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, 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 October 30, 2015, there were 95,847,393 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, 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 September 30, 2015, the Company, through its ownership of Tanger GP Trust and Tanger LP Trust, owned 95,843,493 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 September 30, 2015 and December 31, 2014
Consolidated Statements of Operations - for the three and nine months ended September 30, 2015 and 2014
Consolidated Statements of Comprehensive Income - for the three and nine months ended September 30, 2015 and 2014
Consolidated Statements of Shareholders' Equity - for the nine months ended September 30, 2015 and 2014
Consolidated Statements of Cash Flows - for the nine months ended September 30, 2015 and 2014
 
 
FINANCIAL STATEMENTS OF TANGER PROPERTIES LIMITED PARTNERSHIP (Unaudited)
 
Consolidated Balance Sheets - as of September 30, 2015 and December 31, 2014
Consolidated Statements of Operations - for the three and nine months ended September 30, 2015 and 2014
Consolidated Statements of Comprehensive Income - for the three and nine months ended September 30, 2015 and 2014
Consolidated Statements of Equity - for the nine months ended September 30, 2015 and 2014
Consolidated Statements of Cash Flows - for the nine months ended September 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)
 
 
September 30, 2015
 
December 31, 2014
ASSETS
 
 

 
 

Rental property
 
 

 
 

Land
 
$
225,306

 
$
217,994

Buildings, improvements and fixtures
 
2,173,499

 
1,947,083

Construction in progress
 
63,445

 
98,526

 
 
2,462,250

 
2,263,603

Accumulated depreciation
 
(727,921
)
 
(662,236
)
Total rental property, net
 
1,734,329

 
1,601,367

Cash and cash equivalents
 
20,661

 
16,875

Restricted cash
 
42,904

 

Rental property held for sale
 
19,286

 
46,005

Investments in unconsolidated joint ventures
 
197,964

 
208,050

Deferred lease costs and other intangibles, net
 
130,390

 
140,883

Deferred debt origination costs, net
 
10,688

 
12,126

Prepaids and other assets
 
74,577

 
72,354

Total assets
 
$
2,230,799

 
$
2,097,660

LIABILITIES AND EQUITY
 
 
 
 
Liabilities
 
 

 
 

Debt
 
 

 
 

Senior, unsecured notes (net of discount of $5,919 and $6,426, respectively)
 
$
794,080

 
$
793,574

Unsecured term loans (net of discount of $122 and $241, respectively)
 
267,378

 
267,259

Mortgages payable (including premiums of $2,469 and $3,031, respectively)
 
281,966

 
271,361

Unsecured lines of credit
 
195,800

 
111,000

Total debt
 
1,539,224

 
1,443,194

Accounts payable and accrued expenses
 
90,506

 
69,558

Deferred financing obligation
 
28,388

 
28,388

Other liabilities
 
31,405

 
32,634

Total liabilities
 
1,689,523

 
1,573,774

Commitments and contingencies
 

 

Equity
 
 

 
 

Tanger Factory Outlet Centers, Inc.
 
 

 
 

Common shares, $.01 par value, 300,000,000 shares authorized, 95,843,493 and 95,509,781 shares issued and outstanding at September 30, 2015 and December 31, 2014, respectively
 
958

 
955

Paid in capital
 
802,638

 
791,566

Accumulated distributions in excess of net income 
 
(256,180
)
 
(281,679
)
Accumulated other comprehensive loss
 
(33,943
)
 
(14,023
)
Equity attributable to Tanger Factory Outlet Centers, Inc.
 
513,473

 
496,819

Equity attributable to noncontrolling interests
 
 
 
 
Noncontrolling interests in Operating Partnership
 
27,207

 
26,417

Noncontrolling interests in other consolidated partnerships
 
596

 
650

Total equity
 
541,276

 
523,886

Total liabilities and equity
 
$
2,230,799

 
$
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 September 30,
 
Nine months ended September 30,
 
 
2015
 
2014
 
2015
 
2014
Revenues
 
 
 
 
 
 

 
 
Base rentals
 
$
75,841

 
$
69,612

 
$
215,799

 
$
204,748

Percentage rentals
 
2,625

 
2,634

 
6,896

 
6,632

Expense reimbursements
 
30,542

 
29,463

 
93,815

 
90,457

Management, leasing and other services
 
1,253

 
1,225

 
4,263

 
2,548

Other income
 
2,645

 
2,255

 
5,795

 
5,799

Total revenues
 
112,906

 
105,189

 
326,568

 
310,184

Expenses
 
 
 


