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United States
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
| | | | | | | | | | | |
| ☒ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |
For the quarterly period ended March 31, 2023
OR
| | | | | | | | | | | |
| ☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |
For the transition period from _________ to _________
Commission file number: 1-11986 (Tanger Factory Outlet Centers, Inc.)
Commission file number: 333-3526-01 (Tanger Properties Limited Partnership)
TANGER FACTORY OUTLET CENTERS, INC.
TANGER PROPERTIES LIMITED PARTNERSHIP
(Exact name of registrant as specified in its charter)
| | | | | | | | |
North Carolina | (Tanger Factory Outlet Centers, Inc.) | 56-1815473 |
North Carolina | (Tanger Properties Limited Partnership) | 56-1822494 |
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) |
| | |
3200 Northline Avenue, Suite 360, Greensboro, NC 27408
(Address of principal executive offices) (Zip Code)
(336) 292-3010
(Registrant’s telephone number, including area code)
N/A
(Former name, former address and former fiscal year, if changed since last report)
Securities registered pursuant to Section 12(b) of the Act:
Tanger Factory Outlet Centers, Inc.:
| | | | | | | | |
Title of each class | Trading Symbol(s) | Name of each exchange on which registered |
Common Shares, $0.01 par value | SKT | New York Stock Exchange |
Tanger Properties Limited Partnership:
None
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
| | | | | | | | | | | | | | |
Tanger Factory Outlet Centers, Inc. | Yes | ☒ | No | ☐ |
Tanger Properties Limited Partnership | Yes | ☒ | No | ☐ |
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
| | | | | | | | | | | | | | |
Tanger Factory Outlet Centers, Inc. | Yes | ☒ | No | ☐ |
Tanger Properties Limited Partnership | Yes | ☒ | No | ☐ |
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| | | | | | | | | | | | | | |
Tanger Factory Outlet Centers, Inc. |
Large Accelerated Filer | ☒ | | Accelerated Filer | ☐ |
Non-accelerated Filer | ☐ | | Smaller Reporting Company | ☐ |
| | | Emerging Growth Company | ☐ |
| | | | | | | | | | | | | | |
Tanger Properties Limited Partnership |
Large Accelerated Filer | ☐ | | Accelerated Filer | ☐ |
Non-accelerated Filer | ☒ | | Smaller Reporting Company | ☐ |
| | | Emerging Growth Company | ☐ |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
| | | | | |
Tanger Factory Outlet Centers, Inc. | ☐ |
Tanger Properties Limited Partnership | ☐ |
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
| | | | | | | | | | | | | | |
Tanger Factory Outlet Centers, Inc. | Yes | ☐ | No | ☒ |
Tanger Properties Limited Partnership | Yes | ☐ | No | ☒ |
As of April 24, 2023, there were 105,181,181 common shares of Tanger Factory Outlet Centers, Inc. outstanding, $.01 par value.
EXPLANATORY NOTE
This report combines the unaudited quarterly reports on Form 10-Q for the quarter ended March 31, 2023 of Tanger Factory Outlet Centers, Inc. and Tanger Properties Limited 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.
Tanger Factory Outlet Centers, Inc. and subsidiaries is one of the largest owners and operators of outlet centers in the United States and Canada. The Company is a fully-integrated, self-administered and self-managed real estate investment trust (“REIT”), which, through its controlling interest in the Operating Partnership, focuses exclusively on developing, acquiring, owning, operating and managing outlet shopping centers. The outlet centers and other assets are held by, and all of the operations are conducted by, the Operating Partnership. Accordingly, the descriptions of the business, employees and properties of the Company are also descriptions of the business, employees and properties of the Operating Partnership. As the Operating Partnership is the issuer of our registered debt securities, we are required to present a separate set of financial statements for this entity.
The Company, including its wholly-owned subsidiary, Tanger LP Trust, owns the majority of the units of partnership interest issued by the Operating Partnership. The Company controls the Operating Partnership as its sole general partner. Tanger LP Trust holds a limited partnership interest. As of March 31, 2023, the Company and its wholly owned subsidiaries owned 105,316,253 units of the Operating Partnership and other limited partners (the “Non-Company LPs”) collectively owned 4,737,982 Class A common limited partnership units. Each Class A common limited partnership unit held by the Non-Company LPs is exchangeable for one of the Company’s common shares, subject to certain limitations to preserve the Company’s status as a REIT. Class B common limited partnership units, which are held by Tanger LP Trust, are not exchangeable for common shares of the Company.
