Tanger Inc. Quarterly report pursuant to Section 13 or 15(d)

Quarterly report pursuant to Section 13 or 15(d)

Investments in Unconsolidated Real Estate Joint Ventures

Investments in Unconsolidated Real Estate Joint Ventures

3 Months Ended

Mar. 31, 2014

Investments In Unconsolidated Real Estate Joint Ventures [Abstract]

Investments in Unconsolidated Real Estate Joint Ventures

Our investments in unconsolidated joint ventures as of March 31, 2014 and December 31, 2013 aggregated $171.0 million and $140.2 million, respectively. We have concluded based on the current facts and circumstances that the equity method of accounting should be used to account for each of the individual joint ventures below. At March 31, 2014 and December 31, 2013, we were members of the following unconsolidated real estate joint ventures:



As of March 31, 2014
Joint Venture	Center Location	Ownership %		Square Feet	Carrying Value of Investment (in millions)		Total Joint Venture Debt (in millions)
Charlotte	Charlotte, NC	50.0	%	—	$	20.7	$	—
Galveston/Houston	Texas City, TX	50.0	%	352,705	7.2		65.0
National Harbor	Washington D.C. Metro Area	50.0	%	338,786	17.3		60.9
RioCan Canada	Various	50.0	%	432,448	86.7		17.1
Savannah ⁽¹⁾	Savannah, GA	50.0	%	—	20.8		—
Westgate	Glendale, AZ	58.0	%	331,739	15.8		43.6
Wisconsin Dells	Wisconsin Dells, WI	50.0	%	265,086	2.4		24.3
Other				—	0.1		—
					$	171.0	$	210.9

(1)

Based on capital contribution and distribution provisions in the joint venture agreement, we expect our economic interest in the venture's cash flow to be greater than indicated in the Tanger Share column, which in this case, states our legal interest in this venture. Our economic interest may fluctuate based on a number of factors,including mortgage financing, partnership capital contributions and distributions, and proceeds from gains or losses of asset sales.



As of December 31, 2013
Joint Venture	Center Location	Ownership %		Square Feet	Carrying Value of Investment (in millions)		Total Joint Venture Debt (in millions)
Charlotte	Charlotte, NC	50.0	%	—	$	11.6	$	—
Galveston/Houston	Texas City, TX	50.0	%	352,705	7.4		65.0
National Harbor	Washington D.C. Metro Area	50.0	%	336,286	16.7		52.4
RioCan Canada	Various	50.0	%	432,836	85.7		17.9
Westgate	Glendale, AZ	58.0	%	331,739	16.1		43.1
Wisconsin Dells	Wisconsin Dells, WI	50.0	%	265,086	2.5		24.3
Other				—	0.2		—
					$	140.2	$	202.7

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 described below.

Fees we received for various services provided to our unconsolidated joint ventures were recognized as follows (in thousands):



	Three months ended
	March 31,
	2014		2013
Fee:
Development and leasing	$	8	$	69
Loan guarantee	40		40
Management	409		496
Marketing	109		110
Total Fees	$	566	$	715

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 $2.3 million and $1.6 million as of March 31, 2014 and December 31, 2013) are amortized over the various useful lives of the related assets.

Charlotte, North Carolina

In May 2013, we formed a 50/50 joint venture for the development of an outlet center in the Charlotte, NC market. Subsequently, during the third quarter of 2013, the joint venture began construction on the outlet center which will be located eight miles southwest of uptown Charlotte at the interchange of I-485 and Steele Creek Road (NC Highway 160), the two major thoroughfares for the city. The approximately 400,000 square foot project will feature approximately 90 brand name and designer stores and is expected to open during the third quarter of 2014.

As of March 31, 2014, we and our partner had each contributed approximately $20.3 million in cash to the joint venture to fund development activities. We are providing development services to the project; and with our partner, are jointly providing leasing services. Our partner will provide property management and marketing services to the center once open.

RioCan Canada

We have entered into a 50/50 co-ownership agreement with RioCan Real Estate Investment Trust ("RioCan Joint Venture") to develop and acquire outlet centers in Canada. Any projects developed or acquired will be branded as Tanger Outlet Centers. We have agreed to provide leasing and marketing services to the venture and RioCan will provide development and property management services.

In March of 2013, the RioCan Joint Venture acquired the land adjacent to the existing Cookstown Outlet Mall for $13.9 million. The land is being used for an expansion of the Cookstown Outlet Mall which began in May 2013. The expansion, which is expected to open in the fourth quarter of 2014, will add approximately 153,000 square feet and approximately 35 new brand name and designer outlet stores to the center.

Also, during the second quarter of 2013, the joint venture purchased land for $28.7 million and broke ground on Tanger Outlets Ottawa, the first ground up development of a Tanger Outlet Center in Canada. Located in suburban Kanata off the TransCanada Highway (Highway 417) at Palladium Drive, this center will contain approximately 303,000 square feet and will feature approximately 80 brand name and designer outlet stores. The center is currently expected to open in the fourth quarter of 2014. As of March 31, 2014, we and our co-owner had each contributed $17.2 million in cash to fund development activities on these two projects.

Savannah, Georgia

In January 2014, we announced our plans to develop Tanger Outlets Savannah through a joint venture arrangement. The center will include approximately 385,000 square feet. The site is located on I-95, just north of I-16 in Pooler, Georgia, adjacent to the City of Savannah, and near the Savannah International Airport. As of March 31, 2014, our equity contributions totaled $20.9 million and our partner's equity contribution totaled $7.4 million. Contributions we make in excess of $7.4 million will earn a preferred rate of return equal to 8% from the date the contributions are made until the outlet center’s grand opening date, and then 10% annually thereafter.

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	March 31, 2014			December 31, 2013
Assets
Land	$	65,242		$	66,020
Buildings, improvements and fixtures	325,115			327,972
Construction in progress, including land	147,099			86,880
	537,456			480,872
Accumulated depreciation	(33,487		)	(29,523		)
Total rental property, net	503,969			451,349
Cash and cash equivalents	22,678			22,704
Deferred lease costs, net	21,839			19,281
Deferred debt origination costs, net	1,834			1,737
Prepaids and other assets	9,898			9,107
Total assets	$	560,218		$	504,178
Liabilities and Owners' Equity
Mortgages payable	$	210,932		$	202,688
Construction trade payables	20,295			19,370
Accounts payable and other liabilities	10,221			8,540
Total liabilities	241,448			230,598
Owners' equity	318,770			273,580
Total liabilities and owners' equity	$	560,218		$	504,178



	Three months ended
Condensed Combined Statements of Operations	March 31,
- Unconsolidated Joint Ventures	2014			2013
Revenues	$	16,755		$	21,395
Expenses
Property operating	6,646			8,803
General and administrative	129			485
Acquisition costs	—			421
Depreciation and amortization	4,974			7,384
Total expenses	11,749			17,093
Operating income	5,006			4,302
Interest expense	(1,226		)	(4,052		)
Net income	$	3,780		$	250

The Company and Operating Partnership's share of:
Net income	$	1,933		$	590
Depreciation and impairment charge (real estate related)	$	2,605		$	3,173

- Definition

The entire disclosure for equity method investments and joint ventures. Equity method investments are investments that give the investor the ability to exercise significant influence over the operating and financial policies of an investee. Joint ventures are entities owned and operated by a small group of businesses as a separate and specific business or project for the mutual benefit of the members of the group.

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