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, 2018

OR

	o	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from _________ to _________

Commission file number 1-11986 (Tanger Factory Outlet Centers, Inc.)

Commission file number 333-3526-01 (Tanger Properties Limited Partnership)

TANGER FACTORY OUTLET CENTERS, INC.

TANGER PROPERTIES LIMITED PARTNERSHIP

(Exact name of Registrant as specified in its charter)

North Carolina (Tanger Factory Outlet Centers, Inc.)	56-1815473
North Carolina (Tanger Properties Limited Partnership)	56-1822494
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
3200 Northline Avenue, Suite 360, Greensboro, NC 27408
(Address of principal executive offices)
(336) 292-3010
(Registrant's telephone number, including area code)

Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Tanger Factory Outlet Centers, Inc.	Yes x   No o
Tanger Properties Limited Partnership	Yes  x   No  o

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted 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 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
		Emerging growth company o

Tanger Properties Limited Partnership
Large accelerated filer o		Accelerated filer o
Non-accelerated filer x		Smaller reporting company o
		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 1, 2018, there were 93,907,034 common shares of Tanger Factory Outlet Centers, Inc. outstanding, $.01 par value.

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EXPLANATORY NOTE

This report combines the unaudited quarterly reports on Form 10-Q for the quarter ended September 30, 2018 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 controls the Operating Partnership as its sole general partner. Tanger LP Trust holds a limited partnership interest. As of September 30, 2018, the Company, through its ownership of Tanger GP Trust and Tanger LP Trust, owned 93,907,034 units of the Operating Partnership and other limited partners (the "Non-Company LPs") collectively owned 4,995,433 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.

2

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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.

3

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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, 2018 and December 31, 2017	5
Consolidated Statements of Operations - for the three and nine months ended September 30, 2018 and 2017	6
Consolidated Statements of Comprehensive Income - for the three and nine months ended September 30, 2018 and 2017	7
Consolidated Statements of Shareholders' Equity - for the nine months ended September 30, 2018 and 2017	8
Consolidated Statements of Cash Flows - for the nine months ended September 30, 2018 and 2017	10
FINANCIAL STATEMENTS OF TANGER PROPERTIES LIMITED PARTNERSHIP (Unaudited)
Consolidated Balance Sheets - as of September 30, 2018 and December 31, 2017	11
Consolidated Statements of Operations - for the three and nine months ended September 30, 2018 and 2017	12
Consolidated Statements of Comprehensive Income - for the three and nine months ended September 30, 2018 and 2017	13
Consolidated Statements of Equity - for the nine months ended September 30, 2018 and 2017	14
Consolidated Statements of Cash Flows - for the nine months ended September 30, 2018 and 2017	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	39
Item 3. Quantitative and Qualitative Disclosures about Market Risk	61
Item 4. Controls and Procedures (Tanger Factory Outlet Centers, Inc. and Tanger Properties Limited Partnership)	63
Part II. Other Information
Item 1. Legal Proceedings	64
Item 1A. Risk Factors	64
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	64
Item 4. Mine Safety Disclosure	64
Item 6. Exhibits	65
Signatures	66

