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Item 2. Management’s Discussion and Analysis

2021-08-03 compared with 2021-05-07 · 242 added, 98 removed, 527 unchanged (39% of the section changed)

Management’s Discussion and Analysis of Financial Condition and Results of Operations

The discussion of our results of operations reported in the unaudited, consolidated statements of operations compares the three months ended March 31, 2021 with the three months ended March 31, 2020.

The discussion of our results of operations reported in the unaudited, consolidated statements of operations compares the three and six months ended June 30, 2021 with the three and six months ended June 30, 2020.

The results of operations discussion is combined for Tanger Factory Outlet Centers, Inc.

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Currently, one of the most significant factors, however, is the adverse effect of the COVID-19 pandemic on the financial condition, results of operations, cash flows, compliance with debt covenants and performance of the Company and its tenants, the real estate market and the global economy and financial markets.

The extent to which COVID-19 impacts us and our tenants will depend on future developments, which are highly uncertain and cannot be predicted with confidence, including the scope, severity and duration of the pandemic, the actions taken to contain the pandemic or mitigate its impact, the timing or effectiveness of any vaccines or treatments, and the direct and indirect economic effects of the pandemic and containment measures, among others.

The extent to which COVID-19 impacts us and our tenants will depend on future developments, which are highly uncertain and cannot be predicted with confidence, including the scope, severity and duration of the pandemic, the actions taken to contain the pandemic or mitigate its impact, the acceptance or effectiveness of vaccines or treatments, and the direct and indirect economic effects of the pandemic and containment measures, among others.

Moreover, you should interpret many of the risks identified in this report, as well as the risks set forth below, as being heightened as a result of the ongoing and numerous adverse impacts of COVID-19.

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General Overview

As of March 31, 2021, we had 30 consolidated outlet centers in 18 states totaling 11.5 million square feet.

As of June 30, 2021, we had 30 consolidated outlet centers in 18 states totaling 11.5 million square feet.

We also had 6 unconsolidated outlet centers in 5 states or provinces totaling 2.1 million square feet.

The table below details our new developments, expansions and dispositions of consolidated and unconsolidated outlet centers that significantly impacted our results of operations and liquidity from January 1, 2020 to March 31, 2021 (square feet in thousands):

Consolidated Outlet Centers Unconsolidated Joint Venture Outlet Centers

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Saint-Saveur First Quarter (99) (1)

As of March 31, 2021

As of June 30, 2021

11,456 30 2,113 6

The following table summarizes certain information for our existing outlet centers in which we have an ownership interest as of March 31, 2021.

The following table summarizes certain information for our existing outlet centers in which we have an ownership interest as of June 30, 2021.

Except as noted, all properties are fee owned.

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100 729,558 90

Foley, Alabama 100 554,649 88

Rehoboth Beach, Delaware (1)

100 552,841 92

Foley, Alabama 100 554,649 87

Atlantic City, New Jersey (1) (3)

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Leasing Activity

The tables below show changes in rent (base rent and common area maintenance (“CAM”) for leases for new stores that opened or renewals that started during the respective trailing twelve month periods ended March 31, 2021 and 2020:

Trailing twelve months ended March 31, 2021 (1),(2), (3)

The tables below show changes in rent (base rent and common area maintenance (“CAM”)) for leases for new stores that opened or renewals that started during the respective trailing twelve month periods ended June 30, 2021 and 2020:

Trailing twelve months ended June 30, 2021 (1),(2), (3)

# of Leases Square Feet

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Renewal 245 1,236 $ 26.60 $ 0.62 3.17 $ 26.40

Trailing twelve months ended March 31, 2020 (1),(2)

Trailing twelve months ended June 30, 2020 (1),(2)

# of Leases Square Feet

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COVID-19 Pandemic

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 collect rent under our existing leases, 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.

Due to the COVID-19 pandemic, a number of our tenants 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.

As of April 30, 2021, contractual fixed rents billed during 2020 that were deferred or under negotiation as a direct result of the COVID-19 pandemic and remain outstanding totaled $3.7 million and $2.9 million, respectively.

Through April 30, 2021, the Company had collected 83% of 2020 rents deferred until 2021 and had collected 96% of the 2020 deferred rents due to be repaid in the first quarter of 2021, and as a result, the Company recorded a $1.6 million reversal of rental revenue reserves during the first quarter related to prior period rents that were previously deferred.

As of March 31, 2021, remaining rental revenue reserves totaled $2.6 million, or 39% of the total remaining 2020 rents deferred or under negotiation.

Based on rents received through April 30, 2021, collections of contractual fixed rents billed of $85.6 million in the first quarter of 2021 for the consolidated portfolio were approximately 95%.

As of June 30, 2021, contractual fixed rents billed during 2020 that were deferred as a direct result of the COVID-19 pandemic and remain outstanding totaled $1.4 million.

Through July 30, 2021, the Company had collected 94% of 2020 rents deferred until 2021 and had collected 98% of the 2020 deferred rents due to be repaid through the second quarter of 2021.

The extent of future tenant requests for rent relief and the impact on our results of operations and cash flows is uncertain and cannot be predicted at this time.

While none of our domestic outlets centers are in markets subject to mandatory closures as April 30, 2021, our two Canadian centers held in the RioCan unconsolidated joint venture are currently under mandated closure with stay at home orders in place through May 19, 2021.

If store closures were to occur again in our domestic markets, this could have a material adverse impact on our financial position and results of operations.

RESULTS OF OPERATIONS

Comparison of the three months ended March 31, 2021 to the three months ended March 31, 2020

Comparison of the three months ended June 30, 2021 to the three months ended June 30, 2020

NET INCOME (LOSS)

Net income in the 2021 period increased $26.5 million to $2.6 million as compared to a $23.9 million loss for the 2020 period.

