

 
21,483

Acquisition costs
 

 

 

 
7

Abandoned pre-development costs
 

 

 

 
1,596

Depreciation and amortization
 
24,272

 
25,197

 
48,261

 
51,260

Total expenses
 
70,842

 
69,587

 
143,868

 
144,002

Operating income
 
36,894

 
32,625


69,794


60,993

 
 
 
 
 
 
 
 
 
Other income/(expense)
 
 
 
 
 
 
 
 
Interest expense
 
(13,088
)
 
(14,582
)
 
(26,177
)
 
(29,502
)
Gain on sale of assets and interests in unconsolidated entities
 

 

 
13,726

 

Other nonoperating income (expense)
 
(493
)
 
64

 
(187
)
 
123

Income before equity in earnings of unconsolidated joint ventures
 
23,313

 
18,107

 
57,156

 
31,614

Equity in earnings of unconsolidated joint ventures
 
2,046

 
1,788

 
4,589

 
3,721

Net income
 
25,359

 
19,895


61,745


35,335

Noncontrolling interests in Operating Partnership
 
(1,313
)
 
(1,028
)
 
(3,168
)
 
(1,831
)
Noncontrolling interests in other consolidated partnerships
 
435

 
(17
)
 
416

 
(38
)
Net income attributable to Tanger Factory Outlet Centers, Inc.
 
$
24,481

 
$
18,850


$
58,993


$
33,466

 
 
 
 
 
 
 
 
 
Basic earnings per common share
 
 
 
 
 
 

 
 

Net income
 
$
0.26

 
$
0.20

 
$
0.62

 
$
0.35

Diluted earnings per common share
 
 
 
 
 
 
 
 
Net income
 
$
0.26

 
$
0.20

 
$
0.62

 
$
0.35

 
 
 
 
 
 
 
 
 
Dividends paid per common share
 
$
0.285

 
$
0.240

 
$
0.525

 
$
0.465

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

7



TANGER FACTORY OUTLET CENTERS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(In thousands, unaudited)
 
 
Three months ended
 
Six months ended
 
 
June 30,
 
June 30,
 
 
2015
 
2014
 
2015
 
2014
Net income
 
$
25,359

 
$
19,895

 
$
61,745

 
$
35,335

Other comprehensive income (loss)
 
 
 
 
 
 
 

Reclassification adjustments for amounts recognized in net income
 

 
(98
)
 

 
(194
)
Foreign currency translation adjustments
 
3,063

 
3,488

 
(8,013
)
 
648

Change in fair value of cash flow hedges
 
398

 
(1,018
)
 
(889
)
 
(1,338
)
Other comprehensive income (loss)
 
3,461

 
2,372

 
(8,902
)
 
(884
)
Comprehensive income
 
28,820

 
22,267

 
52,843

 
34,451

Comprehensive income attributable to noncontrolling interests
 
(1,054
)
 
(1,167
)
 
(2,297
)
 
(1,822
)
Comprehensive income attributable to Tanger Factory Outlet Centers, Inc.
 
$
27,766

 
$
21,100

 
$
50,546

 
$
32,629

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 loss
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 ($0.465 per share)
 


(44,448
)

(44,448
)


(44,448
)
Distributions to noncontrolling interests
 





(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 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 loss
Total Tanger Factory Outlet Centers, Inc. equity
Noncontrolling interests in Operating Partnership
Noncontrolling
interests in
other consolidated partnerships
Total
 equity
Balance, December 31, 2014
 
$
955

$
791,566

$
(281,679
)
$
(14,023
)
$
496,819

$
26,417

$
650

$
523,886

Net income
 


58,993


58,993

3,168

(416
)
61,745

Other comprehensive loss
 



(8,447
)
(8,447
)
(455
)

(8,902
)
Compensation under Incentive Award Plan
 

7,969



7,969



7,969

Issuance of 14,000 common shares upon exercise of options
 

384



384



384

Issuance of 348,844 restricted common shares, net of forfeitures
 
3

(3
)






Withholding of 30,578 common shares for employee income taxes
 

(1,084
)


(1,084
)


(1,084
)
Contributions from noncontrolling interests
 






456

456

Adjustment for noncontrolling interests in Operating Partnership
 

(248
)


(248
)
248



Adjustment for noncontrolling interests in other consolidated partnerships
 

3



3


(3
)