 
 
 
 

Property operating
 
36,231

 
32,798

 
108,921

 
102,454

General and administrative
 
11,514

 
11,334

 
34,431

 
32,817

Acquisition costs
 

 

 

 
7

Abandoned pre-development costs
 

 

 

 
1,596

Depreciation and amortization
 
28,785

 
25,774

 
77,046

 
77,034

Total expenses
 
76,530

 
69,906

 
220,398

 
213,908

Operating income
 
36,376

 
35,283


106,170


96,276

Other income/(expense)
 
 
 
 
 
 
 
 
Interest expense
 
(13,933
)
 
(13,902
)
 
(40,110
)
 
(43,404
)
Gain on sale of assets and interests in unconsolidated entities
 
20,215

 

 
33,941

 

Other nonoperating income (expense)
 
89

 
437

 
(98
)
 
560

Income before equity in earnings of unconsolidated joint ventures
 
42,747

 
21,818

 
99,903

 
53,432

Equity in earnings of unconsolidated joint ventures
 
3,713

 
2,479

 
8,302

 
6,200

Net income
 
46,460

 
24,297


108,205


59,632

Noncontrolling interests in Operating Partnership
 
(2,364
)
 
(1,252
)
 
(5,532
)
 
(3,083
)
Noncontrolling interests in other consolidated partnerships
 
(21
)
 
(42
)
 
395

 
(80
)
Net income attributable to Tanger Factory Outlet Centers, Inc.
 
$
44,075

 
$
23,003


$
103,068


$
56,469

 
 
 
 
 
 
 
 
 
Basic earnings per common share
 
 
 
 
 
 

 
 

Net income
 
$
0.46

 
$
0.24

 
$
1.08

 
$
0.59

Diluted earnings per common share
 
 
 
 
 
 
 
 
Net income
 
$
0.46

 
$
0.24

 
$
1.08

 
$
0.59

 
 
 
 
 
 
 
 
 
Dividends paid per common share
 
$
0.285

 
$
0.240

 
$
0.810

 
$
0.705

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

7



TANGER FACTORY OUTLET CENTERS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(In thousands, unaudited)
 
 
Three months ended
 
Nine months ended
 
 
September 30,
 
September 30,
 
 
2015
 
2014
 
2015
 
2014
Net income
 
$
46,460

 
$
24,297

 
$
108,205

 
$
59,632

Other comprehensive income (loss)
 
 
 
 
 
 
 

Reclassification adjustments for amounts recognized in net income
 

 
(99
)
 

 
(293
)
Foreign currency translation adjustments
 
(10,932
)
 
(5,194
)
 
(18,945
)
 
(4,546
)
Change in fair value of cash flow hedges
 
(1,156
)
 
952

 
(2,045
)
 
(386
)
Other comprehensive income (loss)
 
(12,088
)
 
(4,341
)
 
(20,990
)
 
(5,225
)
Comprehensive income
 
34,372

 
19,956

 
87,215

 
54,407

Comprehensive income attributable to noncontrolling interests
 
(1,770
)
 
(1,070
)
 
(4,067
)
 
(2,892
)
Comprehensive income attributable to Tanger Factory Outlet Centers, Inc.
 
$
32,602

 
$
18,886

 
$
83,148

 
$
51,515

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
 


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 ($0.705 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 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
 


103,068


103,068

5,532

(395
)
108,205

Other comprehensive loss
 



(19,920
)
(19,920
)
(1,070
)

(20,990
)
Compensation under Incentive Award Plan
 

12,180



12,180



12,180

Issuance of 16,400 common shares upon exercise of options
 

448



448



448

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

(3
)






Withholding of 31,532 common shares for employee income taxes
 

(1,115
)


(1,115
)


(1,115
)
Contributions from noncontrolling interests
 






461

461

Adjustment for noncontrolling interests in Operating Partnership
 

(442
)


(442
)
442



Adjustment for noncontrolling interests in other consolidated partnerships
 

4



4


(4
)

Common dividends ($.810 per share)
 


(77,569
)

(77,569
)


(77,569
)
Distributions to noncontrolling interests
 





(4,114
)
(116
)
(4,230
)
Balance,
September 30, 2015
 
$
958

$
802,638

$
(256,180
)
$
(33,943
)
$
513,473

$
27,207

$
596

$
541,276


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




10



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

 
 
