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•	enhancing investors’ understanding of the Company and the Operating Partnership by enabling investors to view the business as a whole in the same manner as management views and operates the business;

•	eliminating duplicative disclosure and providing a more streamlined and readable presentation since a substantial portion of the disclosure applies to both the Company and the Operating Partnership; and

•	creating time and cost efficiencies through the preparation of one combined report instead of two separate reports.

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•	Debt of the Company and the Operating Partnership;

•	Shareholders’ Equity, if applicable, and Partners’ Equity;

•	Earnings Per Share and Earnings Per Unit;

•	Accumulated Other Comprehensive Income of the Company and the Operating Partnership;

•	Liquidity and Capital Resources in the Management’s Discussion and Analysis of Financial Condition and Results of Operations.

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Tanger Factory Outlet Centers, Inc. and subsidiaries is one of the largest owners and operators of outlet centers in the United States and Canada. We are a fully-integrated, self-administered and self-managed real estate investment trust (“REIT”) which, through our controlling interest in the Operating Partnership, focuses exclusively on developing, acquiring, owning, operating and managing outlet shopping centers. As of June 30, 2020, we owned and operated 32 consolidated outlet centers, with a total gross leasable area of approximately 12.1 million square feet. We also had partial ownership interests in 7 unconsolidated outlet centers totaling approximately 2.2 million square feet, including 3 outlet centers in Canada.

Our outlet centers and other assets are held by, and all of our operations are conducted by, Tanger Properties Limited Partnership and subsidiaries. Accordingly, the descriptions of our business, employees and properties are also descriptions of the business, employees and properties of the Operating Partnership. Unless the context indicates otherwise, the term “Company” refers to Tanger Factory Outlet Centers, Inc. and subsidiaries and the term, “Operating Partnership”, refers to Tanger Properties Limited Partnership and subsidiaries. The terms “we”, “our” and “us” refer to the Company or the Company and the Operating Partnership together, as the text requires.

Basis of Presentation

The unaudited consolidated financial statements included herein have been prepared pursuant to accounting principles generally accepted in the United States of America and should be read in conjunction with the consolidated financial statements and notes thereto of the Company’s and the Operating Partnership’s combined Annual Report on Form 10-K for the year ended December 31, 2019. The December 31, 2019 balance sheet data in this Form 10-Q was derived from audited financial statements. Certain information and note disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted pursuant to the SEC’s rules and regulations, although management believes that the disclosures are adequate to make the information presented not misleading. In the opinion of management, all adjustments (consisting only of normal recurring adjustments) necessary for a fair presentation of the financial statements for the interim periods have been made. The results of interim periods are not necessarily indicative of the results for a full year.

The Company currently consolidates the Operating Partnership because it has (1) the power to direct the activities of the Operating Partnership that most significantly impact the Operating Partnership’s economic performance and (2) the obligation to absorb losses and the right to receive the residual returns of the Operating Partnership that could be potentially significant.

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We consolidate properties that are wholly-owned and properties where we own less than 100% but control such properties. Control is determined using an evaluation based on accounting standards related to the consolidation of voting interest entities and variable interest entities (“VIE”). For joint ventures that are determined to be a VIE, we consolidate the entity where we are deemed to be the primary beneficiary. Determination of the primary beneficiary is based on whether an entity has (1) the power to direct the activities of the VIE that most significantly impact the entity’s economic performance, and (2) the obligation to absorb losses of the entity that could potentially be significant to the VIE or the right to receive benefits from the entity that could potentially be significant to the VIE. Our determination of the primary beneficiary considers all relationships between us and the VIE, including management agreements and other contractual arrangements.

Investments in real estate joint ventures that we do not control but may exercise significant influence on are accounted for using the equity method of accounting. These investments are recorded initially at cost and subsequently adjusted for our equity in the joint venture’s net income or loss, cash contributions, distributions and other adjustments required under the equity method of accounting.

For certain investments in real estate joint ventures, we record our equity in the venture’s net income or loss under the hypothetical liquidation at book value (“HLBV”) method of accounting due to the structures and the preferences we receive on the distributions from our joint ventures pursuant to the respective joint venture agreements for those joint ventures. Under this method, we recognize income and loss in each period based on the change in liquidation proceeds we would receive from a hypothetical liquidation of our investment based on depreciated book value. Therefore, income or loss may be allocated disproportionately as compared to the ownership percentages due to specified preferred return rate thresholds and may be more or less than actual cash distributions received and more or less than what we may receive in the event of an actual liquidation.

We separately report investments in joint ventures for which accumulated distributions have exceeded investments in, and our share of net income or loss of, the joint ventures within other liabilities in the consolidated balance sheets because we are committed to provide further financial support to these joint ventures. The carrying amount of our investments in the Charlotte, Columbus, Galveston/Houston, and National Harbor joint ventures are less than zero because of financing or operating distributions that were greater than net income, as net income includes non-cash charges for depreciation and amortization.

“Noncontrolling interests in the Operating Partnership” reflects the Non-Company LP’s percentage ownership of the Operating Partnership’s units. “Noncontrolling interests in other consolidated partnerships” consist of outside equity interests in partnerships or joint ventures not wholly-owned by the Company or the Operating Partnership that are consolidated with the financial results of the Company and Operating Partnership because the Operating Partnership exercises control over the entities that own the properties. Noncontrolling interests are initially recorded in the consolidated balance sheets at fair value based upon purchase price allocations. Income is allocated to the noncontrolling interests based on the allocation provisions within the partnership or joint venture agreements.

Accounts Receivable

Historically, our accounts receivable from tenants has not been material; however, given the impacts from coronavirus (“COVID-19”) discussed below, our net accounts receivable balance, which is recorded in other assets on the consolidated balance sheet, has increased from approximately $4.8 million at December 31, 2019 to approximately $42.0 million at June 30, 2020. Straight-line rent adjustments recorded as a receivable in other assets on the consolidated balance sheets were approximately $61.2 million and $61.6 million as of June 30, 2020 and December 31, 2019, respectively. Individual leases are assessed for collectability and upon the determination that the collection of rents is not probable, accrued rent and accounts receivable are reduced as an adjustment to rental revenue. Revenue from leases where collection is deemed to be less than probable is recorded on a cash basis until collectability is determined to be probable. Further we assess whether operating lease receivables, at a portfolio level, are appropriately valued based upon an analysis of balances outstanding, historical bad debt levels and current economic trends including discussions with tenants for potential lease amendments. Our estimate of the collectability of accrued rents and accounts receivable is based on the best information available to us at the time of preparing the financial statements.

The duration of the COVID 19 pandemic, recent tenant bankruptcies and other significant uncertainties with the economy required significant judgment to be used when estimating the collection of rents through June 30, 2020. See Note 3 for amounts we recorded as a reduction of revenues for uncollectible accounts.

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Impairment of Long-Lived Assets

Rental property held and used by us is reviewed for impairment in the event that facts and circumstances indicate that the carrying amount of an asset may not be recoverable. In such an event, we compare the estimated future undiscounted cash flows associated with the asset to the asset's carrying amount, and if less, recognize an impairment loss in an amount by which the carrying amount exceeds its fair value.

During the first quarter of 2020, we determined that the estimated future undiscounted cash flows of our Foxwoods outlet center, Mashantucket, Connecticut did not exceed the property's carrying value due to a decline in forecasted operating results. Therefore, we recorded a $45.7 million non-cash impairment charge in our consolidated statement of operations which equaled the excess of the property's carrying value over its estimated fair value. See Note 5 for discussion of the impairment of the Saint-Sauveur, Quebec outlet center in our Canadian unconsolidated joint venture during the quarter ended June 30, 2020.

If the effects of the COVID-19 pandemic cause economic and market conditions to continue to deteriorate or if our expected holding periods for assets change, subsequent tests for impairment could result in additional impairment charges in the future. We can provide no assurance that material impairment charges with respect to our investment properties will not occur during the remaining quarters in 2020 or future periods.

The current novel COVID-19 pandemic has had, and will continue to have, repercussions across local, national and global economies and financial markets. COVID-19 has impacted all states where our tenants operate their businesses or where our properties are located and measures taken to prevent or remediate COVID-19, including “shelter-in place” or “stay-at-home” orders or other quarantine mandates issued by local, state or federal authorities, have had an adverse effect on our business and the businesses of our tenants. The full extent of the adverse impact on, among other things, our results of operations, liquidity (including our ability to access capital markets), the possibility of future impairments of long-lived assets or our investments in unconsolidated joint ventures, our compliance with debt covenants, our ability to renew and re-lease our leased space, the outlook for the retail environment, bankruptcies and potential further bankruptcies or other store closings and our ability to develop, acquire, dispose or lease properties for our portfolio, is unknown and will depend on future developments, which are highly uncertain and cannot be predicted. Our results of operations, liquidity and cash flows have been and may continue to be in the future materially affected.