Common dividends ($.525 per share)
 


(50,262
)

(50,262
)


(50,262
)
Distributions to noncontrolling interests
 





(2,666
)
(90
)
(2,756
)
Balance,
June 30, 2015
 
$
958

$
798,587

$
(272,948
)
$
(22,470
)
$
504,127

$
26,712

$
597

$
531,436


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




10



TANGER FACTORY OUTLET CENTERS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands, unaudited)

 
 
Six months ended
 
 
June 30,
 
 
2015
 
2014
OPERATING ACTIVITIES
 
 
 
 

Net income
 
$
61,745

 
$
35,335

Adjustments to reconcile net income to net cash provided by operating activities:
 
 
 
 
Depreciation and amortization
 
48,261

 
51,260

Amortization of deferred financing costs
 
1,202

 
1,107

Abandoned pre-development costs
 

 
1,596

Gain on sale of assets and interests in unconsolidated entities
 
(13,726
)
 

Equity in earnings of unconsolidated joint ventures
 
(4,589
)
 
(3,721
)
Share-based compensation expense
 
7,566

 
7,120

Amortization of debt (premiums) and discounts, net
 
(74
)
 
(181
)
Amortization (accretion) of market rent rate adjustments, net
 
1,299

 
1,527

Straight-line rent adjustments
 
(2,818
)
 
(3,361
)
Distributions of cumulative earnings from unconsolidated joint ventures
 
5,535

 
2,699

Changes in other assets and liabilities:
 
 
 
 
Other assets
 
1,146

 
2,258

Accounts payable and accrued expenses
 
(4,847
)
 
(11,530
)
Net cash provided by operating activities
 
100,700

 
84,109

INVESTING ACTIVITIES
 
 
 
 
Additions to rental property
 
(111,231
)
 
(43,703
)
Additions to investments in unconsolidated joint ventures
 
(26,938
)
 
(69,698
)
Net proceeds on sale of interests in unconsolidated entities
 
15,495

 

Proceeds from insurance reimbursements
 
187

 
550

Additions to non-real estate assets
 
(457
)
 
(803
)
Distributions in excess of cumulative earnings from unconsolidated joint ventures
 
9,448

 
3,033

Additions to deferred lease costs
 
(3,989
)
 
(2,541
)
Net cash used in investing activities
 
(117,485
)
 
(113,162
)
FINANCING ACTIVITIES
 
 
 
 
Cash dividends paid
 
(50,262
)
 
(44,448
)
Distributions to noncontrolling interests in Operating Partnership
 
(2,666
)
 
(2,388
)
Proceeds from debt issuances
 
302,257

 
271,600

Repayments of debt
 
(230,887
)
 
(198,380
)
Employee income taxes paid related to shares withheld upon vesting of equity awards
 
(1,084
)
 

Distributions to noncontrolling interests in other consolidated partnerships
 
(90
)
 
(44
)
Additions to deferred financing costs
 
(721
)
 
(21
)
Proceeds from exercise of options
 
384

 
628

Contributions from noncontrolling interests
 
259

 

Net cash provided by financing activities
 
17,190

 
26,947

Effect of foreign currency rate changes on cash and cash equivalents
 
(331
)
 
105

Net increase (decrease) in cash and cash equivalents
 
74

 
(2,001
)
Cash and cash equivalents, beginning of period
 
16,875

 
15,241

Cash and cash equivalents, end of period
 
$
16,949

 
$
13,240

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

11



Item 1 - Financial Statements of Tanger Properties Limited Partnership

TANGER PROPERTIES LIMITED PARTNERSHIP AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands, except unit data, unaudited)
 
 
June 30, 2015
 
December 31, 2014
ASSETS
 
 

 
 

Rental property
 
 

 
 

Land
 
$
217,994

 
$
217,994

Buildings, improvements and fixtures
 
2,078,946

 
1,947,083

Construction in progress
 
95,167

 
98,526

 
 
2,392,107

 
2,263,603

Accumulated depreciation
 
(699,836
)
 
(662,236
)
Total rental property, net
 
1,692,271

 
1,601,367

Cash and cash equivalents
 
16,906

 
15,806

Rental property held for sale
 
46,862

 
46,005

Investments in unconsolidated joint ventures
 
212,939

 
208,050

Deferred lease costs and other intangibles, net
 
133,909

 
140,883

Deferred debt origination costs, net
 
11,417

 
12,126

Prepaids and other assets
 
73,851

 
71,848

Total assets
 
$
2,188,155

 
$
2,096,085

LIABILITIES AND EQUITY
 

 
 
