Tanger Inc. Quarterly report pursuant to Section 13 or 15(d)

Quarterly report pursuant to Section 13 or 15(d)

Investments in Unconsolidated Joint Ventures (Notes)

Investments in Unconsolidated Joint Ventures (Notes)

6 Months Ended

Jun. 30, 2012

Investments In Unconsolidated Real Estate Joint Ventures [Abstract]

Equity Method Investments Disclosure [Text Block]

Investments in Unconsolidated Real Estate Joint Ventures

Our investments in unconsolidated joint ventures as of June 30, 2012 and December 31, 2011 aggregated $72.4 million and $28.5 million, respectively. We have concluded based on the current facts and circumstances that the equity method of accounting should be used to account for each of the individual joint ventures below. At June 30, 2012, we were members of the following unconsolidated real estate joint ventures:



Joint Venture	Center Location	Ownership %		Square Feet	Carrying Value of Investment (in millions)		Total Joint Venture Debt (in millions)
Deer Park	Deer Park, Long Island NY	33.3	%	741,976	$	4.1	$	246.9
Deer Park Warehouse	Deer Park, Long Island NY	33.3	%	29,253	—		1.8
Galveston/Houston	Texas City, Texas	50.0	%	—	21.0		—
National Harbor	Washington D.C. Metro Area	50.0	%	—	0.9		—
RioCan Canada	Various	50.0	%	155,522	24.0		—
Westgate	Phoenix, Arizona	58.0	%	—	18.3		—
Wisconsin Dells	Wisconsin Dells, Wisconsin	50.0	%	265,086	3.9		24.3
Other		50.0	%	—	0.2		—
Total					$	72.4	$	273.0

These investments are recorded initially at cost and subsequently adjusted for our equity in the venture's net income (loss), cash contributions, distributions and other adjustments required by the equity method of accounting as discussed below.

Management, leasing and marketing fees earned from services provided to our unconsolidated joint ventures were recognized as follows (in thousands):



	Three Months Ended June 30,				Six Months Ended June 30,
	2012		2011		2012		2011
Fee:
Management and leasing	$	474	$	469	$	953	$	973
Marketing	47		44		100		88
Total Fees	$	521	$	513	$	1,053	$	1,061

Our investments in real estate joint ventures are reduced by the percentage of the profits earned for leasing and development services associated with our ownership interest in each joint venture. Our carrying value of investments in unconsolidated joint ventures differs from our share of the assets reported in the "Summary Balance Sheets - Unconsolidated Joint Ventures" shown below due to adjustments to the book basis, including intercompany profits on sales of services that are capitalized by the unconsolidated joint ventures. The differences in basis are amortized over the various useful lives of the related assets.

Deer Park Warehouse, Long Island, New York

In June 2008, we, along with our partners in Deer Park, entered into a joint venture to purchase a warehouse adjacent to the Tanger Outlet Center located in Deer Park, NY for a total purchase price of $3.3 million and obtained mortgage financing of $2.3 million. The interest only mortgage loan secured by the warehouse matured on May 17, 2011 and the joint venture did not qualify for the one-year extension option. As a result, in June 2012 the joint venture reduced the outstanding principal balance by $500,000 to $1.8 million and entered into a loan forbearance agreement with the lender whereby the lender agreed that it will not enforce its rights under the loan until the forbearance termination date of October 1, 2012 unless extended. Additional interest expense accrues at a rate of Prime + 5.5% less the amount paid. During this time, the joint venture committed to continue making monthly debt service payments pursuant to the forbearance and the loan agreement at a pay rate of LIBOR + 1.85%, to maintain the property, and to list the property for sale. In June 2012, the joint venture recorded an impairment charge of approximately $420,000 to lower the basis of the warehouse to its estimated fair market value.

Galveston/Houston, Texas

In June 2011, we announced the formation of a joint venture for the development of a Tanger Outlet Center south of Houston in Texas City, TX. We expect the center to be completed in time for a grand opening on October 19, 2012 and to feature over 85 brand name and designer outlet stores in the first phase of approximately 350,000 square feet, with room for expansion for a total build out of approximately 470,000 square feet. In July 2011, the joint venture acquired the land underlying the site for approximately $5.6 million. As of June 30, 2012, we have contributed $20.6 million in cash to the joint venture to fund development activities. We will provide property management and marketing services to the center; and with our partner, are jointly providing development and leasing services.

National Harbor, Washington, D.C. Metro Area

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

RioCan Canada

On December 9, 2011, the RioCan Canadian Joint Venture purchased the Cookstown Outlet Mall. The existing outlet center was acquired for $47.4 million, plus an additional $13.8 million for excess land upon the seller meeting certain conditions, for an aggregate purchase price of $61.2 million. RioCan is providing development and property management services to this existing outlet center and we are providing leasing and marketing services. In connection with the purchase, the joint venture assumed the in place financing of $29.6 million which carried an interest rate of 5.10% and had an original maturity date of June 21, 2014. In March 2012, the joint venture retired the outstanding loan and we contributed an additional $15.1 million to the joint venture to fund the payment.

During the first quarter of 2012, the joint venture terminated an option contract to develop a center in Halton Hills, Ontario and accordingly wrote-off pre-development costs of approximately $1.3 million.

Westgate, Glendale, Arizona

On May 4, 2012, we closed on the formation of a joint venture for the development of a Tanger Outlet Center in Glendale, Arizona. Construction of the center began in February 2012. Situated on 38-acres, the outlet center is located on Loop 101 and Glendale Avenue in Western Phoenix. We currently expect this center to be completed in time for a November 15, 2012 grand opening and will have approximately 80 brand name and designer outlet stores in the first phase which will contain approximately 330,000 square feet. As of June 30, 2012, we have contributed $18.1 million in cash to the joint venture to fund development activities. We are providing property management, construction supervision, leasing and marketing services to the joint venture.

On June 27, 2012, the joint venture closed on a construction loan with the ability to borrow up to $43.8 million (our share $25.4 million), which carries an interest rate of LIBOR + 1.75%. As of June 30, 2012 the balance on the loan was zero and no draws were made during the second quarter of 2012.

We evaluate our real estate joint ventures in accordance with the Consolidation guidance of the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC"). As a result of our qualitative assessment, we concluded that our Westgate and Deer Park joint ventures are Variable Interest Entities ("VIEs") and all of our other joint ventures are not VIEs. Westgate is considered a VIE because the voting rights are disproportionate to the economic interests. Deer Park is considered a VIE because it does not meet the criteria of the members having a sufficient equity investment at risk. Investments in real estate joint ventures in which we have a non-controlling ownership interest are accounted for using the equity method of accounting.

After making the determination that Westgate and Deer Park were VIEs, we performed an assessment to determine if we would be considered the primary beneficiary and thus be required to consolidate their balance sheets and results of operations. This assessment was based upon whether we had the following:


a.	The power to direct the activities of the VIE that most significantly impact the entity's economic performance


b.	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

Based on the provisions of the operating, development, leasing, and management agreements of Westgate and Deer Park, we determined that neither member has the power to direct the significant activities that affect the economic performance of Westgate or Deer Park.

We have determined that the partners at both Westgate and Deer Park share power in the decisions that most significantly impact the respective joint ventures, and therefore we are not required to consolidate Westgate or Deer Park. Our equity method investments in Westgate and Deer Park as of June 30, 2012 were approximately $18.3 million and $4.1 million, respectively. We are unable to estimate our maximum exposure to loss at this time because our guarantees are limited and based on the future operating performance of Westgate and Deer Park.

Condensed combined summary financial information of unconsolidated joint ventures accounted for using the equity method is as follows (in thousands):



Summary Balance Sheets - Unconsolidated Joint Ventures	As of June 30, 2012		As of December 31, 2011
Assets
Investment properties at cost, net	$	338,144	$	332,822
Construction in progress	66,263		11,276
Assets held for sale ⁽¹⁾	1,800		—
Cash and cash equivalents	16,855		7,582
Deferred lease costs, net	13,514		14,815
Deferred debt origination costs, net	6,566		7,566
Prepaids and other assets	16,386		11,687
Total assets	$	459,528	$	385,748
Liabilities and Owners' Equity
Mortgages payable	$	273,034	$	303,230
Construction trade payables	23,135		2,669
Accounts payable and other liabilities	25,641		27,246
Total liabilities	321,810		333,145
Owners' equity	137,718		52,603
Total liabilities and owners' equity	$	459,528	$	385,748

(1) Assets related to our Deer Park Warehouse joint venture, which is currently for sale.



	Three Months Ended						Six Months Ended
Summary Statements of Operations	June 30,						June 30,
- Unconsolidated Joint Ventures	2012			2011			2012			2011
Revenues	$	11,606		$	9,752		$	23,264		$	19,314
Expenses
Property operating	5,083			4,473			9,974			8,574
General and administrative	237			(131		)	400			56
Acquisition costs	—			—			704			—
Abandoned development costs	436			—			1,310			—
Impairment charge	420			—			420			—
Depreciation and amortization	4,300			3,627			8,908			7,238
Total expenses	10,476			7,969			21,716			15,868
Operating income	1,130			1,783			1,548			3,446
Interest expense	3,598			4,126			7,427			5,929
Net loss	$	(2,468	)	$	(2,343	)	$	(5,879	)	$	(2,483	)

The Company and Operating Partnership's share of:
Net loss	$	(867	)	$	(764	)	$	(2,319	)	$	(796	)
Depreciation and impairment charge (real estate related)	$	1,793		$	1,336		$	3,608		$	2,642

- Definition

The entire disclosure for equity investment, or group of investments, for which combined disclosure is appropriate, including: (a) the name of each investee and percentage of ownership of common stock, (b) accounting policies for investments in common stock, (c) difference between the amount at which the investment is carried and the amount of underlying equity in net assets and the accounting treatment of the difference, (d) the total fair value of each identified investment for which a market value is available, (e) summarized information as to assets, liabilities, and results of operations of the investees (for investments in unconsolidated subsidiaries, common stock of joint ventures, or other investments using the equity method), and (f) material effects of possible conversions, exercises, or contingent issuances of the investee. Other disclosures include (a) the names of any investee in which the investor owns 20 percent or more of the voting stock and investment is not accounted for using the equity method, and the reasons why not, and (b) the names of any investee in which the investor owns less than 20 percent of the voting stock and the investment is accounted for using the equity method, and the reasons why it is.

+ References + Details