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, 2010  
  OR  
  [   ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) of  
  THE SECURITIES EXCHANGE ACT OF 1934  
     
  For the transition period from                   to  
     
  Commission File No. 1-11986 (Tanger Factory Outlet Centers, Inc.)  
  Commission File No. 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, North Carolina 27408  
  (Address of principal executive offices) (Zip code)  
     
  (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).
Yes x No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer or a non-accelerated filer. See definition of "large accelerated filer", "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act.

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  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)  
                       
  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)  

Indicated by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Tanger Factory Outlet Centers, Inc.
Yes o No x
Tanger Properties Limited Partnership
Yes o No x

     
  As of November 1, 2010, there were 40,486,834 shares of Tanger Factory Outlet Centers, Inc. common stock outstanding, $.01 par value.  

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EXPLANATORY NOTE

This report combines the quarterly reports on Form 10-Q for the quarter ended September 30, 2010 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. The Company is a fully-integrated, self-administered and self-managed real estate investment trust, or REIT, which, through its controlling interest in the Operating Partnership, focuses exclusively on developing, acquiring, owning, operating and managing outlet shopping centers. The outlet centers and other assets are held by, and all of the operations are conducted by, the Operating Partnership and its subsidiaries. Accordingly, the descriptions of the business, employees and properties of the Company are also descriptions of the business, employees and properties of the Operating Partnership.

The Company owns the majority of the units of partnership interest issued by the Operating Partnership through its two wholly-owned subsidiaries, the Tanger GP Trust and the Tanger LP Trust. The Tanger GP Trust controls the Operating Partnership as its sole general partner. The Tanger LP Trust holds a limited partnership interest. The Tanger family, through its ownership of the Tanger Family Limited Partnership, holds the remaining units as a limited partner. Stanley K. Tanger, founder of the Company, was the sole general partner of the Tanger Family Limited Partnership from its inception until August 2010. Subsequently, Stanley K. Tanger transferred his general partnership interest in the Tanger Family Limited Partnership to the Stanley K. Tanger Marital Trust. See Note 19 for further discussion.

As of September 30, 2010, the Company, through its ownership of the GP Trust and LP Trust, owned 20,243,417 units of the Operating Partnership and the Tanger Family Limited Partnership owned 3,033,305 units. Each Tanger Family Limited Partnership unit is exchangeable for two of the Company's common shares, subject to certain limitations to preserve the Company's REIT status. Prior to the Company's two for one share split on December 28, 2004, the exchange ratio was one for one.

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 the 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 few differences between the Company and the Operating Partnership, which are reflected in the disclosure in this report. We believe it is important to understand the 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 REIT. 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 substantially all the assets of the Company and holds the ownership interests in the Company's 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

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Partnership generates the capital required by the Company's business through the Operating Partnership's operations, by the Operating Partnership's incurrence of indebtedness or through the issuance of partnership units of the Operating Partnership or its subsidiaries.

Noncontrolling interests, shareholder's equity and partners' capital are the main areas of difference between the consolidated financial statements of the Company and those of the Operating Partnership. The limited partnership interests in the Operating Partnership held by the Tanger Family Limited Partnership are accounted for as partners' capital in the Operating Partnership's financial statements and as noncontrolling interests in the Company's financial statements.

To help investors understand the significant differences between the Company and the Operating Partnership, this report presents the following separate sections for each of the Company and the Operating Partnership:

           
 
  • consolidated financial statements;
 
 
  • the following notes to the consolidated financial statements:
 
       
  • Debt;
 
       
  • Shareholders' Equity of the Company and Partners' Equity of the Operating Partnership;
 
       
  • Other Comprehensive Income of the Company and Other Comprehensive Income of the Operating Partnership;
 
       
  • Earnings Per Share and Earnings Per Unit and
 
 
  • 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.

In order to highlight the differences between the Company and the Operating Partnership, 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.

As the 100% owner of Tanger GP Trust, the general partner with control of the Operating Partnership, the Company consolidates the Operating Partnership for financial reporting purposes. The separate discussions of the Company and the Operating Partnership in this report should be read in conjunction with each other to understand the results of the Company on a consolidated basis and how management operates the Company.