The increase in net income is primarily due to the following:

• The $45.7 million impairment charge recognized in March 2020 at our outlet center in Mashantucket, Connecticut.

• Lower property operating expense due to decreased advertising and promotion expense.

• the prior year period was heavily impacted by the COVID-19 pandemic and had significant revenue reductions,

• increased variable revenue derived from tenant sales due to the mandatory closure of the vast majority of stores in our outlet centers by local and state authorities for a portion of the 2020 period, and

• the 2020 period included our share of an impairment charge totaling $3.1 million in equity in earnings that related to the Saint-Sauveur, Quebec outlet center in our Canadian joint venture.

Partially offsetting the impact of the items above were the following items:

• We recorded a foreign currency loss of approximately $3.6 million in other income (expense), which had been previously recorded in other comprehensive income associated with the sale of our RioCan joint venture outlet center in Saint-Sauveur.

• We recorded $2.4 million of compensation cost related to a voluntary retirement plan offer which required eligible participants to give notice of acceptance by December 1, 2020 for an effective retirement date of March 31, 2021 and other executive severance.

• The sale of two operating properties since the first quarter of last year, as discussed below, and

• Lower rental revenues primarily due to lower occupancy, as discussed below.

• the current period included a loss on the early extinguishment of debt of $14.0 million, and

• the sale of two operating properties since the first quarter of last year, as discussed below.

In the tables below, information set forth for properties disposed includes the Terrell outlet center sold in August 2020 and the Jeffersonville outlet center sold in January 2021.

RENTAL REVENUES

Rental revenues decreased $11.1 million in the 2021 period compared to the 2020 period.

Rental revenues increased $34.6 million in the 2021 period compared to the 2020 period.

The following table sets forth the changes in various components of rental revenues (in thousands):

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$ 96,824 $ 62,273 $ 34,551

Rental revenues decreased primarily due to rent modifications and store closings as a result of recent retailer bankruptcies and brand-wide restructurings, most of which occurred during 2020.

Our overall portfolio occupancy rate declined to 91.7% as of the end of the current period compared to 94.3% as of the end of the prior year period.

The prior year period includes the impact of a $33.9 million COVID-19 pandemic-related revenue reduction.

In addition, variable revenues, which are derived from tenant sales, are also driving the increase over the prior year as the vast majority of stores in our outlet centers were under mandated closure by local and state authorities for a portion of the 2020 period.

During 2020 we recognized a write-off of revenue of approximately $3.7 million of straight-line rents associated with tenant bankruptcies and uncollectible accounts.

MANAGEMENT, LEASING AND OTHER SERVICES

Management, leasing and other services decreased $71,000 in the 2021 period compared to the 2020 period.

Management, leasing and other services increased $634,000 in the 2021 period compared to the 2020 period.

The following table sets forth the changes in various components of management, leasing and other services (in thousands):

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$ 1,359 $ 725 $ 634

Management, leasing and other service revenue increased in the 2021 period due to the prior year impact of the COVID-19 pandemic.

The COVID-19 pandemic resulted in materially lower rental revenues received during the 2020 period which resulted in lower management fees.

OTHER REVENUES

Other revenues increased $223,000 in the 2021 period as compared to the 2020 period.

Other revenues increased $2.1 million in the 2021 period as compared to the 2020 period.

The following table sets forth the changes in various components of other revenues (in thousands):

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$ 3,090 $ 992 $ 2,098

Other revenues from existing properties increased in the 2021 period due to the prior year impact of the COVID-19 pandemic.

The 2020 period included large reductions in variable vending and other revenue sources due to the mandatory closure of the vast majority of stores for a portion of the 2020 period as discussed above.

PROPERTY OPERATING EXPENSES

Property operating expenses decreased $3.3 million in the 2021 period compared to the 2020 period.

Property operating expenses increased $3.1 million in the 2021 period compared to the 2020 period.

The following table sets forth the changes in various components of property operating expenses (in thousands):

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$ 31,250 $ 28,158 $ 3,092

The decrease in property operating expenses at existing properties was primarily due to decreased advertising and promotion expense.

Property operating expenses at existing properties increased in the 2021 period compared to the 2020 period primarily due to the lower costs needed to operate and advertise the centers while stores were closed under government mandates in response to the COVID-19 pandemic in 2020 as well as operating the centers under reduced hours when the stores reopened.

The 2021 period for properties disposed includes $1.7 million in net proceeds received from the successful appeal of property taxes for tax years prior to disposition.

GENERAL AND ADMINISTRATIVE EXPENSES

General and administrative expenses increased $4.2 million in the 2021 period compared to the 2020 period, primarily as a result of $2.4 million of compensation cost related to employees that accepted a voluntary retirement plan with an effective retirement date of March 31, 2021 and other executive severance.

Additionally, the 2021 period included incremental compensation following the 2020 period related to executives hired after March 31, 2020, including our current President and Chief Executive Officer, hired in April 2020, and our Executive Vice President of Operations, hired in October 2020.

Also, the 2021 period included increases in other professional and legal fees, some of which are related to collection of rents during the COVID-19 mandated shut downs.

General and administrative expenses increased $4.1 million in the 2021 period compared to the 2020 period.

The 2021 period includes higher compensation costs due to the addition of certain executives and other key employees added to drive certain of the our operational and growth initiatives and increases in other professional and legal fees, some of which are related to collection of rents from periods during the COVID-19 mandated shut downs.

The 2020 period included temporary reductions in compensation costs of our executive officers and other employees and virtually all travel and entertainment expenses were eliminated during the period.