Nine months ended
 
 
September 30,
 
 
2015
 
2014
OPERATING ACTIVITIES
 
 
 
 

Net income
 
$
108,205

 
$
59,632

Adjustments to reconcile net income to net cash provided by operating activities:
 
 
 
 
Depreciation and amortization
 
77,046

 
77,034

Amortization of deferred financing costs
 
1,896

 
1,654

Abandoned pre-development costs
 

 
1,596

Casualty gain
 

 
(329
)
Gain on sale of assets and interests in unconsolidated entities
 
(33,941
)
 

Equity in earnings of unconsolidated joint ventures
 
(8,302
)
 
(6,200
)
Share-based compensation expense
 
11,560

 
10,933

Amortization of debt (premiums) and discounts, net
 
65

 
(273
)
Amortization (accretion) of market rent rate adjustments, net
 
2,124

 
2,250

Straight-line rent adjustments
 
(4,742
)
 
(5,027
)
Distributions of cumulative earnings from unconsolidated joint ventures
 
8,803

 
4,166

Changes in other assets and liabilities:
 
 
 
 
Other assets
 
2,197

 
(1,784
)
Accounts payable and accrued expenses
 
10,117

 
4,854

Net cash provided by operating activities
 
175,028

 
148,506

INVESTING ACTIVITIES
 
 
 
 
Additions to rental property
 
(181,127
)
 
(90,254
)
Additions to investments in unconsolidated joint ventures
 
(31,517
)
 
(114,476
)
Net proceeds on sale of assets and interests in unconsolidated entities
 
58,799

 

Change in restricted cash
 
(42,904
)
 

Proceeds from insurance reimbursements
 
253

 
1,784

Additions to non-real estate assets
 
(691
)
 
(933
)
Distributions in excess of cumulative earnings from unconsolidated joint ventures
 
19,325

 
5,374

Additions to deferred lease costs
 
(5,592
)
 
(4,109
)
Net cash used in investing activities
 
(183,454
)
 
(202,614
)
FINANCING ACTIVITIES
 
 
 
 
Cash dividends paid
 
(77,569
)
 
(67,445
)
Distributions to noncontrolling interests in Operating Partnership
 
(4,114
)
 
(3,612
)
Proceeds from debt issuances
 
469,663

 
410,300

Repayments of debt
 
(373,698
)
 
(289,381
)
Employee income taxes paid related to shares withheld upon vesting of equity awards
 
(1,115
)
 

Distributions to noncontrolling interests in other consolidated partnerships
 
(116
)
 
(88
)
Additions to deferred financing costs
 
(758
)
 
(778
)
Proceeds from exercise of options
 
448

 
895

Contributions from noncontrolling interests
 
259

 

Net cash provided by financing activities
 
13,000

 
49,891

Effect of foreign currency rate changes on cash and cash equivalents
 
(788
)
 
(200
)
Net increase (decrease) in cash and cash equivalents
 
3,786

 
(4,417
)
Cash and cash equivalents, beginning of period
 
16,875

 
15,241

Cash and cash equivalents, end of period
 
$
20,661

 
$
10,824

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)
 
 
September 30, 2015
 
December 31, 2014
ASSETS
 
 

 
 

Rental property
 
 

 
 

Land
 
$
225,306

 
$
217,994

Buildings, improvements and fixtures
 
2,173,499

 
1,947,083

Construction in progress
 
63,445

 
98,526

 
 
2,462,250

 
2,263,603

Accumulated depreciation
 
(727,921
)
 
(662,236
)
Total rental property, net
 
1,734,329

 
1,601,367

Cash and cash equivalents
 
20,640

 
15,806

Restricted cash
 
42,904

 

Rental property held for sale
 
19,286

 
46,005

Investments in unconsolidated joint ventures
 
197,964

 
208,050

Deferred lease costs and other intangibles, net
 
130,390

 
140,883

Deferred debt origination costs, net
 
10,688

 
12,126

Prepaids and other assets
 
73,871

 
71,848

Total assets
 
$
2,230,072

 
$
2,096,085

LIABILITIES AND EQUITY
 

 
 
Liabilities
 
 
 
 
Debt
 
 
 
 
Senior, unsecured notes (net of discount of $5,919 and $6,426, respectively)
 
$
794,080

 
$
793,574

Unsecured term loans (net of discount of $122 and $241, respectively)
 
