Document

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 March 31, 2017



	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 a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer”, “accelerated filer", “smaller reporting company” and "emerging growth company" in Rule 12b-2 of the Exchange Act.



Tanger Factory Outlet Centers, Inc.
Large accelerated filer x		Accelerated filer o
Non-accelerated filer o		Smaller reporting company o
(Do not check if a smaller reporting company)		Emerging growth company o



Tanger Properties Limited Partnership
Large accelerated filer o		Accelerated filer o
Non-accelerated filer x		Smaller reporting company o
(Do not check if a smaller reporting company)		Emerging growth company o

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.



Tanger Factory Outlet Centers, Inc.	o
Tanger Properties Limited Partnership	o

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 April 28, 2017, there were 96,456,117 common shares of Tanger Factory Outlet Centers, Inc. outstanding, $.01 par value.

EXPLANATORY NOTE

This report combines the unaudited quarterly reports on Form 10-Q for the quarter ended March 31, 2017 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. As the Operating Partnership is the issuer of our registered debt securities, we are required to present a separate set of financial statements for this entity.

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 is the sole general partner of the Operating Partnership. Tanger LP Trust holds a limited partnership interest. As of March 31, 2017, the Company, through its ownership of Tanger GP Trust and Tanger LP Trust, owned 96,456,117 units of the Operating Partnership and other limited partners (the "Non-Company LPs") collectively owned 5,027,781 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.

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 partner's 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 partner's 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, as applicable, 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, if applicable, 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.

The Company currently consolidates the Operating Partnership because it has (1) the power to direct the activities of the Operating Partnership that most significantly impact the Operating Partnership’s economic performance and (2) the obligation to absorb losses and the right to receive the residual returns of the Operating Partnership that could be potentially significant. 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.

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 March 31, 2017 and December 31, 2016	7
Consolidated Statements of Operations - for the three months ended March 31, 2017 and 2016	8
Consolidated Statements of Comprehensive Income - for the three months ended March 31, 2017 and 2016	9
Consolidated Statements of Shareholders' Equity - for the three months ended March 31, 2017 and 2016	10
Consolidated Statements of Cash Flows - for the three months ended March 31, 2017 and 2016	12

FINANCIAL STATEMENTS OF TANGER PROPERTIES LIMITED PARTNERSHIP (Unaudited)
Consolidated Balance Sheets - as of March 31, 2017 and December 31, 2016	13
Consolidated Statements of Operations - for the three months ended March 31, 2017 and 2016	14
Consolidated Statements of Comprehensive Income - for the three months ended March 31, 2017 and 2016	15
Consolidated Statements of Equity - for the three months ended March 31, 2017 and 2016	16
Consolidated Statements of Cash Flows - for the three months ended March 31, 2017 and 2016	17

Condensed Notes to Consolidated Financial Statements of Tanger Factory Outlet Centers, Inc. and Tanger Properties Limited Partnership	18

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations	36

Item 3. Quantitative and Qualitative Disclosures about Market Risk	56

Item 4. Controls and Procedures (Tanger Factory Outlet Centers, Inc. and Tanger Properties Limited Partnership)	57

Part II. Other Information

Item 1. Legal Proceedings	58

Item 1A. Risk Factors	58

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	58

Item 4. Mine Safety Disclosure	58

Item 6. Exhibits	59

Signatures	60

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)



	March 31, 2017			December 31, 2016
Assets
Rental property:
Land	$	272,153		$	272,153
Buildings, improvements and fixtures	2,667,087			2,647,477
Construction in progress	65,461			46,277
	3,004,701			2,965,907
Accumulated depreciation	(839,843		)	(814,583		)
Total rental property, net	2,164,858			2,151,324
Cash and cash equivalents	7,225			12,222
Investments in unconsolidated joint ventures	127,901			128,104
Deferred lease costs and other intangibles, net	146,965			151,579
Prepaids and other assets	92,821			82,985
Total assets	$	2,539,770		$	2,526,214
Liabilities and Equity
Liabilities
Debt:
Senior, unsecured notes, net	$	1,135,806		$	1,135,309
Unsecured term loans, net	322,575			322,410
Mortgages payable, net	171,458			172,145
Unsecured lines of credit, net	69,622			58,002
Total debt	1,699,461			1,687,866
Accounts payable and accrued expenses	82,772			78,143
Other liabilities	59,534			54,764
Total liabilities	1,841,767			1,820,773
Commitments and contingencies
Equity
Tanger Factory Outlet Centers, Inc.:
Common shares, $.01 par value, 300,000,000 shares authorized, 96,456,117 and 96,095,891 shares issued and outstanding at March 31, 2017 and December 31, 2016, respectively	965			961
Paid in capital	821,509			820,251
Accumulated distributions in excess of net income	(132,571		)	(122,701		)
Accumulated other comprehensive loss	(26,632		)	(28,295		)
Equity attributable to Tanger Factory Outlet Centers, Inc.	663,271			670,216
Equity attributable to noncontrolling interests:
Noncontrolling interests in Operating Partnership	34,573			35,066
Noncontrolling interests in other consolidated partnerships	159			159
Total equity	698,003			705,441
Total liabilities and equity	$	2,539,770		$	2,526,214

