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, 2015

Investments In Unconsolidated Real Estate Joint Ventures [Abstract]

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 March 31, 2015
Joint Venture	Outlet Center Location	Ownership %		Square Feet (in 000's)	Carrying Value of Investment (in millions)			Total Joint Venture Debt (in millions)
Columbus	Columbus, OH	50.0	%	—	$	2.0		$	—
Galveston/Houston	Texas City, TX	50.0	%	353	0.6			65.0
National Harbor	National Harbor, MD	50.0	%	339	9.1			83.7
RioCan Canada	Various	50.0	%	870	132.0			14.3
Savannah ⁽¹⁾	Savannah, GA	50.0	%	—	47.4			55.2
Westgate	Glendale, AZ	58.0	%	411	13.9			62.0
Other				—	0.1			—
					$	205.1		$	280.2

Charlotte⁽²⁾	Charlotte, NC	50.0	%	398	$	(0.6	)	$	90.0
					$	(0.6	)	$	90.0



As of December 31, 2014
Joint Venture	Center Location	Ownership %		Square Feet (in 000's)	Carrying Value of Investment (in millions)			Total Joint Venture Debt (in millions)
Galveston/Houston	Texas City, TX	50.0	%	353	$	1.3		$	65.0
National Harbor	National Harbor, MD	50.0	%	339	9.5			83.7
RioCan Canada	Various	50.0	%	870	132.5			15.7
Savannah ⁽¹⁾	Savannah, GA	50.0	%	—	46.5			25.5
Westgate	Glendale, AZ	58.0	%	381	14.3			54.0
Wisconsin Dells	Wisconsin Dells, WI	50.0	%	265	2.4			24.3
Other				—	1.5			—
					$	208.0		$	268.2

Charlotte⁽²⁾	Charlotte, NC	50.0	%	398	$	(2.2	)	$	90.0
					$	(2.2	)	$	90.0

(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 the ownership percentage indicated above, 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.


(2)	The negative carrying value is due to the distributions of proceeds from a mortgage loan, as well as quarterly distributions of excess cash flow, exceeding the original contributions from the partners.

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



	Three months ended
	March 31,
	2015		2014
Fee:
Development and leasing	$	581	$	8
Loan guarantee	196		40
Management and marketing	506		518
Total Fees	$	1,283	$	566

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 $4.4 million as of March 31, 2015 and December 31, 2014) are amortized over the various useful lives of the related assets.

Columbus, Ohio

We and our joint venture partner closed on the acquisition of land on April 29, 2015 and plan to start building imminently in the Columbus, Ohio market. The partners currently expect to complete construction in time to open the center during the second quarter of 2016. We are providing property management, marketing and leasing services to the outlet center.

Savannah, Georgia

In January 2014, we announced a joint venture arrangement to develop Tanger Outlets Savannah. The center, which opened on April 16, 2015, includes approximately 377,000 square feet, and is located on I-95 at the Savannah/Hilton Head International Airport interchange. As of March 31, 2015, our equity contributions totaled $45.2 million and our partner’s equity contributions totaled $8.3 million. Contributions we make in excess of our partners' equity contributions 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.

The joint venture has an interest only mortgage loan with the ability to borrow up to $97.7 million, of which $4.7 million will be available for future expansion, at an interest rate of LIBOR + 1.65%. The loan initially matures on May 21, 2017, with two, one -year extension options. As of March 31, 2015, the balance on the loan was $55.2 million. We are providing development, management and marketing services to the joint venture; and with our partner, are jointly providing leasing services to the outlet center.

Westgate, Glendale, Arizona

During the first quarter, the joint venture completed the remaining 28,000 square feet of a 78,000 square foot expansion of the existing property which brought the size of the outlet center to approximately 411,000 square feet. Construction commenced on the expansion during the second quarter of 2014 and was funded with borrowings under the amended Westgate mortgage loan. The joint venture's amended and restated construction loan has the ability to borrow up to $62.0 million and matures in June 2015 with the option to extend the maturity date for two additional years. On April 1, 2015, the joint venture exercised the option to extend the maturity date of the loan to June 27, 2017. As of March 31, 2015, the balance on the loan was $62.0 million.

Tanger Outlets Westgate opened in November 2012 and was developed through, and currently owned by, a joint venture that was formed in May 2012. We are providing property management, construction supervision, marketing and leasing services to the joint venture.

Wisconsin Dells, Wisconsin

In February 2015, we sold our equity interest in the joint venture that owned an outlet center in Wisconsin Dells, Wisconsin for approximately $15.6 million, representing our share of the sales price totaling $27.7 million less our share of the outstanding debt, which totaled $12.1 million. As a result of this transaction, we recorded a gain of approximately $13.7 million in the first quarter of 2015, which represents the difference between the carrying value of our equity method investment and the net proceeds received.

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, 2015			December 31, 2014
Assets
Land	$	91,922		$	102,601
Buildings, improvements and fixtures	496,201			542,501
Construction in progress, including land	128,529			104,780
	716,652			749,882
Accumulated depreciation	(38,236		)	(48,233		)
Total rental property, net	678,416			701,649
Cash and cash equivalents	56,119			46,917
Deferred lease costs, net	19,345			21,234
Deferred debt origination costs, net	5,256			5,995
Prepaids and other assets	14,648			12,766
Total assets	$	773,784		$	788,561
Liabilities and Owners' Equity
Mortgages payable	$	370,244		$	358,219
Accounts payable and other liabilities	46,971			70,795
Total liabilities	417,215			429,014
Owners' equity	356,569			359,547
Total liabilities and owners' equity	$	773,784		$	788,561



	Three months ended
Condensed Combined Statements of Operations	March 31,
- Unconsolidated Joint Ventures	2015			2014
Revenues	$	23,965		$	16,755
Expenses
Property operating	9,144			6,646
General and administrative	218			129
Depreciation and amortization	7,822			4,974
Total expenses	17,184			11,749
Operating income	6,781			5,006
Interest expense	(1,770		)	(1,226		)
Interest and other income	8			—
Net income	$	5,019		$	3,780

The Company and Operating Partnership's share of:
Net income	$	2,543		$	1,933
Depreciation and impairment charge (real estate related)	$	4,076		$	2,605

- 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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