Annual report pursuant to Section 13 and 15(d)

Investments in Unconsolidated Real Estate Joint Ventures

v3.22.4
Investments in Unconsolidated Real Estate Joint Ventures
 12 Months Ended
Dec. 31, 2022
Equity Method Investments and Joint Ventures [Abstract]  
Investments in Unconsolidated Real Estate Joint Ventures Investments in Unconsolidated Real Estate Joint Ventures
The equity method of accounting is used to account for each of the individual joint ventures. We have an ownership interest in the following unconsolidated real estate joint ventures:
As of December 31, 2022
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  % 665  73.8  — 
$ 73.8 
Investments included in other liabilities:
Charlotte (2)
Charlotte, NC 50.0  % 399  $ (18.8) $ 99.7 
National Harbor (2)
National Harbor, MD 50.0  % 341  (12.8) 94.6 
Galveston/Houston (2)
Texas City, TX 50.0  % 353  (15.5) 64.5 
Columbus Columbus, OH 50.0  % 355  (2.4) 70.3 
$ (49.5)
As of December 31, 2021
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:
Columbus Columbus, OH 50.0  % 355  $ 0.2  $ 70.9 
RioCan Canada Various 50.0  % 665  82.4  — 
$ 82.6 
Investments included in other liabilities:
Charlotte (2)
Charlotte, NC 50.0  % 399  $ (16.2) $ 99.6 
National Harbor (2)
National Harbor, MD 50.0  % 341  (11.2) 94.5 
Galveston/Houston (2)
Texas City, TX 50.0  % 353  (14.0) 64.4 
$ (41.4)
(1)Net of debt origination costs of $1.5 million and $1.0 million as of December 31, 2022 and 2021, respectively.
(2)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 and intend to provide further financial support to these joint ventures. The negative carrying value is due to the distributions of proceeds from mortgage loans and quarterly distributions of excess cash flow exceeding the original contributions from the partners and equity in earnings of the joint ventures.

Fees we received for various services provided to our unconsolidated joint ventures were recognized in management, leasing and other services as follows (in thousands):
Year Ended December 31,
2022 2021 2020
Fees:
Management and marketing $ 2,207  $ 2,347  $ 1,859 
Leasing and other fees 194  228  60 
Expense reimbursements from unconsolidated joint ventures 4,432  3,836  3,017 
Total Fees $ 6,833  $ 6,411  $ 4,936 
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 “Condensed Combined 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 $3.2 million and $3.4 million as of December 31, 2022 and 2021, respectively) are amortized over the various useful lives of the related assets.

Charlotte

In July 2014, we opened an approximately 398,000 square foot outlet center in Charlotte, North Carolina that was developed through, and is owned by, a joint venture formed in May 2013. In June 2018, the Charlotte joint venture closed on a $100.0 million mortgage loan with a fixed interest rate of approximately 4.3% and a maturity date of July 2028. The proceeds from the loan were used to pay off the existing $90.0 million mortgage loan with an interest rate of LIBOR + 1.45%, which had an original maturity date of November 2018. The joint venture distributed the incremental net loan proceeds of $9.3 million equally to the partners. Our partner provides property management, marketing and leasing services to the joint venture.

Columbus

In June 2016, we opened an approximately 355,000 square foot outlet center in Columbus, Ohio. The development was initially fully funded with equity contributed to the joint venture by Tanger and its partner. In November 2016, the joint venture closed on an interest-only mortgage loan of $85.0 million at an interest rate of LIBOR + 1.65%. The loan initially matured in November 2019, with two one-year extension options. The joint venture received net loan proceeds of $84.2 million and distributed them equally to the partners. In October 2019, the joint venture exercised its first option to extend the mortgage loan for one year to November 2020 under the same terms. In December 2020, the Columbus joint venture amended the mortgage loan to extend the maturity to November 2022, which required a reduction in principal balance from $85.0 million to $71.0 million. The amendment also changed the interest rate from LIBOR + 1.65% to LIBOR + 1.85%. In addition, the mortgage loan guarantee by us was increased from $6.4 million to $11.9 million. In September 2022, we refinanced this mortgage. The new $71.0 million non-recourse loan has a maturity date of October 2032 and a fixed interest rate of 6.25%. We are providing property management, marketing and leasing services to the joint venture.

