Tanger Inc. Annual report pursuant to Section 13 and 15(d)

Annual report pursuant to Section 13 and 15(d)

Equity-Based Compensation of the Operating Partnership

Equity-Based Compensation of the Operating Partnership (Tanger Properties Limited Partnership [Member])

12 Months Ended

Dec. 31, 2012

Tanger Properties Limited Partnership [Member]

Equity-Based Compensation of the Operating Partnership

As discussed in Note 16, the Operating Partnership and the Company have a joint plan whereby equity based and performance based awards may be granted to directors, officers and employees. When common shares are issued by the Company, the Operating Partnership issues corresponding units to the Company based on the current exchange ratio as provided by the Operating Partnership agreement. Based on the current exchange ratio, each unit in the Operating Partnership is equivalent to four common shares of the Company. Therefore, when the Company grants an equity based award, the Operating Partnership treats each award as having been granted by the Operating Partnership. The maximum units that may be issued to the Company due to equity awards granted by the Company are limited by the Plan to 15.4 million of the Company's common shares, or in terms of units, 3,850,000 units. Units available to satisfy future equity based awards by the Company at December 31, 2012 totaled 886,355.

The tables below set forth the unit based compensation expense and other related information as recognized in the Operating Partnership's consolidated financial statements.

We recorded equity-based compensation expense in general and administrative expenses in the consolidated statements of operations for the years ended December 31, 2012, 2011 and 2010, respectively, as follows (in thousands):



	2012		2011		2010
Restricted units ⁽¹⁾	$	8,485	$	5,227	$	4,095
Notional unit performance awards	1,970		1,885		1,753
Options	209		179		—
Total equity based compensation	$	10,664	$	7,291	$	5,848

(1) For the twelve months ended December 31, 2012, includes approximately $1.3 million of compensation expense related to 11,250 units issued related to a restricted share grant that vested immediately pursuant to the Employment Agreement as described in footnote 16.

Equity-based compensation expense capitalized as a part of rental property and deferred lease costs during the years ended December 31, 2012, 2011 and 2010 was $368,000, $234,000 and $393,000, respectively.

Options outstanding at December 31, 2012 had the following weighted average exercise prices and weighted average remaining contractual lives:



	Options Outstanding				Options Exercisable
Range of exercise prices	Options	Weighted average exercise price		Weighted remaining contractual life in years	Options	Weighted average exercise price
$38.83	10,250	$	38.83	1.32	10,250	$	38.83
$47.25	3,000	47.25		1.84	3,000	47.25
$104.24	40,700	104.24		8.14	7,000	104.24
	53,950	$	88.64	6.50	20,250	$	62.69

A summary of option activity under our Amended and Restated Incentive Award Plan as of December 31, 2012 and changes during the year then ended is presented below (aggregate intrinsic value amount in thousands):



Options	Units		Weighted-average exercise price		Weighted-average remaining contractual life in years	Aggregate intrinsic value
Outstanding as of December 31, 2011	65,300		$	83.66
Granted	—		—
Exercised	(9,425	)	50.96
Forfeited	(1,925	)	104.24
Outstanding as of December 31, 2012	53,950		$	88.64	6.50	$	2,583

Vested and Expected to Vest as of
December 31, 2012	45,691		$	85.82	6.20	$	2,316

Exercisable as of December 31, 2012	20,250		$	62.69	3.74	$	1,495

The total intrinsic value of options exercised during the years ended December 31, 2012, 2011 and 2010 was $716,000, $652,000 and $1.7 million, respectively.

The following table summarizes information related to unvested restricted units outstanding as of December 31, 2012:



Unvested Restricted Units	Number of units		Weighted average grant date fair value
Unvested at December 31, 2011	197,834		$	83.70
Granted	142,750		111.59
Vested	(77,336	)	87.69
Forfeited	(1,250	)	118.00
Unvested at December 31, 2012	261,998		$	97.56

The total value of restricted units vested during the years ended 2012, 2011 and 2010 was $10.6 million, $7.1 million and $4.7 million, respectively.

As of December 31, 2012, there was $20.0 million of total unrecognized compensation cost related to unvested equity-based compensation arrangements granted under the Plan. That cost is expected to be recognized over a weighted-average period of 3.4 years.