Management operates the Company and the Operating Partnership as one enterprise. The management of the Company consists of the same members as the management of the Operating Partnership. These individuals are officers of the Company and employees of the Operating Partnership.
We believe combining the quarterly reports on Form 10-Q of the Company and the Operating Partnership into this single report results in the following benefits:
•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.
There are only a few differences between the Company and the Operating Partnership, which are reflected in the disclosure in this report. We believe it is important, however, to understand these differences between the Company and the Operating Partnership in the context of how the Company and the Operating Partnership operate as an interrelated consolidated company.
As stated above, the Company is a REIT, whose only material asset is its ownership of partnership interests of the Operating Partnership, including through its wholly-owned subsidiary, Tanger LP Trust. As a result, the Company does not conduct business itself, other than issuing public equity from time to time and incurring expenses required to operate as a public company. However, all operating expenses incurred by the Company are reimbursed by the Operating Partnership, thus the only material item on the Company’s income statement is its equity in the earnings of the Operating Partnership. Therefore, the assets and liabilities and the revenues and expenses of the Company and the Operating Partnership are the same on their respective financial statements, except for immaterial differences related to cash, other assets and accrued liabilities that arise from public company expenses paid by the Company. The Company itself does not hold any indebtedness but does guarantee certain debt of the Operating Partnership, as disclosed in this report.
The Operating Partnership holds all of the outlet centers and other assets, including the ownership interests in consolidated and unconsolidated joint ventures. The Operating Partnership conducts the operations of the business and is structured as a partnership with no publicly traded equity. Except for net proceeds from public equity issuances by the Company, which are contributed to the Operating Partnership in exchange for partnership units, the Operating Partnership generates the capital required through its operations, its incurrence of indebtedness or through the issuance of partnership units.
Noncontrolling interests, shareholders’ equity and partners’ capital are the main areas of difference between the consolidated financial statements of the Company and those of the Operating Partnership. The limited partnership interests in the Operating Partnership held by the Non-Company LPs are accounted for as partners’ capital in the Operating Partnership’s financial statements and as noncontrolling interests in the Company’s financial statements.
To help investors understand the significant differences between the Company and the Operating Partnership, this report presents the following separate sections, for each of the Company and the Operating Partnership:
•Consolidated financial statements;
•The following notes to the consolidated financial statements:
•Debt of the Company and the Operating Partnership;
•Shareholders’ Equity and Partners’ Equity;
•Earnings Per Share and Earnings Per Unit;
•Accumulated Other Comprehensive Income of the Company and the Operating Partnership; and
•Liquidity and Capital Resources in the Management’s Discussion and Analysis of Financial Condition and Results of Operations.
This report also includes separate Item 4. Controls and Procedures sections and separate Exhibit 31 and 32 certifications for each of the Company and the Operating Partnership in order to establish that the Principal Executive Officer and the Principal Financial Officer of each entity have made the requisite certifications and that the Company and Operating Partnership are compliant with Rule 13a-15 or Rule 15d-15 of the Securities Exchange Act of 1934 and 18 U.S.C. §1350.
The separate sections in this report for the Company and the Operating Partnership specifically refer to the Company and the Operating Partnership. In the sections that combine disclosure of the Company and the Operating Partnership, this report refers to actions or holdings as being actions or holdings of the Company. Although the Operating Partnership is generally the entity that enters into contracts and joint ventures and holds assets and debt, reference to the Company is appropriate because the business is one enterprise and the Company operates the business through the Operating Partnership.
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. The separate discussions of the Company and the Operating Partnership in this report should be read in conjunction with each other to understand the results of the Company on a consolidated basis and how management operates the Company.