DEPRECIATION AND AMORTIZATION

Depreciation and amortization costs decreased $1.3 million in the 2021 period compared to the 2020 period.

Depreciation and amortization costs decreased $914,000 in the 2021 period compared to the 2020 period.

The following table sets forth the changes in various components of depreciation and amortization costs from the 2020 period to the 2021 period (in thousands):

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Depreciation and amortization decreased at our existing properties primarily due to the lower basis in our Foxwoods property due to impairments recorded in the first and fourth quarters of 2020.

INTEREST EXPENSE

Interest expense decreased $3.6 million in the 2021 period compared to the 2020 period for the following reasons:

• In April 2021, we completed the partial early redemption of $150.0 million of our 3.875% senior notes due December 2023 (the “Notes).

• During the first six months of 2021, we paid down $50.0 million of borrowings under our unsecured term loan.

• Interest rate swap agreements in place during the 2021 period compared to the 2020 period had lower average interest rates.

• The 2020 period included interest expense related to borrowing approximately $599.8 million under our unsecured lines of credit to increase liquidity and preserve financial flexibility as a result of the COVID-19 pandemic.

In June 2020, we repaid $200.0 million of these borrowings.

During the 2021 period we had no borrowings under our unsecured lines of credit.

LOSS ON EARLY EXTINGUISHMENT OF DEBT

As part of completing the partial redemption of the Notes, we paid a make-whole premium of $13.0 million and expensed approximately $1.0 million of unamortized debt origination costs and debt discount related to the Notes.

EQUITY IN EARNINGS (LOSSES) OF UNCONSOLIDATED JOINT VENTURES

Equity in earnings (losses) of unconsolidated joint ventures increased approximately $5.7 million in the 2021 period compared to the 2020 period.

In the table below, information set forth for property disposed includes the Saint-Sauveur outlet center in our Canadian joint venture, which was sold in March 2021.

2021 2020 Increase/(Decrease)

Equity in earnings from existing properties $ 2,728 $ 156 $ 2,572

Equity in losses from property disposed — (3,131) 3,131

$ 2,728 $ (2,975) $ 5,703

Equity in earnings of unconsolidated joint ventures from existing properties increased due to the impact of COVID-19 on revenues in the previous year.

Equity in earnings from the property disposed 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.

Comparison of the six months ended June 30, 2021 to the six months ended June 30, 2020

NET INCOME (LOSS)

Net income increased $58.9 million in the 2021 period to net income of $6.9 million as compared to net loss of $52.0 million for the 2020 period.

The increase in net income is primarily due to the following:

• the prior year period was heavily impacted by the COVID-19 pandemic and had significant revenue reductions,

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

• the 2020 period included our share of an impairment charge totaling $3.1 million in equity in earnings that related to the Saint-Sauveur, Quebec outlet center in our Canadian joint venture.

Partially offsetting the impact of the items above were the following items:

• we recognized in the current period a loss on the early extinguishment of debt of $14.0 million,

• we recorded in the current period a foreign currency loss of approximately $3.6 million in other income (expense), which had been previously recorded in other comprehensive income associated with the sale of our RioCan joint venture outlet center in Saint-Sauveur.

• we recorded $2.4 million of compensation cost related to a voluntary retirement plan offer which required eligible participants to give notice of acceptance by December 1, 2020 for an effective retirement date of March 31, 2021 and other executive severance.

• we sold two operating properties since the first quarter of last year, as discussed below.

In the tables below, information set forth for properties disposed includes the Terrell outlet center sold in August 2020 and the Jeffersonville outlet center sold in January 2021.

RENTAL REVENUES

Rental revenues increased $23.5 million in the 2021 period compared to the 2020 period.

The following table sets forth the changes in various components of rental revenues (in thousands):

2021 2020 Increase/(Decrease)

Rental revenues from existing properties $ 194,476 $ 166,036 $ 28,440

Rental revenues from properties disposed 375 4,021 (3,646)

Straight-line rent adjustments (1,521) (677) (844)

Lease termination fees 800 1,677 (877)

Amortization of above and below market rent adjustments, net 161 (226) 387

$ 194,291 $ 170,831 $ 23,460

The prior year period included the impact of the $33.9 million COVID-19 pandemic-related revenue reduction.

In addition, variable revenues which is derived from tenant sales is also driving the increase over prior year due to the mandated store closures by local and state authorities for a portion of the 2020 period discussed above.

In addition in the prior year, we recognized a write-off of revenue of approximately $3.7 million of straight-line rents associated with the tenant bankruptcies and uncollectible accounts.

MANAGEMENT, LEASING AND OTHER SERVICES

Management, leasing and other services increased $563,000 in the 2021 period compared to the 2020 period.

The following table sets forth the changes in various components of management, leasing and other services (in thousands):

2021 2020 Increase/(Decrease)

Management and marketing $ 1,045 $ 685 $ 360

Leasing and other fees 159 35 124

Expense reimbursements from unconsolidated joint ventures 1,527 1,448 79

Total Fees $ 2,731 $ 2,168 $ 563

Management, leasing and other service revenue increased in the 2021 period due to the prior year impact of the COVID-19 pandemic.

The COVID-19 pandemic resulted in materially lower rental revenues received during the 2020 period which resulted in lower management fees.

OTHER REVENUES

Other revenues increased $2.3 million in the 2021 period as compared to the 2020 period.

The following table sets forth the changes in other revenues (in thousands):

2021 2020 Increase/(Decrease)

Other revenues from existing properties $ 4,929 $ 2,556 $ 2,373

Other revenues from property disposed 16 68 (52)

$ 4,945 $ 2,624 $ 2,321

Other revenues from existing properties increased in the 2021 period due to the prior year impact of the COVID-19 pandemic.