Our outlet centers have not closed throughout the pandemic, but have been operating under reduced hours since late April when the first stores began to reopen. Our outlet centers may experience additional short-term store closures as retailers implement additional safety protocols at specific locations impacted by increased exposure to COVID-19.

While our outlet centers remained open, retailers began closing their stores in our outlet centers in mid-March and by April 6, 2020, substantially all of the stores in our portfolio were closed as a result of mandates by order of local and state authorities. By June 15, 2020, in store shopping for non essential retail was allowed in every market in which our centers are located.

A number of our tenants have requested rent deferrals, rent abatements or other types of rent relief during this pandemic. As a response, in late March 2020, we offered all tenants in our consolidated portfolio the option to defer 100% of April and May rents interest free, payable in equal installments due in January and February of 2021.

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The following table sets forth information regarding the status of rents billed during the second quarter as of June 30, 2020 (In thousands):

Second Quarter Rents Billed: (1)	As of June 30, 2020			% of Rents
Rents collected	$	22,899		23	%
Unmodified rents expected to be collected(2)	$	19,469		20	%
Rents deferred (3)	$	25,558		26	%
Under negotiation	$	5,389		6	%
One-time rent concessions in exchange for amendments to lease structure	$	13,852		14	%
Bankruptcy related, primarily pre-petition rents	$	8,894		9	%
At risk due to tenant financial weakness	$	1,447		2	%
Total rents billed	$	97,508		100	%

(1)	Excludes variable revenue which is derived from tenant sales and lease termination fees.

(2)	In July 2020, we collected $9.7 million of these rents.

(3)	Includes rents deferred with substantially all payments due in 2021, for which the majority is due in January/February of 2021.

During the three months ended June 30. 2020, we wrote off approximately 25% of second quarter rents, of which 9% is related to bankruptcies 2% related to other uncollectible accounts due to financial weakness and 14% related to one-time concessions in exchange for landlord-favorable amendments to lease structure. In addition, for both the three and six months ended June 30,2020, we recorded a $9.7 million reserve for a portion of deferred and under negotiation billings that are expected to become uncollectible in future periods. Further, we recognized a write-off of revenue of approximately $3.7 million of straight-line rents associated with the tenant bankruptcies and uncollectible accounts. We are closely monitoring changes in the collectability assessment of our tenant receivables as a result of certain tenants suffering adverse financial consequences due to COVID-19 and should our estimates change, there could be material modifications to our revenues in future periods.

Given the economic environment as a result of COVID-19, a select number of our tenants underwent liquidity hardships and filed for Chapter 11 bankruptcy protection in the second and third quarter to date of 2020. Although some of these tenants intend to exit the Chapter 11 bankruptcy process and resume operations, the outcomes of such proceedings are unknown and we are currently exploring leasing alternatives for stores we expect to close. Recent Chapter 11 bankruptcy filings include, but not limited to, J. Crew Group, Inc. (filed in May 2020) and Brooks Brothers, Lucky Brand Jeans, New York and Company and Ascena Retail Group, Inc. (all filed in July, 2020). Substantially all of the rents billed to these tenants during the second quarter (which were approximately 93% of the rents included in the table above under the caption “Bankruptcy related, primarily pre-petition rents”) were written off as uncollectible rent as of June 30, 2020.

In March 2020, to increase liquidity, preserve financial flexibility and help meet our obligations for a sustained period of time, we drew down substantially all of the available capacity under our $600.0 million unsecured lines of credit. In June 2020, we repaid $200.0 million of the outstanding balances bringing the outstanding balance to $399.8 million. Additionally, subsequent to June 30, 2020 through July 31, 2020, we repaid an additional $320.0 million.

We also took steps to reduce cash outflows, including the reduction or deferral of certain operating costs, temporary base salary reductions for our named executive officers and other employees, and the reduction of certain other general and administrative expenses. During the second quarter, these reductions reduced cash outflows by approximately $11.0 million, including $1.0 million of general and administrative and $10.0 million of property operating expenses. In July 2020, we restored the above mentioned salary reductions.

We also deferred our Nashville pre-development-stage project and certain other planned capital expenditures. We paid the dividend that was declared in January 2020 as scheduled on May 15, 2020. Given the uncertainty related to the pandemic’s near and potential long-term impact, the Company’s Board of Directors temporarily suspended dividend distributions to conserve approximately $35.0 million in cash per quarter and preserve our balance sheet strength and flexibility. The Board continues to evaluate the potential for future dividend distributions on a quarterly basis. We expect to remain in compliance with REIT taxable income distribution requirements for the 2020 tax year.

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Disposition of Properties

During the six months ended June 30, 2019, we closed on the sale of four non-core outlet centers for total gross proceeds of $130.5 million.

The following table sets forth certain summarized information regarding properties and land outparcels sold during the six months ended June 30, 2019:

Property

Location

Date Sold

Square Feet (in 000’s)

Net Sales Proceeds (in 000’s)

Gain on Sale (in 000’s)

Nags Head, Ocean City, Park City, and Williamsburg

Nags Head, NC, Ocean City, MD, Park City, UT, and Williamsburg, IA

March 2019

878

$

128,248

$

43,422

The rental properties sold did not meet the criteria to be reported as discontinued operations.

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, 2020
Joint Venture		Outlet Center Location		Ownership %			Square Feet (in 000’s)			Carrying Value of Investment (in millions)				Total Joint Venture Debt, Net (in millions)(1)
Investments included in investments in unconsolidated joint ventures:
RioCan Canada		Various		50.0	%		765			$	92.1			$	—
										$	92.1
Investments included in other liabilities:
Columbus(2)		Columbus, OH		50.0	%		355			$	(3.9	)		$	85.0
Charlotte(2)		Charlotte, NC		50.0	%		399			(13.1		)		99.6
National Harbor(2)		National Harbor, MD		50.0	%		341			(7.8		)		94.5
Galveston/Houston (2)		Texas City, TX		50.0	%		353			(20.0		)		79.9
										$	(44.8	)

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As of December 31, 2019
Joint Venture		Outlet Center Location		Ownership %			Square Feet (in 000’s)			Carrying Value of Investment (in millions)				Total Joint Venture Debt, Net (in millions)(1)
Investments included in investments in unconsolidated joint ventures:
RioCan Canada		Various		50.0	%		764			$	94.7			$	9.2
										$	94.7
Investments included in other liabilities:
Columbus(2)		Columbus, OH		50.0	%		355			$	(3.5	)		$	85.0
Charlotte(2)		Charlotte, NC		50.0	%		399			(13.0		)		99.5
National Harbor(2)		National Harbor, MD		50.0	%		341			(5.9		)		94.4
Galveston/Houston (2)		Texas City, TX		50.0	%		353			(19.7		)		79.9
										$	(42.1	)

(1)	Net of debt origination costs of $1.1 million as of June 30, 2020 and net of debt origination cost and including premiums of $1.1 million as of December 31, 2019.

(2)	The negative carrying value is due to distributions exceeding contributions and increases or decreases from our equity in earnings of the joint venture.

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,
		2020				2019				2020				2019
Fee:
Management and marketing		$	143			$	561			$	685			$	1,128
Leasing and other fees		15				9				35				40
Expense reimbursements from unconsolidated joint ventures		566				675				1,448				1,419
Total Fees		$	724			$	1,245			$	2,168			$	2,587

Galveston/Houston

In June 2020, in response to the COVID 19 impact on the property, the Galveston/Houston joint venture amended its mortgage loan. The loan modification amended the first one-year extension option to provide for two six-month options (the “First Extension” and “Second Extension”, respectively). Under the loan modification, the joint venture is prohibited from making partner distributions during the term of the First Extension.  If the joint venture exercises all available options, the loan would mature in July 2022.  The joint venture exercised its First Extension option to extend the mortgage loan for six months to January 2021.

RioCan Canada

In May 2020, the joint venture’s mortgage loan for the outlet center in Saint-Sauveur matured and the joint venture repaid the approximately $8.3 million owed in full.

During June 2020, the Rio-Can joint venture recognized an impairment charge related to its Saint-Sauveur property in Quebec. The impairment charge was primarily driven by deterioration of net operating income caused by market competition and the COVID-19 pandemic.

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The table below summarizes the impairment charge taken during the second quarter of 2020 (in thousands):

				Impairment Charge(1)
		Outlet Center		Total				Our Share
2020		Saint-Sauveur		$	6,181			$	3,091

(1)	The fair value was determined using an income approach considering the prevailing market income capitalization rates for similar assets.