267,378

 
267,259

Mortgages payable (including premiums of $2,469 and $3,031, respectively)
 
281,966

 
271,361

Unsecured lines of credit
 
195,800

 
111,000

Total debt
 
1,539,224

 
1,443,194

Accounts payable and accrued expenses
 
89,779

 
67,983

Deferred financing obligation
 
28,388

 
28,388

Other liabilities
 
31,405

 
32,634

Total liabilities
 
1,688,796

 
1,572,199

Commitments and contingencies
 

 

Equity
 
 
 
 
Partners' Equity
 
 
 
 
General partner, 1,000,000 units outstanding at September 30, 2015 and December 31, 2014
 
5,093

 
4,828

Limited partners, 5,078,406 and 5,078,406 Class A units and 94,843,493 and 94,509,781 Class B units outstanding at September 30, 2015 and December 31, 2014, respectively
 
571,368

 
533,199

Accumulated other comprehensive loss
 
(35,781
)
 
(14,791
)
Total partners' equity
 
540,680

 
523,236

Noncontrolling interests in consolidated partnerships
 
596

 
650

Total equity
 
541,276

 
523,886

Total liabilities and equity
 
$
2,230,072

 
$
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 September 30,
 
Nine months ended September 30,
 
 
2015
 
2014
 
2015
 
2014
Revenues
 
 
 
 
 
 

 
 
Base rentals
 
$
75,841

 
$
69,612

 
$
215,799

 
$
204,748

Percentage rentals
 
2,625

 
2,634

 
6,896

 
6,632

Expense reimbursements
 
30,542

 
29,463

 
93,815

 
90,457

Management, leasing and other services
 
1,253

 
1,225

 
4,263

 
2,548

Other income
 
2,645

 
2,255

 
5,795

 
5,799

Total revenues
 
112,906

 
105,189


326,568


310,184

Expenses
 


 


 


 
 
Property operating
 
36,231

 
32,798

 
108,921

 
102,454

General and administrative
 
11,514

 
11,334

 
34,431

 
32,817

Acquisition costs
 

 

 

 
7

Abandoned pre-development costs
 

 

 

 
1,596

Depreciation and amortization
 
28,785

 
25,774

 
77,046

 
77,034

Total expenses
 
76,530

 
69,906


220,398


213,908

Operating income
 
36,376

 
35,283


106,170


96,276

Other income/(expense)
 
 
 
 
 
 
 
 
Interest expense
 
(13,933
)
 
(13,902
)
 
(40,110
)
 
(43,404
)
Gain on sale of assets and interests in unconsolidated entities
 
20,215

 

 
33,941

 

Other nonoperating income (expense)
 
89

 
437

 
(98
)
 
560

Income before equity in earnings of unconsolidated joint ventures
 
42,747

 
21,818


99,903


53,432

Equity in earnings of unconsolidated joint ventures
 
3,713

 
2,479

 
8,302

 
6,200

Net income
 
46,460

 
24,297


108,205


59,632

Noncontrolling interests in consolidated partnerships
 
(21
)
 
(42
)
 
395

 
(80
)
Net income available to partners
 
46,439

 
24,255


108,600


59,552

Net income available to limited partners
 
45,979

 
24,012

 
107,525

 
58,952

Net income available to general partner
 
$
460

 
$
243


$
1,075


$
600

 
 
 
 
 
 
 
 
 
Basic earnings per common unit
 
 
 
 
 
 
 
 

Net income
 
$
0.46

 
$
0.24

 
$
1.08

 
$
0.59

Diluted earnings per common unit
 
 
 
 
 
 
 
 
Net income
 
$
0.46

 
$
0.24

 
$
1.08

 
$
0.59

 
 
 
 
 
 
 
 
 
Distribution paid per common unit
 
$
0.285

 
$
0.240

 
$
0.810

 
$
0.705

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
 
Nine months ended
 
 
September 30,
 
September 30,
 
 
2015
 
2014
 
2015
 
2014
Net income
 
$
46,460

 
$
24,297

 
$
108,205

 
$
59,632

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

 
(99
)
 

 
(293
)
Foreign currency translation adjustments
 
(10,932
)
 
(5,194
)
 
(18,945
)
 
(4,546
)
Changes in fair value of cash flow hedges
 
(1,156
)
 
952

 
(2,045
)
 
(386
)
Other comprehensive income (loss)
 