The 2020 period included large reductions in variable vending and other revenue sources due to the mandatory store closures by local and state authorities for a portion of the 2020 period discussed above.

PROPERTY OPERATING EXPENSES

Property operating expenses decreased $224,000 in the 2021 period as compared to the 2020 period.

The following table sets forth the changes in various components of property operating expenses (in thousands):

2021 2020 Increase/(Decrease)

Property operating expenses from existing properties $ 65,506 $ 61,435 $ 4,071

Property operating expenses from property disposed (1,155) 2,942 (4,097)

Expenses related to unconsolidated joint ventures 1,527 1,448 79

Other property operating expense 683 960 (277)

$ 66,561 $ 66,785 $ (224)

Property operating expenses at existing properties increased in the 2021 period compared to the 2020 period, primarily due to the lower costs needed to operate and advertise the centers while stores were closed under government mandates in response to the COVID-19 pandemic in 2020, as well as operating the centers under reduced hours when the stores reopened.

The 2021 period for properties disposed includes $1.7 million in net proceeds received from the successful appeal of property taxes for tax years prior to disposition.

GENERAL AND ADMINISTRATIVE EXPENSES

General and administrative expenses increased $8.3 million in the 2021 period compared to the 2020 period.

The 2021 period included $2.4 million of compensation cost related to employees that accepted a voluntary retirement plan with an effective retirement date of March 31, 2021 and other executive severance.

Additionally, the 2021 period included incremental compensation related to executives hired during 2020, including our current President and Chief Executive Officer, hired in April 2020, and our Executive Vice President of Operations, hired in October 2020.

The 2021 period also had increases in other professional and legal fees, some of which are related to collection of rents from periods during the COVID-19 mandated shut downs.

IMPAIRMENT CHARGE

During the first quarter of 2020, we determined that the estimated future undiscounted cash flows of our Foxwoods outlet center in Mashantucket, Connecticut did not exceed the property's carrying value due to a decline in operating results.

Therefore, we recorded a $45.7 million non-cash impairment charge in our consolidated statement of operations for the 2020 period which equaled the excess of the property's carrying value over its estimated fair value.

DEPRECIATION AND AMORTIZATION

Depreciation and amortization costs decreased $2.2 million in the 2021 period compared to the 2020 period.

The following table sets forth the changes in various components of depreciation and amortization costs from the 2020 period to the 2021 period (in thousands):

2021 2020 Increase/(Decrease)

Depreciation and amortization expenses from existing properties $ 55,844 $ 57,501 $ (1,657)

Depreciation and amortization from property disposed 38 562 (524)

$ 55,882 $ 58,063 $ (2,181)

Depreciation and amortization decreased at our existing properties primarily due to the lower basis in our Foxwoods property due to impairments recorded in the first and fourth quarters of 2020.

INTEREST EXPENSE

Interest expense decreased $4.4 million in the 2021 period compared to the 2020 period for the following reasons:

• In April 2021, we completed the partial early redemption of $150.0 million of our 3.875% senior notes due December 2023.

• During the first six months of 2021, we paid down $50.0 million of borrowings under our unsecured term loan.

• Interest rate swap agreements in place during the 2021 period compared to the 2020 period had lower average interest rates.

In June 2020, we repaid $200.0 million of these borrowings.

During the 2021 period we had no borrowings under our unsecured lines of credit.

LOSS ON EARLY EXTINGUISHMENT OF DEBT

OTHER INCOME (EXPENSE)

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As a result of this transaction, we recorded a foreign currency loss of approximately $3.6 million in other income (expense), which had been previously recorded in other comprehensive income.

INTEREST EXPENSE

Interest expense decreased $834,000 in the 2021 period compared to the 2020 period.

Since March 31, 2020, we lowered the average interest rate on $300 million of variable rate debt by approximately 100 basis points by entering into several interest rate protection agreements.

This decrease was partially offset by higher loan cost amortization from the cost of amending our debt covenants during the second quarter of 2020 related to our unsecured lines of credit and our unsecured term loan.

EQUITY IN EARNINGS OF UNCONSOLIDATED JOINT VENTURES

Equity in earnings of unconsolidated joint ventures increased approximately $242,000 in the 2021 period compared to the 2020 period.

In the table below, information set forth for properties disposed includes the Saint-Sauveur outlet center in our Canadian joint venture, which was sold in March 2021.

EQUITY IN EARNINGS (LOSSES) OF UNCONSOLIDATED JOINT VENTURES

Equity in earnings (losses) of unconsolidated joint ventures increased approximately $5.9 million in the 2021 period compared to the 2020 period.

In the table below, information set forth for properties disposed includes the Saint-Sauveur, Quebec outlet center in our Canadian joint venture, which was sold in March 2021.

2021 2020 Increase/(Decrease)

Equity in earnings (losses) from existing properties $ 1,579 $ 1,458 $ 121

Equity in earnings from properties disposed 190 69 121

Equity in earnings from existing properties $ 4,307 $ 1,533 $ 2,774

Equity in earnings (losses) from property disposed 190 (2,981) 3,171

$ 4,497 $ (1,448) $ 5,945

Equity in earnings (losses) of unconsolidated joint ventures from existing properties increased due to the impact of COVID-19 on revenues in the previous year.

Equity in earnings (losses) from properties disposed 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.

The impairment charge was primarily driven by deterioration of net operating income caused by market competition and the COVID-19 pandemic.