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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, 2010 and December 31, 2009     6  
        Consolidated Statements of Operations - for the three and nine months ended September 30, 2010 and 2009     7  
        Consolidated Statements of Cash Flows - for the nine months ended September 30, 2010 and 2009     8  
                 
        FINANCIAL STATEMENTS OF TANGER PROPERTIES LIMITED PARTNERSHIP (Unaudited)        
        Consolidated Balance Sheets - as of September 30, 2010 and December 31, 2009     9  
        Consolidated Statements of Operations - for the three and nine months ended September 30, 2010 and 2009     10  
        Consolidated Statements of Cash Flows - for the nine months ended September 30, 2010 and 2009     11  
                 
        Notes to Consolidated Financial Statements of Tanger Factory Outlet Centers, Inc and Tanger Properties Limited Partnership     12  
           
  Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations     27  
           
  Item 3. Quantitative and Qualitative Disclosures about Market Risk     42  
           
  Item 4. Controls and Procedures (Tanger Factory Outlet Centers, Inc. and Tanger Properties Limited Partnership)     42  
     
  Part II. Other Information  
           
  Item 1. Legal Proceedings     42  
           
  Item 1A. Risk Factors     42  
           
  Item 6. Exhibits     43  
           
  Signatures     44  

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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 and per share data)
(Unaudited)

                                                                 
        September 30,     December 31,  
        2010     2009        
  ASSETS:              
        Rental property              
        Land   $ 141,576   $ 143,933  
        Buildings, improvements and fixtures     1,353,171     1,352,568  
        Construction in progress     58,952     11,369  
        1,553,699     1,507,870  
        Accumulated depreciation     (438,955 )   (412,530 )
        Rental property, net     1,114,744     1,095,340  
        Cash and cash equivalents     2,835     3,267  
        Rental property held for sale     424     ---  
        Investments in unconsolidated joint ventures     7,064     9,054  
        Deferred charges, net     33,365     38,867  
        Other assets     39,127     32,333  
              Total assets   $ 1,197,559   $ 1,178,861  
  LIABILITIES AND EQUITY              
  Liabilities              
        Debt              
        Senior, unsecured notes (net of discount of $2,695 and $858 respectively)   $ 554,515   $ 256,352  
        Mortgage payable (including a debt discount of $0 and $241, respectively)     ---     35,559  
        Unsecured term loan     ---     235,000  
        Unsecured lines of credit     54,800     57,700  
              609,315     584,611  
        Construction trade payables     31,051     14,194  
        Accounts payable and accrued expenses     40,060     31,916  
        Other liabilities     17,084     27,077  
               Total liabilities     697,510     657,798  
  Commitments and contingencies              
  Equity              
  Tanger Factory Outlet Centers, Inc.              
        Preferred shares, 7.5% Class C, liquidation preference $25 per share, 8,000,000 shares authorized, 3,000,000 shares issued and outstanding at September 30, 2010 and December 31, 2009     75,000     75,000  
        Common shares, $.01 par value, 150,000,000 shares authorized, 40,486,834 and 40,277,124 shares issued and outstanding at September 30, 2010 and December 31, 2009, respectively     405     403  
        Paid in capital     600,813     596,074  
        Distributions in excess of net income      (233,387 )   (202,997 )
        Accumulated other comprehensive income (loss)     1,828     (5,809 )
              Equity attributable to Tanger Factory Outlet Centers, Inc.     444,659     462,671  
  Equity attributable to noncontrolling interest in Operating Partnership     55,390     58,392  
                    Total equity     500,049     521,063  
                          Total liabilities and equity   $ 1,197,559   $ 1,178,861  
  The accompanying notes are an integral part of these consolidated financial statements.  