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

TANGER FACTORY OUTLET CENTERS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except share data, unaudited)



	Three months ended March 31,
	2017			2016
Revenues:
Base rentals	$	80,330		$	72,623
Percentage rentals	1,855			2,150
Expense reimbursements	36,598			33,242
Management, leasing and other services	579			1,121
Other income	2,006			1,669
Total revenues	121,368			110,805
Expenses:
Property operating	40,387			37,874
General and administrative	11,412			11,565
Abandoned pre-development costs	627			—
Depreciation and amortization	31,294			26,567
Total expenses	83,720			76,006
Operating income	37,648			34,799
Other income (expense):
Interest expense	(16,487		)	(14,884		)
Gain on sale of assets	—			4,887
Other non-operating income (expense)	35			316
Income before equity in earnings of unconsolidated joint ventures	21,196			25,118
Equity in earnings of unconsolidated joint ventures	2,318			3,499
Net income	23,514			28,617
Noncontrolling interests in Operating Partnership	(1,178		)	(1,444		)
Noncontrolling interests in other consolidated partnerships	—			(23		)
Net income attributable to Tanger Factory Outlet Centers, Inc.	$	22,336		$	27,150

Basic earnings per common share:
Net income	$	0.23		$	0.28
Diluted earnings per common share:
Net income	$	0.23		$	0.28

Dividends declared per common share	$	0.325		$	0.285

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

TANGER FACTORY OUTLET CENTERS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(In thousands, unaudited)



	Three months ended March 31,
	2017			2016
Net income	$	23,514		$	28,617
Other comprehensive income:
Foreign currency translation adjustments	1,010			8,654
Change in fair value of cash flow hedges	722			(1,386		)
Other comprehensive income	1,732			7,268
Comprehensive income	25,246			35,885
Comprehensive income attributable to noncontrolling interests	(1,247		)	(1,834		)
Comprehensive income attributable to Tanger Factory Outlet Centers, Inc.	$	23,999		$	34,051

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

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			Equity attributable to Tanger Factory Outlet Centers, Inc.			Noncontrolling interests in Operating Partnership			Noncontrolling interests in other consolidated partnerships			Total equity
Balance, December 31, 2015	$	959		$	806,379		$	(195,486	)	$	(36,715	)	$	575,137		$	30,309		$	586		$	606,032
Net income	—			—			27,150			—			27,150			1,444			23			28,617
Other comprehensive income	—			—			—			6,901			6,901			367			—			7,268
Compensation under Incentive Award Plan	—			4,230			—			—			4,230			—			—			4,230
Issuance of 4,500 common shares upon exercise of options	—			123			—			—			123			—			—			123
Issuance of 277,524 restricted common share awards	3			(3		)	—			—			—			—			—			—
Issuance of 24,040 deferred shares	—			—			—			—			—			—			—			—
Withholding of 60,382 common shares for employee income taxes	(1		)	(1,920		)	—			—			(1,921		)	—			—			(1,921		)
Adjustment for noncontrolling interests in Operating Partnership	—			(31		)	—			—			(31		)	31			—			—
Adjustment for noncontrolling interests in other consolidated partnerships	—			1			—			—			1			—			(1		)	—
Common dividends ($.285 per share)	—			—			(27,318		)	—			(27,318		)	—			—			(27,318		)
Distributions to noncontrolling interests	—			—			—			—			—			(1,440		)	(19		)	(1,459		)
Balance, March 31, 2016	$	961		$	808,779		$	(195,654	)	$	(29,814	)	$	584,272		$	30,711		$	589		$	615,572