4

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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, 2018				December 31, 2017
Assets
Rental property:
Land		$	278,632			$	279,978
Buildings, improvements and fixtures		2,755,698				2,793,638
Construction in progress		762				14,854
		3,035,092				3,088,470
Accumulated depreciation		(953,158		)		(901,967		)
Total rental property, net		2,081,934				2,186,503
Cash and cash equivalents		4,404				6,101
Investments in unconsolidated joint ventures		111,305				119,436
Deferred lease costs and other intangibles, net		120,064				132,061
Prepaids and other assets		103,910				96,004
Total assets		$	2,421,617			$	2,540,105
Liabilities and Equity
Liabilities
Debt:
Senior, unsecured notes, net		$	1,136,184			$	1,134,755
Unsecured term loan, net		323,416				322,975
Mortgages payable, net		88,359				99,761
Unsecured lines of credit, net		199,701				206,160
Total debt		1,747,660				1,763,651
Accounts payable and accrued expenses		70,132				90,416
Other liabilities		79,342				73,736
Total liabilities		1,897,134				1,927,803
Commitments and contingencies
Equity
Tanger Factory Outlet Centers, Inc.:
Common shares, $.01 par value, 300,000,000 shares authorized, 93,907,034 and 94,560,536 shares issued and outstanding at September 30, 2018 and December 31, 2017, respectively		939				946
Paid in capital		774,724				784,782
Accumulated distributions in excess of net income		(259,258		)		(184,865		)
Accumulated other comprehensive loss		(18,413		)		(19,285		)
Equity attributable to Tanger Factory Outlet Centers, Inc.		497,992				581,578
Equity attributable to noncontrolling interests:
Noncontrolling interests in Operating Partnership		26,491				30,724
Noncontrolling interests in other consolidated partnerships		—				—
Total equity		524,483				612,302
Total liabilities and equity		$	2,421,617			$	2,540,105

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

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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,
		2018				2017				2018				2017
Revenues:
Base rentals		$	82,323			$	80,349			$	244,781			$	241,467
Percentage rentals		3,210				3,138				6,666				6,798
Expense reimbursements		35,468				34,180				107,876				104,801
Management, leasing and other services		583				588				1,826				1,776
Other income		2,652				2,510				6,333				6,905
Total revenues		124,236				120,765				367,482				361,747
Expenses:
Property operating		39,653				37,571				119,817				115,074
General and administrative		10,752				10,934				32,861				33,846
Abandoned pre-development costs		—				(99		)		—				528
Impairment charge		49,739				—				49,739				—
Depreciation and amortization		32,850				30,976				98,667				95,175
Total expenses		132,994				79,382				301,084				244,623
Operating income (loss)		(8,758		)		41,383				66,398				117,124
Other income (expense):
Interest expense		(16,367		)		(16,489		)		(48,348		)		(49,496		)
Loss on early extinguishment of debt		—				(35,626		)		—				(35,626		)
Gain on sale of assets		—				—				—				6,943
Other non-operating income (expense)		261				591				661				683
Income (loss) before equity in earnings (losses) of unconsolidated joint ventures		(24,864		)		(10,141		)		18,711				39,628
Equity in earnings (losses) of unconsolidated joint ventures		1,833				(5,893		)		6,233				(1,201		)
Net income (loss)		(23,031		)		(16,034		)		24,944				38,427
Noncontrolling interests in Operating Partnership		1,172				815				(1,274		)		(1,920		)
Noncontrolling interests in other consolidated partnerships		—				—				278				—
Net income (loss) attributable to Tanger Factory Outlet Centers, Inc.		$	(21,859	)		$	(15,219	)		$	23,948			$	36,507
Basic earnings per common share:
Net income (loss)		$	(0.24	)		$	(0.17	)		$	0.25			$	0.38
Diluted earnings per common share:
Net income (loss)		$	(0.24	)		$	(0.17	)		$	0.25			$	0.38
Dividends declared per common share		$	0.3500			$	0.3425			$	1.0425			$	1.0100

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

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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,
		2018				2017				2018				2017
Net income (loss)		$	(23,031	)		$	(16,034	)		$	24,944			$	38,427
Other comprehensive income (loss):
Foreign currency translation adjustments		1,921				4,737				(3,176		)		8,821
Change in fair value of cash flow hedges		512				39				4,095				217
Other comprehensive income		2,433				4,776				919				9,038
Comprehensive income (loss)		(20,598		)		(11,258		)		25,863				47,465
Comprehensive (income) loss attributable to noncontrolling interests		1,048				573				(1,043		)		(2,376		)
Comprehensive income (loss) attributable to Tanger Factory Outlet Centers, Inc.		$	(19,550	)		$	(10,685	)		$	24,820			$	45,089

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

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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.

