Annual report pursuant to Section 13 and 15(d)

Investments in Unconsolidated Real Estate Joint Ventures (Notes)

v2.4.0.6
Investments in Unconsolidated Real Estate Joint Ventures (Notes)
12 Months Ended
Dec. 31, 2011
Investments In Unconsolidated Real Estate Joint Ventures [Abstract]  
Equity Method Investments Disclosure [Text Block]
Investments in Unconsolidated Real Estate Joint Ventures

Our investments in unconsolidated joint ventures as of December 31, 2011 and 2010 aggregated $28.5 million and $6.4 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 December 31, 2011, we were members of the following unconsolidated real estate joint ventures:
Joint Venture
Center Location
Ownership %
Square Feet
Carrying Value of Investment (in millions)
Total Joint Venture Debt
(in millions)
Wisconsin Dells
Wisconsin Dells, WI
50.0
%
265,086

$
4.0

$
24.3

Deer Park
Deer Park,
Long Island NY
33.3
%
656,788

$
5.4

$
246.9

Deer Park Warehouse
Deer Park,
Long Island NY
33.3
%
29,253

$

$
2.3

Galveston/Houston
Texas City, TX
50.0
%

$
7.9


RioCan Canada
Various
50.0
%
159,391

$
10.0

$
29.7

National Harbor
Washington D.C. Metro Area
50.0
%

$
0.9

$

Other
 
 
 
$
0.3

$


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.

The following management, development, leasing and marketing fees were recognized from services provided to our unconsolidated joint ventures (in thousands):
 
 
Year Ended December 31,
 
 
2011
 
2010
 
2009
Fee:
 
 
 
 
 
 
Management and leasing
 
$
1,958

 
$
1,927

 
$
1,921

Marketing
 
163

 
154

 
147

Total Fees
 
$
2,121

 
$
2,081

 
$
2,068



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 are amortized over the various useful lives of the related assets.
Wisconsin Dells, Wisconsin

In March 2005, we established the 50/50 Wisconsin Dells joint venture to construct and operate a Tanger Outlet center in Wisconsin Dells, WI. The outlet center opened in August 2008. In December 2009, the joint venture extended its interest-only mortgage loan totaling $25.3 million to December 2012. The modified loan refinanced the original construction loan and bears interest based on the LIBOR plus 3.00%. The loan incurred by this unconsolidated joint venture is collateralized by its property as well as a limited joint and several guarantee which in total is limited to interest costs plus 50% of the principal. The loan had a balance of $24.3 million as of December 31, 2011.

Deer Park, Long Island, New York

In October 2003, we, and two other members each having a 33.3% ownership interest, established a joint venture to develop and own a shopping center in Deer Park, NY. The center opened in October 2008.
On December 22, 2011, Deer Park, closed on the refinancing of its mortgage and mezzanine loans. At the closing, Deer Park made a payment of $20.0 million towards the principal amount of the mortgage bringing the new balance outstanding to $231.9 million. The principal balance on the mezzanine loan remained at $15.0 million. The new interest rates for the mortgage and mezzanine loan are LIBOR plus 3.50% and LIBOR plus 5.00%, respectively. Each of the three partners made an equity contribution to Deer Park prior to closing of $6.4 million. The $20.0 million principal payment was made from a combination of these three equity contributions totaling $19.2 million and cash available within Deer Park. The maturity date of both the mortgage and the mezzanine loan is May 17, 2014.
Deer Park Warehouse, Long Island, New York
In June 2008, we, along with our partners in Deer Park, entered into a joint venture to purchase a warehouse adjacent to the Deer Park project described above for a total purchase price of $3.3 million. Deer Park Warehouse, in which we have a 33.3% ownership interest, is an unconsolidated joint venture. The interest-only mortgage loan for the warehouse matured on May 17, 2011 and the joint venture did not qualify for the one-year extension option. As a result, the joint venture has accrued interest at a default rate of 8.25% from May 17, 2011 to December 31, 2011, and is currently in negotiations with the lender. As of December 31, 2011, the outstanding principal balance under the warehouse mortgage was $2.3 million. In December 2011, the joint venture recorded an impairment charge of approximately $900,000 to lower the basis of the warehouse to its estimated fair market value.

Galveston/Houston, Texas

In June 2011, we announced the formation of a 50/50 joint venture with Simon Property Group, Inc. for the development of a Tanger Outlet Center south of Houston in Texas City, TX. When completed, we expect that the center will feature over 90 brand name and designer outlet stores in the first phase which will contain approximately 350,000 square feet, with room to expand to approximately 470,000 square feet. In July 2011, the joint venture acquired the land underlying the site for approximately $5.6 million. Ground breaking ceremonies were held on August 30, 2011. As of December 31, 2011, we have contributed $7.8 million in cash to the joint venture to fund development activities. We will provide property management and marketing services to the center and with our partners, will jointly provide development and leasing services.

RioCan Canadian Joint Venture

In January 2011, we announced that we entered into a letter of intent with RioCan Real Estate Investment Trust to form an exclusive joint venture for the acquisition, development and leasing of sites across Canada that are suitable for development or redevelopment as outlet shopping centers similar in concept and design to those within our existing U.S. portfolio. Subsequently, in July 2011, we finalized and executed the co-ownership documentation related to the joint venture. Through December 31, 2011, we have contributed approximately $1.0 million to fund pre-development and due diligence costs for various sites. Any projects developed will be co-owned by us and RioCan on a 50/50 basis and 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.

On December 9, 2011, the RioCan Canadian Joint Venture purchased the Cookstown Outlet Mall. The existing outlet center was acquired for $47.4 million, plus an additional $13.8 million for excess land upon the seller meeting certain conditions, for an aggregate purchase price of $61.2 million. RioCan will provide development and property management services to this existing outlet center and we will provide leasing and marketing services. In connection with the purchase, the joint venture assumed the in place financing of $29.6 million which carries an interest rate of 5.10% and matures on June 21, 2014.

National Harbor, Washington Metro Area

In May 2011, we announced the formation of a 50/50 joint venture agreement with The Peterson Companies for the development of Tanger Outlets at National Harbor in the Washington, D.C. Metro area. The resulting Tanger Outlet Center is expected to house approximately 80 outlet designer and name brand stores in a center measuring up to 350,000 square feet. In December 2011, both parties each made initial equity contributions of $850,000 to fund certain pre-development costs. We will provide property management, leasing and marketing services to the joint venture. We and The Peterson Companies will jointly provide site development and construction supervision services to the joint venture.

Condensed combined summary financial information of joint ventures accounted for using the equity method is as follows (in thousands):
Summary Balance Sheets- Unconsolidated Joint Ventures
 
 
 
 
 
 
2011
 
2010
Assets
 
 
 
 
Investment properties at cost, net
 
$
344,098

 
$
283,902

Cash and cash equivalents
 
7,582

 
13,838

Deferred charges, net
 
14,815

 
2,563

Deferred debt origination costs, net
 
7,566

 
1,427

Prepaids and other assets
 
11,687

 
6,291

Total assets
 
$
385,748

 
$
308,021

Liabilities and Owners' Equity
 
 
 
 
Mortgage payable
 
$
303,230

 
$
294,034

Construction trade payables
 
2,669

 
341

Accounts payable and other liabilities
 
27,246

 
4,810

Total liabilities
 
333,145

 
299,185

Owners' equity
 
52,603

 
8,836

Total liabilities and owners' equity
 
$
385,748

 
$
308,021


Summary Statements of Operations- Unconsolidated Joint Ventures:
 
 
 
 
 
 
 
 
2011
 
2010
 
2009
Revenues
 
$
38,847

 
$
37,858

 
$
35,481

Expenses:
 
 
 
 
 
 
Property operating
 
18,034

 
18,172

 
16,643

General and administrative
 
250

 
455

 
861

Impairment charge
 
900

 

 

Depreciation and amortization
 
14,242

 
14,245

 
13,419

 
 
33,426

 
32,872

 
30,923

Operating income
 
5,421

 
4,986

 
4,558

Interest expense
 
10,456

 
6,947

 
9,913

Net loss
 
$
(5,035
)
 
$
(1,961
)
 
$
(5,355
)
The Company and Operating Partnership's share of:
 
 
 
 
 
 
Net loss
 
$
(1,565
)
 
$
(464
)
 
$
(1,512
)
Depreciation and asset impairments (real estate related) (1)
 
5,475

 
5,146

 
4,859


(1) The year ended December 31, 2011 includes our one-third share, or $300,000, of a $900,000 impairment charge recorded at the Deer Park Warehouse joint venture entity.