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




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			Equity attributable to Tanger Factory Outlet Centers, Inc.			Noncontrolling interests in Operating Partnership			Noncontrolling interests in other consolidated partnerships		Total equity
Balance, December 31, 2016	$	961	$	820,251		$	(122,701	)	$	(28,295	)	$	670,216		$	35,066		$	159	$	705,441
Net income	—		—			22,336			—			22,336			1,178			—		23,514
Other comprehensive income	—		—			—			1,663			1,663			69			—		1,732
Compensation under Incentive Award Plan	—		3,537			—			—			3,537			—			—		3,537
Issuance of 1,800 common shares upon exercise of options	—		54			—			—			54			—			—		54
Grant of 428,312 restricted common share awards	4		(4		)	—			—			—			—			—		—
Withholding of 69,886 common shares for employee income taxes	—		(2,435		)	—			—			(2,435		)	—			—		(2,435		)
Adjustment for noncontrolling interests in Operating Partnership	—		106			—			—			106			(106		)	—		—
Common dividends ($.325 per share)	—		—			(32,206		)	—			(32,206		)	—			—		(32,206		)
Distributions to noncontrolling interests	—		—			—			—			—			(1,634		)	—		(1,634		)
Balance, March 31, 2017	$	965	$	821,509		$	(132,571	)	$	(26,632	)	$	663,271		$	34,573		$	159	$	698,003

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

TANGER FACTORY OUTLET CENTERS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands, unaudited)



	Three months ended March 31,
	2017			2016
OPERATING ACTIVITIES
Net income	$	23,514		$	28,617
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	31,294			26,567
Amortization of deferred financing costs	878			744
Gain on sale of assets and interests in unconsolidated entities	—			(4,887		)
Equity in earnings of unconsolidated joint ventures	(2,318		)	(3,499		)
Share-based compensation expense	3,292			4,001
Amortization of debt (premiums) and discounts, net	125			959
Amortization (accretion) of market rent rate adjustments, net	722			664
Straight-line rent adjustments	(1,705		)	(1,607		)
Distributions of cumulative earnings from unconsolidated joint ventures	2,473			2,709
Changes in other assets and liabilities:
Other assets	(909		)	732
Accounts payable and accrued expenses	(761		)	(969		)
Net cash provided by operating activities	56,605			54,031
INVESTING ACTIVITIES
Additions to rental property	(35,527		)	(34,896		)
Additions to investments in unconsolidated joint ventures	(1,371		)	(12,161		)
Net proceeds on sale of assets	—			25,785
Change in restricted cash	—			121,306
Additions to non-real estate assets	(6,949		)	(2,144		)
Distributions in excess of cumulative earnings from unconsolidated joint ventures	3,313			4,394
Additions to deferred lease costs	(1,430		)	(1,520		)
Other investing activities	2,833			72
Net cash provided by (used in) investing activities	(39,131		)	100,836
FINANCING ACTIVITIES
Cash dividends paid	(32,206		)	(47,447		)
Distributions to noncontrolling interests in Operating Partnership	(1,634		)	(2,501		)
Proceeds from revolving credit facility	128,855			320,450
Repayments of revolving credit facility	(117,500		)	(247,050		)
Proceeds from notes, mortgages and loans	—			6,892
Repayments of notes, mortgages and loans	(736		)	(158,196		)
Repayment of deferred financing obligation	—			(28,388		)
Employee income taxes paid related to shares withheld upon vesting of equity awards	(2,435		)	(1,921		)
Distributions to noncontrolling interests in other consolidated partnerships	—			(19		)
Additions to deferred financing costs	(50		)	(82		)
Proceeds from exercise of options	54			123
Other financing activities	3,179			—
Net cash used in financing activities	(22,473		)	(158,139		)
Effect of foreign currency rate changes on cash and cash equivalents	2			591
Net decrease in cash and cash equivalents	(4,997		)	(2,681		)
Cash and cash equivalents, beginning of period	12,222			21,558
Cash and cash equivalents, end of period	$	7,225		$	18,877

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

Item 1 - Financial Statements of Tanger Properties Limited Partnership

TANGER PROPERTIES LIMITED PARTNERSHIP AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(In thousands, except unit data, unaudited)



