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 June 30, 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 July 31, 2017, there were 94,958,136 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 June 30, 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 June 30, 2017, the Company, through its ownership of Tanger GP Trust and Tanger LP Trust, owned 94,958,136 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 June 30, 2017 and December 31, 2016	7
Consolidated Statements of Operations - for the three and six months ended June 30, 2017 and 2016	8
Consolidated Statements of Comprehensive Income - for the three and six months ended June 30, 2017 and 2016	9
Consolidated Statements of Shareholders' Equity - for the six months ended June 30, 2017 and 2016	10
Consolidated Statements of Cash Flows - for the six months ended June 30, 2017 and 2016	12

FINANCIAL STATEMENTS OF TANGER PROPERTIES LIMITED PARTNERSHIP (Unaudited)
Consolidated Balance Sheets - as of June 30, 2017 and December 31, 2016	13
Consolidated Statements of Operations - for the three and six months ended June 30, 2017 and 2016	14
Consolidated Statements of Comprehensive Income - for the three and six months ended June 30, 2017 and 2016	15
Consolidated Statements of Equity - for the six months ended June 30, 2017 and 2016	16
Consolidated Statements of Cash Flows - for the six months ended June 30, 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	39

Item 3. Quantitative and Qualitative Disclosures about Market Risk	63

Item 4. Controls and Procedures (Tanger Factory Outlet Centers, Inc. and Tanger Properties Limited Partnership)	64

Part II. Other Information

Item 1. Legal Proceedings	65

Item 1A. Risk Factors	65

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	65

Item 4. Mine Safety Disclosure	65

Item 6. Exhibits	66

Signatures	67

PART I. - FINANCIAL INFORMATION

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

TANGER FACTORY OUTLET CENTERS, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(In thousands, except share data, unaudited)



	June 30, 2017			December 31, 2016
Assets
Rental property:
Land	$	262,166		$	272,153
Buildings, improvements and fixtures	2,651,419			2,647,477
Construction in progress	94,490			46,277
	3,008,075			2,965,907
Accumulated depreciation	(849,652		)	(814,583		)
Total rental property, net	2,158,423			2,151,324
Cash and cash equivalents	8,362			12,222
Investments in unconsolidated joint ventures	131,172			128,104
Deferred lease costs and other intangibles, net	139,675			151,579
Prepaids and other assets	91,861			82,985
Total assets	$	2,529,493		$	2,526,214
Liabilities and Equity
Liabilities
Debt:
Senior, unsecured notes, net	$	1,136,296		$	1,135,309
Unsecured term loan, net	322,793			322,410
Mortgages payable, net	171,215			172,145
Unsecured lines of credit, net	98,698			58,002
Total debt	1,729,002			1,687,866
Accounts payable and accrued expenses	71,383			78,143
Other liabilities	67,979			54,764
Total liabilities	1,868,364			1,820,773
Commitments and contingencies
Equity
Tanger Factory Outlet Centers, Inc.:
Common shares, $.01 par value, 300,000,000 shares authorized, 94,958,136 and 96,095,891 shares issued and outstanding at June 30, 2017 and December 31, 2016, respectively	950			961
Paid in capital	787,255			820,251
Accumulated distributions in excess of net income	(136,225		)	(122,701		)
Accumulated other comprehensive loss	(24,247		)	(28,295		)
Equity attributable to Tanger Factory Outlet Centers, Inc.	627,733			670,216
Equity attributable to noncontrolling interests:
Noncontrolling interests in Operating Partnership	33,237			35,066
Noncontrolling interests in other consolidated partnerships	159			159
Total equity	661,129			705,441
Total liabilities and equity	$	2,529,493		$	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 June 30,						Six months ended June 30,
	2017			2016			2017			2016
Revenues:
Base rentals	$	80,788		$	75,003		$	161,118		$	147,626
Percentage rentals	1,805			2,326			3,660			4,476
Expense reimbursements	34,023			30,754			70,621			63,996
Management, leasing and other services	609			1,332			1,188			2,453
Other income	2,389			1,918			4,395			3,587
Total revenues	119,614			111,333			240,982			222,138
Expenses:
Property operating	37,116			35,012			77,503			72,886
General and administrative	11,500			11,675			22,912			23,240
Abandoned pre-development costs	—			—			627			—
Depreciation and amortization	32,905			26,306			64,199			52,873
Total expenses	81,521			72,993			165,241			148,999
Operating income	38,093			38,340			75,741			73,139
Other income (expense):
Interest expense	(16,520		)	(13,800		)	(33,007		)	(28,684		)
Gain on sale of assets	6,943			—			6,943			4,887
Gain on previously held interest in acquired joint venture	—			49,258			—			49,258
Other non-operating income (expense)	57			38			92			354
Income before equity in earnings of unconsolidated joint ventures	28,573			73,836			49,769			98,954
Equity in earnings of unconsolidated joint ventures	2,374			3,466			4,692			6,965
Net income	30,947			77,302			54,461			105,919
Noncontrolling interests in Operating Partnership	(1,557		)	(3,897		)	(2,735		)	(5,341		)
Noncontrolling interests in other consolidated partnerships	—			12			—			(11		)
Net income attributable to Tanger Factory Outlet Centers, Inc.	$	29,390		$	73,417		$	51,726		$	100,567