(12,088
)
 
(4,341
)
 
(20,990
)
 
(5,225
)
Comprehensive income
 
34,372

 
19,956

 
87,215

 
54,407

Comprehensive (income) loss attributable to noncontrolling interests in consolidated partnerships
 
(21
)
 
(42
)
 
395

 
(80
)
Comprehensive income attributable to the Operating Partnership
 
$
34,351

 
$
19,914

 
$
87,610

 
$
54,327

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
 
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
 






Adjustments for noncontrolling interests in 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

 
 
 
 
 
 
 
 
 
 
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
 
1,075

107,525


108,600

(395
)
108,205

Other comprehensive loss
 


(20,990
)
(20,990
)

(20,990
)
Compensation under Incentive Award Plan
 

12,180


12,180


12,180

Issuance of 16,400 common units upon exercise of options
 

448


448


448

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






Withholding of 31,532 common units for employee income taxes
 

(1,115
)

(1,115
)

(1,115
)
Contributions from noncontrolling interests
 




461

461

Adjustment for noncontrolling interests in consolidated partnerships
 

4


4

(4
)

Common distributions ($.810 per common unit)
 
(810
)
(80,873
)

(81,683
)

(81,683
)
Distributions to noncontrolling interests
 




(116
)
(116
)
Balance, September 30, 2015
 
$
5,093

$
571,368

$
(35,781
)
$
540,680

$
596

$
541,276

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

15



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

 
 

Net income
 
$
108,205

 
$
59,632

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


Depreciation and amortization
 
77,046

 
77,034

Amortization of deferred financing costs
 
1,896

 
1,654

Abandoned pre-development costs
 

 
1,596

Casualty gain
 

 
(329
)
Gain on sale of assets and interests in unconsolidated entities
 
(33,941
)
 

Equity in earnings of unconsolidated joint ventures
 
(8,302
)
 
(6,200
)
Equity-based compensation expense
 
11,560

 
10,933

Amortization of debt (premiums) and discounts, net
 
65

 
(273
)
Amortization (accretion) of market rent rate adjustments, net
 
2,124

 
2,250

Straight-line rent adjustments
 
(4,742
)
 
(5,027
)
Distributions of cumulative earnings from unconsolidated joint ventures
 
8,803

 
4,166

Changes in other assets and liabilities:
 
 
 
 
Other assets
 
2,397

 
(1,439
)
Accounts payable and accrued expenses
 
10,965

 
4,758

Net cash provided by operating activities
 
176,076

 
148,755

INVESTING ACTIVITIES
 
 
 
 
Additions to rental property
 
(181,127
)
 
(90,254
)
Additions to investments in unconsolidated joint ventures
 
(31,517
)
 
(114,476
)
Net proceeds on sale of assets and interests in unconsolidated entities
 
58,799

 

Change in restricted cash
 
(42,904
)
 

Proceeds from insurance reimbursements
 
253

 
1,784

Additions to non-real estate assets
 
(691
)
 
(933
)
Distributions in excess of cumulative earnings from unconsolidated joint ventures
 
19,325

 
5,374

Additions to deferred lease costs
 
(5,592
)
 
(4,109
)
Net cash used in investing activities
 
(183,454
)
 
(202,614
)
FINANCING ACTIVITIES
 
 
 
 
Cash distributions paid
 
(81,683
)
 
(71,057
)
Proceeds from debt issuances
 
469,663

 
410,300

Repayments of debt
 
(373,698
)
 
(289,381
)
Employee income taxes paid related to shares withheld upon vesting of equity awards
 
(1,115
)
 

Distributions to noncontrolling interests in consolidated partnerships
 
(116
)
 
(88
)
Additions to deferred financing costs
 
(758
)
 
(778
)
Proceeds from exercise of options
 
448

 
895

Contributions from noncontrolling interests
 
259

 

Net cash provided by financing activities
 
13,000

 
49,891

Effect of foreign currency on cash and cash equivalents
 
(788
)
 