6


TANGER FACTORY OUTLET CENTERS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
(Unaudited)

                                         
                 
        Three months ended     Nine months ended  
        September 30,     September 30,  
        2010     2009     2010     2009  
  Revenues                          
        Base rentals   $ 44,857   $ 43,948   $ 132,322   $ 129,842  
        Percentage rentals     1,910     1,442     4,263     3,690  
        Expense reimbursements     20,139     19,020     58,087     56,511  
        Other income     2,567     5,638     6,138     9,256  
        Total revenues     69,473     70,048     200,810     199,299  
                             
  Expenses                          
        Property operating     22,567     21,218     67,039     63,488  
        General and administrative     6,403     15,763     17,832     27,515  
        Impairment charge     ---     ---     735     ---  
        Depreciation and amortization     16,805     20,164     60,388     59,752  
        Total expenses     45,775     57,145     145,994     150,755  
  Operating income     23,698     12,903     54,816     48,544  
  Interest expense     (8,767 )   (8,692 )   (24,666 )   (29,466 )
  Gain (loss) on early extinguishment of debt     ---     ---     (563 )   10,467  
  Gain on fair value measurement of previously held                          
        interest in acquired joint venture     ---     ---     ---     31,497  
  Loss on termination of interest rate swaps     ---     ---     (6,142 )   ---  
  Income before equity in earnings (losses) of                          
        unconsolidated joint ventures and                          
        discontinued operations     14,931     4,211     23,445     61,042  
  Equity in earnings (losses) of unconsolidated joint ventures     (75 )   68     (194 )   (1,346 )
  Income from continuing operations     14,856     4,279     23,251     59,696  
  Discontinued operations     (103 )   85     (103 )   (5,277 )
  Net income     14,753     4,364     23,148     54,419  
  Noncontrolling interest     (1,754 )   (407 )   (2,488 )   (7,938 )
  Net income attributable to                          
        Tanger Factory Outlet Centers, Inc.   $ 12,999   $ 3,957   $ 20,660   $ 46,481  
                             
  Basic earnings per common share:                          
        Income from continuing operations   $ .29   $ .06   $ .40   $ 1.33  
        Net income   $ .29   $ .06   $ .40   $ 1.20  
                             
  Diluted earnings per common share:                          
        Income from continuing operations   $ .29   $ .06   $ .40   $ 1.33  
        Net income   $ .29   $ .06   $ .40   $ 1.20  
                             
  Dividends paid per common share   $ .3875   $ .3825   $ 1.1575   $ 1.1450  
                             

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

7


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

                                         
        Nine Months Ended  
        September 30,  
        2010     2009  
  OPERATING ACTIVITIES              
        Net income   $ 23,148   $ 54,419  
        Adjustments to reconcile net income to net cash              
              provided by operating activities:              
              Depreciation and amortization (including discontinued operations)     60,475     60,262  
              Impairment charge (including discontinued operations)     846     5,200  
              Loss on termination of interest rate swap agreements     6,142     ---  
              Gain on sale of outparcels of land     (161 )   (3,293 )
              Amortization of deferred financing costs     916     1,169  
              (Gain) loss on early extinguishment of debt     563     (10,467 )
              Gain on fair value measurement of previous interest held in acquired joint venture     ---     (31,497 )
              Equity in losses of unconsolidated joint ventures     194     1,346  
              Compensation expense related share-based compensation     4,224     10,969  
              Amortization of debt (premiums) and discount, net     (197 )   972  
              Distributions of cumulative earnings from unconsolidated joint ventures     568     510  
              Net accretion of market rent rate adjustment     (576 )   (266 )
              Straight-line base rent adjustment     (2,171 )   (1,955 )
        Changes in other assets and liabilities:              
              Other assets     (4,461 )   948  
              Accounts payable and accrued expenses     7,688     7,103  
                    Net cash provided by operating activities     97,198     95,420  
  INVESTING ACTIVITIES              
        Additions to rental property     (55,588 )   (25,105 )
        Acquisition of remaining interests in unconsolidated joint venture, net of cash acquired     ---     (31,086 )
        Additions to investments in unconsolidated joint ventures     ---     (95 )
        Termination payments related to interest rate swap agreements     (6,142 )   ---  
        Distributions in excess of cumulative earnings from unconsolidated joint ventures     682     ---  
        Net proceeds from the sale of real estate     2,025     1,577  
        Additions to deferred lease costs     (3,066 )   (3,261 )
                    Net cash used in investing activities     (62,089 )   (57,970 )
  FINANCING ACTIVITIES              
        Cash dividends paid     (51,050 )   (42,527 )
        Distributions to noncontrolling interest in Operating Partnership     (7,022 )   (6,946 )
        Proceeds from issuance of common shares     ---     116,819  
        Proceeds from debt issuances     567,530     149,150  
        Repayments of debt     (543,300 )   (256,650 )
        Proceeds from tax incremental financing     ---     945  
        Additions to deferred financing costs     (2,592 )   (443 )
        Proceeds from exercise of options     893     1,626  
                    Net cash used in financing activities     (35,541 )   (38,026 )
        Net decrease in cash and cash equivalents     (432 )   (576 )
        Cash and cash equivalents, beginning of period     3,267     4,977  
        Cash and cash equivalents, end of period   $ 2,835   $ 4,401  

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

8


Item 1 - Financial Statements of Tanger Properties Limited Partnership

TANGER PROPERTIES LIMITED PARTNERSHIP AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands)
(Unaudited)

                                                                                   
        September 30,           December 31,  
        2010           2009  
  ASSETS:                                      
        Rental property                                      
        Land         141,576                     143,933  
        Buildings, improvements and fixtures           1,353,171                       1,352,568  
        Construction in progress           58,952                       11,369  
              1,553,699                       1,507,870  
        Accumulated depreciation           (438,955 )                     (412,530 )
        Rental property, net           1,114,744                       1,095,340  
        Cash and cash equivalents           2,779                       3,214  
        Rental property held for sale           424                       ---  
        Investments in unconsolidated joint ventures           7,064                       9,054  
        Deferred charges, net           33,365                       38,867  
        Other assets           38,859                       32,025  
              Total assets         1,197,235                     1,178,500  
  LIABILITIES AND PARTNERS' EQUITY        
  Liabilities                                      
              Debt                                      
        Senior, unsecured notes (net of discount of $2,695 and $858, respectively)         554,515                     256,352  
        Mortgage payable (including a debt discount of $0 and $241, respectively)           ---                       35,559  
        Unsecured term loan           ---                       235,000  
        Unsecured lines of credit           54,800                       57,700  
                    609,315                       584,611  
        Construction trade payables           31,051                       14,194  
        Accounts payable and accrued expenses           39,736                       31,555  
        Other liabilities           17,084                       27,077  
               Total liabilities           697,186                       657,437  
                                         
  Commitments and contingencies                                      
                                         
  Partners' Equity                                      
        General partner           5,284                       5,633  
        Limited partners           492,967                       522,425  
        Accumulated other comprehensive income (loss)           1,798                       (6,995 )
                    Total partners' equity           500,049                       521,063  
                          Total liabilities and partners' equity         1,197,235                     1,178,500  

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

9


TANGER PROPERITES LIMITED PARTNERSHIP AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per unit data)
(Unaudited)

                                               
        Three months ended     Nine months ended        
        September 30,     September 30,        
        2010     2009     2010     2009        
  Revenues                          
        Base rentals   $ 44,857   $ 43,948   $ 132,322   $ 129,842        
        Percentage rentals     1,910     1,442     4,263     3,690        
        Expense reimbursements     20,139     19,020     58,087     56,511        
        Other income     2,567     5,638     6,138     9,256        
        Total revenues     69,473     70,048     200,810     199,299        
                                   
  Expenses                                
        Property operating     22,567     21,218     67,039     63,488        
        General and administrative     6,403     15,763     17,832     27,515        
        Impairment charge     ---     ---     735     ---        
        Depreciation and amortization     16,805     20,164     60,388     59,752        
        Total expenses     45,775     57,145     145,994     150,755        
  Operating income     23,698     12,903     54,816     48,544        
  Interest expense     (8,767 )   (8,692 )   (24,666 )   (29,466 )      
  Gain (loss) on early extinguishment of debt     ---     ---     (563 )   10,467        
  Gain on fair value measurement of previously held interest in acquired joint venture     ---     ---     ---     31,497        
  Loss on termination of interest rate swaps     ---     ---     (6,142 )   ---        
  Income before equity in earnings (losses) of                                
        unconsolidated joint ventures and                                
        discontinued operations     14,931     4,211     23,445     61,042        
  Equity in earnings (losses) of unconsolidated joint ventures     (75 )   68     (194 )   (1,346 )      
  Income from continuing operations     14,856     4,279     23,251     59,696        
  Discontinued operations     (103 )   85     (103 )   (5,277 )      
  Net income     14,753     4,364     23,148     54,419        
  Net income available to limited partners     14,616     4,332     22,954     54,014        
  Net income available to general partner   $ 137   $ 32   $ 194   $ 405        
                                   
  Basic earnings per common unit:                                
        Income from continuing operations   $ .57   $ .12   $ .80   $ 2.70        
        Net income   $ .57   $ .12   $ .80   $ 2.44        
                                   
  Diluted earnings per common unit:                                
        Income from continuing operations   $ .57   $ .12   $ .80   $ 2.69        
        Net income   $ .57   $ .12   $ .80   $ 2.43        
                                   
  Distribution paid per common unit   $ .775   $ .765   $ 2.315   $ 2.290        
                                   

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,  
        2010     2009  
  OPERATING ACTIVITIES              
        Net income   $ 23,148   $ 54,419  
        Adjustments to reconcile net income to net cash              
              provided by operating activities:              
              Depreciation and amortization (including discontinued operations)     60,475     60,262  
              Impairment charge (including discontinued operations)     846     5,200  
              Loss on termination of interest rate swap agreements     6,142     ---  
              Gain on sale of outparcels of land     (161 )   (3,293 )
              Amortization of deferred financing costs     916     1,169  
              (Gain) loss on early extinguishment of debt     563     (10,467 )
              Gain on fair value measurement of previous interest held in acquired joint venture     ---     (31,497 )
              Equity in losses of unconsolidated joint ventures     194     1,346  
              Equity-based compensation expense     4,224     10,969  
              Amortization of debt premiums and discount, net     (197 )   972  
              Distributions of cumulative earnings from unconsolidated joint ventures     568     510  
              Net accretion of market rent rate adjustment     (576 )   (266 )
              Straight-line base rent adjustment     (2,171 )   (1,955 )
        Changes in other assets and liabilities:              
              Other assets     (4,501 )   1,134  
              Accounts payable and accrued expenses     7,725     6,939  
                    Net cash provided by operating activities     97,195     95,442  
  INVESTING ACTIVITIES              
        Additions to rental property     (55,588 )   (25,105 )
        Acquisition of remaining interests in unconsolidated joint venture, net of cash acquired     ---     (31,086 )
        Additions to investments in unconsolidated joint ventures     ---     (95 )
        Termination payments related to interest rate swap agreements     (6,142 )   ---  
        Distributions in excess of cumulative earnings from unconsolidated joint ventures     682     ---  
        Net proceeds from the sale of real estate     2,025     1,577  
        Additions to deferred lease costs     (3,066 )   (3,261 )
                    Net cash used in investing activities     (62,089 )   (57,970 )
  FINANCING ACTIVITIES              
        Cash distributions paid     (58,072 )   (49,473 )
        Contributions from partners     ---     116,819  
        Proceeds from debt issuances     567,530     149,150  
        Repayments of debt     (543,300 )   (256,650 )
        Proceeds from tax incremental financing     ---     945  
        Additions to deferred financing costs     (2,592 )   (443 )
        Proceeds from exercise of options     893     1,626  
                    Net cash used in financing activities     (35,541 )   (38,026 )
        Net decrease in cash and cash equivalents     (435 )   (554 )
        Cash and cash equivalents, beginning of period     3,214     4,952  
        Cash and cash equivalents, end of period   $ 2,779   $ 4,398  

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 SUBSIDIAIRES
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. We are a fully-integrated, self-administered and self-managed real estate investment trust, or 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, 2010, we owned and operated 30 outlet centers, with a total gross leasable area of approximately 8.9 million square feet. We also operated and had partial ownership interests in two outlet centers totaling approximately 948,000 square feet.

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, the Tanger GP Trust and the Tanger LP Trust. The Tanger GP Trust controls the Operating Partnership as its sole general partner. The Tanger LP Trust holds a limited partnership interest. The Tanger family, through its ownership of the Tanger Family Limited Partnership holds the remaining units as a limited partner.

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 separate Annual Reports on Form 10-K for the year ended December 31, 2009. The December 31, 2009 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 Securities and Exchange Commission's, or the SEC, rules and regulations, although management believes that the disclosures are adequate to make the information presented not misleading.

Investments in real estate joint ventures that we do not control are accounted for using the equity method of accounting. These investments are recorded initially at cost and subsequently adjusted for our equity in the venture's net income (loss), cash contributions, distributions and other adjustments required under the equity method of accounting. These investments are evaluated for impairment when necessary. Control is determined using an evaluation based on accounting standards related to the consolidation of joint ventures and variable interest entities. For joint ventures that are defined as variable interest entities, the primary beneficiary consolidates the entity.

3. Development of Rental Properties

New Development

During the third quarter of 2010, construction continued on our development site in Mebane, North Carolina in preparation for our scheduled November 5, 2010 grand opening. As of October 31, 2010, we had signed leases or leases out for signature for 100% of the total square feet of the outlet center.

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Redevelopment at Existing Outlet Centers

During the second quarter of 2010, we completed the demolition of our Hilton Head I center in Bluffton, South Carolina. The redevelopment of the outlet center is currently underway and as of October 31, 2010 we had leases signed or out for signature on approximately 73% of the leasable square feet. When completed, the new 176,000 square foot center, with an additional four outparcel pads, will be the first LEED certified green shopping center in Beaufort County, SC. Our $50.0 million redevelopment is projected to open during the second half of 2011. As a result of the demolition and redevelopment plan, a total of $9.2 million in depreciation and amortization was recognized in the first quarter of 2010 to completely depreciate the existing center. The demolition was completed during the second quarter of 2010, at which time the fully depreciated assets were written-off.

Commitments to complete construction of our new developments, redevelopments and other capital expenditure requirements amounted to approximately $19.7 million at September 30, 2010. Commitments for construction represent only those costs contractually required to be paid by us.

Interest costs capitalized during the three months ended September 30, 2010 and 2009 amounted to $583,000 and $0, respectively, and for the nine months ended September 30, 2010 and 2009 amounted to $1.1 million and $84,000, respectively.

Impairment Charges

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.

Seymour, Indiana 2010

In 2005 we sold our outlet center located in Seymour, Indiana, but retained various outparcels of land at the development site, some of which we sold in recent years. In February 2010, our Board of Directors approved the sale of the remaining parcels of land in Seymour, IN. As a result of this Board approval and an approved plan to actively market the land, we accounted for the land as "held for sale" and recorded a non-cash impairment charge of approximately $735,000 in our consolidated statement of operations which equaled the excess of the carrying amount of the land over its fair value. We determined the fair value using a market approach considering offers that we obtained for all the various parcels less estimated closing costs. See Note 18, Fair Value Measurements, for further discussion.

Commerce I, Georgia 2010

In May 2010, the Company's Board of Directors approved the plan for our management to sell our Commerce I, Georgia center. The majority of the center was sold in July 2010 for net proceeds of approximately $1.4 million. The remaining portion of the center, classified as held for sale in the consolidated balance sheets, is under contract and is expected to close in the near future. During the third quarter of 2010, we recorded an impairment of approximately $111,000 to lower the basis of the center to its approximate fair value based on the actual sales contracts related to the center. In the second quarter of 2009, we recorded an impairment charge for this property of $5.2 million which equaled the excess of the property's carrying value over its estimated fair value at that time. We determined the fair value in 2009 using a market approach whereby we considered the prevailing market income capitalization rates and sales data for transactions involving similar assets. The above mentioned impairment charges are included in discontinued operations in the consolidated income statements.

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Land Outparcel Sales

Gains on sale of outparcels are included in other income in the consolidated statements of operations. Cost is allocated to the outparcels based on the relative market value method. Below is a summary of outparcel sales that we completed during the three and nine months ended September 30, 2010 and 2009, respectively. (in thousands, except number of outparcels):

                                   
              Three Months Ended     Nine Months Ended  
              September 30,     September 30,  
              2010     2009(1)     2010     2009 (1)
  Number of outparcels           ---     1     3     1  
  Net proceeds         $ ---   $ 1,577   $ 602   $ 1,577  
  Gains on sales included in other income         $ ---   $ 3,292   $ 161   $ 3,292  

(1) A condition of the sale was the assumption by the buyer of approximately $2.6 million of the tax increment financing liability that is associated with the Washington, Pennsylvania property.

4. Investments in Unconsolidated Real Estate Joint Ventures

Our investments in unconsolidated joint ventures as of September 30, 2010 and December 31, 2009 aggregated $7.1 million and $9.1 million, respectively. We have evaluated the accounting treatment for each of the joint ventures and have concluded based on the current facts and circumstances that the equity method of accounting should be used to account for the individual joint ventures. At September 30, 2010, we were members of the following unconsolidated real estate joint ventures:

                                         
  Joint Venture     Center Location     Opening Date     Ownership %     Square Feet     Carrying Value of Investment (in millions)     Total Joint Venture Debt (in millions)  
  Deer Park     Deer Park, Long Island, New York     2008     33.3%     683,033     $2.1     $269.3  
                                         
  Wisconsin Dells     Wisconsin Dells, Wisconsin     2006     50%     265,061     $5.0     $24.8  
                                         

These investments are recorded initially at cost and subsequently adjusted for our equity in the venture's net income (loss), cash contributions, distributions and other adjustments required by the equity method of accounting as discussed below.

The following management, leasing and marketing fees were recognized from services provided to Wisconsin Dells and Deer Park (in thousands):

                                         
              Three Months Ended     Nine Months Ended  
              September 30,     September 30,  
              2010     2009     2010     2009  
  Fee:                                
        Management and leasing   $ 464   $ 462   $ 1,399   $ 1,427  
        Marketing           39     35     119     114  
  Total Fees         $ 503   $ 497   $ 1,518   $ 1,541  

Our investments in real estate joint ventures are reduced by 50% of the profits earned for leasing services provided to Wisconsin Dells and by 33.3% of the profits earned for leasing services provided to Deer Park. 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 are amortized over the various useful lives of the related assets.

On a periodic basis, we assess whether there are any indicators that the value of our investments in unconsolidated joint ventures may be impaired. An investment is impaired only if management's estimate of the value of the investment is less than the carrying value of the investments, and such decline in value is deemed to be other than temporary. To the extent impairment has occurred, the loss shall be measured as the excess of the carrying amount of the investment over the fair value of the investment. Our estimates of fair value for each joint venture investment are based on a number of assumptions that are subject to economic and market uncertainties including, among others, demand for space, competition for tenants, changes in market rental rates

14


and operating costs of the property. As these factors are difficult to predict and are subject to future events that may alter our assumptions, the values estimated by us in our impairment analysis may not be realized. As of September 30, 2010, we do not believe that any of our equity investments were impaired.

In accordance with amended guidance related to the consolidation of variable interest entities which became effective January 1, 2010, we performed an analysis of all of our real estate joint ventures to determine whether they would qualify as variable interest entities, or VIE, and whether the joint venture should be consolidated or accounted for as an equity method investment in an unconsolidated joint venture. As a result of our qualitative assessment, we concluded that Deer Park is a VIE and Wisconsin Dells is not a VIE. Deer Park is considered a VIE because it does not meet the criteria of the members having a sufficient equity investment at risk.

After making the determination that Deer Park was a VIE, we performed an assessment to determine if we would be considered the primary beneficiary and thus be required to consolidate Deer Park's balance sheets and results of operations. This assessment was based upon whether we had the following:

           
  a.     The power to direct the activities of the variable interest entity that most significantly impact the entity's economic performance  
  b.     The obligation to absorb losses of the entity that could potentially be significant to the variable interest entity or the right to receive benefits from the entity that could potentially be significant to the variable interest entity  

Based on the provisions of the operating and management agreements of Deer Park, we determined that no one member alone has the power to direct the significant activities that affect the economic performance of Deer Park.

We have determined that all three partners share power in the decisions that most significantly impact Deer Park, as well as the financial rights and obligations, and therefore we are not required to consolidate Deer Park. Our equity method investment in Deer Park as of September 30, 2010 was approximately $2.1 million. We are unable to estimate our maximum exposure to loss at this time. Upon completion of the final phase of the project, the debt is expected to be approximately $284.0 million, of which our proportionate share would be approximately $94.7 million. A calculation of the maximum loss would involve variables such as the loan balance amount and any proceeds from the sale of the property.

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