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 $3.7 million and $3.8 million as of June 30, 2020 and December 31, 2019, respectively) are amortized over the various useful lives of the related assets.

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, 2020				December 31, 2019
Assets
Land		$	87,402			$	90,859
Buildings, improvements and fixtures		457,969				477,061
Construction in progress		4,495				4,779
		549,866				572,699
Accumulated depreciation		(133,199		)		(132,860		)
Total rental property, net		416,667				439,839
Cash and cash equivalents		9,274				19,750
Deferred lease costs and other intangibles, net		5,554				6,772
Prepaids and other assets		26,888				17,789
Total assets		$	458,383			$	484,150
Liabilities and Owners’ Equity
Mortgages payable, net		$	358,923			$	368,032
Accounts payable and other liabilities		15,627				17,173
Total liabilities		374,550				385,205
Owners’ equity		83,833				98,945
Total liabilities and owners’ equity		$	458,383			$	484,150

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		Three months ended								Six months ended
Condensed Combined Statements of Operations		June 30,								June 30,
- Unconsolidated Joint Ventures		2020				2019				2020				2019
Revenues		$	16,475			$	23,575			$	38,512			$	47,038
Expenses:
Property operating		6,860				9,611				15,989				19,400
General and administrative		123				62				262				152
Asset impairment		6,181				—				6,181				—
Depreciation and amortization		5,903				6,317				11,809				12,427
Total expenses		19,067				15,990				34,241				31,979
Other income (expense):
Interest expense		(3,232		)		(4,138		)		(6,967		)		(8,272		)
Other income		6				60				61				126
Total other income (expense)		(3,226		)		(4,078		)		$	(6,906	)		$	(8,146	)
Net income (loss)		$	(5,818	)		$	3,507			$	(2,635	)		$	6,913
The Company and Operating Partnership’s share of:
Net income (loss)		$	(2,975	)		$	1,646			$	(1,448	)		$	3,275
Depreciation and amortization (real estate related)		$	3,017			$	3,265			$	6,035			$	6,395

All of the Company’s debt is held by the Operating Partnership and its consolidated subsidiaries.

The Company guarantees the Operating Partnership’s obligations with respect to its unsecured lines of credit which have a total borrowing capacity of $600.0 million. The Company also guarantees the Operating Partnership’s unsecured term loan.

The Operating Partnership had the following principal amounts outstanding on the debt guaranteed by the Company (in thousands):

		As of
		June 30, 2020				December 31, 2019
Unsecured lines of credit		$	399,830			$	—
Unsecured term loan		$	350,000			$	350,000

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The debt of the Operating Partnership consisted of the following (in thousands):

									As of								As of
									June 30, 2020								December 31, 2019
		Stated Interest Rate(s)					Maturity Date		Principal				Book Value(1)				Principal				Book Value(1)
Senior, unsecured notes:
Senior notes		3.875	%				December 2023		$	250,000			$	247,635			$	250,000			$	247,308
Senior notes		3.750	%				December 2024		250,000				248,309				250,000				248,127
Senior notes		3.125	%				September 2026		350,000				346,492				350,000				346,215
Senior notes		3.875	%				July 2027		300,000				297,149				300,000				296,953
Mortgages payable:
Atlantic City (2)(3)		5.14	%	-	7.65%		November 2021- December 2026		29,151				30,575				30,909				32,531
Southaven		LIBOR		+	1.80%		April 2021		51,400				51,322				51,400				51,272
Unsecured term loan		LIBOR(4)		+	1.00%		April 2024		350,000				347,003				350,000				347,367
Unsecured lines of credit		LIBOR(4)		+	1.00%		October 2021 (5)		399,830				397,407				—				—
									$	1,980,381			$	1,965,892			$	1,582,309			$	1,569,773

(1)	Including premiums and net of debt discount and debt origination costs.

(2)	The effective interest rate assigned during the purchase price allocation to the Atlantic City mortgages assumed during the acquisition in 2011 was 5.05%.

(3)	Principal and interest due monthly with remaining principal due at maturity.

(4)	If the LIBOR is less than 0.25% per annum, the rate will be deemed to be 0.25%.

(5)	Unsecured lines of credit have a one-year extension option to extend maturity to October 2022.

Certain of our properties, which had a net book value of approximately $169.5 million at June 30, 2020, serve as collateral for mortgages payable. We maintain unsecured lines of credit that provide for borrowings of up to $600.0 million. The unsecured lines of credit include a $20.0 million liquidity line and a $580.0 million syndicated line. The syndicated line may be increased up to $1.2 billion through an accordion feature in certain circumstances.

We provide guarantees to lenders for our joint ventures which include standard non-recourse carve out indemnifications for losses arising from items such as but not limited to fraud, physical waste, payment of taxes, environmental indemnities, misapplication of insurance proceeds or security deposits and failure to maintain required insurance. For construction and term loans, we may include a guaranty of completion as well as a principal guaranty ranging from 5% to 100% of principal.  The principal guarantees include terms for release or reduction based upon satisfactory completion of construction and performance targets including occupancy thresholds and minimum debt service coverage tests. As of June 30, 2020, the maximum amount of unconsolidated joint venture debt guaranteed by the Company was $16.4 million.

The unsecured lines of credit and senior unsecured notes include covenants that require the maintenance of certain ratios, including debt service coverage and leverage, and limit the payment of dividends such that dividends and distributions will not exceed funds from operations, as defined in the agreements, for the prior fiscal year on an annual basis or 95% of funds from operations on a cumulative basis. As of June 30, 2020, we believe we were in compliance with all of our debt covenants.

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Lines of credit and Term Loan Covenant Modifications

In June 2020, we amended the debt agreements for our lines of credit and bank term loan, primarily to improve future covenant flexibility. The amendments, among other things, allow us to access the existing surge leverage provision, which provides for an increase to the maximum thresholds to 65% from 60% for total leverage and unsecured leverage, for twelve months starting July 1, 2020, during which time share repurchases are prohibited. Additionally, the leverage covenants are determined based on the calculation period which is modified to be based on the immediately preceding three calendar month period annualized for the calculation date occurring on December 31, 2020; the immediately preceding six calendar month period annualized for the calculation date occurring on March 31, 2021; the immediately preceding nine calendar month period annualized for the calculation date occurring on June 30, 2021; and for all other calculation dates occurring during the term on the agreement, the immediately preceding twelve calendar month period. Some definitional modifications related to the calculation of certain covenants are permanent, including the netting of cash balances in excess of $30.0 million (or debt maturing in the next 24 months, if less) as well as using adjusted EBITDA, which adds back general and administrative expenses not attributable to the subsidiaries or properties and deducts a management fee of 3% of rental revenues in liability and asset calculations for certain covenants. The amendments revised the interest rate to provide a LIBOR floor of 0.25% for the portions of the lines of credit and bank term loan that are not fixed with an interest rate swap. Although the amended covenants provide additional flexibility and we expect to remain in compliance with such covenants, the potential impacts from COVID 19 are highly uncertain and therefore could impact covenant compliance in the future.

Unsecured Lines of Credit

In March 2020, in response to the COVID-19 pandemic, we drew down approximately $599.8 million under our unsecured lines of credit to increase liquidity and preserve financial flexibility to help ensure that we are able to meet our obligations for a sustained period. In June 2020, we repaid $200.0 million of the outstanding balances bringing the outstanding balance to $399.8 million. Additionally, subsequent to June 30, 2020 through July 31, 2020, we repaid an additional $320.0 million.

Interest Rate Spread over LIBOR

In February 2020, due to a change in our credit rating, our interest rate spread over LIBOR on our $600.0 million unsecured line of credit facility increased from 0.875% to 1.0% and our annual facility fee increased from 0.15% to 0.20%. In addition, our interest rate spread over LIBOR on our $350.0 million unsecured term loan increased from 0.90% to 1.0%.

Debt Maturities

Maturities of the existing long-term debt as of June 30, 2020 for the next five years and thereafter are as follows (in thousands):

Calendar Year		Amount
For the remainder of 2020		$	1,808
2021		457,023
2022		4,436
2023		254,768
2024		605,140
Thereafter		657,206
Subtotal		1,980,381
Net discount and debt origination costs		(14,489		)
Total		$	1,965,892

Given the financial implications of COVID-19, we have considered our short-term (one year or less from the date of filing these financial statements) liquidity needs and the adequacy of our estimated cash flows from operating activities and other financing sources to meet these needs. These other sources include but are not limited to: existing cash, ongoing relationships with certain financial institutions, our ability to sell debt or issue equity subject to market conditions and proceeds from the potential sale of non-core assets. We believe that we have access to the necessary financing to fund our short-term liquidity needs.