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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, 2017		$	946		$	784,782		$	(184,865	)	$	(19,285	)	$	581,578		$	30,724		$	—		$	612,302
Net income		—			—			23,948			—			23,948			1,274			(278		)	24,944
Other comprehensive income		—			—			—			872			872			47			—			919
Compensation under Incentive Award Plan		—			11,654			—			—			11,654			—			—			11,654
Grant of 355,184 restricted common share awards, net of forfeitures		3			(3		)	—			—			—			—			—			—
Repurchase of 919,249 common shares, including transaction costs		(9		)	(19,989		)	—			—			(19,998		)	—			—			(19,998		)
Withholding of 89,437 common shares for employee income taxes		(1		)	(2,067		)	—			—			(2,068		)	—			—			(2,068		)
Contributions from noncontrolling interests		—			—			—			—			—			—			445			445
Adjustment for noncontrolling interests in Operating Partnership		—			347			—			—			347			(347		)	—			—
Common dividends ($1.0425 per share)		—			—			(98,341		)	—			(98,341		)	—			—			(98,341		)
Distributions to noncontrolling interests		—			—			—			—			—			(5,207		)	(167		)	(5,374		)
Balance, September 30, 2018		$	939		$	774,724		$	(259,258	)	$	(18,413	)	$	497,992		$	26,491		$	—		$	524,483

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

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TANGER FACTORY OUTLET CENTERS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands, unaudited)

		Nine months ended September 30,
		2018				2017
OPERATING ACTIVITIES
Net income		$	24,944			$	38,427
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		98,667				95,175
Impairment charge		49,739				—
Amortization of deferred financing costs		2,280				2,640
Gain on sale of assets		—				(6,943		)
Loss on early extinguishment of debt		—				35,626
Equity in (earnings) losses of unconsolidated joint ventures		(6,233		)		1,201
Equity-based compensation expense		10,814				10,114
Amortization of debt (premiums) and discounts, net		309				363
Amortization (accretion) of market rent rate adjustments, net		1,980				2,107
Straight-line rent adjustments		(4,744		)		(4,749		)
Distributions of cumulative earnings from unconsolidated joint ventures		6,081				8,128
Changes in other assets and liabilities:
Other assets		(406		)		(1,131		)
Accounts payable and accrued expenses		(3,471		)		653
Net cash provided by operating activities		179,960				181,611
INVESTING ACTIVITIES
Additions to rental property		(53,349		)		(132,612		)
Additions to investments in unconsolidated joint ventures		(1,764		)		(4,033		)
Net proceeds from sale of assets		—				39,213
Additions to non-real estate assets		(1,203		)		(8,384		)
Distributions in excess of cumulative earnings from unconsolidated joint ventures		16,656				16,019
Additions to deferred lease costs		(5,220		)		(4,218		)
Other investing activities		8,065				4,963
Net cash used in investing activities		(36,815		)		(89,052		)
FINANCING ACTIVITIES
Cash dividends paid		(98,341		)		(97,781		)
Distributions to noncontrolling interests in Operating Partnership		(5,207		)		(5,078		)
Proceeds from revolving credit facility		391,900				543,866
Repayments of revolving credit facility		(396,900		)		(456,666		)
Proceeds from notes, mortgages and loans		—				299,460
Repayments of notes, mortgages and loans		(10,971		)		(302,240		)
Payment of make-whole premium related to early extinguishment of debt		—				(34,143		)
Repurchase of common shares, including transaction costs		(19,998		)		(49,362		)
Employee income taxes paid related to shares withheld upon vesting of equity awards		(2,068		)		(2,436		)
Additions to deferred financing costs		(2,615		)		(2,900		)
Proceeds from exercise of options		—				54
Proceeds from other financing activities		445				12,054
Payment for other financing activities		(1,027		)		(782		)
Net cash used in financing activities		(144,782		)		(95,954		)
Effect of foreign currency rate changes on cash and cash equivalents		(60		)		(54		)
Net decrease in cash and cash equivalents		(1,697		)		(3,449		)
Cash and cash equivalents, beginning of period		6,101				12,222
Cash and cash equivalents, end of period		$	4,404			$	8,773