TANGER FACTORY OUTLET CENTERS, INC. AND TANGER PROPERTIES LIMITED PARTNERSHIP
Index
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| Page Number |
Part I. Financial Information |
Item 1. | |
FINANCIAL STATEMENTS OF TANGER FACTORY OUTLET CENTERS, INC. (Unaudited) | |
Consolidated Balance Sheets - as of March 31, 2023 and December 31, 2022 | |
Consolidated Statements of Operations - for the three months ended March 31, 2023 and 2022 | |
Consolidated Statements of Comprehensive Income - for the three months ended March 31, 2023 and 2022 | |
Consolidated Statements of Shareholders’ Equity - for the three months ended March 31, 2023 and 2022 | |
Consolidated Statements of Cash Flows - for the three months ended March 31, 2023 and 2022 | |
FINANCIAL STATEMENTS OF TANGER PROPERTIES LIMITED PARTNERSHIP (Unaudited) | |
Consolidated Balance Sheets - as of March 31, 2023 and December 31, 2022 | |
Consolidated Statements of Operations - for the three months ended March 31, 2023 and 2022 | |
Consolidated Statements of Comprehensive Income - for the three months ended March 31, 2023 and 2022 | |
Consolidated Statements of Equity - for the three months ended March 31, 2023 and 2022 | |
Consolidated Statements of Cash Flows - for the three months ended March 31, 2023 and 2022 | |
Notes to Consolidated Financial Statements of Tanger Factory Outlet Centers, Inc. and Tanger Properties Limited Partnership | |
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations | |
Item 3. Quantitative and Qualitative Disclosures about Market Risk | |
Item 4. Controls and Procedures (Tanger Factory Outlet Centers, Inc. and Tanger Properties Limited Partnership) | |
Part II. Other Information |
Item 1. Legal Proceedings | |
Item 1A. Risk Factors | |
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| |
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds | |
Item 6. Exhibits | |
Signatures | |
PART I. - FINANCIAL INFORMATION
Item 1 - Financial Statements of Tanger Factory Outlet Centers, Inc.
TANGER FACTORY OUTLET CENTERS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands, except share data, unaudited) | | | | | | | | | | | | | | |
| | March 31, 2023 | | December 31, 2022 |
Assets | | | | |
Rental property: | | | | |
Land | | $ | 275,081 | | | $ | 275,079 | |
Buildings, improvements and fixtures | | 2,558,983 | | | 2,553,452 | |
Construction in progress | | 54,623 | | | 27,340 | |
| | 2,888,687 | | | 2,855,871 | |
Accumulated depreciation | | (1,248,391) | | | (1,224,962) | |
Total rental property, net | | 1,640,296 | | | 1,630,909 | |
Cash and cash equivalents | | 202,821 | | | 212,124 | |
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Short-term investments | | 32,946 | | | 52,450 | |
Investments in unconsolidated joint ventures | | 73,368 | | | 73,809 | |
Deferred lease costs and other intangibles, net | | 56,818 | | | 58,574 | |
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Operating lease right-of-use assets | | 78,332 | | | 78,636 | |
Prepaids and other assets | | 100,811 | | | 111,163 | |
Total assets | | $ | 2,185,392 | | | $ | 2,217,665 | |
Liabilities and Equity | | | | |
Liabilities | | | | |
Debt: | | | | |
Senior, unsecured notes, net | | $ | 1,038,456 | | | $ | 1,037,998 | |
Unsecured term loan, net | | 321,736 | | | 321,525 | |
Mortgages payable, net | | 67,749 | | | 68,971 | |
Unsecured lines of credit | | — | | | — | |
Total debt | | 1,427,941 | | | 1,428,494 | |
Accounts payable and accrued expenses | | 79,401 | | | 104,741 | |
Operating lease liabilities | | 87,234 | | | 87,528 | |
Other liabilities | | 84,510 | | | 82,968 | |
Total liabilities | | 1,679,086 | | | 1,703,731 | |
Commitments and contingencies | | | | |
Equity | | | | |
Tanger Factory Outlet Centers, Inc.: | | | | |
Common shares, $0.01 par value, 300,000,000 shares authorized, 105,316,253 and 104,497,920 shares issued and outstanding at March 31, 2023 and December 31, 2022, respectively | | 1,053 | | | 1,045 | |
Paid in capital | | 984,253 | | | 987,192 | |
Accumulated distributions in excess of net income | | (486,638) | | | (485,557) | |
Accumulated other comprehensive loss | | (14,159) | | | (11,037) | |
Equity attributable to Tanger Factory Outlet Centers, Inc. | | 484,509 | | | 491,643 | |
Equity attributable to noncontrolling interests: | | | | |
Noncontrolling interests in Operating Partnership | | 21,797 | | | 22,291 | |
Noncontrolling interests in other consolidated partnerships | | — | | | — | |
Total equity | | 506,306 | | | 513,934 | |
Total liabilities and equity | | $ | 2,185,392 | | | $ | 2,217,665 | |
The accompanying notes are an integral part of these consolidated financial statements.