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The following table summarizes the terms and fair values of our derivative financial instruments, as well as their classifications within the consolidated balance sheets (notional amounts and fair values in thousands):

														Fair Value
Effective Date		Maturity Date		Notional Amount				Bank Pay Rate			Company Fixed Pay Rate			June 30, 2020				December 31, 2019
Assets (Liabilities)(1):
Interest rate swaps:
April 13, 2016		January 1, 2021		175,000				1	month LIBOR		1.03	%		$	(789	)		$	1,018
March 1, 2018		January 31, 2021		40,000				1	month LIBOR		2.47	%		(543		)		(376		)
August 14, 2018		January 1, 2021		150,000				1	month LIBOR		2.20	%		(1,585		)		(896		)
July 1, 2019		February 1, 2024		25,000				1	month LIBOR		1.75	%		(1,408		)		(170		)
January 1, 2021		February 1, 2024		150,000				1	month LIBOR		0.60	%		(2,035		)		—
January 1, 2021		February 1, 2024		$	100,000			1	month LIBOR		0.22	%		$	(238	)		—
Total				$	640,000									$	(6,598	)		$	(424	)

(1)	Asset balances are recorded in prepaids and other assets on the consolidated balance sheets and liabilities are recorded in other liabilities on the consolidated balance sheets.

The derivative financial instruments are comprised of interest rate swaps, which are designated and qualify as cash flow hedges, each with a separate counterparty. We do not use derivatives for trading or speculative purposes and currently do not have any derivatives that are not designated as hedges.

Changes in the fair value of derivatives designated and qualifying as cash flow hedges is recorded in accumulated other comprehensive loss and subsequently reclassified into earnings in the period that the hedged forecasted transaction affects earnings.

The following table represents the effect of the derivative financial instruments on the accompanying consolidated financial statements (in thousands):

		Three months ended June 30,								Six months ended June 30,
		2020				2019				2020				2019
Interest Rate Swaps:
Amount of loss recognized in other comprehensive income (loss) on derivative		$	(498	)		$	(3,613	)		$	(6,174	)		$	(5,565	)

Fair value guidance establishes a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value. These tiers are defined as follows:

Tier		Description
Level 1		Observable inputs such as quoted prices in active markets
Level 2		Inputs other than quoted prices in active markets that are either directly or indirectly observable
Level 3		Unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions

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Fair Value Measurements on a Recurring Basis

The following table sets forth our assets and liabilities that are measured at fair value within the fair value hierarchy (in thousands):

						Level 1				Level 2				Level 3
						Quoted Prices in Active Markets for Identical Assets or Liabilities				Significant Observable Inputs				Significant Unobservable Inputs
		Total
Fair value as of June 30, 2020:
Assets:
Short-term government securities (cash and cash equivalents)		$	339,156			$	339,156			$	—			$	—
Total assets		$	339,156			$	339,156			$	—			$	—
Liabilities:
Interest rate swaps (other liabilities)		$	6,598			$	—			$	6,598			$	—
Total liabilities		$	6,598			$	—			$	6,598			$	—

						Level 1				Level 2				Level 3
						Quoted Prices in Active Markets for Identical Assets or Liabilities				Significant Observable Inputs				Significant Unobservable Inputs
		Total
Fair value as of December 31, 2019:
Asset:
Interest rate swaps (prepaids and other assets)		$	1,018			$	—			$	1,018			$	—
Total assets		$	1,018			$	—			$	1,018			$	—
Liabilities:
Interest rate swaps (other liabilities)		$	1,442			$	—			$	1,442			$	—
Total liabilities		$	1,442			$	—			$	1,442			$	—

Short-term government securities

Short-term government securities are highly liquid investments, which are classified as Level 1 in the fair value hierarchy because they are valued using quoted market prices in an active market.

Interest rate swaps

Fair values of interest rate swaps are estimated using Level 2 inputs based on current market data received from financial sources that trade such instruments and are based on prevailing market data and derived from third party proprietary models based on well recognized financial principles including counterparty risks, credit spreads and interest rate projections, as well as reasonable estimates about relevant future market conditions.

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Fair Value Measurements on a Nonrecurring Basis

The following table sets forth our assets that are measured at fair value on a nonrecurring basis within the fair value hierarchy (in thousands):

						Level 1				Level 2				Level 3
						Quoted Prices in Active Markets for Identical Assets or Liabilities				Significant Observable Inputs				Significant Unobservable Inputs
		Total
Fair value as of March 31,2020:
Asset:
Long-lived assets		$	60,000			$	—			$	—			$	60,000

During the first quarter 2020, we recorded a $45.7 million impairment charge in our consolidated statement of operations which equaled the excess of the carrying value of our Foxwoods outlet center over its estimated fair value. The estimated fair value was based on the income approach. The income approach involves discounting the estimated income stream and reversion (presumed sale) value of a property over an estimated holding period to a present value at a risk-adjusted rate. Discount rates and terminal capitalization rates utilized in this approach were derived from property-specific information, market transactions and other financial and industry data. The terminal capitalization rate and discount rate are significant unobservable inputs in determining the fair value. The terminal capitalization rate used in the calculation was 7.8% and the discount rate used was 8.5%. These inputs are classified under Level 3 in the fair value hierarchy above. Should the significant assumptions utilized above to determine fair value continue to deteriorate, additional impairments in the future could be possible. 

Other Fair Value Disclosures

The estimated fair value within the fair value hierarchy and recorded value of our debt consisting of senior unsecured notes, unsecured term loans, secured mortgages and unsecured lines of credit were as follows (in thousands):

		June 30, 2020				December 31, 2019
Level 1 Quoted Prices in Active Markets for Identical Assets or Liabilities		$	—			$	—
Level 2 Significant Observable Inputs		1,091,262				1,169,481
Level 3 Significant Unobservable Inputs		832,143				434,333
Total fair value of debt		$	1,923,405			$	1,603,814
Recorded value of debt		$	1,965,892			$	1,569,773

Our senior unsecured notes are publicly-traded which provides quoted market rates. However, due to the limited trading volume of these notes, we have classified these instruments as Level 2 in the hierarchy. Our other debt is classified as Level 3 given the unobservable inputs utilized in the valuation. Our unsecured term loan, unsecured lines of credit and variable interest rate mortgages are all LIBOR based instruments. When selecting the discount rates for purposes of estimating the fair value of these instruments, we evaluated the original credit spreads and do not believe that the use of them differs materially from current credit spreads for similar instruments and therefore the recorded values of these debt instruments is considered their fair value.

The carrying values of cash and cash equivalents, receivables, accounts payable, accrued expenses and other assets and liabilities are reasonable estimates of their fair values because of the short maturities of these instruments.

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Dividend Declaration

In January 2020, the Company's Board of Directors declared a $0.355 cash dividend per common which was paid during the first quarter of 2020 to each shareholder of record on January 31, 2020, and the Trustees of Tanger GP Trust declared a $0.355 cash distribution per Operating Partnership unit to the Operating Partnership's unitholders.

Also in January 2020, the Company's Board of Directors declared a $0.3575 cash dividend per common share payable on May 15, 2020 to each shareholder of record on April 30, 2020, and the Trustees of Tanger GP Trust declared a $0.3575 cash distribution per Operating Partnership unit to the Operating Partnership's unitholders. A liability in the amount of approximately $35.1 million was recorded in accounts payable and accrued expenses in the consolidated balance sheet as of March 31, 2020.

In January 2019, the Company's Board of Directors declared a $0.35 cash dividend per common which was paid during the first quarter of 2019, to each shareholder of record on January 31, 2019, and the Trustees of Tanger GP Trust declared a $0.35 cash distribution per Operating Partnership unit to the Operating Partnership's unitholders.

In February 2019, the Company's Board of Directors declared a $0.355 cash dividend per common share payable on May 15, 2019 to each shareholder of record on April 30, 2019, and the Trustees of Tanger GP Trust declared a $0.355 cash distribution per Operating Partnership unit to the Operating Partnership's unitholders. A liability in the amount of approximately $35.2 million was recorded in accounts payable and accrued expenses in the consolidated balance sheet as of March 31, 2019.

Share Repurchase Program

In February 2019, the Company’s Board of Directors authorized the repurchase of an additional $44.3 million of our outstanding common shares for an aggregate authorization of $169.3 million until May 2021. Repurchases may be made from time to time through open market, privately-negotiated, structured or derivative transactions (including accelerated share repurchase transactions), or other methods of acquiring shares. The Company intends to structure open market purchases to occur within pricing and volume requirements of Rule 10b-18.  The Company may, from time to time, enter into Rule 10b5-1 plans to facilitate the repurchase of its shares under this authorization. The Company did not repurchase any shares for the periods ended June 30, 2020. The remaining amount authorized to be repurchased under the program as of June 30, 2020 was approximately $80.0 million. The Company intends to temporarily suspend share repurchases for at least the twelve months starting July 1, 2020 as the June 2020 amendments to our debt agreements for our lines of credit and bank term loan prohibit share repurchases during such time and in order to preserve our liquidity position.