(200
)
Net increase (decrease) in cash and cash equivalents
 
4,834

 
(4,168
)
Cash and cash equivalents, beginning of period
 
15,806

 
14,984

Cash and cash equivalents, end of period
 
$
20,640

 
$
10,816

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 September 30, 2015, we owned and operated 34 outlet centers, with a total gross leasable area of approximately 11.6 million square feet. We also had partial ownership interests in 9 outlet centers totaling approximately 2.8 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 September 30, 2015, the Company, through its ownership of Tanger GP Trust and Tanger LP Trust, owned 95,843,493 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 at 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. Also, due to certain reconsideration events, we concluded during the quarter ended June 30, 2105 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 $46.7 million as of September 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 September 30, 2015, total assets of this venture, which is currently under construction, were $57.1 million and total liabilities were $30.2 million. The primary classification of the assets on the consolidated balance sheets are total rental property, net of $53.2 million; cash of $1.3 million and other assets of $2.6 million (including deferred lease costs and other intangibles and deferred debt origination costs) and the primary classification of the liabilities include accounts payable and accrued expenses of $15.0 million and mortgages payable of $15.2 million. 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 $1.2 million and $2.5 million related to management, leasing and other services for the three and nine months ended September 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 nine months ended September 30, 2015. In addition, we have reclassified certain amounts related to other non-operating income and expenses for the three and nine months ended September 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 nine months ended September 30, 2015.

We have revised the previously reported amounts in the consolidated statement of cash flows to reclassify approximately $2.2 million related to tax increment financing for the nine months ended September 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 nine months ended September 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

In the third quarter of 2015, we sold our Kittery, Tuscola, and West Branch outlet centers for a gain of $20.2 million. We received net proceeds of $43.3 million of which $42.9 million is recorded in restricted cash as of September 30, 2015. The restricted cash represents the cash proceeds from property sales that are being held by a qualified intermediary in anticipation of such amounts subsequently being invested in a tax efficient manner
under Section 1031 of the Internal Revenue Code of 1986, as amended.

During the third quarter of 2015, we also entered into a contractual agreement to sell our Barstow outlet center, the sale of which closed in October 2015. The Barstow outlet center has been classified as rental property held for sale as of September 30, 2015 on the consolidated balance sheets.

The following table sets forth certain summarized information regarding the properties sold during the quarter and the property held for sale as of September 30, 2015:
Properties
 
Locations
 
Date Sold
 
Square Feet
(in 000's)
 
Net Sales Price
(in 000's)
 
Gain on Sale(in 000's)
Sold:
 
 
 
 
 
 
 
 
 
 
Kittery I and II, Tuscola, and West Branch
 
Kittery, ME, Tuscola, IL, and West Branch, MI
 
September 2015
 
439

 
$
43,304

 
$
20,215

 
 
 
 
 
 
 
 
 
 
 
Held For Sale:
 
 
 
 
 
 
 
 
 
 
Barstow
 
Barstow, CA
 
October 2015
 
171

 
$
105,705

 
$
86,419


The rental properties sold and held for sale did not meet the criteria set forth in the newly-adopted guidance for reporting discontinued operations, thus their results of operations have remained in continuing operations.

The carrying values of the assets held for sale at September 30, 2015 and December 31, 2014 were comprised of the following (in thousands):
 
 
September 30, 2015
 
December 31, 2014
Rental property, net
 
$
17,980

 
$
43,532

Deferred lease costs and other intangibles, net
 
181

 
757

Prepaids and other assets
 
1,125

 
1,716

Rental property held for sale
 
$
19,286

 
$
46,005




19



4. Developments of Consolidated Outlet Centers

Foxwoods

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 September 30, 2015, our partner’s equity contributions totaled approximately $1.0 million and our equity contributions totaled approximately $56.2 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. Under the terms of the operating agreement, upon liquidation, we would receive all of our unreturned contributions and all unpaid returns earned on those contributions prior to any distributions being made to our partner. 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 our legal ownership percentage of 67%. As of September 30, 2015, based upon the liquidation proceeds we would receive from a hypothetical liquidation of our investment based at depreciated book value, our economic interest would represent substantially all of the economic benefit of the property. Our economic interest may fluctuate based on a number of factors, including mortgage financing, partnership capital contributions and distributions, and proceeds from asset sales.

Grand Rapids

In July 2015, we opened a 351,000 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.

Development continues for the following consolidated outlet center as of September 30, 2015:
Project
Approximate square feet
(in 000's)
Costs Incurred to Date
(in millions)
Borrowed to date
(in millions)
Projected Opening
Southaven, Mississippi (Memphis)
320

47.5

15.2

Nov 2015

Southaven

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 September 30, 2015, our partner’s equity contributions totaled approximately $461,000 and our equity contributions totaled approximately $26.5 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 September 30, 2015, the balance of our senior contributions was $17.7 million and our junior contributions was $8.3 million. Under the terms of the operating agreement, upon liquidation, we would receive all of our unreturned contributions and all unpaid returns earned on those contributions prior to any distributions being made to our partner.