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

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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, 2018				December 31, 2017
Assets
Rental property:
Land		$	278,632			$	279,978
Buildings, improvements and fixtures		2,755,698				2,793,638
Construction in progress		762				14,854
		3,035,092				3,088,470
Accumulated depreciation		(953,158		)		(901,967		)
Total rental property, net		2,081,934				2,186,503
Cash and cash equivalents		4,361				6,050
Investments in unconsolidated joint ventures		111,305				119,436
Deferred lease costs and other intangibles, net		120,064				132,061
Prepaids and other assets		103,313				95,384
Total assets		$	2,420,977			$	2,539,434
Liabilities and Equity
Liabilities
Debt:
Senior, unsecured notes, net		$	1,136,184			$	1,134,755
Unsecured term loan, net		323,416				322,975
Mortgages payable, net		88,359				99,761
Unsecured lines of credit, net		199,701				206,160
Total debt		1,747,660				1,763,651
Accounts payable and accrued expenses		69,492				89,745
Other liabilities		79,342				73,736
Total liabilities		1,896,494				1,927,132
Commitments and contingencies
Equity
Partners' Equity:
General partner, 1,000,000 units outstanding at September 30, 2018 and December 31, 2017		5,054				5,844
Limited partners, 4,995,433 and 4,995,433 Class A common units, and 92,907,034 and 93,560,536 Class B common units outstanding at September 30, 2018 and December 31, 2017, respectively		538,855				626,803
Accumulated other comprehensive loss		(19,426		)		(20,345		)
Total partners' equity		524,483				612,302
Noncontrolling interests in consolidated partnerships		—				—
Total equity		524,483				612,302
Total liabilities and equity		$	2,420,977			$	2,539,434

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

11

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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,
		2018				2017				2018				2017
Revenues:
Base rentals		$	82,323			$	80,349			$	244,781			$	241,467
Percentage rentals		3,210				3,138				6,666				6,798
Expense reimbursements		35,468				34,180				107,876				104,801
Management, leasing and other services		583				588				1,826				1,776
Other income		2,652				2,510				6,333				6,905
Total revenues		124,236				120,765				367,482				361,747
Expenses:
Property operating		39,653				37,571				119,817				115,074
General and administrative		10,752				10,934				32,861				33,846
Abandoned pre-development costs		—				(99		)		—				528
Impairment charge		49,739				—				49,739				—
Depreciation and amortization		32,850				30,976				98,667				95,175
Total expenses		132,994				79,382				301,084				244,623
Operating income (loss)		(8,758		)		41,383				66,398				117,124
Other income (expense):
Interest expense		(16,367		)		(16,489		)		(48,348		)		(49,496		)
Loss on early extinguishment of debt		—				(35,626		)		—				(35,626		)
Gain on sale of assets		—				—				—				6,943
Other non-operating income (expense)		261				591				661				683
Income (loss) before equity in earnings (losses) of unconsolidated joint ventures		(24,864		)		(10,141		)		18,711				39,628
Equity in earnings (losses) of unconsolidated joint ventures		1,833				(5,893		)		6,233				(1,201		)
Net income (loss)		(23,031		)		(16,034		)		24,944				38,427
Noncontrolling interests in consolidated partnerships		—				—				278				—
Net income (loss) available to partners		(23,031		)		(16,034		)		25,222				38,427
Net income (loss) available to limited partners		(22,798		)		(15,874		)		24,970				38,048
Net income (loss) available to general partner		$	(233	)		$	(160	)		$	252			$	379
Basic earnings per common unit:
Net income (loss)		$	(0.24	)		$	(0.17	)		$	0.25			$	0.38
Diluted earnings per common unit:
Net income (loss)		$	(0.24	)		$	(0.17	)		$	0.25			$	0.38
Distribution declared per common unit		$	0.3500			$	0.3425			$	1.0425			$	1.0100

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

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TANGER PROPERTIES LIMITED PARTNERSHIP AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(In thousands, unaudited)

		Three months ended September 30,								Nine months ended September 30,
		2018				2017				2018				2017
Net income (loss)		$	(23,031	)		$	(16,034	)		$	24,944			$	38,427
Other comprehensive income (loss):
Foreign currency translation adjustments		1,921				4,737				(3,176		)		8,821
Changes in fair value of cash flow hedges		512				39				4,095				217
Other comprehensive income		2,433				4,776				919				9,038
Comprehensive income (loss)		(20,598		)		(11,258		)		25,863				47,465
Comprehensive loss attributable to noncontrolling interests in consolidated partnerships		—				—				278				—
Comprehensive income (loss) attributable to the Operating Partnership		$	(20,598	)		$	(11,258	)		$	26,141			$	47,465

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

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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, 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, net of forfeitures		—			—			—			—			—			—
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
		General partner			Limited partners			Accumulated other comprehensive loss			Total partners' equity			Noncontrolling interests in consolidated partnerships			Total equity
Balance, December 31, 2017		$	5,844		$	626,803		$	(20,345	)	$	612,302		$	—		$	612,302
Net income		252			24,970			—			25,222			(278		)	24,944
Other comprehensive income		—			—			919			919			—			919
Compensation under Incentive Award Plan		—			11,654			—			11,654			—			11,654
Grant of 355,184 restricted common share awards by the Company		—			—			—			—			—			—
Repurchase of 919,249 units, including transaction costs		—			(19,998		)	—			(19,998		)	—			(19,998		)
Withholding of 89,437 common units for employee income taxes		—			(2,068		)	—			(2,068		)	—			(2,068		)
Contributions from noncontrolling interests		—			—			—			—			445			445
Common distributions ($1.0425  per common unit)		(1,042		)	(102,506		)	—			(103,548		)	—			(103,548		)
Distributions to noncontrolling interests		—			—			—			—			(167		)	(167		)
Balance, September 30, 2018		$	5,054		$	538,855		$	(19,426	)	$	524,483		$	—		$	524,483

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

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TANGER PROPERTIES LIMITED PARTNERSHIP AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands, unaudited)

		Nine months ended September 30,
		2018				2017
OPERATING ACTIVITIES
Net income		$	24,944			$	38,427
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		98,667				95,175
Impairment charge		49,739				—
Amortization of deferred financing costs		2,280				2,640
Gain on sale of assets		—				(6,943		)
Loss on early extinguishment of debt		—				35,626
Equity in (earnings) losses of unconsolidated joint ventures		(6,233		)		1,201
Equity-based compensation expense		10,814				10,114
Amortization of debt (premiums) and discounts, net		309				363
Amortization (accretion) of market rent rate adjustments, net		1,980				2,107
Straight-line rent adjustments		(4,744		)		(4,749		)
Distributions of cumulative earnings from unconsolidated joint ventures		6,081				8,128
Changes in other assets and liabilities:
Other assets		(429		)		(1,110		)
Accounts payable and accrued expenses		(3,440		)		551
Net cash provided by operating activities		179,968				181,530
INVESTING ACTIVITIES
Additions to rental property		(53,349		)		(132,612		)
Additions to investments in unconsolidated joint ventures		(1,764		)		(4,033		)
Net proceeds from sale of assets		—				39,213
Additions to non-real estate assets		(1,203		)		(8,384		)
Distributions in excess of cumulative earnings from unconsolidated joint ventures		16,656				16,019
Additions to deferred lease costs		(5,220		)		(4,218		)
Other investing activities		8,065				4,963
Net cash used in investing activities		(36,815		)		(89,052		)
FINANCING ACTIVITIES
Cash distributions paid		(103,548		)		(102,859		)
Proceeds from revolving credit facility		391,900				543,866
Repayments of revolving credit facility		(396,900		)		(456,666		)
Proceeds from notes, mortgages and loans		—				299,460
Repayments of notes, mortgages and loans		(10,971		)		(302,240		)
Payment of make-whole premium related to early extinguishment of debt		—				(34,143		)
Repurchase of units, including transaction costs		(19,998		)		(49,362		)
Employee income taxes paid related to shares withheld upon vesting of equity awards		(2,068		)		(2,436		)
Additions to deferred financing costs		(2,615		)		(2,900		)
Proceeds from exercise of options		—				54
Proceeds from other financing activities		445				12,054
Payment for other financing activities		(1,027		)		(782		)
Net cash used in financing activities		(144,782		)		(95,954		)
Effect of foreign currency on cash and cash equivalents		(60		)		(54		)
Net decrease in cash and cash equivalents		(1,689		)		(3,530		)
Cash and cash equivalents, beginning of period		6,050				12,199
Cash and cash equivalents, end of period		$	4,361			$	8,669