LIQUIDITY AND CAPITAL RESOURCES OF THE COMPANY

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The following table sets forth information regarding settlements under our ATM offering program:

Three months ended March 31,

Three months ended June 30, Six months ended June 30,

2021 2020 2021 2020

Number of common shares settled during the period (1)

2,810,503 — 9,677,581 —

Average price per share (1)

$ 18.85 $ — $ 18.97 $ —

Aggregate gross proceeds (in thousands) $ 52,977 $ — $ 183,615 $ —

Aggregate net proceeds after selling commissions (in thousands) $ 128,655 $ —

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 18, 2021.

Aggregate net proceeds after selling commissions and fees (in thousands) (1)

$ 52,221 $ — $ 180,876 $ —

(1) In July 2021, we had an additional 331,682 shares settle at an average price per share of $18.85 with aggregate net proceeds after commissions and fees of $6.2 million.

In May 2021, the Company’s Board of Directors authorized the repurchase of up to $80.0 million of the Company’s outstanding shares through May 31, 2023.

This authorization replaced a previous repurchase authorization for approximately $80 million that expired in May 2021.

On July 1, 2021, a covenant in the Company’s debt agreements (the “repurchase covenant”) prohibiting share repurchases expired.

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.

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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 March 31, 2021 and 2020.

The remaining amount authorized to be repurchased under the program as of March 31, 2021 was approximately $80.0 million.

The Company has temporarily suspended 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.

In January 2021, the Company's Board of Directors declared a $0.1775 cash dividend per common share payable on February 12, 2021 to each shareholder of record on January 29, 2021, and the Trustees of Tanger GP Trust declared a $0.1775 cash distribution per Operating Partnership unit to the Operating Partnership's unitholders.

In April 2021, the Company's Board of Directors declared a $0.1775 cash dividend per common share payable on May 14, 2021 to each shareholder of record on March 31, 2021, and the Trustees of Tanger GP Trust declared a $0.1775 cash distribution per Operating Partnership unit to the Operating Partnership's unitholders.

The Company did not repurchase any shares for the periods ended June 30, 2021 and 2020.

The remaining amount authorized to be repurchased under the program as of June 30, 2021 was approximately $80.0 million.

The Company temporarily suspended share repurchases for at least the twelve months starting July 1, 2020 and ending on June 30, 2021 in light of the repurchase covenant.

In July 2021, the Company's Board of Directors declared a $0.1775 cash dividend per common share payable on August 13, 2021 to each shareholder of record on July 30, 2021, and the Trustees of Tanger GP Trust declared a $0.1775 cash distribution per Operating Partnership unit to the Operating Partnership's unitholders.

LIQUIDITY AND CAPITAL RESOURCES OF THE OPERATING PARTNERSHIP

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Our ability to access capital on favorable terms as well as to use cash from operations to continue to meet our liquidity needs, all of which are highly uncertain and cannot be predicted, could be affected by various risks and uncertainties, including, but not limited to, the effects of the COVID-19 pandemic and other risks detailed in the “Risk Factors” section of our Annual Report on Form 10-K for the year ended December 31, 2020.

In 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.

For details of our expected collection of rents billed in the second through fourth quarters of 2020, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations-COVID-19 Pandemic.”

The following table sets forth our changes in cash flows (in thousands):

Three months ended March 31,

Six months ended June 30,

2021 2020 Change

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Net cash provided by (used in) investing activities 4,009 (16,821) 20,830

Net cash provided by financing activities 82,956 562,901 (479,945)

Net cash provided by (used in) financing activities (72,761) 324,714 (397,475)

Effect of foreign currency rate changes on cash and equivalents (73) (203) 130

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These rents were payable during the first quarter of 2021.

In addition, our cash collections normalized in the second quarter of 2021 when compared to the second quarter of 2020, since the second quarter of 2020 had uncollected and deferred contractual rents as a result of COVID-19.

Investing Activities

The cause for the increase in net cash provided by investing activities was due to the net proceeds of approximately $8.1 from the sale of our Jeffersonville outlet center in the 2021 period and increased distributions in excess of cumulative earnings from unconsolidated joint ventures.

The increase in net cash provided by investing activities was due to the net proceeds of approximately $8.1 million from the sale of our Jeffersonville outlet center in the 2021 period and increased distributions in excess of cumulative earnings from unconsolidated joint ventures.

These increases were partially offset by the $7.0 million contribution made to the Galveston/Houston joint venture to reduce the principal balance of the mortgage loan.

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The primary cause for the decrease in net cash provided by financing activities was our draw down of substantially all of the available capacity under our $600.0 million unsecured lines of credit in March 2020, due to the COVID-19 pandemic.

Also impacting the decrease was mortgage repayments during the 2021 period being higher than the 2020 period.

These decrease was partially offset by the proceeds from our common share offering of $128.7 million in March 2021 and, in addition, and lower dividend payments in 2021 compared to 2020.

Also impacting the decrease, in April 2021, we completed a partial redemption of $150.0 million aggregate principal amount of our $250.0 million 3.875% senior notes due December 2023, for $163.0 million in cash, which included a make-whole premium of $13.0 million.

In addition, in March 2021 and June 2021, we paid down a total of $50.0 million of borrowings under our unsecured term loan with cash on hand.

These decreases were partially offset by the proceeds from our common share offering of $180.9 million in 2021 under our ATM offering program and, in addition, lower dividend payments in 2021 compared to 2020.

Capital Expenditures

The following table details our capital expenditures (in thousands):

Three months ended March 31,

Six months ended June 30,

2021 2020 Change

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Additions to rental property-cash basis $ 11,836 $ 16,476 $ (4,640)

• New developments and expansions decreased due to a suspension of major development projects because of the uncertainty caused by the COVID-19 pandemic.