Shares repurchased were follows:

		Three months ended June 30,								Six months ended June 30,
		2020				2019				2020				2019
Total number of shares purchased		—				558,399				—				558,399
Average price paid per share		$	—			$	17.89			$	—			$	17.89
Total price paid exclusive of commissions and related fees (in thousands)		$	—			$	9,989			$	—			$	9,989

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All units of partnership interest issued by the Operating Partnership have equal rights with respect to earnings, dividends and net assets. When the Company issues common shares upon the exercise of options, the grant of restricted common share awards, or the exchange of Class A common limited partnership units, the Operating Partnership issues a corresponding Class B common limited partnership unit to Tanger LP Trust, a wholly-owned subsidiary of the Company. Likewise, when the Company repurchases its outstanding common shares, the Operating Partnership repurchases a corresponding Class B common limited partnership unit held by Tanger LP Trust.

The following table sets forth the changes in outstanding partnership units for the three and six months ended June 30, 2020 and June 30, 2019:

					Limited Partnership Units
		General Partnership Units			Class A			Class B			Total
Balance March 31, 2019		1,000,000			4,960,684			93,102,666			98,063,350
Repurchase of units		—			—			(558,399	)		(558,399	)
Balance June 30, 2019		1,000,000			4,960,684			92,544,267			97,504,951
Balance December 31, 2018		1,000,000			4,960,684			92,941,783			97,902,467
Grant of restricted common share awards by the Company, net of forfeitures		—			—			242,167			242,167
Repurchase of units		—			—			(558,399	)		(558,399	)
Units withheld for employee income taxes		—			—			(81,284	)		(81,284	)
Balance June 30, 2019		1,000,000			4,960,684			92,544,267			97,504,951
Balance March 31, 2020		1,000,000			4,911,173			92,076,701			96,987,874
Grant of restricted common share awards by the Company, net of forfeitures		—			—			389,308			389,308
Issuance of deferred units		—			—			6,258			6,258
Balance June 30, 2020		1,000,000			4,911,173			92,472,267			97,383,440
Balance December 31, 2019		1,000,000			4,911,173			91,892,260			96,803,433
Grant of restricted common share awards by the Company, net of forfeitures		—			—			630,346			630,346
Issuance of deferred units		—			—			6,258			6,258
Units withheld for employee income taxes		—			—			(56,597	)		(56,597	)
Balance June 30, 2020		1,000,000			4,911,173			92,472,267			97,383,440

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The following table sets forth a reconciliation of the numerators and denominators in computing the Company’s earnings per share (in thousands, except per share amounts):

		Three months ended June 30,								Six months ended June 30,
		2020				2019				2020				2019
Numerator:
Net income (loss) attributable to Tanger Factory Outlet Centers, Inc.		$	(22,688	)		$	13,727			$	(49,570	)		$	76,058
Less allocation of earnings to participating securities		(176		)		(114		)		(692		)		(725		)
Net income (loss) available to common shareholders of Tanger Factory Outlet Centers, Inc.		$	(22,864	)		$	13,613			$	(50,262	)		$	75,333
Denominator:
Basic weighted average common shares		92,632				93,187				92,569				93,245
Diluted weighted average common shares		92,632				93,187				92,569				93,245
Basic earnings per common share:
Net income (loss)		$	(0.25	)		$	0.15			$	(0.54	)		$	0.81
Diluted earnings per common share:
Net income (loss)		$	(0.25	)		$	0.15			$	(0.54	)		$	0.81

We determine diluted earnings per share based on the weighted average number of common shares outstanding combined with the incremental weighted average shares that would have been outstanding assuming all potentially dilutive securities were converted into common shares at the earliest date possible.

Notional units granted under our equity compensation plan are considered contingently issuable common shares and are included in earnings per share if the effect is dilutive using the treasury stock method and the common shares would be issuable if the end of the reporting period were the end of the contingency period. For both the three and six months ended June 30, 2020 approximately 1.7 million notional units were excluded from the computation and for both the three and six months ended June 30, 2019, approximately 1.1 million notional units were excluded from the computation because these notional units either would not have been issuable if the end of the reporting period were the end of the contingency period or as they were anti-dilutive.

With respect to outstanding options, the effect of dilutive common shares is determined using the treasury stock method, whereby outstanding options are assumed exercised at the beginning of the reporting period and the exercise proceeds from such options and the average measured but unrecognized compensation cost during the period are assumed to be used to repurchase our common shares at the average market price during the period. For both the three and six months ended June 30, 2020 approximately 1.5 million options were excluded from the computation, as they were anti-dilutive. For both the three and six months ended June 30, 2019 approximately 526,000 options were excluded from the computation, as they were anti-dilutive.

The assumed exchange of the partnership units held by the Non-Company LPs as of the beginning of the year, which would result in the elimination of earnings allocated to the noncontrolling interest in the Operating Partnership, would have no impact on earnings per share since the allocation of earnings to a common limited partnership unit, as if exchanged, is equivalent to earnings allocated to a common share.

Certain of the Company’s unvested restricted common share awards contain non-forfeitable rights to dividends or dividend equivalents. The impact of these unvested restricted common share awards on earnings per share has been calculated using the two-class method whereby earnings are allocated to the unvested restricted common share awards based on dividends declared and the unvested restricted common shares’ participation rights in undistributed earnings. Unvested restricted common shares that do not contain non-forfeitable rights to dividends or dividend equivalents are included in the diluted earnings per share computation if the effect is dilutive, using the treasury stock method.

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The following table sets forth a reconciliation of the numerators and denominators in computing earnings per unit (in thousands, except per unit amounts):

		Three months ended June 30,								Six months ended June 30,
		2020				2019				2020				2019
Numerator:
Net income (loss) attributable to partners of the Operating Partnership		$	(23,890	)		$	14,457			$	(52,199	)		$	80,103
Less allocation of earnings to participating securities		(176		)		(114		)		(692		)		(725		)
Net income (loss) available to common unitholders of the Operating Partnership		$	(24,066	)		$	14,343			$	(52,891	)		$	79,378
Denominator:
Basic weighted average common units		97,543				98,147				97,480				98,205
Diluted weighted average common units		97,543				98,147				97,480				98,205
Basic earnings per common unit:
Net income (loss)		$	(0.25	)		$	0.15			$	(0.54	)		$	0.81
Diluted earnings per common unit:
Net income (loss)		$	(0.25	)		$	0.15			$	(0.54	)		$	0.81

We determine diluted earnings per unit based on the weighted average number of common units outstanding combined with the incremental weighted average units that would have been outstanding assuming all potentially dilutive securities were converted into common units at the earliest date possible. There were no securities which had a dilutive effect on earnings per common unit for the three and six months ended June 30, 2020 and 2019.

 

Notional units granted under our equity compensation plan are considered contingently issuable common units and are included in earnings per unit if the effect is dilutive using the treasury stock method and the common units would be issuable if the end of the reporting period were the end of the contingency period. For both the three and six months ended June 30, 2020 approximately 1.7 million notional units were excluded from the computation and for both the three and six months ended June 30, 2019 approximately 1.1 million notional units were excluded from the computation because these notional units either would not have been issuable if the end of the reporting period were the end of the contingency period or as they were anti-dilutive.

With respect to outstanding options, the effect of dilutive common units is determined using the treasury stock method, whereby outstanding options are assumed exercised at the beginning of the reporting period and the exercise proceeds from such options and the average measured but unrecognized compensation cost during the period are assumed to be used to repurchase our common units at the average market price during the period. The market price of a common unit is considered to be equivalent to the market price of a Company common share. For both the three and six months ended June 30, 2020, approximately 1.5 million options were excluded from the computation. For both the three and six months ended June 30, 2019, approximately 526,000 options were excluded from the computation as they were anti-dilutive.

Certain of the Company’s unvested restricted common share awards contain non-forfeitable rights to distributions or distribution equivalents. The impact of the corresponding unvested restricted unit awards on earnings per unit has been calculated using the two-class method whereby earnings are allocated to the unvested restricted unit awards based on distributions declared and the unvested restricted units’ participation rights in undistributed earnings. Unvested restricted common units that do not contain non-forfeitable rights to dividends or dividend equivalents are included in the diluted earnings per unit computation if the effect is dilutive, using the treasury stock method.

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We have a shareholder approved equity-based compensation plan, the Incentive Award Plan of Tanger Factory Outlet Centers, Inc. and Tanger Properties Limited Partnership (as amended and restated on April 4, 2014), as amended (the “Plan”), which covers our non-employee directors, officers, employees and consultants. Per the Operating Partnership agreement, when a common share is issued by the Company, the Operating Partnership issues one corresponding unit of partnership interest to the Company’s wholly-owned subsidiaries. Therefore, when the Company grants an equity-based award, the Operating Partnership treats each award as having been granted by the Operating Partnership. In the discussion below, the term “we” refers to the Company and the Operating Partnership together and the term “shares” is meant to also include corresponding units of the Operating Partnership.

We recorded equity-based compensation expense in general and administrative expenses in our consolidated statements of operations as follows (in thousands):

		Three months ended								Six months ended
		June 30,								June 30,
		2020				2019				2020				2019
Restricted common shares (1)		$	1,895			$	4,627			$	4,121			$	7,140
Notional unit performance awards (1)		1,461				2,314				2,982				3,576
Options		75				41				116				84
Total equity-based compensation		$	3,431			$	6,982			$	7,219			$	10,800

(1) The three and six months ended June 30, 2019 include the accelerated recognition of compensation cost related to the planned retirement of an executive officer.

Equity-based compensation expense capitalized as a part of rental property and deferred lease costs were as follows (in thousands):

		Three months ended								Six months ended
		June 30,								June 30,
		2020				2019				2020				2019
Equity-based compensation expense capitalized		$	101			$	96			$	202			$	188

Option Awards

In April 2020, Stephen Yalof became the President and Chief Operating Officer of the Company. As part of his employment, Mr. Yalof was granted 1.0 million options that have an exercise price of $7.15 per share, which equaled the closing market price of a common share of the Company on the day prior to the grant date. The options expire 10 years from the date of grant and 25% of the options become exercisable on December 31, 2020 with the remaining options vesting ratably on each December 31st through 2023, in each case, contingent upon continued employment with the Company through the applicable vesting date (subject to acceleration upon certain terminations of employment). The fair value of each option grant was estimated on the date of grant using the Black-Scholes option pricing model, which resulted in a weighted average grant date fair value per share of $0.42 and included the following weighted-average assumptions: expected dividend yield 9.86%; expected life of 7.9 years; expected volatility of 30%; a risk-free rate of 0.60%; and forfeiture rate 0.0%.

Restricted Common Share and Restricted Share Unit Awards

During February 2020, the Company granted approximately 399,000 restricted common shares and restricted share units to the Company’s non-employee directors and the Company’s senior executive officers. The grant date fair value of the awards ranged from $12.03 to $13.75 per share. The restricted common shares vest ratably over a three year period on January 4th of each year for non-employee directors and on February 15th of each year for senior executive officers. For the restricted shares units issued to our Chief Executive Officer, the award agreements require him to hold shares or units issued to him for a minimum of three years following vesting or the share issuance date, as applicable. Compensation expense related to the amortization of the deferred compensation is being recognized in accordance with the vesting schedule of the restricted shares.

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Also in April 2020, Mr. Yalof was granted 389,308 restricted common shares with a grant date fair value of $7.15 per share. The restricted common shares vest ratably over a three year period, with one-third of the restricted common shares vesting on each anniversary of the grant date, beginning on April 10, 2021, contingent upon continued employment with the Company through the applicable vesting date (subject to acceleration upon certain terminations of employment).

For certain shares that vest during the period, we withhold shares with value equivalent up to the employees’ maximum statutory obligation for the applicable income and other employment taxes, and remit cash to the appropriate taxing authorities. The total number of shares withheld upon vesting were approximately 57,000 and 81,000 for the six months ended June 30, 2020 and 2019, respectively. The total number of shares withheld was based on the value of the restricted common shares on the vesting date as determined by our closing share price on the day prior to the vesting date. Total amounts paid for the employees’ tax obligation to taxing authorities were $736,000 and $1.8 million for the six months ended June 30, 2020 and 2019, respectively. These amounts are reflected as financing activities within the consolidated statements of cash flows.

2020 Outperformance Plan

During February 2020, the Compensation Committee of the Company approved the general terms of the Tanger Factory Outlet Centers, Inc. 2020 Outperformance Plan (the “2020 OPP”) covering the Company's senior executive officers whereby a maximum of approximately 697,000 restricted common shares may be earned if certain share price appreciation goals are achieved over a three year measurement period. The 2020 OPP is a long-term incentive compensation plan. Recipients may earn units which may convert into restricted common shares of the Company based on the Company’s absolute share price appreciation (or absolute total shareholder return) and its share price appreciation relative to its peer group (or relative total shareholder return) over a three-year measurement period. Any shares earned at the end of the three-year measurement period are subject to a time-based vesting schedule, with 50% of the shares vesting immediately following the measurement period, and the remaining 50% vesting one year thereafter, contingent upon continued employment with the Company through the vesting date (unless terminated prior thereto (a) by the Company without cause, (b) by participant for good reason or, with respect to our Chief Executive Officer, retirement or (c) due to death or disability).

The following table sets forth 2020 OPP performance targets and other relevant information about the 2020 OPP:

Performance targets (1)
Absolute portion of award:
Percent of total award		33.3%
Absolute total shareholder return range		36.8		%	-	52.1%
Percentage of units to be earned		20		%	-	100%
Relative portion of award:
Percent of total award		66.7%
Percentile rank of peer group range(2)		30		th	-	80th
Percentage of units to be earned		20		%	-	100%
Maximum number of restricted common shares that may be earned (3)		902,167
February grant date fair value per share		$	7.30
April grant date fair value per share (3)		$	3.11

(1)	The number of restricted common shares received under the 2020 OPP will be determined on a pro-rata basis by linear interpolation between total shareholder return thresholds, both for absolute total shareholder return and for relative total shareholder return amongst the Company’s peer group.

(2)	The peer group is based on companies included in the FTSE NAREIT Retail Index.

(3)	In April 2020, Mr. Yalof was awarded 205,480 notional units under the 2020 OPP. These awards have the same terms as the awards our executive officers received in February 2020.

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The fair values of the 2020 OPP awards granted during the six months ended June 30, 2020 were determined at the grant dates using a Monte Carlo simulation pricing model and the following assumptions:

Risk free interest rate (1)		1.4	%
Expected dividend yield (2)		8.4	%
Expected volatility (3)		29	%

(1)	Represents the interest rate as of the grant date on US treasury bonds having the same life as the estimated life of the restricted unit grants.

(2)	The dividend yield is calculated utilizing the dividends paid for the previous five-year period.

(3)	Based on a mix of historical and implied volatility for our common shares and the common shares of our peer index companies over the measurement period.

The following table presents changes in the balances of each component of accumulated comprehensive loss for the three and six months ended June 30, 2020 (in thousands):

		Tanger Factory Outlet Centers, Inc. Accumulated Other Comprehensive Income (Loss)												Noncontrolling Interest in Operating Partnership Accumulated Other Comprehensive Income (Loss)
		Foreign Currency				Cash flow hedges				Total				Foreign Currency				Cash flow hedges				Total
Balance March 31, 2020		$	(32,437	)		$	(5,791	)		$	(38,228	)		$	(1,759	)		$	(310	)		$	(2,069	)
Other comprehensive income (loss) before reclassifications		3,188				(1,565		)		1,623				169				(83		)		86
Reclassification out of accumulated other comprehensive income (loss) into interest expense for cash flow hedges		—				1,092				1,092				—				58				58
Balance June 30, 2020		$	(29,249	)		$	(6,264	)		$	(35,513	)		$	(1,590	)		$	(335	)		$	(1,925	)
		Tanger Factory Outlet Centers, Inc. Accumulated Other Comprehensive Income (Loss)												Noncontrolling Interest in Operating Partnership Accumulated Other Comprehensive Income (Loss)
		Foreign Currency				Cash flow hedges				Total				Foreign Currency				Cash flow hedges				Total
Balance December 31, 2019		$	(25,094	)		$	(401	)		$	(25,495	)		$	(1,369	)		$	(24	)		$	(1,393	)
Other comprehensive loss before reclassifications		(4,155		)		(6,953		)		(11,108		)		(221		)		(369		)		(590		)
Reclassification out of accumulated other comprehensive income (loss) into interest expense		—				1,090				1,090				—				58				58
Balance June 30, 2020		$	(29,249	)		$	(6,264	)		$	(35,513	)		$	(1,590	)		$	(335	)		$	(1,925	)

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The following table presents changes in the balances of each component of accumulated comprehensive income (loss) for the three and six months ended June 30, 2019 (in thousands):

		Tanger Factory Outlet Centers, Inc. Accumulated Other Comprehensive Income (Loss)												Noncontrolling Interest in Operating Partnership Accumulated Other Comprehensive Income (Loss)
		Foreign Currency				Cash flow hedges				Total				Foreign Currency				Cash flow hedges				Total
Balance March 31, 2019		$	(30,759	)		$	3,606			$	(27,153	)		$	(1,672	)		$	191			$	(1,481	)
Other comprehensive income (loss) before reclassifications		1,714				(2,683		)		(969		)		91				(143		)		(52		)
Reclassification out of accumulated other comprehensive income (loss) into other income (expense) for foreign currency and interest expense for cash flow hedges		3,454				(747		)		2,707				184				(40		)		144
Balance June 30, 2019		$	(25,591	)		$	176			$	(25,415	)		$	(1,397	)		$	8			$	(1,389	)
		Tanger Factory Outlet Centers, Inc. Accumulated Other Comprehensive Income (Loss)												Noncontrolling Interest in Operating Partnership Accumulated Other Comprehensive Income (Loss)
		Foreign Currency				Cash flow hedges				Total				Foreign Currency				Cash flow hedges				Total
Balance December 31, 2018		$	(32,610	)		$	5,459			$	(27,151	)		$	(1,770	)		$	290			$	(1,480	)
Other comprehensive income (loss) before reclassifications		3,565				(3,849		)		(284		)		189				(205		)		(16		)
Reclassification out of accumulated other comprehensive income (loss) into other income (expense) for foreign currency and interest expense for cash flow hedges		3,454				(1,434		)		2,020				184				(77		)		107
Balance June 30, 2019		$	(25,591	)		$	176			$	(25,415	)		$	(1,397	)		$	8			$	(1,389	)

We expect within the next twelve months to reclassify into earnings as an increase to interest expense approximately $1.6 million of the amounts recorded within accumulated other comprehensive loss related to the interest rate swap agreements in effect as of June 30, 2020.

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The following table presents changes in the balances of each component of accumulated comprehensive loss for the three and six months ended June 30, 2020 (in thousands):

		Foreign Currency				Cash flow hedges				Accumulated Other Comprehensive Income (Loss)
Balance March 31, 2020		$	(34,196	)		$	(6,101	)		$	(40,297	)
Other comprehensive income (loss) before reclassifications		3,357				(1,648		)		1,709
Reclassification out of accumulated other comprehensive income (loss) into interest expense for cash flow hedges		—				1,150				1,150
Balance June 30, 2020		$	(30,839	)		$	(6,599	)		$	(37,438	)
		Foreign Currency				Cash flow hedges				Accumulated Other Comprehensive Income (Loss)
Balance December 31, 2019		$	(26,463	)		$	(425	)		$	(26,888	)
Other comprehensive loss before reclassifications		(4,376		)		(7,322		)		(11,698		)
Reclassification out of accumulated other comprehensive income (loss) into interest expense		—				1,148				1,148
Balance June 30, 2020		$	(30,839	)		$	(6,599	)		$	(37,438	)

The following table presents changes in the balances of each component of accumulated comprehensive income (loss) for the three and six months ended June 30, 2019 (in thousands):

		Foreign Currency				Cash flow hedges				Accumulated Other Comprehensive Income (Loss)
Balance March 31, 2019		$	(32,431	)		$	3,797			$	(28,634	)
Other comprehensive income (loss) before reclassifications		1,805				(2,826		)		(1,021		)
Reclassification out of accumulated other comprehensive income (loss) into other income (expense) for foreign currency and interest expense for cash flow hedges		3,638				(787		)		2,851
Balance June 30, 2019		$	(26,988	)		$	184			$	(26,804	)
		Foreign Currency				Cash flow hedges				Accumulated Other Comprehensive Income (Loss)
Balance December 31, 2018		$	(34,380	)		$	5,749			$	(28,631	)
Other comprehensive income (loss) before reclassifications		3,754				(4,054		)		(300		)
Reclassification out of accumulated other comprehensive income (loss) into other income (expense) for foreign currency and interest expense for cash flow hedges		3,638				(1,511		)		2,127
Balance June 30, 2019		$	(26,988	)		$	184			$	(26,804	)

We expect within the next twelve months to reclassify into earnings as an increase to interest expense approximately $1.6 million of the amounts recorded within accumulated other comprehensive loss related to the interest rate swap agreements in effect as of June 30, 2020.

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As of June 30, 2020, we were the lessor to over 2,300 stores in our 32 consolidated outlet centers, under operating leases with initial terms that expire from 2020 to 2035, with certain agreements containing extension options. We also have certain agreements that require tenants to pay their portion of reimbursable expenses such as common area expenses, utilities, insurance and real estate taxes.

The components of rental revenues are as follows (in thousands):

	Three months ended								Six months ended
	June 30,								June 30,
	2020				2019				2020				2019
Rental revenues - fixed	$	48,515			$	89,262			$	135,448			$	182,721
Rental revenues - variable (1)	13,758				23,123				35,383				49,618
Rental revenues	$	62,273			$	112,385			$	170,831			$	232,339

(1)	Primarily includes rents based on a percentage of tenant sales volume and reimbursable expenses such as common area expenses, utilities, insurance and real estate taxes.

We purchase capital equipment and incur costs relating to construction of facilities, including tenant finishing allowances. Expenditures included in accounts payable and accrued expenses were as follows (in thousands):

		As of				As of
		June 30, 2020				June 30, 2019
Costs relating to construction included in accounts payable and accrued expenses		$	22,106			$	13,822

Interest paid, net of interest capitalized was as follows (in thousands):

		Six months ended June 30,
		2020				2019
Interest paid		$	29,749			$	29,284

Recently issued accounting standards

On March 12, 2020, the FASB issued Accounting Standards Update (“ASU”) 2020-04, Reference Rate Reform (Topic 848) - Facilitation of the Effects of Reference Rate Reform on Financial Reporting, which provides optional expedients and exceptions for applying GAAP to contracts, hedging relationships and other transactions that reference LIBOR or other reference rates expected to be discontinued because of reference rate reform. This ASU is effective as of March 12, 2020 through December 31, 2022. We have not adopted any of the optional expedients or exceptions through June 30, 2020, but will continue to evaluate the possible adoption of any such expedients or exceptions during the effective period as circumstances evolve.

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Recently adopted accounting standards

In April 2020, the Financial Accounting Standards Board (“FASB”) staff issued a question and answer document (the “Lease Modification Q&A”) focused on the application of lease accounting guidance to lease concessions provided as a result of the COVID-19 pandemic. Under existing accounting lease guidance under ASC 842, the Company would have to determine, on a lease by lease basis, if a lease concession was the result of a new arrangement reached with the tenant (treated within the lease modification accounting framework) or if a lease concession was under the enforceable rights and obligations within the existing lease agreement (precluded from applying the lease modification accounting framework). The Lease Modification Q&A allows the Company, if certain criteria have been met, to bypass the lease by lease analysis, and instead make an accounting policy election to account for COVID-19 related lease concessions as either a lease modification or a negative variable adjustment to rental revenue. The Lease Modification Q&A allows the Company to determine accounting policy elections at a disaggregated level, and the elections should be applied consistently by either the type of concession or another reasonable disaggregated level. We have evaluated and elected to apply the Lease Modification Q&A to eligible lease concessions. We applied modification accounting to individual leases that did not qualify for the concession. As a result, we have made the following policy elections by the type of concession agreed to with the respective tenant.

Rent Deferrals

We will account for rental deferrals using the receivables model as described within the Lease Modification Q&A. Under the receivables model, we will continue to recognize lease revenue in a manner that is unchanged from the original lease agreement and continue to recognize lease receivables and rental revenue during the deferral period.

Rent Abatements

We will account for rental abatements as negative variable adjustments to rental revenue as described within the Lease Modification Q&A. We will recognize negative variable rent for the current period reduction of rental revenue associated with any lease concessions we provide.

See Notes 2 and 3, for additional details on the impact of the Lease Modification Q&A on the Company’s consolidated financial statements.

In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement. ASU 2018-13 is intended to improve the effectiveness of disclosures required by entities regarding recurring and nonrecurring fair value measurements. ASU 2018-13 is effective for reporting periods beginning after December 15, 2019, with early adoption permitted. The adoption of ASU 2018-13 did not have a material impact on our consolidated financial statements.

In June 2016, the FASB issued ASU No. 2016-13 to amend the accounting for credit losses for certain financial instruments. Under the new guidance, an entity recognizes its estimate of expected credit losses as an allowance, which the FASB believes will result in more timely recognition of such losses. In November 2018, the FASB released ASU No. 2018-19 “Codification Improvements to Topic 326, Financial Instruments - Credit Losses.” This ASU clarifies that receivables arising from operating leases are not within the scope of Subtopic 326-20 “Financial Instruments - Credit Losses.” Instead, impairment of receivables arising from operating leases should be accounted for under Subtopic 842-30 “Leases - Lessor.” ASU 2016-13 is effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. The adoption of this new guidance did not have a material impact on our consolidated financial statements.

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(1)	These properties or a portion thereof are subject to a ground lease.

(2)	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 our legal ownership percentage. We currently receive substantially all the economic interest of the property.

(3)	Property encumbered by mortgage. See Notes 6 and 7 to the consolidated financial statements for further details of our debt obligations.

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(1)	Property encumbered by mortgage. See Note 5 to the consolidated financial statements for further details of the joint venture debt obligations.

(1)	Excludes license agreements, seasonal tenants, and month-to-month leases.

(2)	Excludes outlet centers sold in March 2019 (Nags Head, Ocean City, Park City, and Williamsburg Outlets Centers).

(3)

Net average annual straight-line base rent is calculated by dividing the average tenant allowance costs per square foot by the average initial term and subtracting this calculated number from the average straight-line base rent per year amount. The average annual straight-line base rent disclosed in the table above includes all concessions, abatements and reimbursements of rent to tenants. The average tenant allowance disclosed in the table above includes other landlord costs.

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•	significant revenue reductions caused by the COVID-19 pandemic discussed above, and

•	a decrease in equity in earnings (losses) of unconsolidated joint ventures from the impact of COVID-19, which also includes our share of an impairment charge totaling $3.1 million in the 2020 period related to the Saint-Sauveur, Quebec outlet center in our Canadian joint venture.

•	decreased operating costs in the 2020 period due to lower operating and advertising costs as a result of COVID-19 government mandated store closures,

•	a $4.4 million charge in the 2019 period related to the accelerated recognition of compensation cost as a result of a transition agreement with the Company’s former President and Chief Operating Officer in connection with his retirement (the “COO Transition Agreement”), and

•	a $3.6 million foreign currency loss recorded in the 2019 period upon the sale of the Bromont outlet center by the RioCan joint venture.

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•	significant revenue reductions caused by the COVID-19 pandemic discussed above,

•	the $43.4 million gain recorded on the sale of four outlet centers in March 2019,

•	the loss of revenues from the four outlet centers sold in March 2019,

•	the $45.7 million impairment charge recognized in March 2020 on the outlet center in Mashantucket, Connecticut and

•	a decrease in equity in earnings (losses), which includes our share of an impairment charge totaling $3.1 million in the 2020 period related to the Saint-Sauveur, Quebec outlet center in our Canadian joint venture.

•	decreased operating costs in the 2020 period due to lower operating and advertising costs as a result of COVID-19 government mandated store closures,

•	a $4.4 million charge in the 2019 period related to the COO Transition Agreement, and

•	a $3.6 million foreign currency loss recorded in the 2019 period upon the sale of the Bromont property by the RioCan Canada joint venture.

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•	New developments and expansions decreased due to a suspension of major development projects because of the uncertainty caused by the COVID-19 pandemic. The 2019 period included expenditures related to finalizing the expansion in our Lancaster, PA outlet center and other first generation tenant allowances throughout the portfolio.

•	Major outlet center renovations in the 2020 period includes costs related to bringing two magnate tenants to our Lancaster, PA outlet center.

•	Other capital expenditures decreased in the 2020 period as we decided to defer all capital projects except essential and life-safety projects due to the expected impact on cash flows caused by the COVID-19 pandemic.

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(1)	Includes the unsecured lines of credit, which expire in October 2021, with a one-year extension option whereby we may extend the maturity to October 2022.

(2)	These amounts represent total future cash payments related to debt obligations outstanding as of June 30, 2020

(3)

These amounts represent future interest payments related to our debt obligations based on the fixed and variable interest rates specified in the associated debt agreements, including the effects of our interest rate swaps. All of our variable rate debt agreements are based on the one month LIBOR rate, thus for purposes of calculating future interest amounts on variable interest rate debt, the one month LIBOR rate as of June 30, 2020 was used.

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(1)	We intend to extend the loan using our one-year extension option to November 2021.

(2)

In June 2020, in response to the COVID 19 impact on the property, the Galveston/Houston joint venture amended its mortgage loan. The loan modification amended the first one-year extension option to provide for two six-month options (the “First Extension” and “Second Extension”, respectively). Under the loan modification, the joint venture is prohibited from making partner distributions during the term of the First Extension.  If the joint venture exercises all available options, the loan would mature in July 2022.  The joint venture exercised its First Extension option to extend the mortgage loan for six months to January 2021.

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•	FFO does not reflect our cash expenditures, or future requirements, for capital expenditures or contractual commitments;

•	FFO does not reflect changes in, or cash requirements for, our working capital needs;

•	Although depreciation and amortization are non-cash charges, the assets being depreciated and amortized will often have to be replaced in the future, and FFO does not reflect any cash requirements for such replacements; and

•	Other companies in our industry may calculate FFO differently than we do, limiting its usefulness as a comparative measure.

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•	Core FFO does not reflect our cash expenditures, or future requirements, for capital expenditures or contractual commitments;

•	Core FFO does not reflect changes in, or cash requirements for, our working capital needs;

•	Although depreciation and amortization are non-cash charges, the assets being depreciated and amortized will often have to be replaced in the future, and Core FFO does not reflect any cash requirements for such replacements;

•	Core FFO does not reflect the impact of certain cash charges resulting from matters we consider not to be indicative of our ongoing operations; and

•	Other companies in our industry may calculate Core FFO differently than we do, limiting its usefulness as a comparative measure.

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(1)	Assumes the Class A common limited partnership units of the Operating Partnership held by the noncontrolling interests are exchanged for common shares of the Company. Each Class A common limited partnership unit is exchangeable for one of the Company’s common shares, subject to certain limitations to preserve the Company’s REIT status.

(2)	Represents the accelerated recognition of compensation cost entitled to be received by the Company’s former President and Chief Operating Officer per the terms of a transition agreement executed in connection with his retirement.

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(1)	Non-cash items include straight-line rent, above and below market rent amortization, straight-line rent expense on land leases and gains or losses on outparcel sales, as applicable.

(2)	Excluded from Same Center NOI:

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•	They do not reflect our interest expense;

•	They do not reflect gains or losses on sales of operating properties or impairment write-downs of depreciated property and of investment in unconsolidated joint ventures caused by a decrease in value of depreciated property in the affiliate;

•	Adjusted EBITDA and Adjusted EBITDAre do not reflect gains and losses on extinguishment of debt and other items that may affect operations; and

•	Other companies in our industry may calculate these measures differently than we do, limiting its usefulness as a comparative measure.

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•	Ascena Brands is our second largest tenant with 96 stores in our consolidated portfolio comprising 534,000 square feet and contributing approximately 4.7 points of ABR. They filed for Chapter 11 bankruptcy at the end of July, and they have provided a preliminary store closing list which includes roughly a third of their stores in our consolidated portfolio;

•	Brooks Brothers comprises 23 stores in our consolidated portfolio with 135,000 square feet, and contributes approximately 1.4% to our ABR;

•	J Crew comprises 26 stores with 140,000 square feet, and contributes approximately 1.4% to our consolidated ABR; and

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•	G-III Apparel has announced a brand-wide restructuring, including its intention to close all of its Wilsons and Bass stores. There are currently 38 Wilsons & Bass stores in our consolidated portfolio, comprising 184,000 square feet and 1.6% of our ABR.

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•	the reduced economic activity that could result in a prolonged recession and may consequently negatively impact consumer discretionary spending;

•

difficulty accessing debt and equity capital on attractive terms, or at all, deteriorations in our credit ratings, and a severe disruption and instability in the global financial markets or deteriorations in credit and financing conditions may affect our access to capital necessary to fund business operations or address maturing liabilities on a timely basis and our tenants' ability to fund their business operations and meet their obligations to us;

•	the financial impact of the COVID-19 pandemic could negatively impact our future compliance with financial covenants of our credit facility and other debt agreements and result in a default and potentially an acceleration of indebtedness, which non-compliance could negatively impact our liquidity;

•	any impairment in value of our tangible or intangible assets which could be recorded as a result of a weaker economic conditions;

•	a general decline in business activity and demand for real estate transactions could adversely affect our ability or desire to grow our portfolio of properties;

•	a deterioration in our or our tenants' ability to operate in affected areas or delays in the supply of products or services to us or our tenants from vendors that are needed for our or our tenants' efficient operations could adversely affect our operations and those of our tenants;

•	a significant increase in the number of tenants that file for Chapter 11 bankruptcy;

•	adverse impacts from requiring most employees to work remotely, such as reductions in productivity and heightened cybersecurity risks; and

•	the potential negative impact on the health of our personnel, particularly if a significant number of them are impacted, could result in a deterioration in our ability to ensure business continuity during this disruption.

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