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

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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, 2018, we owned and operated 36 consolidated outlet centers, with a total gross leasable area of approximately 12.9 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, 2018, the Company, through its ownership of Tanger GP Trust and Tanger LP Trust, owned 93,907,034 units of the Operating Partnership and other limited partners (the "Non-Company LPs") collectively owned 4,995,433 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, 2017. The December 31, 2017 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.

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.

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We consolidate properties that are wholly-owned and properties where we own less than 100% but control such properties. 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 on 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, Galveston/Houston, and Columbus 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.

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3. Impairment Charge and Disposition of Property

Impairment Charge

Rental property held and used by us 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, we compare the estimated future undiscounted cash flows associated with the asset to the asset's carrying amount, and if less, recognize an impairment loss in an amount by which the carrying amount exceeds its fair value.

During the third quarter 2018, we determined that the estimated future undiscounted cash flows of our Jeffersonville, OH outlet center did not exceed the property's carrying value due to a decline of operating results at the center likely resulting from increased competition from the Company's center in Columbus, OH and slower than expected improvement from remerchandising activities. Therefore, we recorded a $49.7 million non-cash impairment charge in our consolidated statement of operations which equaled the excess of the property's carrying value over its estimated fair value, see Note 8, for additional information on the fair market value calculation.

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

$

39,213

$

6,943

The rental property sold did not meet the criteria to be reported as discontinued operations, thus its results of operations have been reported as part of continuing operations.

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4. Investments in Unconsolidated Real Estate Joint Ventures

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

As of September 30, 2018
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)
Investments included in investments in unconsolidated joint ventures:
National Harbor		National Harbor, MD		50.0	%		341			$	0.6			$	86.7
RioCan Canada		Various		50.0	%		923			110.7				10.2
										$	111.3
Investments included in other liabilities:
Columbus(2)		Columbus, OH		50.0	%		355			$	(1.1	)		$	84.7
Charlotte(2)		Charlotte, NC		50.0	%		398			(10.3		)		99.5
Galveston/Houston (2)		Texas City, TX		50.0	%		353			(15.3		)		79.5
										$	(26.7	)

As of December 31, 2017
Joint Venture		Outlet Center Location		Ownership %			Square Feet (in 000's)			Carrying Value of Investment (in millions)				Total Joint Venture Debt, Net (in millions)(1)
Investments included in investments in unconsolidated joint ventures:
Columbus		Columbus, OH		50.0	%		355			$	1.1			$	84.4
National Harbor		National Harbor, MD		50.0	%		341			2.5				86.4
RioCan Canada		Various		50.0	%		923			115.8				11.1
										$	119.4
Investments included in other liabilities:
Charlotte(2)		Charlotte, NC		50.0	%		398			$	(4.1	)		$	89.8
Galveston/Houston (2)		Texas City, TX		50.0	%		353			(13.0		)		79.4
										$	(17.1	)

(1)	Net of debt origination costs and including premiums of $1.4 million as of September 30, 2018 and December 31, 2017.

(2)	The negative carrying value is due to distributions exceeding contributions and increases or decreases from our equity in earnings of the joint venture.