TANGER FACTORY OUTLET CENTERS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except share data, unaudited)
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| | Three months ended March 31, | |
| | 2023 | | 2022 | |
Revenues: | | | | | |
Rental revenues | | $ | 103,582 | | | $ | 104,609 | | |
Management, leasing and other services | | 1,914 | | | 1,527 | | |
Other revenues | | 3,447 | | | 2,732 | | |
Total revenues | | 108,943 | | | 108,868 | | |
Expenses: | | | | | |
Property operating | | 33,148 | | | 36,758 | | |
General and administrative | | 17,434 | | | 15,467 | | |
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Depreciation and amortization | | 25,893 | | | 26,243 | | |
Total expenses | | 76,475 | | | 78,468 | | |
Other income (expense): | | | | | |
Interest expense | | (12,343) | | | (11,634) | | |
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Other income (expense) | | 2,800 | | | 183 | | |
Total other income (expense) | | (9,543) | | | (11,451) | | |
Income before equity in earnings of unconsolidated joint ventures | | 22,925 | | | 18,949 | | |
Equity in earnings of unconsolidated joint ventures | | 1,935 | | | 2,513 | | |
Net income | | 24,860 | | | 21,462 | | |
Noncontrolling interests in Operating Partnership | | (1,071) | | | (944) | | |
Noncontrolling interests in other consolidated partnerships | | (248) | | | — | | |
Net income attributable to Tanger Factory Outlet Centers, Inc. | | $ | 23,541 | | | $ | 20,518 | | |
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Basic earnings per common share: | | | | | |
Net income | | $ | 0.22 | | | $ | 0.20 | | |
Diluted earnings per common share: | | | | | |
Net income | | $ | 0.22 | | | $ | 0.19 | | |
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The accompanying notes are an integral part of these consolidated financial statements.
TANGER FACTORY OUTLET CENTERS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(In thousands, unaudited)
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| | Three months ended March 31, | |
| | 2023 | | 2022 | |
Net income | | $ | 24,860 | | | $ | 21,462 | | |
Other comprehensive income (loss): | | | | | |
Foreign currency translation adjustments | | 162 | | | 1,226 | | |
Change in fair value of cash flow hedges | | (3,426) | | | 7,674 | | |
Other comprehensive income (loss) | | (3,264) | | | 8,900 | | |
Comprehensive income | | 21,596 | | | 30,362 | | |
Comprehensive income attributable to noncontrolling interests | | (929) | | | (1,335) | | |
Comprehensive income attributable to Tanger Factory Outlet Centers, Inc. | | $ | 20,667 | | | $ | 29,027 | | |
The accompanying notes are an integral part of these consolidated financial statements.
TANGER FACTORY OUTLET CENTERS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY
(In thousands, except share and per share data, unaudited)
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| | Common shares | Paid in capital | Accumulated distributions in excess of earnings | Accumulated other comprehensive loss | Equity attributable to Tanger Factory Outlet Centers, Inc. | Noncontrolling interests in Operating Partnership | Noncontrolling interests in other consolidated partnerships | Total equity |
Balance, December 31, 2021 | | $ | 1,041 | | $ | 978,054 | | $ | (483,409) | | $ | (17,761) | | $ | 477,925 | | $ | 21,864 | | $ | — | | $ | 499,789 | |
Net income | | — | | — | | 20,518 | | — | | 20,518 | | 944 | | — | | 21,462 | |
Other comprehensive income | | — | | — | | — | | 8,509 | | 8,509 | | 391 | | — | | 8,900 | |
Compensation under Incentive Award Plan | | — | | 2,746 | | — | | — | | 2,746 | | — | | — | | 2,746 | |
Issuance of 1,900 common shares upon exercise of options | | — | | 10 | | — | | — | | 10 | | — | | — | | 10 | |
Grant of 512,398 restricted common share awards, net of forefeitures | | 4 | | (4) | | — | | — | | — | | — | | — | | — | |
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Withholding of 129,971 common shares for employee income taxes | | (1) | | (2,145) | | — | | — | | (2,146) | | — | | — | | (2,146) | |
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Adjustment for noncontrolling interests in Operating Partnership | | — | | 73 | | — | | — | | 73 | | (73) | | — | | — | |
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Common dividends ($0.1825 per share) | | — | | — | | (19,315) | | — | | (19,315) | | — | | — | | (19,315) | |
Distributions to noncontrolling interests | | — | | — | | — | | — | | — | | (869) | | — | | (869) | |
Balance, March 31, 2022 | | $ | 1,044 | | $ | 978,734 | | $ | (482,206) | | $ | (9,252) | | $ | 488,320 | | $ | 22,257 | | $ | — | | $ | 510,577 | |
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The accompanying notes are an integral part of these consolidated financial statements.