• Major outlet center renovations in the 2020 period included costs related to bringing two magnet tenants to our Lancaster outlet center.

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Financing Arrangements

As of March 31, 2021, unsecured borrowings represented 95% of our outstanding debt and 92% of the gross book value of our real estate portfolio was unencumbered.

As of June 30, 2021, unsecured borrowings represented 95% of our outstanding debt and 92% of the gross book value of our real estate portfolio was unencumbered.

The Company guarantees the Operating Partnership’s obligations under our lines of credit.

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The extent to which the COVID-19 pandemic continues to impact our financial condition, results of operations and cash flows will depend on future developments which are highly uncertain and cannot be predicted with confidence, including the scope, severity and duration of the pandemic, the actions taken to contain the pandemic or mitigate its impact, the timing or effectiveness of any vaccines or treatments, and the direct and indirect economic effects of the pandemic and containment measures, among others.

As of March 31, 2021, the Company’s total liquidity was approximately $802 million, including cash and cash equivalents on the Company’s balance sheet and the full undrawn capacity under its $600 million unsecured lines of credit.

Based on estimated monthly cash expenditures of approximately $26.3 million (excluding dividends and debt maturities) for the remainder of 2021, we expect to have sufficient liquidity to meet our obligations for at least the next 12 months.

As of June 30, 2021, the Company’s total liquidity was approximately $707.6 million, including cash and cash equivalents on the Company’s balance sheet and the full undrawn capacity under its $600 million unsecured lines of credit.

We expect to have sufficient liquidity to meet our obligations for at least the next 12 months.

For further discussion of COVID-19, please see “Management’s Discussion and Analysis of Financial Condition and Results of Operations - COVID-19 Pandemic”.

We believe our current balance sheet position is financially sound;

however, due to the economic uncertainty caused by the COVID-19 pandemic and the inherent uncertainty and unpredictability of the capital and credit markets, we can give no assurance that affordable access to capital will exist between now and when our next significant debt matures, which is our unsecured lines of credit to the extent there are amounts outstanding.

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

In April 2021, Moody’s lowered the company’s credit rating to Baa3, stable.

As the Company no longer has a split rating between the rating agencies the pricing over LIBOR for the lines of credit, term loan and facility fee will increase to 1.20%, 1.25% and .25%, respectively, effective May 1, 2021.

As the Company no longer has a split rating between the rating agencies the pricing over LIBOR for the lines of credit, term loan and facility fee increased to 1.20%, 1.25% and .25%, respectively, effective May 1, 2021.

Also, in April 2021, we completed a partial redemption of $150.0 million aggregate principal amount of our $250.0 million 3.875% senior notes due December 2023, for $163.0 million in cash, which includes a make-whole premium of $13.0 million.

Subsequent to the redemption, $100.0 million aggregate principal amount of the Notes remains outstanding.

In March 2021 and June 2021, we paid down a total of $50.0 million of borrowings under our $350.0 million unsecured term loan with cash on hand, reducing the balance outstanding to $300.0 million as of June 30, 2021.

The Operating Partnership’s debt agreements 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% on a cumulative basis.

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.

The amendments, among other things, allowed 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 and ended on June 30, 2021, during which time share repurchases were 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;

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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.

We have historically been and currently are in compliance with all of our debt covenants.

While the amendments discussed above will provide additional covenant flexibility, the financial impact of the COVID-19 pandemic could potentially negatively impact our future compliance with financial covenants of our credit facilities, term loan and other debt agreements and result in a default and potentially an acceleration of indebtedness.

In July 2021, we amended our unsecured lines of credit and extended the maturity date from October 2021 to July 2025, which may be extended by an additional year by exercising two six-month extension options.

The amendment eliminated the LIBOR floor, which was previously 0.25%, and entitles us to a one basis point annual reduction in the interest rate if we meet certain sustainability thresholds.

Other pricing terms remained the same.

The lines provide for borrowings of up to $520.0 million, including a $20.0 million liquidity line and a $500.0 million syndicated line.

A 0.25% facility fee is due annually on the entire committed amount of each facility.

In certain circumstances, total line capacity may be increased to $1.2 billion through an accordion feature in the syndicated line.

We have historically been, and at June 30, 2021 are, in compliance with all of our debt covenants.

The ongoing financial impact of the COVID-19 pandemic could potentially negatively impact our future compliance with financial covenants of our credit facilities, term loan and other debt agreements and result in a default and potentially an acceleration of indebtedness.

Our continued compliance with these covenants depends on many factors and could be impacted by current or future economic conditions associated with the COVID-19 pandemic.

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We believe that we have access to the necessary financing to fund our short-term liquidity needs.

As of March 31, 2021, we believe our most restrictive covenants are contained in our senior, unsecured notes.

As of June 30, 2021, we believe our most restrictive covenants are contained in our senior, unsecured notes.

Key financial covenants and their covenant levels, which are calculated based on contractual terms, include the following:

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Total unencumbered assets to unsecured debt >150% 233 %

In addition, key financial covenants for our lines of credit and term loan, include the following:

In addition, key financial covenants for our lines of credit and term loan, include the following as of June 30, 2021:

Required Actual

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Unencumbered Interest Coverage Ratio >1.5 4.6

(1) In June 2020, we amended the debt agreements for our lines of credit and bank term loan which, 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.

Depending on the future economic impact of COVID-19, other convents related to credit facilities, term loans, and other debt obligations could become one of our most restrictive covenants.

(1) In June 2020, we amended the debt agreements for our lines of credit and bank term loan which, among other things, allowed us to access the existing surge leverage provision, which provided for an increase to the maximum thresholds to 65% from 60% for total leverage and unsecured leverage, for twelve months starting July 1, 2020.