Basic earnings per common share:
Net income	$	0.31		$	0.76		$	0.54		$	1.05
Diluted earnings per common share:
Net income	$	0.31		$	0.76		$	0.54		$	1.04

Dividends declared per common share	$	0.3425		$	0.3250		$	0.6675		$	0.6100

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 June 30,						Six months ended June 30,
	2017			2016			2017			2016
Net income	$	30,947		$	77,302		$	54,461		$	105,919
Other comprehensive income:
Foreign currency translation adjustments	3,074			47			4,084			8,701
Change in fair value of cash flow hedges	(544		)	(2,443		)	178			(3,829		)
Other comprehensive income (loss)	2,530			(2,396		)	4,262			4,872
Comprehensive income	33,477			74,906			58,723			110,791
Comprehensive income attributable to noncontrolling interests	(1,702		)	(3,765		)	(2,949		)	(5,599		)
Comprehensive income attributable to Tanger Factory Outlet Centers, Inc.	$	31,775		$	71,141		$	55,774		$	105,192

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	—			—			100,567			—			100,567			5,341			11			105,919
Other comprehensive income	—			—			—			4,625			4,625			247			—			4,872
Compensation under Incentive Award Plan	—			8,152			—			—			8,152			—			—			8,152
Issuance of 35,300 common shares upon exercise of options	—			1,041			—			—			1,041			—			—			1,041
Grant of 173,124 restricted common share awards, net of forfeitures	2			(2		)	—			—			—			—			—			—
Issuance of 24,040 deferred shares	—			—			—			—			—			—			—			—
Withholding of 60,382 common shares for employee income taxes	(1		)	(1,920		)	—			—			(1,921		)	—			—			(1,921		)
Contributions from noncontrolling interests	—			—			—			—			—			—			35			35
Adjustment for noncontrolling interests in Operating Partnership	—			(182		)	—			—			(182		)	182			—			—
Adjustment for noncontrolling interests in other consolidated partnerships	—			2			—			—			2			—			(2		)	—
Acquisition of noncontrolling interest in other consolidated partnership	—			(1,617		)	—			—			(1,617		)	—			(325		)	(1,942		)
Common dividends ($.61 per share)	—			—			(58,546		)	—			(58,546		)	—			—			(58,546		)
Distributions to noncontrolling interests	—			—			—			—			—			(3,083		)	(145		)	(3,228		)
Balance, June 30, 2016	$	960		$	811,853		$	(153,465	)	$	(32,090	)	$	627,258		$	32,996		$	160		$	660,414

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	—			—			51,726			—			51,726			2,735			—		54,461
Other comprehensive income	—			—			—			4,048			4,048			214			—		4,262
Compensation under Incentive Award Plan	—			7,306			—			—			7,306			—			—		7,306
Issuance of 1,800 common shares upon exercise of options	—			54			—			—			54			—			—		54
Grant of 428,312 restricted common share awards	4			(4		)	—			—			—			—			—		—
Repurchase of 1,497,981 common shares, including transaction costs	(15		)	(39,339		)	—			—			(39,354		)	—			—		(39,354		)
Withholding of 69,886 common shares for employee income taxes	—			(2,435		)	—			—			(2,435		)	—			—		(2,435		)
Adjustment for noncontrolling interests in Operating Partnership	—			1,422			—			—			1,422			(1,422		)	—		—
Common dividends ($.6675 per share)	—			—			(65,250		)	—			(65,250		)	—			—		(65,250		)
Distributions to noncontrolling interests	—			—			—			—			—			(3,356		)	—		(3,356		)
Balance, June 30, 2017	$	950		$	787,255		$	(136,225	)	$	(24,247	)	$	627,733		$	33,237		$	159	$	661,129