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TANGER FACTORY OUTLET CENTERS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY (In thousands, except share and per share data, unaudited) |
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| | Common shares | Paid in capital | Accumulated distributions in excess of earnings | Accumulated other comprehensive loss | Equity attributable to Tanger Factory Outlet Centers, Inc. | Noncontrolling interests in Operating Partnership | Noncontrolling interests in other consolidated partnerships | Total equity |
Balance, December 31, 2022 | | $ | 1,045 | | $ | 987,192 | | $ | (485,557) | | $ | (11,037) | | $ | 491,643 | | $ | 22,291 | | $ | — | | $ | 513,934 | |
Net income | | — | | — | | 23,541 | | — | | 23,541 | | 1,071 | | 248 | | 24,860 | |
Other comprehensive loss | | — | | — | | — | | (3,122) | | (3,122) | | (142) | | — | | (3,264) | |
Compensation under Incentive Award Plan | | — | | 2,323 | | — | | — | | 2,323 | | — | | — | | 2,323 | |
Issuance of 2,600 common shares upon exercise of options | | — | | 15 | | — | | — | | 15 | | — | | — | | 15 | |
Grant of 1,116,372 restricted common share awards, net of forfeitures
| | 11 | | (11) | | — | | — | | — | | — | | — | | — | |
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Withholding of 300,639 common shares for employee income taxes | | (3) | | (5,646) | | — | | — | | (5,649) | | — | | — | | (5,649) | |
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Adjustment for noncontrolling interests in Operating Partnership | | — | | 381 | | — | | — | | 381 | | (381) | | — | | — | |
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Common dividends ($0.2200 per share) | | — | | — | | (24,623) | | — | | (24,623) | | — | | — | | (24,623) | |
Distributions to noncontrolling interests | | — | | — | | — | | — | | — | | (1,042) | | (248) | | (1,290) | |
Balance, March 31, 2023 | | $ | 1,053 | | $ | 984,254 | | $ | (486,639) | | $ | (14,159) | | $ | 484,509 | | $ | 21,797 | | $ | — | | $ | 506,306 | |
The accompanying notes are an integral part of these consolidated financial statements.
TANGER FACTORY OUTLET CENTERS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands, unaudited)
| | | | | | | | | | | | | | |
| | Three months ended March 31, |
| | 2023 | | 2022 |
OPERATING ACTIVITIES | | | | |
Net income | | $ | 24,860 | | | $ | 21,462 | |
Adjustments to reconcile net income (loss) to net cash provided by operating activities: | | | | |
Depreciation and amortization | | 25,893 | | | 26,243 | |
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Amortization of deferred financing costs | | 808 | | | 759 | |
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Equity in earnings of unconsolidated joint ventures | | (1,935) | | | (2,513) | |
Equity-based compensation expense | | 2,271 | | | 2,708 | |
Amortization of debt (premiums) and discounts, net | | 144 | | | 117 | |
Amortization (accretion) of market rent rate adjustments, net | | 134 | | | 176 | |
Straight-line rent adjustments | | 680 | | | 1,337 | |
Distributions of cumulative earnings from unconsolidated joint ventures | | 2,007 | | | 2,474 | |
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Changes in other assets and liabilities: | | | | |
Other assets | | 6,064 | | | (1,377) | |
Accounts payable and accrued expenses | | (35,352) | | | (32,532) | |
Net cash provided by operating activities | | 25,574 | | | 18,854 | |
INVESTING ACTIVITIES | | | | |
Additions to rental property | | (25,940) | | | (5,867) | |
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Proceeds from short-term investments | | 19,504 | | | — | |
Additions to non-real estate assets | | (370) | | | (1,924) | |
Distributions in excess of cumulative earnings from unconsolidated joint ventures | | 2,556 | | | 3,353 | |
Additions to deferred lease costs | | (694) | | | (588) | |
Other investing activities | | 3,071 | | | 1,686 | |
Net cash used in investing activities | | (1,873) | | | (3,340) | |
FINANCING ACTIVITIES | | | | |
Cash dividends paid | | (24,623) | | | (19,315) | |
Distributions to noncontrolling interests in Operating Partnership | | (1,042) | | | (869) | |
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Proceeds from notes, mortgages and loans | | — | | | — | |
Repayments of notes, mortgages and loans | | (1,160) | | | (1,080) | |
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Employee income taxes paid related to shares withheld upon vesting of equity awards | | (5,649) | | | (2,146) | |
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Additions to deferred financing costs | | (17) | | | (227) | |
Proceeds from exercise of options | | 15 | | | 10 | |
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Payment for other financing activities | | (287) | | | (287) | |
Distributions to noncontrolling interests in other consolidated partnerships | | (248) | | | — | |
Net cash used in financing activities | | (33,011) | | | (23,914) | |
Effect of foreign currency rate changes on cash and cash equivalents | | 7 | | | (8) | |
Net decrease in cash and cash equivalents | | (9,303) | | | (8,408) | |
Cash and cash equivalents, beginning of period | | 212,124 | | | 161,255 | |
Cash and cash equivalents, end of period | | $ | 202,821 | | | $ | 152,847 | |
The accompanying notes are an integral part of these consolidated financial statements.
Item 1 - Financial Statements of Tanger Properties Limited Partnership
TANGER PROPERTIES LIMITED PARTNERSHIP AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands, except unit data, unaudited)
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| | March 31, 2023 | | December 31, 2022 |
Assets | | | | |
Rental property: | | | | |
Land | | $ | 275,081 | | | $ | 275,079 | |
Buildings, improvements and fixtures | | 2,558,983 | | | 2,553,452 | |
Construction in progress | | 54,623 | | | 27,340 | |
| | 2,888,687 | | | 2,855,871 | |
Accumulated depreciation | | (1,248,391) | | | (1,224,962) | |
Total rental property, net | | 1,640,296 | | | 1,630,909 | |
Cash and cash equivalents | | 202,629 | | | 212,011 | |
Short-term investments | | 32,946 | | | 52,450 | |
Investments in unconsolidated joint ventures | | 73,368 | | | 73,809 | |
Deferred lease costs and other intangibles, net | | 56,818 | | | 58,574 | |
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Operating lease right-of-use assets | | 78,332 | | | 78,636 | |
Prepaids and other assets | | 100,186 | | | 110,622 | |
Total assets | | $ | 2,184,575 | | | $ | 2,217,011 | |
Liabilities and Equity | | | | |
Liabilities | | | | |
Debt: | | | | |
Senior, unsecured notes, net | | $ | 1,038,456 | | | $ | 1,037,998 | |
Unsecured term loan, net | | 321,736 | | | 321,525 | |
Mortgages payable, net | | 67,749 | | | 68,971 | |
Unsecured lines of credit | | — | | | — | |
Total debt | | 1,427,941 | | | 1,428,494 | |
Accounts payable and accrued expenses | | 78,584 | | | 104,087 | |
Operating lease liabilities | | 87,234 | | | 87,528 | |
Other liabilities | | 84,510 | | | 82,968 | |
Total liabilities | | 1,678,269 | | | 1,703,077 | |
Commitments and contingencies | | | | |
Equity | | | | |
Partners’ Equity: | | | | |
General partner, 1,100,000 units outstanding at March 31, 2023 and 1,100,000 units at December 31, 2022, respectively | | 4,520 | | | 4,516 | |
Limited partners, 4,737,982 and 4,737,982 Class A common units, and 104,216,253 and 103,397,920 Class B common units outstanding at March 31, 2023 and December 31, 2022, respectively | | 516,800 | | | 521,168 | |
Accumulated other comprehensive loss | | (15,014) | | | (11,750) | |
Total partners’ equity | | 506,306 | | | 513,934 | |
Noncontrolling interests in consolidated partnerships | | — | | | — | |
Total equity | | 506,306 | | | 513,934 | |
Total liabilities and equity | | $ | 2,184,575 | | | $ | 2,217,011 | |
The accompanying notes are an integral part of these consolidated financial statements.
TANGER PROPERTIES LIMITED PARTNERSHIP AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per unit data, unaudited)
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| | Three months ended March 31, | |
| | 2023 | | 2022 | |
Revenues: | | | | | |
Rental revenues | | $ | 103,582 | | | $ | 104,609 | | |
Management, leasing and other services | | 1,914 | | | 1,527 | | |
Other revenues | | 3,447 | | | 2,732 | | |
Total revenues | | 108,943 | | | 108,868 | | |
Expenses: | | | | | |
Property operating | | 33,148 | | | 36,758 | | |
General and administrative | | 17,434 | | | 15,467 | | |
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Depreciation and amortization | | 25,893 | | | 26,243 | | |
Total expenses | | 76,475 | | | 78,468 | | |
Other income (expense): | | | | | |
Interest expense | | (12,343) | | | (11,634) | | |
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Other income (expense) | | 2,800 | | | 183 | | |
Total other income (expense) | | (9,543) | | | (11,451) | | |
Income before equity in earnings of unconsolidated joint ventures | | 22,925 | | | 18,949 | | |
Equity in earnings of unconsolidated joint ventures | | 1,935 | | | 2,513 | | |
Net income | | 24,860 | | | 21,462 | | |
Noncontrolling interests in consolidated partnerships | | (248) | | | — | | |
Net income available to partners | | 24,612 | | | 21,462 | | |
Net income available to limited partners | | 24,366 | | | 17,150 | | |
Net income (loss) available to general partner | | $ | 246 | | | $ | 4,312 | | |
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Basic earnings per common unit: | | | | | |
Net income | | $ | 0.22 | | | $ | 0.20 | | |
Diluted earnings per common unit: | | | | | |
Net income | | $ | 0.22 | | | $ | 0.19 | | |
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The accompanying notes are an integral part of these consolidated financial statements.
TANGER PROPERTIES LIMITED PARTNERSHIP AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(In thousands, unaudited)
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| | Three months ended March 31, | |
| | 2023 | | 2022 | |
Net income | | $ | 24,860 | | | $ | 21,462 | | |
Other comprehensive income (loss): | | | | | |
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Foreign currency translation adjustments | | 162 | | | 1,226 | | |
Changes in fair value of cash flow hedges | | (3,426) | | | 7,674 | | |
Other comprehensive income (loss) | | (3,264) | | | 8,900 | | |
Comprehensive income | | 21,596 | | | 30,362 | | |
Comprehensive income attributable to noncontrolling interests in consolidated partnerships | | (248) | | | — | | |
Comprehensive income attributable to the Operating Partnership | | $ | 21,348 | | | $ | 30,362 | | |
The accompanying notes are an integral part of these consolidated financial statements.
TANGER PROPERTIES LIMITED PARTNERSHIP AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EQUITY
(In thousands, except unit and per unit data, unaudited)
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| | General partner | Limited partners | Accumulated other comprehensive loss | Total partners’ equity | Noncontrolling interests in consolidated partnerships | Total equity |
Balance, December 31, 2021 | | $ | 4,539 | | $ | 514,023 | | $ | (18,773) | | $ | 499,789 | | $ | — | | $ | 499,789 | |
Net income | | 4,312 | | 17,150 | | — | | 21,462 | | — | | 21,462 | |
Other comprehensive income | | — | | — | | 8,900 | | 8,900 | | — | | 8,900 | |
Compensation under Incentive Award Plan | | — | | 2,746 | | — | | 2,746 | | — | | 2,746 | |
Issuance of 1,900 common units upon exercise of options | | — | | 10 | | — | | 10 | | — | | 10 | |
Withholding of 129,971 common units for employee income taxes | | — | | (2,146) | | — | | (2,146) | | — | | (2,146) | |
Grant of 512,398 restricted common share awards by the Company | | — | | — | | — | | — | | — | | — | |
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Common distributions ($0.1825 per unit) | | (201) | | (19,983) | | — | | (20,184) | | — | | (20,184) | |
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Balance, March 31, 2022 | | $ | 8,650 | | $ | 511,800 | | $ | (9,873) | | $ | 510,577 | | $ | — | | $ | 510,577 | |
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TANGER PROPERTIES LIMITED PARTNERSHIP AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF EQUITY (In thousands, except unit and per unit data, unaudited)
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| | General partner | Limited partners | Accumulated other comprehensive loss | Total partners’ equity | Noncontrolling interests in consolidated partnerships | Total equity |
Balance, December 31, 2022 | | $ | 4,516 | | $ | 521,168 | | $ | (11,750) | | $ | 513,934 | | $ | — | | $ | 513,934 | |
Net income | | 246 | | 24,366 | | — | | 24,612 | | 248 | | $ | 24,860 | |
Other comprehensive loss | | — | | — | | (3,264) | | (3,264) | | — | | (3,264) | |
Compensation under Incentive Award Plan | | — | | 2,323 | | — | | 2,323 | | — | | 2,323 | |
Issuance of 2,600 common shares upon exercise of options | | | 15 | | | 15 | | | 15 | |
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Withholding of 300,639 common units for employee income taxes | | — | | (5,649) | | — | | (5,649) | | — | | (5,649) | |
Grant of 1,116,372 restricted common share awards by the Company | | — | | — | | — | | — | | — | | — | |
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Common distributions ($0.2200 per unit) | | (242) | | (25,423) | | — | | (25,665) | | (248) | | (25,913) | |
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Balance, March 31, 2023 | | $ | 4,520 | | $ | 516,800 | | $ | (15,014) | | $ | 506,306 | | $ | — | | $ | 506,306 | |
The accompanying notes are an integral part of these consolidated financial statements.
TANGER PROPERTIES LIMITED PARTNERSHIP AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands, unaudited)
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| | Three months ended March 31, |
| | 2023 | | 2022 |
OPERATING ACTIVITIES | | | | |
Net income | | $ | 24,860 | | | $ | 21,462 | |
Adjustments to reconcile net income (loss) to net cash provided by operating activities: | | | | |
Depreciation and amortization | | 25,893 | | | 26,243 | |
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Amortization of deferred financing costs | | 808 | | | 759 | |
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Equity in earnings of unconsolidated joint ventures | | (1,935) | | | (2,513) | |
Equity-based compensation expense | | 2,271 | | | 2,708 | |
Amortization of debt (premiums) and discounts, net | | 144 | | | 117 | |
Amortization (accretion) of market rent rate adjustments, net | | 134 | | | 176 | |
Straight-line rent adjustments | | 680 | | | 1,337 | |
Distributions of cumulative earnings from unconsolidated joint ventures | | 2,007 | | | 2,474 | |
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Changes in other assets and liabilities: | | | | |
Other assets | | 6,064 | | | (1,394) | |
Accounts payable and accrued expenses | | (35,431) | | | (32,681) | |
Net cash provided by operating activities | | 25,495 | | | 18,688 | |
INVESTING ACTIVITIES | | | | |
Additions to rental property | | (25,940) | | | (5,867) | |
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Proceeds from short-term investments | | 19,504 | | | — | |
Additions to non-real estate assets | | (370) | | | (1,924) | |
Distributions in excess of cumulative earnings from unconsolidated joint ventures | | 2,556 | | | 3,353 | |
Additions to deferred lease costs | | (694) | | | (588) | |
Other investing activities | | 3,071 | | | 1,686 | |
Net cash used in investing activities | | (1,873) | | | (3,340) | |
FINANCING ACTIVITIES | | | | |
Cash distributions paid | | (25,665) | | | (20,184) | |
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Proceeds from notes, mortgages and loans | | — | | | — | |
Repayments of notes, mortgages and loans | | (1,160) | | | (1,080) | |
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Employee income taxes paid related to shares withheld upon vesting of equity awards | | (5,649) | | | (2,146) | |
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Additions to deferred financing costs | | (17) | | | (227) | |
Proceeds from exercise of options | | 15 | | | 10 | |
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Payment for other financing activities | | (287) | | | (287) | |
Distributions to noncontrolling interests in other consolidated partnerships | | (248) | | | — | |
Net cash used in financing activities | | (33,011) | | | (23,914) | |
Effect of foreign currency on cash and cash equivalents | | 7 | | | (8) | |
Net increase (decrease) in cash and cash equivalents | | (9,382) | | | (8,574) | |
Cash and cash equivalents, beginning of period | | 212,011 | | | 161,152 | |
Cash and cash equivalents, end of period | | $ | 202,629 | | | $ | 152,578 | |
The accompanying notes are an integral part of these consolidated financial statements.
TANGER FACTORY OUTLET CENTERS, INC. AND SUBSIDIARIES
TANGER PROPERTIES LIMITED PARTNERSHIP AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Business
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 March 31, 2023, we owned and operated 29 consolidated outlet centers, with a total gross leasable area of approximately 11.4 million square feet, which were 97% occupied and contained over 2,200 stores representing approximately 600 store brands, as well as one center under construction. We also had partial ownership interests in six unconsolidated outlet centers totaling approximately 2.1 million square feet, including two outlet centers in Canada. Our portfolio also includes one managed center totaling approximately 500,000 square feet. Each of our outlet centers, except one joint venture property, features the Tanger brand name.
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.
The Company, including its wholly-owned subsidiary, Tanger LP Trust, owns the majority of the units of partnership interest issued by the Operating Partnership. The Company controls the Operating Partnership as its sole general partner. Tanger LP Trust holds a limited partnership interest. As of March 31, 2023, the Company and its wholly-owned subsidiaries owned 105,316,253 units of the Operating Partnership and other limited partners (the “Non-Company LPs”) collectively owned 4,737,982 Class A common limited partnership units. Each Class A common limited partnership unit held by the Non-Company LPs is exchangeable for one of the Company’s common shares, subject to certain limitations to preserve the Company’s REIT status. Class B common limited partnership units, which are held by Tanger LP Trust, are not exchangeable for common shares of the Company.
2. Summary of Significant Accounting Policies
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 (“GAAP”) 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, 2022. The December 31, 2022 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 U.S. GAAP have been condensed or omitted pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”), 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.
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 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 LPs’ 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
Individual leases are assessed for collectability and upon the determination that the collection of rents is not probable, accrued rent and accounts receivable are written-off 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