	March 31, 2017			December 31, 2016
Assets
Rental property:
Land	$	272,153		$	272,153
Buildings, improvements and fixtures	2,667,087			2,647,477
Construction in progress	65,461			46,277
	3,004,701			2,965,907
Accumulated depreciation	(839,843		)	(814,583		)
Total rental property, net	2,164,858			2,151,324
Cash and cash equivalents	7,160			12,199
Investments in unconsolidated joint ventures	127,901			128,104
Deferred lease costs and other intangibles, net	146,965			151,579
Prepaids and other assets	92,277			82,481
Total assets	$	2,539,161		$	2,525,687
Liabilities and Equity
Liabilities
Debt:
Senior, unsecured notes, net	$	1,135,806		$	1,135,309
Unsecured term loans, net	322,575			322,410
Mortgages payable, net	171,458			172,145
Unsecured lines of credit, net	69,622			58,002
Total debt	1,699,461			1,687,866
Accounts payable and accrued expenses	82,163			77,616
Other liabilities	59,534			54,764
Total liabilities	1,841,158			1,820,246
Commitments and contingencies
Equity
Partners' Equity:
General partner, 1,000,000 units outstanding at March 31, 2017 and December 31, 2016	6,393			6,485
Limited partners, 5,027,781 and 5,027,781 Class A common units, and 95,456,117 and 95,095,891 Class B common units outstanding at March 31, 2017 and December 31, 2016, respectively	719,553			728,631
Accumulated other comprehensive loss	(28,102		)	(29,834		)
Total partners' equity	697,844			705,282
Noncontrolling interests in consolidated partnerships	159			159
Total equity	698,003			705,441
Total liabilities and equity	$	2,539,161		$	2,525,687

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

TANGER PROPERTIES LIMITED PARTNERSHIP AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per unit data, unaudited)



	Three months ended March 31,
	2017			2016
Revenues:
Base rentals	$	80,330		$	72,623
Percentage rentals	1,855			2,150
Expense reimbursements	36,598			33,242
Management, leasing and other services	579			1,121
Other income	2,006			1,669
Total revenues	121,368			110,805
Expenses:
Property operating	40,387			37,874
General and administrative	11,412			11,565
Abandoned pre-development costs	627			—
Depreciation and amortization	31,294			26,567
Total expenses	83,720			76,006
Operating income	37,648			34,799
Other income (expense):
Interest expense	(16,487		)	(14,884		)
Gain on sale of assets	—			4,887
Other non-operating income (expense)	35			316
Income before equity in earnings of unconsolidated joint ventures	21,196			25,118
Equity in earnings of unconsolidated joint ventures	2,318			3,499
Net income	23,514			28,617
Noncontrolling interests in consolidated partnerships	—			(23		)
Net income available to partners	23,514			28,594
Net income available to limited partners	23,281			28,311
Net income available to general partner	$	233		$	283

Basic earnings per common unit:
Net income	$	0.23		$	0.28
Diluted earnings per common unit:
Net income	$	0.23		$	0.28

Distribution declared per common unit	$	0.325		$	0.285

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

TANGER PROPERTIES LIMITED PARTNERSHIP AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(In thousands, unaudited)



	Three months ended March 31,
	2017		2016
Net income	$	23,514	$	28,617
Other comprehensive income:
Foreign currency translation adjustments	1,010		8,654
Changes in fair value of cash flow hedges	722		(1,386		)
Other comprehensive income	1,732		7,268
Comprehensive income	25,246		35,885
Comprehensive income attributable to noncontrolling interests in consolidated partnerships	—		(23		)
Comprehensive income attributable to the Operating Partnership	$	25,246	$	35,862

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

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, 2015	$	5,726		$	638,422		$	(38,702	)	$	605,446		$	586		$	606,032
Net income	283			28,311			—			28,594			23			28,617
Other comprehensive income	—			—			7,268			7,268			—			7,268
Compensation under Incentive Award Plan	—			4,230			—			4,230			—			4,230
Issuance of 4,500 common units upon exercise of options	—			123			—			123			—			123
Grant of 277,524 restricted common share awards by the Company	—			—			—			—			—			—
Issuance of 24,040 deferred units	—			—			—			—			—			—
Withholding of 60,382 common units for employee income taxes	—			(1,921		)	—			(1,921		)	—			(1,921		)
Adjustments for noncontrolling interests in consolidated partnerships	—			1			—			1			(1		)	—
Common distributions ($.285 per common unit)	(285		)	(28,473		)	—			(28,758		)	—			(28,758		)
Distributions to noncontrolling interests	—			—			—			—			(19		)	(19		)
Balance, March 31, 2016	$	5,724		$	640,693		$	(31,434	)	$	614,983		$	589		$	615,572

	General partner			Limited partners			Accumulated other comprehensive loss			Total partners' equity			Noncontrolling interests in consolidated partnerships			Total equity
Balance, December 31, 2016	$	6,485		$	728,631		$	(29,834	)	$	705,282		$	159		$	705,441
Net income	233			23,281			—			23,514			—			23,514
Other comprehensive income	—			—			1,732			1,732			—			1,732
Compensation under Incentive Award Plan	—			3,537			—			3,537			—			3,537
Issuance of 1,800 common units upon exercise of options	—			54			—			54			—			54
Grant of 428,312 restricted common share awards by the Company	—			—			—			—			—			—
Withholding of 69,886 common units for employee income taxes	—			(2,435		)	—			(2,435		)	—			(2,435		)
Common distributions ($.325 per common unit)	(325		)	(33,515		)	—			(33,840		)	—			(33,840		)
Balance, March 31, 2017	$	6,393		$	719,553		$	(28,102	)	$	697,844		$	159		$	698,003

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

TANGER PROPERTIES LIMITED PARTNERSHIP AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands, unaudited)



	Three months ended March 31,
	2017			2016
OPERATING ACTIVITIES
Net income	$	23,514		$	28,617
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	31,294			26,567
Amortization of deferred financing costs	878			744
Gain on sale of assets and interests in unconsolidated entities	—			(4,887		)
Equity in earnings of unconsolidated joint ventures	(2,318		)	(3,499		)
Equity-based compensation expense	3,292			4,001
Amortization of debt (premiums) and discounts, net	125			959
Amortization (accretion) of market rent rate adjustments, net	722			664
Straight-line rent adjustments	(1,705		)	(1,607		)
Distributions of cumulative earnings from unconsolidated joint ventures	2,473			2,709
Changes in other assets and liabilities:
Other assets	(869		)	301
Accounts payable and accrued expenses	(843		)	(579		)
Net cash provided by operating activities	56,563			53,990
INVESTING ACTIVITIES
Additions to rental property	(35,527		)	(34,896		)
Additions to investments in unconsolidated joint ventures	(1,371		)	(12,161		)
Net proceeds on sale of assets	—			25,785
Change in restricted cash	—			121,306
Additions to non-real estate assets	(6,949		)	(2,144		)
Distributions in excess of cumulative earnings from unconsolidated joint ventures	3,313			4,394
Additions to deferred lease costs	(1,430		)	(1,520		)
Other investing activities	2,833			72
Net cash provided by (used in) investing activities	(39,131		)	100,836
FINANCING ACTIVITIES
Cash distributions paid	(33,840		)	(49,948		)
Proceeds from revolving credit facility	128,855			320,450
Repayments of revolving credit facility	(117,500		)	(247,050		)
Proceeds from notes, mortgages and loans	—			6,892
Repayments of notes, mortgages and loans	(736		)	(158,196		)
Repayment of deferred financing obligation	—			(28,388		)
Employee income taxes paid related to shares withheld upon vesting of equity awards	(2,435		)	(1,921		)
Distributions to noncontrolling interests in consolidated partnerships	—			(19		)
Additions to deferred financing costs	(50		)	(82		)
Proceeds from exercise of options	54			123
Other financing activities	3,179			—
Net cash used in financing activities	(22,473		)	(158,139		)
Effect of foreign currency on cash and cash equivalents	2			591
Net decrease in cash and cash equivalents	(5,039		)	(2,722		)
Cash and cash equivalents, beginning of period	12,199			21,552
Cash and cash equivalents, end of period	$	7,160		$	18,830

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

TANGER FACTORY OUTLET CENTERS, INC. AND SUBSIDIARIES

TANGER PROPERTIES LIMITED PARTNERSHIP AND SUBSIDIARIES

CONDENSED 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 March 31, 2017, we owned and operated 36 consolidated outlet centers, with a total gross leasable area of approximately 12.7 million square feet. We also had partial ownership interests in 8 unconsolidated outlet centers totaling approximately 2.4 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 is the sole general partner of the Operating Partnership. Tanger LP Trust holds a limited partnership interest. As of March 31, 2017, the Company, through its ownership of Tanger GP Trust and Tanger LP Trust, owned 96,456,117 units of the Operating Partnership and other limited partners (the "Non-Company LPs") collectively owned 5,027,781 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, 2016. The December 31, 2016 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.

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 joint 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 because we are committed to provide further financial support to these joint ventures. 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.

"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.

3. Developments of Consolidated Outlet Centers

The table below sets forth our consolidated outlet centers under development as of March 31, 2017:



Project	Approximate square feet (in 000's)	Costs Incurred to Date (in millions)		Projected Opening
New development:
Fort Worth	352	$	35.9	October 2017

Expansion:
Lancaster	123	23.6		September 2017

Total	475	$	59.5

Fort Worth

In September 2016, we purchased land in the greater Fort Worth, Texas area for approximately $11.2 million and began construction immediately on the development of a wholly-owned outlet center. The outlet center will be located within the 279-acre Champions Circle mixed-use development adjacent to Texas Motor Speedway.

Lancaster Expansion

In July 2016, we commenced construction on a 123,000 square foot expansion of our outlet center in Lancaster, Pennsylvania.

Interest Costs Capitalized

Interest costs capitalized for development activities, including development in our unconsolidated joint ventures, was $492,000 and $482,000 for the three months ended March 31, 2017 and 2016, respectively.

4. 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 March 31, 2017
Joint Venture	Outlet Center Location	Ownership %		Square Feet (in 000's)	Carrying Value of Investment (in millions)			Total Joint Venture Debt, Net (in millions)⁽¹⁾
Columbus	Columbus, OH	50.0	%	355	$	6.6		$	84.2
National Harbor	National Harbor, MD	50.0	%	341	3.2			86.2
RioCan Canada	Various	50.0	%	926	118.1			11.0
					$	127.9		$	181.4

Charlotte⁽²⁾	Charlotte, NC	50.0	%	398	$	(2.6	)	$	89.8
Galveston/Houston ⁽²⁾	Texas City, TX	50.0	%	353	(4.5		)	64.9
					$	(7.1	)	$	154.7



As of December 31, 2016
Joint Venture	Outlet Center Location	Ownership %		Square Feet (in 000's)	Carrying Value of Investment (in millions)			Total Joint Venture Debt, Net (in millions)⁽¹⁾
Columbus	Columbus, OH	50.0	%	355	$	6.7		$	84.2
National Harbor	National Harbor, MD	50.0	%	341	4.1			86.1
RioCan Canada	Various	50.0	%	901	117.3			11.1
					$	128.1		$	181.4

Charlotte⁽²⁾	Charlotte, NC	50.0	%	398	$	(2.5	)	$	89.7
Galveston/Houston⁽²⁾	Texas City, TX	50.0	%	353	(3.8		)	64.9
					$	(6.3	)	$	154.6


(1)	Net of debt origination costs and including premiums of $1.5 million and $1.6 million as of March 31, 2017 and December 31, 2016, respectively.


(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.

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
	March 31,
	2017		2016
Fee:
Management and marketing	$	542	$	747
Development and leasing	32		192
Loan guarantee	5		182
Total Fees	$	579	$	1,121

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 $3.6 million and $3.7 million as of March 31, 2017 and December 31, 2016, respectively) are amortized over the various useful lives of the related assets.

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	March 31, 2017			December 31, 2016
Assets
Land	$	89,517		$	88,015
Buildings, improvements and fixtures	512,294			503,548
Construction in progress, including land under development	7,218			13,037
	609,029			604,600
Accumulated depreciation	(73,431		)	(67,431		)
Total rental property, net	535,598			537,169
Cash and cash equivalents	20,609			27,271
Deferred lease costs, net	12,612			13,612
Prepaids and other assets	13,832			12,567
Total assets	$	582,651		$	590,619
Liabilities and Owners' Equity
Mortgages payable, net	$	336,066		$	335,971
Accounts payable and other liabilities	14,113			20,011
Total liabilities	350,179			355,982
Owners' equity	232,472			234,637
Total liabilities and owners' equity	$	582,651		$	590,619



	Three months ended
Condensed Combined Statements of Operations ⁽¹⁾	March 31,
- Unconsolidated Joint Ventures	2017			2016
Revenues	$	24,062		$	27,698
Expenses:
Property operating	9,378			10,318
General and administrative	120			117
Depreciation and amortization	7,513			8,799
Total expenses	17,011			19,234
Operating income	7,051			8,464
Interest expense	(2,260		)	(2,554		)
Other non-operating income	2			1
Net income	$	4,793		$	5,911

The Company and Operating Partnership's share of:
Net income	$	2,318		$	3,499
Depreciation and amortization expense (real estate related)	$	3,838		$	5,339


(1)	The three months ended March 31, 2017 includes results from the Columbus outlet center, which opened in June 2016. The three months ended March 31, 2016 includes results from our Westgate and Savannah outlet centers, which were previously held in unconsolidated joint ventures prior to acquiring our partners' interest in each venture in June 2016 and August 2016, respectively.

5. Debt Guaranteed by the Company

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

The Company guarantees the Operating Partnership's obligations with respect to its unsecured lines of credit which have a total borrowing capacity of $520.0 million. The Company also guarantees the Operating Partnership's unsecured term loan.

The Operating Partnership had the following principal amounts outstanding on the debt guaranteed by the Company (in thousands):



	March 31, 2017		December 31, 2016
Unsecured lines of credit	$	72,350	$	61,000
Unsecured term loan	$	325,000	$	325,000

6. Debt of the Operating Partnership

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



				As of				As of
				March 31, 2017				December 31, 2016
	Stated Interest Rate(s)		Maturity Date	Principal		Book Value⁽¹⁾		Principal		Book Value⁽¹⁾
Senior, unsecured notes:
Senior notes	6.125	%	June 2020	$	300,000	$	298,351	$	300,000	$	298,226
Senior notes	3.875	%	December 2023	250,000		245,577		250,000		245,425
Senior notes	3.750	%	December 2024	250,000		247,145		250,000		247,058
Senior notes	3.125	%	September 2026	350,000		344,733		350,000		344,600

Mortgages payable:
Atlantic City ⁽²⁾	5.14%-7.65%		November 2021- December 2026	39,733		42,449		40,471		43,286
Foxwoods	LIBOR + 1.55%		December 2017	70,250		69,993		70,250		69,902
Southaven	LIBOR + 1.75%		April 2018	59,277		59,016		59,277		58,957
Unsecured term loan	LIBOR + 0.95%		April 2021	325,000		322,575		325,000		322,410
Unsecured lines of credit	LIBOR + 0.90%		October 2019	72,350		69,622		61,000		58,002
				$	1,716,610	$	1,699,461	$	1,705,998	$	1,687,866


(1)	Including premiums and net of debt discount and debt origination costs.


(2)	The effective interest rate assigned during the purchase price allocation to the Atlantic City mortgages assumed during the acquisition in 2011 was 5.05%.

Certain of our properties, which had a net book value of approximately $323.1 million at March 31, 2017, serve as collateral for mortgages payable. We maintain unsecured lines of credit that provide for borrowings of up to $520.0 million. The unsecured lines of credit include a $20.0 million liquidity line and a $500.0 million syndicated line. The syndicated line may be increased up to $1.0 billion through an accordion feature in certain circumstances. As of March 31, 2017, letters of credit totaling approximately $6.3 million were issued under the lines of credit.

We provide guarantees to lenders for our joint ventures which include standard non-recourse carve out indemnifications for losses arising from items such as but not limited to fraud, physical waste, payment of taxes, environmental indemnities, misapplication of insurance proceeds or security deposits and failure to maintain required insurance. For construction and term loans, we may include a guaranty of completion as well as a principal guaranty ranging from 5% to 100% of principal. The principal guarantees include terms for release or reduction based upon satisfactory completion of construction and performance targets including occupancy thresholds and minimum debt service coverage tests. As of March 31, 2017, the maximum amount of joint venture debt guaranteed by the Company was $28.0 million.

The unsecured lines of credit and senior unsecured notes include covenants that require the maintenance of certain ratios, including debt service coverage and leverage, and limit the payment of dividends such that dividends and distributions will not exceed funds from operations, as defined in the agreements, for the prior fiscal year on an annual basis or 95% of funds from operations on a cumulative basis. As of March 31, 2017, we were in compliance with all of our debt covenants.

Debt Maturities

Maturities of the existing long-term debt as of March 31, 2017 for the next five years and thereafter are as follows (in thousands):



Calendar Year	Amount
2017	$	72,520
2018	62,460
2019	75,719
2020	303,566
2021	330,793
Thereafter	871,552
Subtotal	1,716,610
Net discount and debt origination costs	(17,149		)
Total	$	1,699,461

7. Derivative Financial Instruments

The following table summarizes the terms and fair values of our derivative financial instruments, as well as their classifications within the consolidated balance sheets (notional amounts and fair values in thousands):



							Fair Value
Effective Date	Maturity Date	Notional Amount		Bank Pay Rate	Company Fixed Pay Rate		March 31, 2017		December 31, 2016
Assets (Liabilities):
November 14, 2013	August 14, 2018	$	50,000	1 month LIBOR	1.3075	%	$	5	$	(119	)
November 14, 2013	August 14, 2018	50,000		1 month LIBOR	1.2970	%	12		(110		)
November 14, 2013	August 14, 2018	50,000		1 month LIBOR	1.3025	%	9		(115		)
April 13, 2016	January 1, 2021	50,000		1 month LIBOR	1.0390	%	1,328		1,227
April 13, 2016	January 1, 2021	50,000		1 month LIBOR	1.0395	%	1,327		1,226
April 13, 2016	January 1, 2021	50,000		1 month LIBOR	1.0400	%	1,327		1,222
April 13, 2016	January 1, 2021	25,000		1 month LIBOR	0.9915	%	708		662
Total		$	325,000				$	4,716	$	3,993

The derivative financial instruments are comprised of interest rate swaps, which are designated and qualify as cash flow hedges, each with a separate counterparty. We do not use derivatives for trading or speculative purposes and currently do not have any derivatives that are not designated as hedges.

The effective portion of changes in the fair value of derivatives designated and qualifying as cash flow hedges is recorded in accumulated other comprehensive loss and subsequently reclassified into earnings in the period that the hedged forecasted transaction affects earnings. The ineffective portion of the change in fair value of the derivative, if significant, is recognized directly in earnings. For the three months ended March 31, 2017 and 2016, the ineffective portion was not significant.

The following table represents the effect of the derivative financial instruments on the accompanying consolidated financial statements (in thousands):



	Three months ended March 31,
	2017		2016
Interest Rate Swaps (Effective Portion):
Amount of gain (loss) recognized in OCI on derivative	$	722	$	(1,386	)

8. Fair Value Measurements

Fair value guidance establishes a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value. These tiers are defined as follows:



Tier		Description
Level 1		Observable inputs such as quoted prices in active markets
Level 2		Inputs other than quoted prices in active markets that are either directly or indirectly observable
Level 3		Unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions

The following table sets forth our assets and liabilities that are measured at fair value within the fair value hierarchy (in thousands):



			Level 1		Level 2		Level 3
			Quoted Prices in Active Markets for Identical Assets or Liabilities		Significant Observable Inputs		Significant Unobservable Inputs
	Total				Significant Observable Inputs		Significant Unobservable Inputs
Fair value as of March 31, 2017:
Asset:
Interest rate swaps (prepaids and other assets)	$	4,716	$	—	$	4,716	$	—
Total assets	$	4,716	$	—	$	4,716	$	—



			Level 1		Level 2		Level 3
			Quoted Prices in Active Markets for Identical Assets or Liabilities		Significant Observable Inputs		Significant Unobservable Inputs
	Total				Significant Observable Inputs		Significant Unobservable Inputs
Fair value as of December 31, 2016:
Asset:
Interest rate swaps (prepaids and other assets)	$	3,993	$	—	$	3,993	$	—
Total assets	$	3,993	$	—	$	3,993	$	—

Fair values of interest rate swaps are approximated using Level 2 inputs based on current market data received from financial sources that trade such instruments and are based on prevailing market data and derived from third party proprietary models based on well recognized financial principles including counterparty risks, credit spreads and interest rate projections, as well as reasonable estimates about relevant future market conditions.

The estimated fair value within the fair value hierarchy and recorded value of our debt consisting of senior unsecured notes, unsecured term loans, secured mortgages and unsecured lines of credit were as follows (in thousands):



	March 31, 2017		December 31, 2016
Level 1 Quoted Prices in Active Markets for Identical Assets or Liabilities	$	—	$	—
Level 2 Significant Observable Inputs	1,134,037		1,137,976
Level 3 Significant Unobservable Inputs	574,717		566,668
Total fair value of debt	$	1,708,754	$	1,704,644
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