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)



	Six months ended June 30,
	2017			2016
OPERATING ACTIVITIES
Net income	$	54,461		$	105,919
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	64,199			52,873
Amortization of deferred financing costs	1,749			1,505
Gain on sale of assets	(6,943		)	(4,887		)
Gain on previously held interest in acquired joint venture	—			(49,258		)
Equity in earnings of unconsolidated joint ventures	(4,692		)	(6,965		)
Equity-based compensation expense	6,796			7,655
Amortization of debt (premiums) and discounts, net	245			1,075
Amortization (accretion) of market rent rate adjustments, net	1,691			1,303
Straight-line rent adjustments	(3,293		)	(3,321		)
Distributions of cumulative earnings from unconsolidated joint ventures	4,952			7,468
Changes in other assets and liabilities:
Other assets	787			(1,011		)
Accounts payable and accrued expenses	(9,198		)	(7,335		)
Net cash provided by operating activities	110,754			105,021
INVESTING ACTIVITIES
Additions to rental property	(88,761		)	(68,582		)
Acquisitions of interests in unconsolidated joint ventures, net of cash acquired	—			(34,187		)
Additions to investments in unconsolidated joint ventures	(3,617		)	(19,363		)
Net proceeds on sale of assets	39,213			25,785
Change in restricted cash	—			121,306
Additions to non-real estate assets	(7,959		)	(2,379		)
Distributions in excess of cumulative earnings from unconsolidated joint ventures	6,330			7,874
Additions to deferred lease costs	(2,845		)	(2,919		)
Other investing activities	2,591			(1,676		)
Net cash provided by (used in) investing activities	(55,048		)	25,859
FINANCING ACTIVITIES
Cash dividends paid	(65,250		)	(78,675		)
Distributions to noncontrolling interests in Operating Partnership	(3,356		)	(4,144		)
Proceeds from revolving credit facility	326,254			509,550
Repayments of revolving credit facility	(286,127		)	(440,650		)
Proceeds from notes, mortgages and loans	454			88,165
Repayments of notes, mortgages and loans	(1,483		)	(168,901		)
Repayment of deferred financing obligation	—			(28,388		)
Repurchase of common shares, including transaction costs	(39,354		)	—
Employee income taxes paid related to shares withheld upon vesting of equity awards	(2,435		)	(1,921		)
Additions to deferred financing costs	(50		)	(1,883		)
Proceeds from exercise of options	54			1,041
Other financing activities	11,718			(64		)
Net cash used in financing activities	(59,575		)	(125,870		)
Effect of foreign currency rate changes on cash and cash equivalents	9			539
Net increase (decrease) in cash and cash equivalents	(3,860		)	5,549
Cash and cash equivalents, beginning of period	12,222			21,558
Cash and cash equivalents, end of period	$	8,362		$	27,107

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)