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 September 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
%
 

 
$
10.2

 
$

National Harbor
 
National Harbor, MD
 
50.0
%
 
339

 
8.6

 
83.7

RioCan Canada
 
Various
 
50.0
%
 
870

 
120.0

 
11.9

Savannah (1)
 
Savannah, GA
 
50.0
%
 
377

 
46.7

 
85.1

Westgate
 
Glendale, AZ
 
58.0
%
 
414

 
12.5

 
62.0

 
 
 
 
 
 
 
 
$
198.0

 
$
242.7

 
 
 
 
 
 
 
 
 
 
 
Charlotte(2)
 
Charlotte, NC
 
50.0
%
 
398

 
$
(0.9
)
 
$
90.0

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

 
(0.5
)
 
65.0

 
 
 
 
 
 
 
 
$
(1.4
)
 
$
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 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.



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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

Nine months ended
 
 
September 30,

September 30,
 
 
2015
 
2014

2015

2014
Fee:
 
 
 
 
 
 

 
 

Development and leasing
 
$
325

 
$
624

 
$
1,632

 
$
702

Loan guarantee
 
182

 
23

 
564

 
209

Management and marketing
 
746

 
578

 
2,067

 
1,637

Total Fees
 
$
1,253

 
$
1,225

 
$
4,263

 
$
2,548


Our investments in real estate joint ventures are reduced by the percentage of the profits earned for leasing and development services associated with our ownership interest in each joint venture. Our carrying value of investments in unconsolidated joint ventures differs from our share of the assets reported in the "Summary Balance Sheets - Unconsolidated Joint Ventures" shown below due to adjustments to the book basis, including intercompany profits on sales of services that are capitalized by the unconsolidated joint ventures. The differences in basis (totaling $3.9 million and $4.4 million as of September 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. As of September 30, 2015 our equity contributions have totaled $9.8 million and our partner's equity contributions have totaled $9.8 million. 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 September 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 are considered preferred equity and 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. Under the terms of the operating agreement, upon liquidation, we would receive all of our unreturned preferred equity contributions and all unpaid returns earned on those contributions prior to any distributions being made to our equity partner. As of September 30, 2015, based upon the liquidation proceeds we would receive from a hypothetical liquidation of our investment based at depreciated book value, our estimated economic interest in the venture was approximately 98%. Our economic interest may fluctuate based on a number of factors, including mortgage financing, partnership capital contributions and distributions, and proceeds from asset sales.

In May 2014, the joint venture closed on a construction loan with the ability to borrow up to $97.7 million at an interest rate of LIBOR + 1.65%. In September 2015, the loan maximum borrowing amount was increased to $100.9 million. The construction loan has a maturity date of May 21, 2017, with two, one -year extension options. As of September 30, 2015, the balance on the loan was $85.1 million. The additional $15.8 million is available for construction of the approximately 42,000 square foot expansion that is currently in process. 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.



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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 414,000 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 is fully funded with a balance of $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.

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.
Wisconsin Dells, Wisconsin

In February 2015, we sold our equity interest in the joint venture that owned the Wisconsin Dells outlet center 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
 
September 30, 2015
 
December 31, 2014
Assets
 
 

 
 

Land
 
$
104,518

 
$
102,601

Buildings, improvements and fixtures
 
617,732

 
542,501

Construction in progress, including land
 
33,850

 
104,780

 
 
756,100

 
749,882

Accumulated depreciation
 
(53,098
)
 
(48,233
)
Total rental property, net
 
703,002

 
701,649

Cash and cash equivalents
 
29,745

 
46,917

Deferred lease costs, net
 
19,305

 
21,234

Deferred debt origination costs, net
 
4,403

 
5,995

Prepaids and other assets
 
14,367

 
12,766

Total assets
 
$
770,822

 
$
788,561

Liabilities and Owners' Equity
 
 

 
 

Mortgages payable
 
$
397,715

 
$
358,219

Accounts payable and other liabilities
 
29,621

 
70,795

Total liabilities
 
427,336

 
429,014

Owners' equity
 
343,486

 
359,547

Total liabilities and owners' equity
 
$
770,822

 
$
788,561



23