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,
		2018				2017				2018				2017
Fee:
Management and marketing		$	571			$	564			$	1,704			$	1,676
Leasing and other fees		12				24				122				100
Total Fees		$	583			$	588			$	1,826			$	1,776

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Our investments in real estate joint ventures are reduced by the percentage of the profits earned for leasing and development services associated with our ownership interest in each joint venture. Our carrying value of investments in unconsolidated joint ventures differs from our share of the assets reported in the "Summary Balance Sheets - Unconsolidated Joint Ventures" shown below due to adjustments to the book basis, including intercompany profits on sales of services that are capitalized by the unconsolidated joint ventures. The differences in basis (totaling $4.1 million and $4.2 million as of September 30, 2018 and December 31, 2017, respectively) are amortized over the various useful lives of the related assets.

Charlotte

In June 2018, the Charlotte joint venture closed on a $100.0 million mortgage loan with a fixed interest rate of 4.3% and a maturity date of July 2028. The proceeds from the loan were used to pay off the $90.0 million mortgage loan with an interest rate of LIBOR + 1.45%, which had an original maturity date of November 2018. The joint venture distributed the incremental net loan proceeds of $9.3 million equally to the partners.

RioCan Canada

During the third quarter of 2017, the joint venture determined for its Bromont and Saint Sauveur, Quebec outlet centers that the estimated future undiscounted cash flows of those properties did not exceed the properties' carrying values based on the joint venture's expectations of the future performance of the centers. Therefore, the joint venture recorded an $18.0 million non-cash impairment charge in its statement of operations, which equaled the excess of the properties' carrying values over their fair values. The fair values were 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, 2018				December 31, 2017
Assets
Land		$	94,118			$	95,686
Buildings, improvements and fixtures		503,430				505,618
Construction in progress		3,169				3,005
		600,717				604,309
Accumulated depreciation		(110,213		)		(93,837		)
Total rental property, net		490,504				510,472
Cash and cash equivalents		13,366				25,061
Deferred lease costs and other intangibles, net		9,387				10,985
Prepaids and other assets		18,142				15,073
Total assets		$	531,399			$	561,591
Liabilities and Owners' Equity
Mortgages payable, net		$	360,600			$	351,259
Accounts payable and other liabilities		11,114				14,680
Total liabilities		371,714				365,939
Owners' equity		159,685				195,652
Total liabilities and owners' equity		$	531,399			$	561,591

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		Three months ended								Nine months ended
Condensed Combined Statements of Operations		September 30,								September 30,
- Unconsolidated Joint Ventures		2018				2017				2018				2017
Revenues		$	23,538			$	25,241			$	70,940			$	72,588
Expenses:
Property operating		9,147				8,987				28,032				27,242
General and administrative		49				72				301				289
Asset impairment		—				18,042				—				18,042
Depreciation and amortization		6,860				6,998				19,768				21,453
Total expenses		16,056				34,099				48,101				67,026
Operating income (loss)		7,482				(8,858		)		22,839				5,562
Interest expense		(3,810		)		(2,776		)		(10,275		)		(7,497		)
Other non-operating income		68				20				175				23
Net income (loss)		$	3,740			$	(11,614	)		$	12,739			$	(1,912	)
The Company and Operating Partnership's share of:
Net income (loss)		$	1,833			$	(5,893	)		$	6,233			$	(1,201	)
Depreciation and amortization and asset impairments (real estate related)		$	3,466			$	12,604			$	10,020			$	19,992

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5. Debt Guaranteed by the Company

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

The Company guarantees the Operating Partnership's obligations with respect to its unsecured lines of credit which have a total borrowing capacity of $600.0 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):

		As of
		September 30, 2018				December 31, 2017
Unsecured lines of credit		$	203,100			$	208,100
Unsecured term loan		$	325,000			$	325,000

6. Debt of the Operating Partnership

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

As of

As of

September 30, 2018

December 31, 2017

Stated Interest Rate(s)

Maturity Date

Principal

Book Value(1)

Principal

Book Value(1)

Senior, unsecured notes: