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 September 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 November 3, 2017, there were 94,528,188 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 September 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 September 30, 2017, the Company, through its ownership of Tanger GP Trust and Tanger LP Trust, owned 94,528,188 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 September 30, 2017 and December 31, 2016	5
Consolidated Statements of Operations - for the three and nine months ended September 30, 2017 and 2016	6
Consolidated Statements of Comprehensive Income - for the three and nine months ended September 30, 2017 and 2016	7
Consolidated Statements of Shareholders' Equity - for the nine months ended September 30, 2017 and 2016	8
Consolidated Statements of Cash Flows - for the nine months ended September 30, 2017 and 2016	10

FINANCIAL STATEMENTS OF TANGER PROPERTIES LIMITED PARTNERSHIP (Unaudited)
Consolidated Balance Sheets - as of September 30, 2017 and December 31, 2016	11
Consolidated Statements of Operations - for the three and nine months ended September 30, 2017 and 2016	12
Consolidated Statements of Comprehensive Income - for the three and nine months ended September 30, 2017 and 2016	13
Consolidated Statements of Equity - for the nine months ended September 30, 2017 and 2016	14
Consolidated Statements of Cash Flows - for the nine months ended September 30, 2017 and 2016	15

Condensed Notes to Consolidated Financial Statements of Tanger Factory Outlet Centers, Inc. and Tanger Properties Limited Partnership	16

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations	37

Item 3. Quantitative and Qualitative Disclosures about Market Risk	60

Item 4. Controls and Procedures (Tanger Factory Outlet Centers, Inc. and Tanger Properties Limited Partnership)	61

Part II. Other Information

Item 1. Legal Proceedings	62

Item 1A. Risk Factors	62

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	62

Item 4. Mine Safety Disclosure	62

Item 6. Exhibits	63

Signatures	64

PART I. - FINANCIAL INFORMATION

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

TANGER FACTORY OUTLET CENTERS, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(In thousands, except share data, unaudited)



	September 30, 2017			December 31, 2016
Assets
Rental property:
Land	$	268,821		$	272,153
Buildings, improvements and fixtures	2,694,549			2,647,477
Construction in progress	87,762			46,277
	3,051,132			2,965,907
Accumulated depreciation	(875,121		)	(814,583		)
Total rental property, net	2,176,011			2,151,324
Cash and cash equivalents	8,773			12,222
Investments in unconsolidated joint ventures	125,819			128,104
Deferred lease costs and other intangibles, net	135,768			151,579
Prepaids and other assets	95,075			82,985
Total assets	$	2,541,446		$	2,526,214
Liabilities and Equity
Liabilities
Debt:
Senior, unsecured notes, net	$	1,134,181		$	1,135,309
Unsecured term loan, net	323,011			322,410
Mortgages payable, net	170,776			172,145
Unsecured lines of credit, net	146,013			58,002
Total debt	1,773,981			1,687,866
Accounts payable and accrued expenses	84,091			78,143
Other liabilities	74,339			54,764
Total liabilities	1,932,411			1,820,773
Commitments and contingencies
Equity
Tanger Factory Outlet Centers, Inc.:
Common shares, $.01 par value, 300,000,000 shares authorized, 94,528,188 and 96,095,891 shares issued and outstanding at September 30, 2017 and December 31, 2016, respectively	945			961
Paid in capital	781,020			820,251
Accumulated distributions in excess of net income	(183,975		)	(122,701		)
Accumulated other comprehensive loss	(19,713		)	(28,295		)
Equity attributable to Tanger Factory Outlet Centers, Inc.	578,277			670,216
Equity attributable to noncontrolling interests:
Noncontrolling interests in Operating Partnership	30,758			35,066
Noncontrolling interests in other consolidated partnerships	—			159
Total equity	609,035			705,441
Total liabilities and equity	$	2,541,446		$	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 September 30,						Nine months ended September 30,
	2017			2016			2017			2016
Revenues:
Base rentals	$	80,349		$	79,569		$	241,467		$	227,195
Percentage rentals	3,138			2,995			6,798			7,471
Expense reimbursements	34,180			33,125			104,801			97,121
Management, leasing and other services	588			806			1,776			3,259
Other income	2,510			2,642			6,905			6,229
Total revenues	120,765			119,137			361,747			341,275
Expenses:
Property operating	37,571			37,442			115,074			110,328
General and administrative	10,934			12,128			33,846			35,368
Acquisition costs	—			487			—			487
Abandoned pre-development costs	(99		)	—			528			—
Depreciation and amortization	30,976			29,205			95,175			82,078
Total expenses	79,382			79,262			244,623			228,261
Operating income	41,383			39,875			117,124			113,014
Other income (expense):
Interest expense	(16,489		)	(15,516		)	(49,496		)	(44,200		)
Loss on early extinguishment of debt	(35,626		)	—			(35,626		)	—
Gain on sale of assets	—			1,418			6,943			6,305
Gain on previously held interest in acquired joint venture	—			46,258			—			95,516
Other non-operating income (expense)	591			24			683			378
Income (loss) before equity in earnings (losses) of unconsolidated joint ventures	(10,141		)	72,059			39,628			171,013
Equity in earnings (losses) of unconsolidated joint ventures	(5,893		)	715			(1,201		)	7,680
Net income (loss)	(16,034		)	72,774			38,427			178,693
Noncontrolling interests in Operating Partnership	815			(3,668		)	(1,920		)	(9,009		)
Noncontrolling interests in other consolidated partnerships	—			(2		)	—			(13		)
Net income (loss) attributable to Tanger Factory Outlet Centers, Inc.	$	(15,219	)	$	69,104		$	36,507		$	169,671

Basic earnings per common share:
Net income (loss)	$	(0.17	)	$	0.72		$	0.38		$	1.77
Diluted earnings per common share:
Net income (loss)	$	(0.17	)	$	0.72		$	0.38		$	1.76

Dividends declared per common share	$	0.3425		$	0.3250		$	1.01		$	0.9350

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 September 30,						Nine months ended September 30,
	2017			2016			2017			2016
Net income (loss)	$	(16,034	)	$	72,774		$	38,427		$	178,693
Other comprehensive income:
Foreign currency translation adjustments	4,737			(1,731		)	8,821			6,970
Change in fair value of cash flow hedges	39			2,228			217			(1,601		)
Other comprehensive income	4,776			497			9,038			5,369
Comprehensive income (loss)	(11,258		)	73,271			47,465			184,062
Comprehensive (income) loss attributable to noncontrolling interests	573			(3,695		)	(2,376		)	(9,294		)
Comprehensive income (loss) attributable to Tanger Factory Outlet Centers, Inc.	$	(10,685	)	$	69,576		$	45,089		$	174,768

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	—		—			169,671			—			169,671			9,009			13			178,693
Other comprehensive income	—		—			—			5,097			5,097			272			—			5,369
Compensation under Incentive Award Plan	—		12,556			—			—			12,556			—			—			12,556
Issuance of 57,700 common shares upon exercise of options	—		1,693			—			—			1,693			—			—			1,693
Grant of 173,124 restricted common share awards, net of forfeitures	2		(2		)	—			—			—			—			—			—
Issuance of 24,040 deferred shares	—		—			—			—			—			—			—			—
Withholding of 66,427 common shares for employee income taxes	—		(2,164		)	—			—			(2,164		)	—			—			(2,164		)
Contributions from noncontrolling interests	—		—			—			—			—			—			35			35
Adjustment for noncontrolling interests in Operating Partnership	—		(385		)	—			—			(385		)	385			—			—
Adjustment for noncontrolling interests in other consolidated partnerships	—		4			—			—			4			—			(4		)	—
Acquisition of noncontrolling interest in other consolidated partnership	—		(1,617		)	—			—			(1,617		)	—			(325		)	(1,942		)
Common dividends ($.935 per share)	—		—			(89,750		)	—			(89,750		)	—			—			(89,750		)
Distributions to noncontrolling interests	—		—			—			—			—			(4,725		)	(145		)	(4,870		)
Balance, September 30, 2016	$	961	$	816,464		$	(115,565	)	$	(31,618	)	$	670,242		$	35,250		$	160		$	705,652

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	—			—			36,507			—			36,507			1,920			—			38,427
Other comprehensive income	—			—			—			8,582			8,582			456			—			9,038
Compensation under Incentive Award Plan	—			10,891			—			—			10,891			—			—			10,891
Issuance of 1,800 common shares upon exercise of options	—			54			—			—			54			—			—			54
Grant of 411,968 restricted common share awards, net of forfeitures	4			(4		)	—			—			—			—			—			—
Repurchase of 1,911,585 common shares, including transaction costs	(19		)	(49,343		)	—			—			(49,362		)	—			—			(49,362		)
Withholding of 69,886 common shares for employee income taxes	(1		)	(2,435		)	—			—			(2,436		)	—			—			(2,436		)
Adjustment for noncontrolling interests in Operating Partnership	—			1,606			—			—			1,606			(1,606		)	—			—
Acquisition of noncontrolling interest in other consolidated partnership	—			—			—			—			—			—			(159		)	(159		)
Common dividends ($1.01 per share)	—			—			(97,781		)	—			(97,781		)	—			—			(97,781		)
Distributions to noncontrolling interests	—			—			—			—			—			(5,078		)	—			(5,078		)
Balance, September 30, 2017	$	945		$	781,020		$	(183,975	)	$	(19,713	)	$	578,277		$	30,758		$	—		$	609,035

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)



	Nine months ended September 30,
	2017			2016
OPERATING ACTIVITIES
Net income	$	38,427		$	178,693
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	95,175			82,078
Amortization of deferred financing costs	2,640			2,350
Gain on sale of assets	(6,943		)	(6,305		)
Gain on previously held interest in acquired joint venture	—			(95,516		)
Loss on early extinguishment of debt	35,626			—
Equity in (earnings) losses of unconsolidated joint ventures	1,201			(7,680		)
Equity-based compensation expense	10,114			11,815
Amortization of debt (premiums) and discounts, net	363			1,160
Amortization (accretion) of market rent rate adjustments, net	2,107			2,087
Straight-line rent adjustments	(4,749		)	(5,092		)
Distributions of cumulative earnings from unconsolidated joint ventures	8,128			10,571
Changes in other assets and liabilities:
Other assets	(1,131		)	1,093
Accounts payable and accrued expenses	653			2,512
Net cash provided by operating activities	181,611			177,766
INVESTING ACTIVITIES
Additions to rental property	(132,612		)	(112,213		)
Acquisitions of interests in unconsolidated joint ventures, net of cash acquired	—			(45,219		)
Additions to investments in unconsolidated joint ventures	(4,033		)	(27,851		)
Net proceeds from sale of assets	39,213			28,706
Change in restricted cash	—			118,370
Additions to non-real estate assets	(8,384		)	(8,982		)
Distributions in excess of cumulative earnings from unconsolidated joint ventures	16,019			14,193
Additions to deferred lease costs	(4,218		)	(5,273		)
Other investing activities	4,963			(1,221		)
Net cash used in investing activities	(89,052		)	(39,490		)
FINANCING ACTIVITIES
Cash dividends paid	(97,781		)	(109,879		)
Distributions to noncontrolling interests in Operating Partnership	(5,078		)	(5,786		)
Proceeds from revolving credit facility	543,866			733,450
Repayments of revolving credit facility	(456,666		)	(727,750		)
Proceeds from notes, mortgages and loans	299,460			338,270
Repayments of notes, mortgages and loans	(302,240		)	(329,603		)
Payment of make-whole premium related to early extinguishment of debt	(34,143		)	—
Repayment of deferred financing obligation	—			(28,388		)
Repurchase of common shares, including transaction costs	(49,362		)	—
Employee income taxes paid related to shares withheld upon vesting of equity awards	(2,436		)	(2,164		)
Additions to deferred financing costs	(2,900		)	(4,243		)
Proceeds from exercise of options	54			1,693
Proceeds from other financing activities	12,054			35
Payment for other financing activities	(782		)	(99		)
Net cash used in financing activities	(95,954		)	(134,464		)
Effect of foreign currency rate changes on cash and cash equivalents	(54		)	532
Net increase (decrease) in cash and cash equivalents	(3,449		)	4,344
Cash and cash equivalents, beginning of period	12,222			21,558
Cash and cash equivalents, end of period	$	8,773		$	25,902

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)



	September 30, 2017			December 31, 2016
Assets
Rental property:
Land	$	268,821		$	272,153
Buildings, improvements and fixtures	2,694,549			2,647,477
Construction in progress	87,762			46,277
	3,051,132			2,965,907
Accumulated depreciation	(875,121		)	(814,583		)
Total rental property, net	2,176,011			2,151,324
Cash and cash equivalents	8,669			12,199
Investments in unconsolidated joint ventures	125,819			128,104
Deferred lease costs and other intangibles, net	135,768			151,579
Prepaids and other assets	94,550			82,481
Total assets	$	2,540,817		$	2,525,687
Liabilities and Equity
Liabilities
Debt:
Senior, unsecured notes, net	$	1,134,181		$	1,135,309
Unsecured term loan, net	323,011			322,410
Mortgages payable, net	170,776			172,145
Unsecured lines of credit, net	146,013			58,002
Total debt	1,773,981			1,687,866
Accounts payable and accrued expenses	83,462			77,616
Other liabilities	74,339			54,764
Total liabilities	1,931,782			1,820,246
Commitments and contingencies
Equity
Partners' Equity:
General partner, 1,000,000 units outstanding at September 30, 2017 and December 31, 2016	5,854			6,485
Limited partners, 5,027,781 and 5,027,781 Class A common units, and 93,528,188 and 95,095,891 Class B common units outstanding at September 30, 2017 and December 31, 2016, respectively	623,977			728,631
Accumulated other comprehensive loss	(20,796		)	(29,834		)
Total partners' equity	609,035			705,282
Noncontrolling interests in consolidated partnerships	—			159
Total equity	609,035			705,441
Total liabilities and equity	$	2,540,817		$	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 September 30,						Nine months ended September 30,
	2017			2016			2017			2016
Revenues:
Base rentals	$	80,349		$	79,569		$	241,467		$	227,195
Percentage rentals	3,138			2,995			6,798			7,471
Expense reimbursements	34,180			33,125			104,801			97,121
Management, leasing and other services	588			806			1,776			3,259
Other income	2,510			2,642			6,905			6,229
Total revenues	120,765			119,137			361,747			341,275
Expenses:
Property operating	37,571			37,442			115,074			110,328
General and administrative	10,934			12,128			33,846			35,368
Acquisition costs	—			487			—			487
Abandoned pre-development costs	(99		)	—			528			—
Depreciation and amortization	30,976			29,205			95,175			82,078
Total expenses	79,382			79,262			244,623			228,261
Operating income	41,383			39,875			117,124			113,014
Other income (expense):
Interest expense	(16,489		)	(15,516		)	(49,496		)	(44,200		)
Loss on early extinguishment of debt	(35,626		)	—			(35,626		)	—
Gain on sale of assets	—			1,418			6,943			6,305
Gain on previously held interest in acquired joint venture	—			46,258			—			95,516
Other non-operating income (expense)	591			24			683			378
Income (loss) before equity in earnings (losses) of unconsolidated joint ventures	(10,141		)	72,059			39,628			171,013
Equity in earnings (losses) of unconsolidated joint ventures	(5,893		)	715			(1,201		)	7,680
Net income (loss)	(16,034		)	72,774			38,427			178,693
Noncontrolling interests in consolidated partnerships	—			(2		)	—			(13		)
Net income (loss) available to partners	(16,034		)	72,772			38,427			178,680
Net income (loss) available to limited partners	(15,874		)	72,052			38,048			176,912
Net income (loss) available to general partner	$	(160	)	$	720		$	379		$	1,768

Basic earnings per common unit:
Net income (loss)	$	(0.17	)	$	0.72		$	0.38		$	1.77
Diluted earnings per common unit:
Net income (loss)	$	(0.17	)	$	0.72		$	0.38		$	1.76

Distribution declared per common unit	$	0.3425		$	0.3250		$	1.01		$	0.9350

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 September 30,						Nine months ended September 30,
	2017			2016			2017		2016
Net income (loss)	$	(16,034	)	$	72,774		$	38,427	$	178,693
Other comprehensive income:
Foreign currency translation adjustments	4,737			(1,731		)	8,821		6,970
Changes in fair value of cash flow hedges	39			2,228			217		(1,601		)
Other comprehensive income	4,776			497			9,038		5,369
Comprehensive income (loss)	(11,258		)	73,271			47,465		184,062
Comprehensive income attributable to noncontrolling interests in consolidated partnerships	—			(2		)	—		(13		)
Comprehensive income (loss) attributable to the Operating Partnership	$	(11,258	)	$	73,269		$	47,465	$	184,049

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	1,768			176,912			—			178,680			13			178,693
Other comprehensive income	—			—			5,369			5,369			—			5,369
Compensation under Incentive Award Plan	—			12,556			—			12,556			—			12,556
Issuance of 57,700 common units upon exercise of options	—			1,693			—			1,693			—			1,693
Grant of 173,124 restricted common share awards by the Company, net of forfeitures	—			—			—			—			—			—
Issuance of 24,040 deferred units	—			—			—			—			—			—
Withholding of 66,427 common units for employee income taxes	—			(2,164		)	—			(2,164		)	—			(2,164		)
Contributions from noncontrolling interests	—			—			—			—			35			35
Adjustments for noncontrolling interests in consolidated partnerships	—			4			—			4			(4		)	—
Acquisition of noncontrolling interest in other consolidated partnership	—			(1,617		)	—			(1,617		)	(325		)	(1,942		)
Common distributions ($.935 per common unit)	(935		)	(93,540		)	—			(94,475		)	—			(94,475		)
Distributions to noncontrolling interests	—			—			—			—			(145		)	(145		)
Balance, September 30, 2016	$	6,559		$	732,266		$	(33,333	)	$	705,492		$	160		$	705,652

	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	379			38,048			—			38,427			—			38,427
Other comprehensive income	—			—			9,038			9,038			—			9,038
Compensation under Incentive Award Plan	—			10,891			—			10,891			—			10,891
Issuance of 1,800 common units upon exercise of options	—			54			—			54			—			54
Grant of 411,968 restricted common share awards by the Company	—			—			—			—			—			—
Repurchase of 1,911,585 units, including transaction costs	—			(49,362		)	—			(49,362		)	—			(49,362		)
Withholding of 69,886 common units for employee income taxes	—			(2,436		)	—			(2,436		)	—			(2,436		)
Acquisition of noncontrolling interest in other consolidated partnership	—			—			—			—			(159		)	(159		)
Common distributions ($1.01 per common unit)	(1,010		)	(101,849		)	—			(102,859		)	—			(102,859		)
Balance, September 30, 2017	$	5,854		$	623,977		$	(20,796	)	$	609,035		$	—		$	609,035

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)



	Nine months ended September 30,
	2017			2016
OPERATING ACTIVITIES
Net income	$	38,427		$	178,693
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	95,175			82,078
Amortization of deferred financing costs	2,640			2,350
Gain on sale of assets	(6,943		)	(6,305		)
Gain on previously held interest in acquired joint venture	—			(95,516		)
Loss on early extinguishment of debt	35,626			—
Equity in (earnings) losses of unconsolidated joint ventures	1,201			(7,680		)
Equity-based compensation expense	10,114			11,815
Amortization of debt (premiums) and discounts, net	363			1,160
Amortization (accretion) of market rent rate adjustments, net	2,107			2,087
Straight-line rent adjustments	(4,749		)	(5,092		)
Distributions of cumulative earnings from unconsolidated joint ventures	8,128			10,571
Changes in other assets and liabilities:
Other assets	(1,110		)	780
Accounts payable and accrued expenses	551			2,782
Net cash provided by operating activities	181,530			177,723
INVESTING ACTIVITIES
Additions to rental property	(132,612		)	(112,213		)
Acquisitions of interests in unconsolidated joint ventures, net of cash acquired	—			(45,219		)
Additions to investments in unconsolidated joint ventures	(4,033		)	(27,851		)
Net proceeds from sale of assets	39,213			28,706
Change in restricted cash	—			118,370
Additions to non-real estate assets	(8,384		)	(8,982		)
Distributions in excess of cumulative earnings from unconsolidated joint ventures	16,019			14,193
Additions to deferred lease costs	(4,218		)	(5,273		)
Other investing activities	4,963			(1,221		)
Net cash used in investing activities	(89,052		)	(39,490		)
FINANCING ACTIVITIES
Cash distributions paid	(102,859		)	(115,665		)
Proceeds from revolving credit facility	543,866			733,450
Repayments of revolving credit facility	(456,666		)	(727,750		)
Proceeds from notes, mortgages and loans	299,460			338,270
Repayments of notes, mortgages and loans	(302,240		)	(329,603		)
Payment of make-whole premium related to early extinguishment of debt	(34,143		)	—
Repayment of deferred financing obligation	—			(28,388		)
Repurchase of units, including transaction costs	(49,362		)	—
Employee income taxes paid related to shares withheld upon vesting of equity awards	(2,436		)	(2,164		)
Additions to deferred financing costs	(2,900		)	(4,243		)
Proceeds from exercise of options	54			1,693
Proceeds from other financing activities	12,054			35
Payment for other financing activities	(782		)	(99		)
Net cash used in financing activities	(95,954		)	(134,464		)
Effect of foreign currency on cash and cash equivalents	(54		)	532
Net increase (decrease) in cash and cash equivalents	(3,530		)	4,301
Cash and cash equivalents, beginning of period	12,199			21,552
Cash and cash equivalents, end of period	$	8,669		$	25,853

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 September 30, 2017, we owned and operated 35 consolidated outlet centers, with a total gross leasable area of approximately 12.6 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 September 30, 2017, the Company, through its ownership of Tanger GP Trust and Tanger LP Trust, owned 94,528,188 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 investments in real estate joint ventures, 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.

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 nine months ended September 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 September 30, 2017:



Project	Approximate square feet (in 000's)	Costs Incurred to Date (in millions)		Projected Opening
New development:
Fort Worth	352	$	74.7	October 2017

Lancaster Expansion

In September 2017, we opened a 123,000 square foot expansion of our outlet center in Lancaster, Pennsylvania.

Fort Worth

In October 2017, we opened a 352,000 square foot wholly-owned outlet center center in the greater Fort Worth, Texas area. The outlet center is located within the 279-acre Champions Circle mixed-use development adjacent to Texas Motor Speedway.

Interest Costs Capitalized

Interest costs capitalized for development activities, including development in our unconsolidated joint ventures, was $798,000 and $2.0 million for the three and nine months ended September 30, 2017, respectively, and $574,000 and $1.7 million for the three and nine months ended September 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 September 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		$	84.4
National Harbor	National Harbor, MD	50.0	%	341	2.4			86.4
RioCan Canada	Various	50.0	%	924	116.6			11.4
Investments included in total assets					$	125.8

Charlotte⁽³⁾	Charlotte, NC	50.0	%	398	$	(3.6	)	$	89.8
Galveston/Houston ⁽²⁾⁽³⁾	Texas City, TX	50.0	%	353	(12.5		)	79.4
Investments included in other liabilities					$	(16.1	)



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 $1.6 million and $1.6 million as of September 30, 2017 and December 31, 2016, respectively.

(2)

In July 2017, 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				Nine months ended
	September 30,				September 30,
	2017		2016		2017		2016
Fee:
Management and marketing	$	564	$	656	1,676		2,199
Development and leasing	20		65		$	87	$	611
Loan guarantee	4		85		13		449
Total Fees	$	588	$	806	$	1,776	$	3,259

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 September 30, 2017 and the period ended December 31, 2016) are amortized over the various useful lives of the related assets.

RioCan Canada

Rental property held and used by our RioCan joint venture is reviewed for impairment in the event that facts and circumstances indicate the carrying amount of an asset may not be recoverable. In such an event, the estimated future undiscounted cash flows associated with the asset is compared to the asset's carrying amount, and if less, we recognize an impairment loss in an amount by which the carrying amount exceeds its fair value.

During the third quarter 2017, the joint venture determined for its Bromont and Saint Sauveur, Quebec outlet centers that the estimated future undiscounted cash flows of that property did not exceed the property's carrying value based on our expectations of the future performance of the centers. Therefore, the joint venture recorded a $18.0 million non-cash impairment charge in its statement of operations, which equaled the excess of the properties carrying value over its fair value. The fair value was determined using a market approach considering the prevailing market income capitalization rates for similar assets. Our share of this impairment charge, $9.0 million, was recorded in equity in earnings of unconsolidated joint ventures in our consolidated statement of operations.

Condensed combined summary financial information of unconsolidated joint ventures accounted for using the equity method is as follows (in thousands):



Condensed Combined Balance Sheets - Unconsolidated Joint Ventures	September 30, 2017			December 31, 2016
Assets
Land	$	95,998		$	88,015
Buildings, improvements and fixtures	514,865			503,548
Construction in progress, including land under development	2,849			13,037
	613,712			604,600
Accumulated depreciation	(88,163		)	(67,431		)
Total rental property, net	525,549			537,169
Cash and cash equivalents	23,769			27,271
Deferred lease costs and other intangibles, net	11,436			13,612
Prepaids and other assets	16,262			12,567
Total assets	$	577,016		$	590,619
Liabilities and Owners' Equity
Mortgages payable, net	$	351,322		$	335,971
Accounts payable and other liabilities	13,463			20,011
Total liabilities	364,785			355,982
Owners' equity	212,231			234,637
Total liabilities and owners' equity	$	577,016		$	590,619



	Three months ended					Nine months ended
Condensed Combined Statements of Operations	September 30,					September 30,
- Unconsolidated Joint Ventures	2017			2016		2017		2016
Revenues	$	25,241		$	25,654	$	72,588	$	82,693
Expenses:
Property operating	8,987			9,103		27,242		30,499
General and administrative	72			95		289		390
Asset impairment	18,042			5,838		18,042		5,838
Depreciation and amortization	6,998			8,001		21,453		26,208
Total expenses	34,099			23,037		67,026		62,935
Operating income (loss)	(8,858		)	2,617