Liabilities
 
 
 
 
Debt
 
 
 
 
Senior, unsecured notes (net of discount of $6,090 and $6,426, respectively)
 
$
793,910

 
$
793,574

Unsecured term loans (net of discount of $162 and $241, respectively)
 
267,338

 
267,259

Mortgages payable (including premiums of $2,542 and $3,031, respectively)
 
276,942

 
271,361

Unsecured lines of credit
 
176,300

 
111,000

Total debt
 
1,514,490

 
1,443,194

Accounts payable and accrued expenses
 
83,202

 
67,983

Deferred financing obligation
 
28,388

 
28,388

Other liabilities
 
30,639

 
32,634

Total liabilities
 
1,656,719

 
1,572,199

Commitments and contingencies
 

 

Equity
 
 
 
 
Partners' Equity
 
 
 
 
General partner, 1,000,000 units outstanding at June 30, 2015 and December 31, 2014
 
4,918

 
4,828

Limited partners, 5,078,406 and 5,078,406 Class A units and 94,842,047 and 94,509,781 Class B units outstanding at June 30, 2015 and December 31, 2014, respectively
 
549,614

 
533,199

Accumulated other comprehensive loss
 
(23,693
)
 
(14,791
)
Total partners' equity
 
530,839

 
523,236

Noncontrolling interests in consolidated partnerships
 
597

 
650

Total equity
 
531,436

 
523,886

Total liabilities and equity
 
$
2,188,155

 
$
2,096,085

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

12



TANGER PROPERTIES 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,
 
 
2015
 
2014
 
2015
 
2014
Revenues
 
 
 
 
 
 

 
 
Base rentals
 
$
72,329

 
$
68,160

 
$
139,958

 
$
135,136

Percentage rentals
 
2,042

 
1,915

 
4,271

 
3,998

Expense reimbursements
 
29,909

 
29,452

 
63,273

 
60,994

Management, leasing and other services
 
1,727

 
758

 
3,010

 
1,324

Other income
 
1,729

 
1,927

 
3,150

 
3,543

Total revenues
 
107,736

 
102,212


213,662


204,995

Expenses
 


 


 


 
 
Property operating
 
34,958

 
33,629

 
72,690

 
69,656

General and administrative
 
11,612

 
10,761

 
22,917

 
21,483

Acquisition costs
 

 

 

 
7

Abandoned pre-development costs
 

 

 

 
1,596

Depreciation and amortization
 
24,272

 
25,197

 
48,261

 
51,260

Total expenses
 
70,842

 
69,587


143,868


144,002

Operating income
 
36,894

 
32,625


69,794


60,993

 
 
 
 
 
 
 
 
 
Other income/(expense)
 
 
 
 
 
 
 
 
Interest expense
 
(13,088
)
 
(14,582
)
 
(26,177
)
 
(29,502
)
Gain on sale of assets and interests in unconsolidated entities
 

 

 
13,726

 

Other nonoperating income (expense)
 
(493
)
 
64

 
(187
)
 
123

Income before equity in earnings of unconsolidated joint ventures
 
23,313

 
18,107


57,156


31,614

Equity in earnings of unconsolidated joint ventures
 
2,046

 
1,788

 
4,589

 
3,721

Net income
 
25,359

 
19,895


61,745


35,335

Noncontrolling interests in consolidated partnerships
 
435

 
(17
)
 
416

 
(38
)
Net income available to partners
 
25,794

 
19,878


62,161


35,297

Net income available to limited partners
 
25,539

 
19,677

 
61,546

 
34,940

Net income available to general partner
 
$
255

 
$
201


$
615


$
357

 
 
 
 
 
 
 
 
 
Basic earnings per common unit
 
 
 
 
 
 
 
 

Net income
 
$
0.26

 
$
0.20

 
$
0.62

 
$
0.35

Diluted earnings per common unit
 
 
 
 
 
 
 
 
Net income
 
$
0.26

 
$
0.20

 
$
0.62

 
$
0.35

 
 
 
 
 
 
 
 
