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

6 Months Ended

Jun. 30, 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 June 30, 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	%	—	$	7.3		$	—
National Harbor	National Harbor, MD	50.0	%	339	9.4			83.7
RioCan Canada	Various	50.0	%	870	137.7			14.4
Savannah ⁽¹⁾	Savannah, GA	50.0	%	377	46.0			70.1
Westgate	Glendale, AZ	58.0	%	411	12.5			62.0
					$	212.9		$	230.2

Charlotte⁽²⁾	Charlotte, NC	50.0	%	398	$	(0.6	)	$	90.0
Galveston/Houston ⁽²⁾	Texas City, TX	50.0	%	353	(0.4		)	65.0
					$	(1.0	)	$	155.0



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 mortgage loans and 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				Six months ended
	June 30,				June 30,
	2015		2014		2015		2014
Fee:
Development and leasing	$	727	$	70	$	1,307	$	78
Loan guarantee	187		146		383		187
Management and marketing	813		542		1,320		1,059
Total Fees	$	1,727	$	758	$	3,010	$	1,324

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 $4.0 million and $4.4 million as of June 30, 2015 and December 31, 2014, respectively) are amortized over the various useful lives of the related assets.

Columbus, Ohio

During the second quarter of 2015, the joint venture purchased land for approximately $8.9 million and began construction on Tanger Outlets Columbus. We and our partner currently expect to complete construction in time to open the center during the second quarter of 2016. Our partner is providing development services to the joint venture and we, along with our partner, are providing joint leasing services. Once the center opens, we will provide property management, marketing and leasing services to the joint venture.

Savannah, Georgia

In January 2014, we announced a joint venture arrangement to develop Tanger Outlets Savannah. The center, which opened in April 2015, includes approximately 377,000 square feet. As of June 30, 2015, our equity contributions totaled $45.8 million and our partner’s equity contributions totaled $8.3 million. Contributions we made in excess of our partners' equity contributions earned a preferred rate of return equal to 8% from the date the contributions were made until the outlet center’s grand opening in April 2015, and will earn 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 June 30, 2015, the balance on the loan was $70.1 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 of 2015, 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. The loan initially matured in June 2015, and during the second quarter of 2015 the joint venture exercised the two year option to extend the maturity date of the loan to June 2017. As of June 30, 2015, the balance on the loan was $62.0 million.

Tanger Outlets Westgate opened in November 2012 and was developed through, and is 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	June 30, 2015			December 31, 2014
Assets
Land	$	107,503		$	102,601
Buildings, improvements and fixtures	630,777			542,501
Construction in progress, including land	27,628			104,780
	765,908			749,882
Accumulated depreciation	(46,203		)	(48,233		)
Total rental property, net	719,705			701,649
Cash and cash equivalents	47,793			46,917
Deferred lease costs, net	20,607			21,234
Deferred debt origination costs, net	4,706			5,995
Prepaids and other assets	12,833			12,766
Total assets	$	805,644		$	788,561
Liabilities and Owners' Equity
Mortgages payable	$	385,275		$	358,219
Accounts payable and other liabilities	45,490			70,795
Total liabilities	430,765			429,014
Owners' equity	374,879			359,547
Total liabilities and owners' equity	$	805,644		$	788,561



	Three months ended						Six months ended
Condensed Combined Statements of Operations	June 30,						June 30,
- Unconsolidated Joint Ventures	2015			2014			2015			2014
Revenues	$	26,189		$	16,079		$	50,153		$	32,834
Expenses
Property operating	11,167			6,624			20,311			13,270
General and administrative	90			27			308			156
Depreciation and amortization	8,556			4,564			16,378			9,538
Total expenses	19,813			11,215			36,997			22,964
Operating income	6,376			4,864			13,156			9,870
Interest expense	(2,216		)	(1,383		)	(3,980		)	(2,609		)
Interest and other income	5			—			13			—
Net income	$	4,165		$	3,481		$	9,189		$	7,261

The Company and Operating Partnership's share of:
Net income	$	2,046		$	1,788		$	4,589		$	3,721
Depreciation expense (real estate related)	$	5,038		$	2,403		$	9,114		$	5,008