	June 30, 2017			December 31, 2016
Assets
Rental property:
Land	$	262,166		$	272,153
Buildings, improvements and fixtures	2,651,419			2,647,477
Construction in progress	94,490			46,277
	3,008,075			2,965,907
Accumulated depreciation	(849,652		)	(814,583		)
Total rental property, net	2,158,423			2,151,324
Cash and cash equivalents	8,251			12,199
Investments in unconsolidated joint ventures	131,172			128,104
Deferred lease costs and other intangibles, net	139,675			151,579
Prepaids and other assets	91,657			82,481
Total assets	$	2,529,178		$	2,525,687
Liabilities and Equity
Liabilities
Debt:
Senior, unsecured notes, net	$	1,136,296		$	1,135,309
Unsecured term loan, net	322,793			322,410
Mortgages payable, net	171,215			172,145
Unsecured lines of credit, net	98,698			58,002
Total debt	1,729,002			1,687,866
Accounts payable and accrued expenses	71,068			77,616
Other liabilities	67,979			54,764
Total liabilities	1,868,049			1,820,246
Commitments and contingencies
Equity
Partners' Equity:
General partner, 1,000,000 units outstanding at June 30, 2017 and December 31, 2016	6,356			6,485
Limited partners, 5,027,781 and 5,027,781 Class A common units, and 93,958,136 and 95,095,891 Class B common units outstanding at June 30, 2017 and December 31, 2016, respectively	680,186			728,631
Accumulated other comprehensive loss	(25,572		)	(29,834		)
Total partners' equity	660,970			705,282
Noncontrolling interests in consolidated partnerships	159			159
Total equity	661,129			705,441
Total liabilities and equity	$	2,529,178		$	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 June 30,						Six months ended June 30,
	2017			2016			2017			2016
Revenues:
Base rentals	$	80,788		$	75,003		$	161,118		$	147,626
Percentage rentals	1,805			2,326			3,660			4,476
Expense reimbursements	34,023			30,754			70,621			63,996
Management, leasing and other services	609			1,332			1,188			2,453
Other income	2,389			1,918			4,395			3,587
Total revenues	119,614			111,333			240,982			222,138
Expenses:
Property operating	37,116			35,012			77,503			72,886
General and administrative	11,500			11,675			22,912			23,240
Abandoned pre-development costs	—			—			627			—
Depreciation and amortization	32,905			26,306			64,199			52,873
Total expenses	81,521			72,993			165,241			148,999
Operating income	38,093			38,340			75,741			73,139
Other income (expense):
Interest expense	(16,520		)	(13,800		)	(33,007		)	(28,684		)
Gain on sale of assets	6,943			—			6,943			4,887
Gain on previously held interest in acquired joint venture	—			49,258			—			49,258
Other non-operating income (expense)	57			38			92			354
Income before equity in earnings of unconsolidated joint ventures	28,573			73,836			49,769			98,954
Equity in earnings of unconsolidated joint ventures	2,374			3,466			4,692			6,965
Net income	30,947			77,302			54,461			105,919
Noncontrolling interests in consolidated partnerships	—			12			—			(11		)
Net income available to partners	30,947			77,314			54,461			105,908
Net income available to limited partners	30,641			76,549			53,922			104,860
Net income available to general partner	$	306		$	765		$	539		$	1,048

Basic earnings per common unit:
Net income	$	0.31		$	0.76		$	0.54		$	1.05
Diluted earnings per common unit:
Net income	$	0.31		$	0.76		$	0.54		$	1.05

Distribution declared per common unit	$	0.3425		$	0.3250		$	0.6675		$	0.6100

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 June 30,						Six months ended June 30,
	2017			2016			2017		2016
Net income	$	30,947		$	77,302		$	54,461	$	105,919
Other comprehensive income:
Foreign currency translation adjustments	3,074			47			4,084		8,701
Changes in fair value of cash flow hedges	(544		)	(2,443		)	178		(3,829		)
Other comprehensive income (loss)	2,530			(2,396		)	4,262		4,872
Comprehensive income	33,477			74,906			58,723		110,791
Comprehensive income attributable to noncontrolling interests in consolidated partnerships	—			12			—		(11		)
Comprehensive income attributable to the Operating Partnership	$	33,477		$	74,918		$	58,723	$	110,780

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	1,048			104,860			—			105,908			11			105,919
Other comprehensive income	—			—			4,872			4,872			—			4,872
Compensation under Incentive Award Plan	—			8,152			—			8,152			—			8,152
Issuance of 35,300 common units upon exercise of options	—			1,041			—			1,041			—			1,041
Grant of 173,124 restricted common share awards by the Company, net of forfeitures	—			—			—			—			—			—
Issuance of 24,040 deferred units	—			—			—			—			—			—
Withholding of 60,382 common units for employee income taxes	—			(1,921		)	—			(1,921		)	—			(1,921		)
Contributions from noncontrolling interests	—			—			—			—			35			35
Adjustments for noncontrolling interests in consolidated partnerships	—			2			—			2			(2		)	—
Acquisition of noncontrolling interest in other consolidated partnership	—			(1,617		)	—			(1,617		)	(325		)	(1,942		)
Common distributions ($.61 per common unit)	(610		)	(61,019		)	—			(61,629		)	—			(61,629		)
Distributions to noncontrolling interests	—			—			—			—			(145		)	(145		)
Balance, June 30, 2016	$	6,164		$	687,920		$	(33,830	)	$	660,254		$	160		$	660,414

	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	539			53,922			—			54,461			—			54,461
Other comprehensive income	—			—			4,262			4,262			—			4,262
Compensation under Incentive Award Plan	—			7,306			—			7,306			—			7,306
Issuance of 1,800 common units upon exercise of options	—			54			—			54			—			54
Grant of 428,312 restricted common share awards by the Company	—			—			—			—			—			—
Repurchase of 1,497,981 units, including transaction costs	—			(39,354		)	—			(39,354		)	—			(39,354		)
Withholding of 69,886 common units for employee income taxes	—			(2,435		)	—			(2,435		)	—			(2,435		)
Common distributions ($.6675 per common unit)	(668		)	(67,938		)	—			(68,606		)	—			(68,606		)
Balance, June 30, 2017	$	6,356		$	680,186		$	(25,572	)	$	660,970		$	159		$	661,129

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)



	Six months ended June 30,
	2017			2016
OPERATING ACTIVITIES
Net income	$	54,461		$	105,919
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	64,199			52,873
Amortization of deferred financing costs	1,749			1,505
Gain on sale of assets	(6,943		)	(4,887		)
Gain on previously held interest in acquired joint venture	—			(49,258		)
Equity in earnings of unconsolidated joint ventures	(4,692		)	(6,965		)
Equity-based compensation expense	6,796			7,655
Amortization of debt (premiums) and discounts, net	245			1,075
Amortization (accretion) of market rent rate adjustments, net	1,691			1,303
Straight-line rent adjustments	(3,293		)	(3,321		)
Distributions of cumulative earnings from unconsolidated joint ventures	4,952			7,468
Changes in other assets and liabilities:
Other assets	487			(1,511		)
Accounts payable and accrued expenses	(8,986		)	(6,848		)
Net cash provided by operating activities	110,666			105,008
INVESTING ACTIVITIES
Additions to rental property	(88,761		)	(68,582		)
Acquisitions of interests in unconsolidated joint ventures, net of cash acquired	—			(34,187		)
Additions to investments in unconsolidated joint ventures	(3,617		)	(19,363		)
Net proceeds on sale of assets	39,213			25,785
Change in restricted cash	—			121,306
Additions to non-real estate assets	(7,959		)	(2,379		)
Distributions in excess of cumulative earnings from unconsolidated joint ventures	6,330			7,874
Additions to deferred lease costs	(2,845		)	(2,919		)
Other investing activities	2,591			(1,676		)
Net cash provided by (used in) investing activities	(55,048		)	25,859
FINANCING ACTIVITIES
Cash distributions paid	(68,606		)	(82,819		)
Proceeds from revolving credit facility	326,254			509,550
Repayments of revolving credit facility	(286,127		)	(440,650		)
Proceeds from notes, mortgages and loans	454			88,165
Repayments of notes, mortgages and loans	(1,483		)	(168,901		)
Repayment of deferred financing obligation	—			(28,388		)
Repurchase of units, including transaction costs	(39,354		)	—
Employee income taxes paid related to shares withheld upon vesting of equity awards	(2,435		)	(1,921		)
Additions to deferred financing costs	(50		)	(1,883		)
Proceeds from exercise of options	54			1,041
Other financing activities	11,718			(64		)
Net cash used in financing activities	(59,575		)	(125,870		)
Effect of foreign currency on cash and cash equivalents	9			539
Net increase (decrease) in cash and cash equivalents	(3,948		)	5,536
Cash and cash equivalents, beginning of period	12,199			21,552
Cash and cash equivalents, end of period	$	8,251		$	27,088

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 June 30, 2017, we owned and operated 35 consolidated outlet centers, with a total gross leasable area of approximately 12.4 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 June 30, 2017, the Company, through its ownership of Tanger GP Trust and Tanger LP Trust, owned 94,958,136 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 and 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. Disposition of Property

The following table sets forth certain summarized information regarding the property sold during the six months ended June 30, 2017:

Property

Location

Date Sold

Square Feet

(in 000's)

Net Sales Proceeds

(in 000's)

Gain on Sale(in 000's)

Westbrook

Westbrook, CT

May 2017

290

39,212

6,943

The rental property sold did not meet the criteria for reporting discontinued operations, thus its results of operations have remained in continuing operations.

4. Developments of Consolidated Outlet Centers

The table below sets forth our consolidated outlet centers under development as of June 30, 2017:



Project	Approximate square feet (in 000's)	Costs Incurred to Date (in millions)		Projected Opening
New development:
Fort Worth	352	$	53.7	October 2017

Expansion:
Lancaster	123	32.9		September 2017

Total	475	$	86.6

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 $689,000 and $1.2 million for the three and six months ended June 30, 2017, respectively, and $634,000 and $1.1 million for the three and six months ended June 30, 2016, respectively.

5. Investments in Unconsolidated Real Estate Joint Ventures

The equity method of accounting is used to account for each of the individual joint ventures. We have an ownership interest in the following unconsolidated real estate joint ventures:



As of June 30, 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	$	6.8		$	84.3
National Harbor	National Harbor, MD	50.0	%	341	2.8			86.3
RioCan Canada	Various	50.0	%	924	121.6			11.1
Investments included in total assets					$	131.2

Charlotte⁽³⁾	Charlotte, NC	50.0	%	398	$	(3.1	)	$	89.8
Galveston/Houston ⁽²⁾⁽³⁾	Texas City, TX	50.0	%	353	(4.9		)	64.9
Investments included in other liabilities					$	(8.0	)



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
Investments included in total assets					$	128.1

Charlotte⁽³⁾	Charlotte, NC	50.0	%	398	$	(2.5	)	$	89.7
Galveston/Houston ⁽²⁾⁽³⁾	Texas City, TX	50.0	%	353	(3.8		)	64.9
Investments included in other liabilities					$	(6.3	)


(1)	Net of debt origination costs and including premiums of $1.3 million and $1.6 million as of June 30, 2017 and December 31, 2016, respectively.

(2)

In June 2017, the joint venture exercised its extension option and extended the maturity date of the loan from July 2017 to July 2018. In July, the joint venture amended and restated the initial construction loan to increase the amount available to borrow from $70.0 million to $80.0 million and extended the maturity date until July 2020 with two one-year options. The amended and restated loan also changed the interest rate from LIBOR + 1.50% to an interest rate of LIBOR + 1.65%. At the closing of the amendment, the joint venture distributed approximately $14.5 million equally between the partners.


(3)	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				Six months ended
	June 30,				June 30,
	2017		2016		2017		2016
Fee:
Management and marketing	$	570	$	797	1,112		1,544
Development and leasing	35		353		$	67	$	545
Loan guarantee	4		182		9		364
Total Fees	$	609	$	1,332	$	1,188	$	2,453

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 $3.7 million for both the period ended June 30, 2017 and the period ended December 31, 2016) 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	June 30, 2017			December 31, 2016
Assets
Land	$	90,741		$	88,015
Buildings, improvements and fixtures	520,223			503,548
Construction in progress, including land under development	8,479			13,037
	619,443			604,600
Accumulated depreciation	(80,452		)	(67,431		)
Total rental property, net	538,991			537,169
Cash and cash equivalents	24,610			27,271
Deferred lease costs, net	12,216			13,612
Prepaids and other assets	11,522			12,567
Total assets	$	587,339		$	590,619
Liabilities and Owners' Equity
Mortgages payable, net	$	336,387		$	335,971
Accounts payable and other liabilities	12,905			20,011
Total liabilities	349,292			355,982
Owners' equity	238,047			234,637
Total liabilities and owners' equity	$	587,339		$	590,619



	Three months ended						Six months ended
Condensed Combined Statements of Operations ⁽¹⁾	June 30,						June 30,
- Unconsolidated Joint Ventures	2017			2016			2017			2016
Revenues	$	23,285		$	29,341		$	47,347		$	57,039
Expenses:
Property operating	8,877			11,078			18,255			21,396
General and administrative	96			179			216			295
Depreciation and amortization	6,943			9,408			14,456			18,208
Total expenses	15,916			20,665			32,927			39,899
Operating income	7,369			8,676			14,420			17,140
Interest expense	(2,460		)	(2,682		)	(4,720		)	(5,236		)
Other non-operating income	1			2			3			3
Net income	$	4,910		$	5,996		$	9,703		$	11,907

The Company and Operating Partnership's share of:
Net income	$	2,374		$	3,466		$	4,692		$	6,965
Depreciation and amortization expense (real estate related)	$	3,550		$	5,808		$	7,388		$	11,147


(1)	The three and six months ended June 30, 2017 includes results from the Columbus outlet center, which opened in June 2016. The three and six months ended June 30, 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.

6. 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):



	June 30, 2017		December 31, 2016
Unsecured lines of credit	$	101,155