For the calculation period beginning July 1, 2021, the maximum thresholds for total leverage and unsecured leverage returned to 60%.

Depending on the future economic impact of COVID-19, other covenants related to credit facilities, term loans, and other debt obligations could become one of our most restrictive covenants.

CONTRACTUAL OBLIGATIONS

See Note 6 to the consolidated financial statements for additional information on our $25.0 million pay down of our unsecured term loan in March 2021.

Other than the foregoing, there were no material changes in our commitments during the three months ended March 31, 2021 under contractual obligations from those disclosed in our 2020 Annual Report on Form 10-K for the year ended December 31, 2020.

There were no material changes in our commitments during the six months ended June 30, 2021 under contractual obligations from those disclosed in our Annual Report on Form 10-K for the year ended December 31, 2020, other than the following updates to our contractual obligations for debt and interest payments over the next five years and thereafter as of June 30, 2021 (in thousands):

Contractual Obligations Remainder of 2021 2022 2023 2024 2025 Thereafter Total

$ 55,331 $ 4,436 $ 104,768 $ 555,140 $ 1,501 $ 655,705 $ 1,376,881

Interest payments (2)

$ 23,959 $ 42,536 $ 41,882 $ 33,614 $ 22,983 $ 25,534 $ 190,508

(1) These amounts represent total future cash payments related to debt obligations outstanding as of June 30, 2021.

(2) 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, 2021 was used.

OFF-BALANCE SHEET ARRANGEMENTS

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Debt of unconsolidated joint ventures

The following table details information regarding the outstanding debt of the unconsolidated joint ventures and guarantees of such debt provided by us as of March 31, 2021 (dollars in millions):

The following table details information regarding the outstanding debt of the unconsolidated joint ventures and guarantees of such debt provided by us as of June 30, 2021 (dollars in millions):

Joint Venture Total Joint

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Refer to our Annual Report on Form 10-K for the year ended December 31, 2020 of the Company and the Operating Partnership for a discussion of our critical accounting policies, which include principles of consolidation, rental property, impairment of long-lived assets, impairment of investments, revenue recognition and collectibility of operating lease receivables.

There were no material changes to these policies in the quarter ended March 31, 2021.

There were no material changes to these policies in the quarter ended June 30, 2021.

NON-GAAP SUPPLEMENTAL MEASURES

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Below is a reconciliation of net income to FFO and Core FFO available to common shareholders (in thousands, except per share amounts):

Three months ended

Three months ended Six months ended

June 30, June 30,

2021 2020 2021 2020

Net income (loss) $ 2,596 $ (23,890) $ 6,938 $ (52,009)

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Loss on sale of joint venture property, including foreign currency effect (1)

Impairment charge - unconsolidated joint ventures — 3,091 — 3,091

FFO 32,694 10,275 71,290 59,650

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Compensation related to voluntary retirement plan and other executive severance (3)

Loss on early extinguishment of debt (4)

14,039 — 14,039 —

Impact of above adjustment to the allocation of earnings to participating securities (106) — (128) —

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106,793 97,543 103,712 97,480

(1) The three months ended March 31, 2021 includes a $3.6 million charge related to the foreign currency effect of the sale of the Saint-Sauveur, Quebec property by the RioCan joint venture in March 2021.

(1) The six months ended June 30, 2021 includes a $3.6 million charge related to the foreign currency effect of the sale of the Saint-Sauveur, Quebec property by the RioCan joint venture in March 2021.

(2) 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.

(3) Represents compensation cost related to a voluntary retirement plan offer that required eligible participants to give notice of acceptance by December 1, 2020 for an effective retirement date of March 31, 2021.

(4) In April 2021, we completed a partial redemption of $150.0 million aggregate principal amount of our $250.0 million 3.875% senior notes due December 2023, for $163.0 million in cash.

The loss on extinguishment of debt includes a make-whole premium of $13.0 million.

Portfolio Net Operating Income and Same Center NOI

We present portfolio net operating income (“Portfolio NOI”) and same center net operating income (“Same Center NOI”) as supplemental measures of our operating performance.

Portfolio NOI represents our property level net operating income which is defined as total operating revenues less property operating expenses and excludes termination fees and non-cash adjustments including straight-line rent, net above and below market rent amortization, impairment charges and gains or losses on the sale of assets recognized during the periods presented.

Portfolio NOI represents our property level net operating income which is defined as total operating revenues less property operating expenses and excludes termination fees and non-cash adjustments including straight-line rent, net above and below market rent amortization, impairment charges, loss on early extinguishment of debt and gains or losses on the sale of assets recognized during the periods presented.

We define Same Center NOI as Portfolio NOI for the properties that were operational for the entire portion of both comparable reporting periods and which were not acquired, or subject to a material expansion or non-recurring event, such as a natural disaster, during the comparable reporting periods.

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Below is a reconciliation of net income to Portfolio NOI and Same Center NOI for the consolidated portfolio (in thousands):

Three months ended

Three months ended Six months ended

June 30, June 30,

2021 2020 2021 2020

Net income (loss) $ 2,596 $ (23,890) $ 6,938 $ (52,009)

Adjusted to exclude:

Equity in earnings of unconsolidated joint ventures (1,769) (1,527)

Equity in (earnings) losses of unconsolidated joint ventures (2,728) 2,975 (4,497) 1,448

Interest expense 13,338 16,943 27,700 32,139

Loss on early extinguishment of debt (1)

14,039 — 14,039 —

Other (income) expense (654) (408) 2,851 (628)

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Non-cash adjustments (2)

728 2,621 1,571 1,119

Lease termination fees (127) (1,514) (800) (1,677)

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Non-same center NOI (3)

(1,562) (406) (1,645) (1,147)

Same Center NOI $ 69,415 $ 37,005 $ 134,463 $ 107,738

(1) In April 2021, we completed a partial redemption of $150.0 million aggregate principal amount of our $250.0 million 3.875% senior notes due December 2023, for $163.0 million in cash.