Galveston/Houston

In October 2012, we opened an approximately 353,000 square foot outlet center in Texas City, Texas that was developed through, and is owned by, a joint venture formed in June 2011. In July 2017, the joint venture amended and restated the initial construction loan, which had an outstanding balance of $65.0 million, to increase the amount available to borrow from $70.0 million to $80.0 million and extended the maturity date until July 2020 with two one-year options. The amended and restated loan also changed the interest rate from LIBOR + 1.50% to LIBOR + 1.65%. At the closing of the amendment, the joint venture distributed the net proceeds of approximately $14.5 million equally between the partners.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 loan would have matured in July 2022. In February 2021, the Galveston/Houston joint venture amended its mortgage loan to extend the maturity to July 2023, which required a reduction in principal balance from $80.0 million to $64.5 million. The amendment also changed the interest rate from LIBOR + 1.65% to LIBOR + 1.85%. Each partner made a capital contribution of $7.0 million to fund the reduction in principal balance. We are providing property management, marketing and leasing services to the outlet center.
National Harbor

In November 2013, we opened an approximately 341,000 square foot outlet center at National Harbor in the Washington, D.C. Metro area that was developed through, and is owned by, a joint venture formed in May 2011. In December 2018, the National Harbor joint venture closed on a $95.0 million mortgage loan with a fixed interest rate of approximately 4.6% and a maturity date of January 2030. The proceeds from the loan were used to pay off the $87.0 million construction loan with an interest rate of LIBOR + 1.65%, which had an original maturity date of November 2019. The joint venture distributed the incremental net loan proceeds of $7.4 million equally to the partners.

RioCan Canada

We have a 50/50 co-ownership agreement with RioCan Real Estate Investment Trust to operate and manage outlet centers in Canada. We provide leasing and marketing services for the outlet centers and RioCan provides development and property management services.

In October 2014, the co-owners opened Tanger Outlets Ottawa, the first ground up development of a Tanger Outlet Center in Canada. In 2016, the co-owners commenced construction on a 39,000 square foot expansion, which opened during the second quarter of 2017 to bring the total square feet of the outlet center to approximately 357,000. In November 2020, the RioCan joint venture closed on the sale of an outparcel located at Tanger Outlets Ottawa for net proceeds of approximately $5.5 million and a gain of approximately $2.0 million. Our share of the net proceeds was $2.8 million, and our share of the gain was approximately $1.0 million.

In addition, the RioCan Canada co-owners own Tanger Outlets Cookstown, which is approximately 308,000 square feet.

In March 2021, the RioCan joint venture closed on the sale of its 116,000 square foot outlet center in Saint-Sauveur, for net proceeds of approximately $9.4 million. Our share of the proceeds was approximately $4.7 million. As a result of this transaction, we recorded a loss on the sale of $3.7 million. This includes a $3.6 million charge related to the foreign currency effect of the sale recorded in other income (expense), which had been previously recorded in other comprehensive income.

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 2020, the RioCan joint venture recognized an impairment charge related to its Saint-Sauveur property. The impairment charge was primarily driven by, among other things, new competition in the market and changes in market capitalization rates and the COVID-19 pandemic in 2020.

The table below summarizes the impairment charges taken during 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.
Condensed combined summary financial information of joint ventures accounted for using the equity method as of December 31, 2022 and 2021 and for the years ended December 31, 2022, 2021 and 2020 is as follows (in thousands):
Condensed Combined Balance Sheets - Unconsolidated Joint Ventures 2022 2021
Assets
Land $ 81,716  $ 83,568 
Buildings, improvements and fixtures 458,190  467,918 
Construction in progress 681  744 
540,587  552,230 
Accumulated depreciation (182,731) (166,096)
Total rental property, net 357,856  386,134 
Cash and cash equivalents 17,372  19,030 
Deferred lease costs, net 2,895  3,517 
Prepaids and other assets 10,612  13,109 
Total assets $ 388,735  $ 421,790 
Liabilities and Owners' Equity
Mortgages payable, net $ 329,009  $ 329,460 
Accounts payable and other liabilities 15,374  15,231 
Total liabilities 344,383  344,691 
Owners' equity 44,352  77,099 
Total liabilities and owners' equity $ 388,735  $ 421,790 
Condensed Combined Statements of Operations- Unconsolidated Joint Ventures: Year Ended December 31,
2022 2021 2020
Revenues $ 87,709  $ 88,120  $ 76,866 
Expenses:
Property operating 34,297  35,111  33,053 
General and administrative 257  278  395 
Impairment charges —  —  6,181 
Depreciation and amortization 21,749  22,947  23,544 
Total expenses 56,303  58,336  63,173 
Other income (expense):
Interest expense (14,174) (11,715) (13,091)
Gain on sale of assets —  503  1,983 
Other non-operating income 230  160  170 
Total other income (expense) $ (13,944) $ (11,052) $ (10,938)
Net income $ 17,462  $ 18,732  $ 2,755 
The Company and Operating Partnership's share of:
Net income $ 8,594  $ 8,904  $ 1,126 
Depreciation, amortization and asset impairments (real estate related) $ 11,018  $ 11,618  $ 15,115