 
Distribution paid per common unit
 
$
0.285

 
$
0.240

 
$
0.525

 
$
0.465

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

13



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

 
 
Three months ended
 
Six months ended
 
 
June 30,
 
June 30,
 
 
2015
 
2014
 
2015
 
2014
Net income
 
$
25,359

 
$
19,895

 
$
61,745

 
$
35,335

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

 
(98
)
 

 
(194
)
Foreign currency translation adjustments
 
3,063

 
3,488

 
(8,013
)
 
648

Changes in fair value of cash flow hedges
 
398

 
(1,018
)
 
(889
)
 
(1,338
)
Other comprehensive income (loss)
 
3,461

 
2,372

 
(8,902
)
 
(884
)
Comprehensive income
 
28,820

 
22,267

 
52,843

 
34,451

Comprehensive (income) loss attributable to noncontrolling interests in consolidated partnerships
 
435

 
(17
)
 
416

 
(38
)
Comprehensive income attributable to the Operating Partnership
 
$
29,255

 
$
22,250

 
$
53,259

 
$
34,413

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


14



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

 
 
General partner
Limited partners
Accumulated other comprehensive 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
 
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
 






Adjustments for noncontrolling interests in consolidated partnerships
 

1


1

902

903

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

(46,836
)

(46,836
)
Distributions to noncontrolling interests
 




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

$
545,083

$
(3,605
)
$
546,358

$
7,800

$
554,158

 
 
 
 
 
 
 
 
 
 
General partner
Limited partners
Accumulated other comprehensive loss
Total partners' equity
Noncontrolling interests in consolidated partnerships
Total equity
Balance, December 31, 2014
 
$
4,828

$
533,199

$
(14,791
)
$
523,236

$
650

$
523,886

Net income
 
615

61,546


62,161

(416
)
61,745

Other comprehensive loss
 


(8,902
)
(8,902
)

(8,902
)
Compensation under Incentive Award Plan
 

7,969


7,969


7,969

Issuance of 14,000 common units upon exercise of options
 

384


384


384

Issuance of 348,844 restricted common units, net of forfeitures
 






Withholding of 30,578 common units for employee income taxes
 

(1,084
)

(1,084
)

(1,084
)
Contributions from noncontrolling interests
 




456

456

Adjustment for noncontrolling interests in consolidated partnerships
 

3


3

(3
)

Common distributions ($.525 per common unit)
 
(525
)
(52,403
)

(52,928
)

(52,928
)
Distributions to noncontrolling interests
 




(90
)
(90
)
Balance, June 30, 2015
 
$
4,918

$
549,614

$
(23,693
)
$
530,839

$
597

$
531,436

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

15



TANGER PROPERTIES LIMITED PARTNERSHIP AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands, unaudited)
 
 
Six months ended
 
 
June 30,
 
 
2015
 
2014
OPERATING ACTIVITIES
 
 

 
 

Net income
 
$
61,745

 
$
35,335

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


Depreciation and amortization
 
48,261

 
51,260

Amortization of deferred financing costs
 
1,202

 
1,107

Abandoned pre-development costs
 

 
1,596

Gain on sale of assets and interests in unconsolidated entities
 
(13,726
)
 

Equity in earnings of unconsolidated joint ventures
 
(4,589
)
 
(3,721
)
Equity-based compensation expense
 
7,566

 
7,120

Amortization of debt (premiums) and discounts, net
 
(74
)
 
(181
)
Amortization (accretion) of market rent rate adjustments, net
 
1,299

 
1,527

Straight-line rent adjustments
 
(2,818
)
 
(3,361
)
Distributions of cumulative earnings from unconsolidated joint ventures
 
5,535

 
2,699

Changes in other assets and liabilities:
 
 
 
 
Other assets
 
1,182

 
2,482

Accounts payable and accrued expenses
 
(3,857
)
 
(11,543
)
Net cash provided by operating activities
 
101,726

 
84,320

INVESTING ACTIVITIES
 
 
 
 
Additions to rental property
 
(111,231
)
 
(43,703
)
Additions to investments in unconsolidated joint ventures
 
(26,938
)
 
(69,698
)
Net proceeds on sale of interests in unconsolidated entities
 
15,495

 

Proceeds from insurance reimbursements
 
187

 
550

Additions to non-real estate assets
 
(457
)
 
(803
)
Distributions in excess of cumulative earnings from unconsolidated joint ventures
 
9,448

 
3,033

Additions to deferred lease costs
 
(3,989
)
 
(2,541
)
Net cash used in investing activities
 
(117,485
)
 
(113,162
)
FINANCING ACTIVITIES
 
 
 
 
Cash distributions paid
 
(52,928
)
 
(46,836
)
Proceeds from debt issuances
 
302,257

 
271,600

Repayments of debt
 
(230,887
)
 
(198,380
)
Employee income taxes paid related to shares withheld upon vesting of equity awards
 
(1,084
)
 

Distributions to noncontrolling interests in consolidated partnerships
 
(90
)
 
(44
)
Additions to deferred financing costs
 
(721
)
 
(21
)
Proceeds from exercise of options
 
384

 
628

Contributions from noncontrolling interests
 
259

 

Net cash provided by financing activities
 
17,190

 
26,947

Effect of foreign currency on cash and cash equivalents
 
(331
)
 
105

Net increase (decrease) in cash and cash equivalents
 
1,100

 
(1,790
)
Cash and cash equivalents, beginning of period
 
15,806

 
14,984

Cash and cash equivalents, end of period
 
$
16,906

 
$
13,194

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

16



TANGER FACTORY OUTLET CENTERS INC. AND SUBSIDIARIES
TANGER PROPERTIES LIMITED PARTNERSHIP AND SUBSIDIARIES
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 and Canada. 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, 2015, we owned and operated 37 outlet centers, with a total gross leasable area of approximately 11.7 million square feet. We also had partial ownership interests in 9 outlet centers totaling approximately 2.7 million square feet, including 4 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, 2015, the Company, through its ownership of Tanger GP Trust and Tanger LP Trust, owned 95,842,047 units of the Operating Partnership and other limited partners (the "Non-Company LPs") collectively owned 5,078,406 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, 2014. The December 31, 2014 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.

We consolidate properties that are wholly owned or properties where we own less than 100% but we control. Control is determined using an evaluation based on accounting standards related to the consolidation of voting interest entities and variable interest entities ("VIE"). For joint ventures that are determined to be a VIE, we consolidate the entity where we are deemed to be the primary beneficiary. Determination of the primary beneficiary is based on whether an entity has (1) the power to direct the activities of the VIE that most significantly impact the entity's economic performance, and (2) 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. Our determination of the primary beneficiary considers all relationships between us and the VIE, including management agreements and other contractual arrangements.


17



Investments in real estate joint ventures that we do not control but may exercise significant influence 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 or loss, cash contributions, distributions and other adjustments required under the equity method of accounting.

For certain of these investments, we record our equity in the venture's net income or loss under the hypothetical liquidation of book value (“HLBV”) method of accounting due to the structures and the preferences we receive on the distributions from our joint ventures pursuant to the respective joint venture agreements for those joint ventures. Under this method, we recognize income and loss in each period based on the change in liquidation proceeds we would receive from a hypothetical liquidation of our investment based on depreciated book value. Therefore, income or loss may be allocated disproportionately as compared to the ownership percentages due to specified preferred return rate thresholds and may be more or less than actual cash distributions received and more or less than what we may receive in the event of an actual liquidation. In the event a basis difference is created between our underlying interest in the venture's net assets and our initial investment, we amortize such amount over the estimated life of the venture as a component of equity in earnings of unconsolidated joint ventures.

We separately report investments in joint ventures for which accumulated distributions have exceeded investments in and our share of net income or loss of the joint ventures within other liabilities in the consolidated balance sheets. The carrying amount of our investments in the Charlotte and Galveston/Houston joint ventures are less than zero because of financing or operating distributions that were greater than net income, as net income includes non-cash charges for depreciation and amortization.

We have concluded that our Savannah and Southaven joint ventures are each considered a VIE because our voting rights are disproportionate to our economic interests and substantially all of each venture's activities either involve or are conducted on our behalf. Due to certain reconsideration events, we concluded during the quarter that our Westgate joint venture, previously considered a VIE since inception, was no longer considered a VIE. The operating, development, leasing, and management agreements of Savannah provide that the activities that most significantly impact the economic performance of the venture require unanimous consent. Accordingly, we determined that we are not the primary beneficiary since we do not have the power to direct the significant activities that affect the economic performance of the venture, and have applied the equity method of accounting. The carrying amount of our investment in Savannah is reflected in investments in unconsolidated joint ventures on our consolidated balance sheets and was $46.0 million as of June 30, 2015. 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 Savannah.

The management agreement and other contractual arrangements for Southaven give us, but not necessarily our joint venture partner, significant participating rights over activities that most significantly impact the economic performance of the ventures, thus we have concluded that we are the primary beneficiary and have consolidated the venture's balance sheet and results of operations. At June 30, 2015, total assets of this venture, which is currently under construction, were $38.6 million and total liabilities were $11.5 million. The primary classification of these assets on the consolidated balance sheets are within cash and total rental property, net and the classification of liabilities is within accounts payable and accrued expenses. These assets include only those assets that can be used to settle obligations of the VIE. The liabilities include third party liabilities and exclude intercompany balances that are eliminated in consolidation.

"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 or joint ventures 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 the allocation provisions within the partnership or joint venture agreements.


18



In the consolidated statement of operations, we have reclassified $758,000 and $1.3 million related to management, leasing and other services for the three and six months ended June 30, 2014, respectively, to the caption "management, leasing and other services" from the caption "other income" to conform to the presentation of the consolidated statement of operations for the three and six months ended June 30, 2015. In addition, we have reclassified certain amounts related to other non-operating income and expenses for the three and six months ended June 30, 2014 to the caption " other income/(expense)" from the caption "other income" to conform to the presentation of the consolidated statement of operations for the three and six months ended June 30, 2015.

We have revised the previously reported amounts in the consolidated statement of cash flows to reclassify approximately $2.0 million related to tax increment financing for the six months ended June 30, 2014 to the caption "additions to rental property" from the caption "proceeds from tax increment financing" to conform to the presentation of the consolidated statement of cash flows for the six months ended June 30, 2015. We have concluded the previously reported financial statements were not materially misstated as a result of this revision.

3. Disposition of Properties and Properties Held for Sale

At June 30, 2015, we had a contractual agreement to sell four properties totaling approximately 712,000 square feet classified as rental property held for sale on the consolidated balance sheets. The results of operations for these properties are included in continuing operations as the potential sale did not meet the criteria set forth in the recently adopted guidance requiring the result of operations to be separately set forth as discontinued operations.

The carrying values of the rental properties held for sale were comprised of the following (in thousands):
 
 
June 30, 2015
 
December 31, 2014
Rental property, net
 
$
44,252

 
$
43,532

Deferred lease costs and other intangibles, net
 
888

 
757

Prepaids and other assets
 
1,722

 
1,716

Rental property held for sale
 
$
46,862

 
$
46,005


Subsequent to June 30, 2015, we concluded that the sale of these four outlet centers was no longer probable as a result of the buyer's inability to secure acceptable financing. In the third quarter of 2015, we will reclassify the four outlet centers from held for sale to held and used and record an adjustment of approximately $1.6 million representing the depreciation and amortization expense that would have been recognized had the properties been continuously classified as held and used.


4. Developments of Consolidated Outlet Centers

Foxwoods, Connecticut

In May 2015, we opened a 312,000 square feet outlet center at the Foxwoods Resort Casino in Mashantucket, Connecticut. We own a controlling interest in the joint venture which is consolidated for financial reporting purposes. Construction began on the outlet center in September 2013. As of June 30, 2015, our partner’s equity contributions totaled approximately $1.0 million and our equity contributions totaled approximately $46.7 million. Contributions we make in excess of $40.0 million earn a preferred rate of return of 15% from the date of contribution. In addition, each partner earns a rate of return of 10% on their initial capital contributions from the date of contribution.

Development continues for the following consolidated outlet centers as of June 30, 2015:
Project
Approximate square feet
(in 000's)
Costs Incurred to Date
(in millions)
Borrowed to date
(in millions)
Projected Opening
Grand Rapids, Michigan
350

$
48.0

$

07/31/15
Southaven, Mississippi
320

27.3


Nov 2015
Total
670

$
75.3

$

 

19




Grand Rapids, Michigan

In July 2015, we opened a 350,000 square foot wholly-owned outlet center near Grand Rapids, Michigan. We commenced construction on the development in July 2014. The outlet center is located 11 miles south of downtown Grand Rapids at the southwest quadrant of US-131 and 84th Street in Byron Township, Michigan, with visibility from both roads.

Southaven, Mississippi

In January 2015, we purchased land for approximately $14.8 million and commenced construction on the development of an approximately 320,000 square foot outlet center in Southaven, Mississippi. Tanger Outlets Southaven will be located less than five miles south of Memphis, Tennessee. The outlet center is being developed through a joint venture in which we own a controlling interest and is consolidated for financial reporting purposes. As of June 30, 2015, our partner’s equity contributions totaled approximately $456,000 and our equity contributions totaled approximately $26.6 million. From the date our equity contributions are made, we earn a preferred rate of return of 10% for senior contributions and 14% for junior contributions. As of June 30, 2015, the balance of our senior contributions was $17.7 million and our junior contributions was $8.5 million.

In April 2015, the consolidated joint venture closed on a mortgage loan with the ability to borrow up to $60.0 million at an interest rate of LIBOR +1.75%. The loan initially matures on April 29, 2018, with one two-year extension option.


20



5. Investments in Unconsolidated Real Estate Joint Ventures
The equity method of accounting is used to account for each of the individual joint ventures. We have an ownership interest in the following unconsolidated real estate joint ventures:

As of June 30, 2015
Joint Venture
 
Outlet Center Location
 
Ownership %
 
Square Feet
(in 000's)
 
Carrying Value of Investment (in millions)
 
Total Joint Venture Debt
(in millions)
Columbus
 
Columbus, OH
 
50.0
%
 

 
$
7.3

 
$

National Harbor
 
National Harbor, MD
 
50.0
%
 
339

 
9.4

 
83.7

RioCan Canada
 
Various
 
50.0
%
 
870

 
137.7

 
14.4

Savannah (1)
 
Savannah, GA
 
50.0
%
 
377

 
46.0

 
70.1

Westgate
 
Glendale, AZ
 
58.0
%
 
411

 
12.5

 
62.0

 
 
 
 
 
 
 
 
$
212.9

 
$
230.2

 
 
 
 
 
 
 
 
 
 
 
Charlotte(2)
 
Charlotte, NC
 
50.0
%
 
398

 
$
(0.6
)
 
$
90.0

Galveston/Houston (2)
 
Texas City, TX
 
50.0
%
 
353

 
(0.4
)
 
65.0

 
 
 
 
 
 
 
 
$
(1.0
)
 
$
155.0


As of December 31, 2014
Joint Venture
 
Center Location
 
Ownership %
 
Square Feet
(in 000's)
 
Carrying Value of Investment
(in millions)
 
Total Joint Venture Debt
(in millions)
Galveston/Houston
 
Texas City, TX
 
50.0
%
 
353

 
$
1.3

 
$
65.0

National Harbor
 
National Harbor, MD
 
50.0
%
 
339

 
9.5

 
83.7

RioCan Canada
 
Various
 
50.0
%
 
870

 
132.5

 
15.7

Savannah (1)
 
Savannah, GA
 
50.0
%
 

 
46.5

 
25.5

Westgate
 
Glendale, AZ
 
58.0
%
 
381

 
14.3

 
54.0

Wisconsin Dells
 
Wisconsin Dells, WI
 
50.0
%
 
265

 
2.4

 
24.3

Other
 
 
 
 
 

 
1.5

 

 
 
 
 
 
 
 
 
$
208.0

 
$
268.2

 
 
 
 
 
 
 
 
 
 
 
Charlotte(2)
 
Charlotte, NC
 
50.0
%
 
398

 
$
(2.2
)
 
$
90.0

 
 
 
 
 
 
 
 
$
(2.2
)
 
$
90.0

(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.
(2)
The negative carrying value is due to the distributions of proceeds from mortgage loans and quarterly distributions of excess cash flow exceeding the original contributions from the partners.



21



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

Six months ended
 
 
June 30,

June 30,
 
 
2015
 
2014

2015

2014
Fee:
 
 
 
 
 
 

 
 

Development and leasing
 
$
727

 
$
70

 
$
1,307

 
$
78

Loan guarantee
 
187

 
146

 
383

 
187

Management and marketing
 
813

 
542

 
1,320

 
1,059

Total Fees
 
$
1,727

 
$
758

 
$
3,010

 
$
1,324


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 $4.4 million as of June 30, 2015 and December 31, 2014, respectively) are amortized over the various useful lives of the related assets.

Columbus, Ohio

During the second quarter of 2015, the joint venture purchased land for approximately $8.9 million and began construction on Tanger Outlets Columbus. We and our partner currently expect to complete construction in time to open the center during the second quarter of 2016. Our partner is providing development services to the joint venture and we, along with our partner, are providing joint leasing services. Once the center opens, we will provide property management, marketing and leasing services to the joint venture.

Savannah, Georgia

In January 2014, we announced a joint venture arrangement to develop Tanger Outlets Savannah. The center, which opened in April 2015, includes approximately 377,000 square feet. As of June 30, 2015, our equity contributions totaled $45.8 million and our partner’s equity contributions totaled $8.3 million. Contributions we made in excess of our partners' equity contributions earned a preferred rate of return equal to 8% from the date the contributions were made until the outlet center’s grand opening in April 2015, and will earn 10% annually thereafter.

The joint venture has an interest only mortgage loan with the ability to borrow up to $97.7 million, of which $4.7 million will be available for future expansion, at an interest rate of LIBOR + 1.65%. The loan initially matures on May 21, 2017, with two, one -year extension options. As of June 30, 2015, the balance on the loan was $70.1 million. We are providing development, management and marketing services to the joint venture; and with our partner, are jointly providing leasing services to the outlet center.

Westgate, Glendale, Arizona

During the first quarter of 2015, the joint venture completed the remaining 28,000 square feet of a 78,000 square foot expansion of the existing property which brought the size of the outlet center to approximately 411,000 square feet. Construction commenced on the expansion during the second quarter of 2014 and was funded with borrowings under the amended Westgate mortgage loan. The joint venture's amended and restated construction loan has the ability to borrow up to $62.0 million. The loan initially matured in June 2015, and during the second quarter of 2015 the joint venture exercised the two year option to extend the maturity date of the loan to June 2017. As of June 30, 2015, the balance on the loan was $62.0 million.

Tanger Outlets Westgate opened in November 2012 and was developed through, and is currently owned by, a joint venture that was formed in May 2012. We are providing property management, construction supervision, marketing and leasing services to the joint venture.

22



Wisconsin Dells, Wisconsin

In February 2015, we sold our equity interest in the joint venture that owned an outlet center in Wisconsin Dells, Wisconsin for approximately $15.6 million, representing our share of the sales price totaling $27.7 million less our share of the outstanding debt, which totaled $12.1 million. As a result of this transaction, we recorded a gain of approximately $13.7 million in the first quarter of 2015, which represents the difference between the carrying value of our equity method investment and the net proceeds received.

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, 2015
 
December 31, 2014
Assets
 
 

 
 

Land
 
$
107,503

 
$
102,601

Buildings, improvements and fixtures
 
630,777

 
542,501

Construction in progress, including land
 
27,628

 
104,780

 
 
765,908

 
749,882

Accumulated depreciation
 
(46,203
)
 
(48,233
)
Total rental property, net
 
719,705

 
701,649

Cash and cash equivalents
 
47,793

 
46,917

Deferred lease costs, net
 
20,607

 
21,234

Deferred debt origination costs, net
 
4,706

 
5,995

Prepaids and other assets
 
12,833

 
12,766

Total assets
 
$
805,644

 
$
788,561

Liabilities and Owners' Equity
 
 

 
 

Mortgages payable
 
$
385,275

 
$
358,219

Accounts payable and other liabilities
 
45,490

 
70,795

Total liabilities
 
430,765

 
429,014

Owners' equity
 
374,879

 
359,547

Total liabilities and owners' equity
 
$
805,644

 
$
788,561


 
 
Three months ended
 
Six months ended
Condensed Combined Statements of Operations
 
June 30,
 
June 30,
 - Unconsolidated Joint Ventures
 
2015
 
2014
 
2015
 
2014
Revenues
 
$
26,189

 
$
16,079

 
$
50,153

 
$
32,834

Expenses
 
 
 
 
 
 

 
 
Property operating
 
11,167

 
6,624

 
20,311

 
13,270

General and administrative
 
90

 
27

 
308

 
156

Depreciation and amortization
 
8,556

 
4,564

 
16,378

 
9,538

Total expenses
 
19,813

 
11,215

 
36,997

 
22,964

Operating income
 
6,376

 
4,864

 
13,156

 
9,870

Interest expense
 
(2,216
)
 
(1,383
)