The loss on extinguishment of debt includes a make-whole premium of $13.0 million.

(2) 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.

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Below is a reconciliation of Net Income to Adjusted EBITDA (in thousands):

Three months ended

Three months ended Six months ended

June 30, June 30,

2021 2020 2021 2020

Net income (loss) $ 2,596 $ (23,890) $ 6,938 $ (52,009)

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Impairment charge - consolidated — — — 45,675

Impairment charge - unconsolidated joint ventures — 3,091 — 3,091

Loss on sale of joint venture property, including foreign currency effect (1)

Compensation related to voluntary retirement plan and other executive severance (2)

Loss on early extinguishment of debt (3)

14,039 — 14,039 —

Adjusted EBITDA $ 57,705 $ 24,790 $ 110,681 $ 86,959

Below is a reconciliation of Net Income to EBITDAre and Adjusted EBITDAre (in thousands):

Three months ended

Three months ended Six months ended

June 30, June 30,

2021 2020 2021 2020

Net income (loss) $ 2,596 $ (23,890) $ 6,938 $ (52,009)

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Impairment charge - consolidated — — — 45,675

Impairment charge - unconsolidated joint ventures — 3,091 — 3,091

Loss on sale of joint venture property, including foreign currency effect (1)

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Compensation related to executive officer retirement (2)

Loss on early extinguishment of debt (3)

14,039 — 14,039 —

Adjusted EBITDAre $ 62,073 $ 29,424 $ 119,518 $ 96,478

(1) Includes a $3.6 million charge related to the foreign currency effect of the sale of the Saint-Sauveur, Quebec property by the RioCan joint venture in March 2021.

(2) Represents compensation cost related to a voluntary retirement plan offer that required eligible participants to give notice of acceptance by December 1, 2020 for an effective retirement date of March 31, 2021.

(3) In April 2021, we completed a partial redemption of $150.0 million aggregate principal amount of our $250.0 million 3.875% senior notes due December 2023, for $163.0 million in cash.

The loss on extinguishment of debt includes a make-whole premium of $13.0 million.

ECONOMIC CONDITIONS AND OUTLOOK

We are closely monitoring the impact of the COVID-19 pandemic on all aspects of our business and geographies, including how it will impact our tenants and business partners.

For a complete discussion of the impact the pandemic is having on our current operations, the steps we have taken to increase liquidity and preserve financial flexibility and the uncertainties around our future operations and financial condition, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations-COVID-19 Pandemic.”

For further discussion of COVID-19, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations - COVID-19 Pandemic.”

The majority of our leases contain provisions designed to mitigate the impact of inflation.

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As of January 1, 2021, we had approximately 1.7 million square feet, or 15% of our consolidated portfolio at that time coming up for renewal during 2021.

As of March 31, 2021, we had renewed approximately 40% of this space.

In addition, for the rolling twelve months ended March 31, 2021, we completed renewals and re-tenanted space totaling 1.4 million square feet at a blended 2.8% decrease in average base rental rates compared to the expiring rates.

As of June 30, 2021, we had renewed approximately 49% of this space.

In addition, for the rolling twelve months ended June 30, 2021, we completed renewals and re-tenanted space totaling 1.6 million square feet at a blended 2.4% decrease in average base rental rates compared to the expiring rates.

The current challenging retail environment has impacted our business as our operations are subject to the operating results and operating decisions of our retail tenants.

Our outlook for 2021 remains unchanged.

While we are encouraged by the pace of our progress, we continue to anticipate pressure from current vacancies, potential additional store closures and potential rent modifications.

We are encouraged by the recent improvement in traffic and sales trends, which in many cases are exceeding 2019 levels, and the fact that collections of monthly rents have normalized.

However, we continue to anticipate pressure from current vacancies, potential additional store closures and potential rent modifications.

As is typical in the retail industry, certain tenants have closed, or will close, certain stores by terminating their lease prior to its contractual expiration or as a result of filing for protection under bankruptcy laws, or may request modifications to their existing lease terms.

We have recaptured approximately 61,000 square feet within our consolidated portfolio during the three months ended March 31, 2021 related to bankruptcies and brand-wide restructurings by retailers, compared to 332,000 square feet for the three months ended March 31, 2020.

Collections of contractual fixed rents billed in the first quarter of 2021 was approximately 95%.

We also continued to collect rents billed for prior periods, including amounts related to 2020 we allowed our tenants to defer to 2021.

We have recaptured approximately 80,000 square feet within our consolidated portfolio during the six months ended June 30, 2021 related to bankruptcies and brand-wide restructurings by retailers, compared to 380,000 square feet for the six months ended June 30, 2020, and recaptured another approximately 55,000 square feet in July 2021.

We believe outlet stores will continue to be a profitable and fundamental distribution channel for many brand name manufacturers.

While we continue to attract and retain additional tenants, if we were unable to successfully renew or re-lease a significant amount of this space on favorable economic terms or in a timely manner, the loss in rent and our Same Center NOI could be further negatively impacted in 2021.

Occupancy at our consolidated centers was 91.7% and 94.3% as of March 31, 2021 and 2020, respectively.

Occupancy at our consolidated centers was 93.0% and 93.8% as of June 30, 2021 and 2020, respectively.

As a result of COVID-19 and current economic conditions, occupancy could be negatively impacted in the remainder of 2021 and future periods.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis