Item 1. 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)
June 30, 2021 December 31, 2020
Assets
Rental property:
Land $ 265,714 $ 265,968
Buildings, improvements and fixtures 2,522,600 2,527,404
2,788,314 2,793,372
Accumulated depreciation ( 1,102,800 ) ( 1,054,993 )
Total rental property, net 1,685,514 1,738,379
Cash and cash equivalents 107,204 84,750
Investments in unconsolidated joint ventures 88,868 94,579
Deferred lease costs and other intangibles, net 79,425 84,960
Operating lease right-of-use assets 80,942 81,499
Prepaids and other assets 88,404 104,800
Total assets $ 2,130,357 $ 2,188,967
Liabilities and Equity
Liabilities
Debt:
Senior, unsecured notes, net $ 992,592 $ 1,140,576
Unsecured term loan, net 298,106 347,370
Mortgages payable, net 77,904 79,940
Unsecured lines of credit — —
Total debt 1,368,602 1,567,886
Accounts payable and accrued expenses 69,603 87,689
Operating lease liabilities 89,619 90,105
Other liabilities 79,048 84,404
Total liabilities 1,606,872 1,830,084
Commitments and contingencies
Equity
Partners’ Equity:
General partner, 1,100,000 units outstanding at June 30, 2021 and 1,000,000 at December 31, 2020, respectively
4,909 3,334
Limited partners, 4,794,643 and 4,794,643 Class A common units, and 102,520,580 and 92,569,801 Class B common units outstanding at June 30, 2021 and December 31, 2020, respectively
538,376 383,588
Accumulated other comprehensive loss ( 19,800 ) ( 28,039 )
Total partners’ equity 523,485 358,883
Noncontrolling interests in consolidated partnerships — —
Total equity 523,485 358,883
Total liabilities and equity $ 2,130,357 $ 2,188,967
The accompanying notes are an integral part of these consolidated financial statements.
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TANGER PROPERTIES LIMITED PARTNERSHIP AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per unit data, unaudited)
Three months ended June 30, Six months ended June 30,
2021 2020 2021 2020
Revenues:
Rental revenues $ 96,824 $ 62,273 $ 194,291 $ 170,831
Management, leasing and other services 1,359 725 2,731 2,168
Other revenues 3,090 992 4,945 2,624
Total revenues 101,273 63,990 201,967 175,623
Expenses:
Property operating 31,250 28,158 66,561 66,785
General and administrative 15,700 11,566 32,493 24,150
Impairment charge — — — 45,675
Depreciation and amortization 27,732 28,646 55,882 58,063
Total expenses 74,682 68,370 154,936 194,673
Other income (expense):
Interest expense ( 13,338 ) ( 16,943 ) ( 27,700 ) ( 32,139 )
Loss on early extinguishment of debt ( 14,039 ) — ( 14,039 ) —
Other income (expense) 654 408 ( 2,851 ) 628
Total other income (expense) ( 26,723 ) ( 16,535 ) ( 44,590 ) ( 31,511 )
Income (loss) before equity in earnings (losses) of unconsolidated joint ventures ( 132 ) ( 20,915 ) 2,441 ( 50,561 )
Equity in earnings (losses) of unconsolidated joint ventures 2,728 ( 2,975 ) 4,497 ( 1,448 )
Net income (loss) 2,596 ( 23,890 ) 6,938 ( 52,009 )
Noncontrolling interests in consolidated partnerships — — — ( 190 )
Net income (loss) available to partners 2,596 ( 23,890 ) 6,938 ( 52,199 )
Net income (loss) available to limited partners 2,569 ( 23,649 ) 6,864 ( 51,669 )
Net income (loss) available to general partner $ 27 $ ( 241 ) $ 74 $ ( 530 )
Basic earnings per common unit:
Net income (loss) $ 0.02 $ ( 0.25 ) $ 0.06 $ ( 0.54 )
Diluted earnings per common unit:
Net income (loss) $ 0.02 $ ( 0.25 ) $ 0.06 $ ( 0.54 )
The accompanying notes are an integral part of these consolidated financial statements.
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TANGER PROPERTIES LIMITED PARTNERSHIP AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(In thousands, unaudited)
Three months ended June 30, Six months ended June 30,
2021 2020 2021 2020
Net income (loss) $ 2,596 $ ( 23,890 ) $ 6,938 $ ( 52,009 )
Other comprehensive income (loss):
Foreign currency translation adjustments 1,365 3,357 6,004 ( 4,376 )
Changes in fair value of cash flow hedges 237 ( 498 ) 2,235 ( 6,174 )
Other comprehensive income (loss) 1,602 2,859 8,239 ( 10,550 )
Comprehensive income (loss) 4,198 ( 21,031 ) 15,177 ( 62,559 )
Comprehensive (income) loss attributable to noncontrolling interests in consolidated partnerships — — — ( 190 )
Comprehensive income (loss) attributable to the Operating Partnership $ 4,198 $ ( 21,031 ) $ 15,177 $ ( 62,749 )
The accompanying notes are an integral part of these consolidated financial statements.
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TANGER PROPERTIES LIMITED PARTNERSHIP AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EQUITY
(In thousands, except unit and per unit data, unaudited)
General partner Limited partners Accumulated other comprehensive loss Total partners’ equity Noncontrolling interests in consolidated partnerships Total equity
Balance, March 31, 2020 $ 3,433 $ 384,522 $ ( 40,297 ) $ 347,658 $ — $ 347,658
Net loss ( 241 ) ( 23,649 ) — ( 23,890 ) — ( 23,890 )
Other comprehensive income — — 2,859 2,859 — 2,859
Compensation under Incentive Award Plan — 3,532 — 3,532 — 3,532
Grant of 389,308 restricted common share awards by the Company
— — — — — —
Issuance of 6,258 deferred units
— — — — — —
Common distributions — ( 176 ) — ( 176 ) — ( 176 )
Balance, June 30, 2020 $ 3,192 $ 364,229 $ ( 37,438 ) $ 329,983 $ — $ 329,983
General partner Limited partners Accumulated other comprehensive loss Total partners’ equity Noncontrolling interests in consolidated partnerships Total equity
Balance, December 31, 2019 $ 4,435 $ 478,562 $ ( 26,888 ) $ 456,109 $ — $ 456,109
Net income (loss) ( 530 ) ( 51,669 ) — ( 52,199 ) 190 ( 52,009 )
Other comprehensive loss — — ( 10,550 ) ( 10,550 ) — ( 10,550 )
Compensation under Incentive Award Plan — 7,421 — 7,421 — 7,421
Grant of 630,346 restricted common share awards by the Company
— — — — — —
Issuance of 6,258 deferred units
— — — — — —
Withholding of 56,597 common units for employee income taxes
— ( 736 ) — ( 736 ) — ( 736 )
Contributions from noncontrolling interests — — — — 72 72
Common distributions ($ 0.7125 per unit)
( 713 ) ( 69,349 ) — ( 70,062 ) — ( 70,062 )
Distributions to noncontrolling interests — — — — ( 262 ) ( 262 )
Balance, June 30, 2020 $ 3,192 $ 364,229 $ ( 37,438 ) $ 329,983 $ — $ 329,983
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TANGER PROPERTIES LIMITED PARTNERSHIP AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EQUITY
(In thousands, except unit and per unit data, unaudited)
General partner Limited partners Accumulated other comprehensive loss Total partners’ equity Noncontrolling interests in consolidated partnerships Total equity
Balance, March 31, 2021 $ 5,077 $ 499,339 $ ( 21,402 ) $ 483,014 $ — $ 483,014
Net income 27 2,569 — 2,596 — 2,596
Other comprehensive income — — 1,602 1,602 — 1,602
Compensation under Incentive Award Plan — 2,765 — 2,765 — 2,765
Issuance of 15,500 common units upon exercise of options
— 89 — 89 — 89
Issuance of 2,810,503 common units
— 52,221 — 52,221 — 52,221
Common distributions ($ 0.1775 per unit)
( 195 ) ( 18,607 ) — ( 18,802 ) — ( 18,802 )
Balance, June 30, 2021 $ 4,909 $ 538,376 $ ( 19,800 ) $ 523,485 $ — $ 523,485
General partner Limited partners Accumulated other comprehensive loss Total partners’ equity Noncontrolling interests in consolidated partnerships Total equity
Balance, December 31, 2020 $ 3,334 $ 383,588 $ ( 28,039 ) $ 358,883 $ — $ 358,883
Net income 74 6,864 — 6,938 — 6,938
Other comprehensive income — — 8,239 8,239 — 8,239
Compensation under Incentive Award Plan — 6,674 — 6,674 — 6,674
Issuance of 15,500 common units upon exercise of options
— 89 — 89 — 89
Grant of 469,675 restricted common share awards by the Company
— — — — — —
Issuance of 9,677,581 common units
1,874 179,002 — 180,876 — 180,876
Withholding of 111,977 common units for employee income taxes
— ( 1,637 ) — ( 1,637 ) — ( 1,637 )
Common distributions ($ 0.3550
per unit)
( 373 ) ( 36,204 ) — ( 36,577 ) — ( 36,577 )
Balance, June 30, 2021 $ 4,909 $ 538,376 $ ( 19,800 ) $ 523,485 $ — $ 523,485
The accompanying notes are an integral part of these consolidated financial statements.
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TANGER PROPERTIES LIMITED PARTNERSHIP AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands, unaudited)
Six months ended June 30,
2021 2020
OPERATING ACTIVITIES
Net income (loss) $ 6,938 $ ( 52,009 )
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization 55,882 58,063
Impairment charge — 45,675
Amortization of deferred financing costs 2,320 1,590
Loss on early extinguishment of debt 14,039 —
Equity in (earnings) losses of unconsolidated joint ventures ( 4,497 ) 1,448
Equity-based compensation expense 6,608 7,219
Amortization of debt (premiums) and discounts, net 210 237
Amortization (accretion) of market rent rate adjustments, net 25 411
Straight-line rent adjustments 1,521 677
Distributions of cumulative earnings from unconsolidated joint ventures 4,774 2,092
Other non-cash 3,638 —
Changes in other assets and liabilities:
Other assets 12,454 ( 35,696 )
Accounts payable and accrued expenses ( 12,633 ) ( 15,490 )
Net cash provided by operating activities 91,279 14,217
INVESTING ACTIVITIES
Additions to rental property ( 11,836 ) ( 16,476 )
Additions to investments in unconsolidated joint ventures ( 7,000 ) ( 5,601 )
Net proceeds from sale of assets 8,129 —
Additions to non-real estate assets ( 781 ) ( 1,191 )
Distributions in excess of cumulative earnings from unconsolidated joint ventures 13,364 3,093
Additions to deferred lease costs ( 4,562 ) ( 1,655 )
Other investing activities 6,695 5,009
Net cash provided by (used in) investing activities 4,009 ( 16,821 )
FINANCING ACTIVITIES
Cash distributions paid ( 36,577 ) ( 70,062 )
Proceeds from revolving credit facility — 634,030
Repayments of revolving credit facility — ( 234,200 )
Repayments of notes, mortgages and loans ( 201,861 ) ( 1,758 )
Payment of make-whole premium related to early extinguishment of debt ( 12,954 ) —
Employee income taxes paid related to shares withheld upon vesting of equity awards ( 1,637 ) ( 736 )
Additions to deferred financing costs ( 123 ) ( 1,797 )
Proceeds from exercise of options 89 —
Proceeds from the Company’s common share offering 180,876 —
Proceeds from other financing activities — 72
Payment for other financing activities ( 574 ) ( 835 )
Net cash provided by (used in) financing activities ( 72,761 ) 324,714
Effect of foreign currency on cash and cash equivalents ( 73 ) ( 203 )
Net increase in cash and cash equivalents 22,454 321,907
Cash and cash equivalents, beginning of period 84,750 16,519
Cash and cash equivalents, end of period $ 107,204 $ 338,426
The accompanying notes are an integral part of these consolidated financial statements.
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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 June 30, 2021, we owned and operated 30 consolidated outlet centers, with a total gross leasable area of approximately 11.5 million square feet. We also had partial ownership interests in 6 unconsolidated outlet centers totaling approximately 2.1 million square feet, including 2 outlet centers in Canada.
Our outlet centers and other assets are held by, and all of our operations are conducted by, Tanger Properties Limited Partnership and subsidiaries. Accordingly, the descriptions of our business, employees and properties are also descriptions of the business, employees and properties of the Operating Partnership. Unless the context indicates otherwise, the term “Company” refers to Tanger Factory Outlet Centers, Inc. and subsidiaries and the term, “Operating Partnership”, refers to Tanger Properties Limited Partnership and subsidiaries. The terms “we”, “our” and “us” refer to the Company or the Company and the Operating Partnership together, as the text requires.
The Company owns the majority of the units of partnership interest issued by the Operating Partnership through its two wholly-owned subsidiaries, Tanger GP Trust and Tanger LP Trust. Tanger GP Trust is the sole general partner of the Operating Partnership. Tanger LP Trust holds a limited partnership interest. As of June 30, 2021, the Company, through its ownership of Tanger GP Trust and Tanger LP Trust, owned 103,620,580 units of the Operating Partnership and other limited partners (the “Non-Company LPs”) collectively owned 4,794,643 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 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, 2020. The December 31, 2020 balance sheet data in this Form 10-Q was derived from audited financial statements. Certain information and note disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted pursuant to the SEC’s rules and regulations, although management believes that the disclosures are adequate to make the information presented not misleading. In the opinion of management, all adjustments (consisting only of normal recurring adjustments) necessary for a fair presentation of the financial statements for the interim periods have been made. The results of interim periods are not necessarily indicative of the results for a full year.
The Company currently consolidates the Operating Partnership because it has (1) the power to direct the activities of the Operating Partnership that most significantly impact the Operating Partnership’s economic performance and (2) the obligation to absorb losses and the right to receive the residual returns of the Operating Partnership that could be potentially significant.
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We consolidate properties that are wholly-owned and properties where we own less than 100% but control such properties. Control is determined using an evaluation based on accounting standards related to the consolidation of voting interest entities and variable interest entities (“VIE”). For joint ventures that are determined to be a VIE, we consolidate the entity where we are deemed to be the primary beneficiary. Determination of the primary beneficiary is based on whether an entity has (1) the power to direct the activities of the VIE that most significantly impact the entity’s economic performance, and (2) the obligation to absorb losses of the entity that could potentially be significant to the VIE or the right to receive benefits from the entity that could potentially be significant to the VIE. Our determination of the primary beneficiary considers all relationships between us and the VIE, including management agreements and other contractual arrangements.
Investments in real estate joint ventures that we do not control but may exercise significant influence on are accounted for using the equity method of accounting. These investments are recorded initially at cost and subsequently adjusted for our equity in the joint venture’s net income or loss, cash contributions, distributions and other adjustments required under the equity method of accounting.
For certain investments in real estate joint ventures, we record our equity in the venture’s net income or loss under the hypothetical liquidation at book value method of accounting due to the structures and the preferences we receive on the distributions from our joint ventures pursuant to the respective joint venture agreements for those joint ventures. Under this method, we recognize income and loss in each period based on the change in liquidation proceeds we would receive from a hypothetical liquidation of our investment based on depreciated book value. Therefore, income or loss may be allocated disproportionately as compared to the ownership percentages due to specified preferred return rate thresholds and may be more or less than actual cash distributions received and more or less than what we may receive in the event of an actual liquidation.
We separately report investments in joint ventures for which accumulated distributions have exceeded investments in, and our share of net income or loss of, the joint ventures within other liabilities in the consolidated balance sheets because we are committed to provide further financial support to these joint ventures. The carrying amount of our investments in the Charlotte, Columbus, Galveston/Houston, and National Harbor joint ventures are less than zero because of financing or operating distributions that were greater than net income, as net income includes non-cash charges for depreciation and amortization.
“Noncontrolling interests in the Operating Partnership” reflects the Non-Company LP’s percentage ownership of the Operating Partnership’s units. “Noncontrolling interests in other consolidated partnerships” consist of outside equity interests in partnerships or joint ventures not wholly-owned by the Company or the Operating Partnership that are consolidated with the financial results of the Company and Operating Partnership because the Operating Partnership exercises control over the entities that own the properties. Noncontrolling interests are initially recorded in the consolidated balance sheets at fair value based upon purchase price allocations. Income is allocated to the noncontrolling interests based on the allocation provisions within the partnership or joint venture agreements.
COVID-19 pandemic
The current novel COVID-19 pandemic (“COVID-19”) 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.
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Accounts Receivable
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.
Historically, our accounts receivable from tenants has not been material; however, given the impacts from the COVID-19 pandemic discussed above, our net accounts receivable balance, which is recorded in prepaids and other assets on the consolidated balance sheet, had increased to approximately $ 18.8 million at December 31, 2020, but decreased to approximately $ 3.7 million at June 30, 2021, primarily due to collections of deferred April and May 2020 rents during the first six months of 2021. Straight-line rent adjustments recorded as a receivable in prepaids and other assets on the consolidated balance sheets was approximately $ 53.9 million as of June 30, 2021.
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 discussions with tenants for potential lease amendments. Our estimate of the collectability of accrued rents and accounts receivable is based on the best information available to us at the time of preparing the financial statements.
Impairment of Long-Lived Assets
Rental property held and used by us is reviewed for impairment in the event that facts and circumstances indicate that the carrying amount of an asset may not be recoverable. In such an event, we compare the estimated future undiscounted cash flows associated with the asset to the asset's carrying amount, and if less, recognize an impairment loss in an amount by which the carrying amount exceeds its fair value.
During the first quarter and fourth quarter of 2020, we recorded $ 45.7 million and $ 19.2 million in impairment charges, respectively, related to our Foxwoods outlet center in our consolidated statement of operations which equaled the excess of the carrying value over its estimated fair value.
If the effects of the COVID-19 pandemic cause economic and market conditions to deteriorate beyond our current expectations or if our expected holding periods for assets change, subsequent tests for impairment could result in additional impairment charges in the future. We can provide no assurance that material impairment charges with respect to our properties will not occur during 2021 or future periods.
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3. Disposition of Properties
Disposition of Properties
The following table sets forth certain summarized information regarding properties sold during the six months ended June 30, 2021:
Property (1)
Location Date Sold Square Feet
(in 000’s) Net Sales Proceeds
(in 000’s) Gain on Sale
(in 000’s)
2021 Disposition:
Jeffersonville Jeffersonville, Ohio January 2021 412 $ 8,100 —
(1) The rental properties sold did not meet the criteria to be reported as discontinued operations.
4. 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 June 30, 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 $ 1.5 $ 70.8
RioCan Canada Various 50.0 % 665 87.4 —
$ 88.9
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 ( 10.3 ) 94.5
Galveston/Houston (2)
Texas City, TX 50.0 % 353 ( 12.8 ) 64.3
$ ( 39.3 )
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As of December 31, 2020
Joint Venture Outlet Center Location Ownership % Square Feet
(in 000’s) Carrying Value of Investment (in millions) Total Joint Venture Debt, Net
(in millions) (1)
Investments included in investments in unconsolidated joint ventures:
Columbus Columbus, OH 50.0 % 355 $ 2.0 $ 70.8
RioCan Canada Various 50.0 % 765 92.6 $ —
$ 94.6
Investments included in other liabilities:
Charlotte (2)
Charlotte, NC 50.0 % 399 ( 12.8 ) 99.6
National Harbor (2)
National Harbor, MD 50.0 % 341 ( 8.4 ) 94.5
Galveston/Houston (2)
Texas City, TX 50.0 % 353 ( 19.5 ) 80.0
$ ( 40.7 )
(1) Net of debt origination costs of $ 1.2 million as of June 30, 2021 and $ 1.1 million as of December 31, 2020.
(2) The negative carrying value is due to distributions exceeding contributions and increases or decreases from our equity in earnings of the joint venture.
Fees we received for various services provided to our unconsolidated joint ventures were recognized in management, leasing and other services as follows (in thousands):
Three months ended Six months ended
June 30, June 30,
2021 2020 2021 2020
Fee:
Management and marketing $ 537 $ 144 $ 1,045 $ 685
Leasing and other fees 103 15 159 35
Expense reimbursements from unconsolidated joint ventures 719 566 1,527 1,448
Total Fees $ 1,359 $ 725 $ 2,731 $ 2,168
Our investments in real estate joint ventures are reduced by the percentage of the profits earned for leasing and development services associated with our ownership interest in each joint venture. Our carrying value of investments in unconsolidated joint ventures differs from our share of the assets reported in the “Summary Balance Sheets - Unconsolidated Joint Ventures” shown below due to adjustments to the book basis, including intercompany profits on sales of services that are capitalized by the unconsolidated joint ventures. The differences in basis (totaling $ 3.4 million and $ 3.6 million as of June 30, 2021 and December 31, 2020, respectively) are amortized over the various useful lives of the related assets.
Galveston/Houston
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 %. We are providing property management, marketing and leasing services to the outlet center.
RioCan Canada
In March 2021, the RioCan joint venture closed on the sale of its 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.
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During June 2020, the Rio-Can joint venture recognized an impairment charge related to its Saint-Sauveur property in Quebec. The impairment charge was primarily driven by deterioration of net operating income caused by market competition and the COVID-19 pandemic.
The table below summarizes the impairment charge taken during the second quarter of 2020 (in thousands):
Impairment Charge (1)
Outlet Center Total Our Share
2020 Saint-Sauveur $ 6,181 $ 3,091
(1) The fair value was determined using an income approach considering the prevailing market income capitalization rates for similar assets.
Condensed combined summary financial information of unconsolidated joint ventures accounted for using the equity method is as follows (in thousands):
Condensed Combined Balance Sheets - Unconsolidated Joint Ventures June 30, 2021 December 31, 2020
Assets
Land $ 84,114 $ 86,861
Buildings, improvements and fixtures 470,374 471,798
Construction in progress 871 2,976
555,359 561,635
Accumulated depreciation ( 157,134 ) ( 145,810 )
Total rental property, net 398,225 415,825
Cash and cash equivalents 25,932 21,471
Deferred lease costs and other intangibles, net 4,172 4,849
Prepaids and other assets 14,377 20,478
Total assets $ 442,706 $ 462,623
Liabilities and Owners’ Equity
Mortgages payable, net $ 329,314 $ 344,856
Accounts payable and other liabilities 12,752 17,427
Total liabilities 342,066 362,283
Owners’ equity 100,640 100,340
Total liabilities and owners’ equity $ 442,706 $ 462,623
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Three months ended Six months ended
Condensed Combined Statements of Operations June 30, June 30,
- Unconsolidated Joint Ventures 2021 2020 2021 2020
Revenues $ 22,601 $ 16,475 $ 43,594 $ 38,512
Expenses:
Property operating 8,448 6,860 16,862 15,989
General and administrative 58 123 86 262
Asset impairment — 6,181 — 6,181
Depreciation and amortization 5,763 5,903 11,664 11,809
Total expenses 14,269 19,067 28,612 34,241
Other income (expense):
Interest expense ( 2,910 ) ( 3,232 ) ( 5,855 ) ( 6,967 )
Gain on sale of assets — — 503 —
Other income 96 6 154 61
Total other expense ( 2,814 ) ( 3,226 ) ( 5,198 ) ( 6,906 )
Net income (loss) $ 5,518 $ ( 5,818 ) $ 9,784 $ ( 2,635 )
The Company and Operating Partnership’s share of:
Net income (loss) $ 2,728 $ ( 2,975 ) $ 4,497 $ ( 1,448 )
Depreciation and amortization (real estate related) $ 2,913 $ 3,017 $ 5,909 $ 6,035
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5. Debt Guaranteed by the Company
All of the Company’s debt is held by the Operating Partnership and its consolidated subsidiaries.
The Company guarantees the Operating Partnership’s obligations with respect to its unsecured lines of credit which have a total borrowing capacity of $ 600.0 million as of June 30, 2021. The Company also guarantees the Operating Partnership’s unsecured term loan.
The Operating Partnership had the following principal amounts outstanding on the debt guaranteed by the Company (in thousands):
As of
June 30, 2021 December 31, 2020
Unsecured lines of credit $ — $ —
Unsecured term loan $ 300,000 $ 350,000
6. Debt of the Operating Partnership
The debt of the Operating Partnership consisted of the following (in thousands):
As of As of
June 30, 2021 December 31, 2020
Stated Interest Rate(s) Maturity Date Principal Book Value (1)
Principal Book Value (1)
Senior, unsecured notes:
Senior notes 3.875 % December 2023 $ 100,000 $ 99,322 $ 250,000 $ 247,967
Senior notes 3.750 % December 2024 250,000 248,678 250,000 248,493
Senior notes 3.125 % September 2026 350,000 347,049 350,000 346,770
Senior notes 3.875 % July 2027 300,000 297,543 300,000 297,346
Mortgages payable:
Atlantic City (2)(3)
5.14 % - 7.65 % November 2021- December 2026 25,481 26,511 27,343 28,569
Southaven (4)
LIBOR + 1.80 % July 2021 51,400 51,393 51,400 51,371
Unsecured term loan LIBOR (5)
+ 1.25 % April 2024 300,000 298,106 350,000 347,370
Unsecured lines of credit (6)
LIBOR (5)
+ 1.20 % October 2021 — — — —
$ 1,376,881 $ 1,368,602 $ 1,578,743 $ 1,567,886
(1) Including premiums and net of debt discount and debt origination costs.
(2) The effective interest rate assigned during the purchase price allocation to the Atlantic City mortgages assumed during the acquisition in 2011 was 5.05 %.
(3) Principal and interest due monthly with remaining principal due at maturity.
(4) In July 2021, we extended the maturity date 90 days to explore other financing options; however, the loan may be extended using the original two-year extension option to April 2023. Such extension may require a reduction in principal.
(5) As of June 30, 2021 until we amended our credit facilities in July 2021, if LIBOR was less than 0.25 % per annum, the rate was deemed to be 0.25 % for the portions of the lines of credit and bank term loan that were not fixed with an interest rate swap.
(6) 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.
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Certain of our properties, which had a net book value of approximately $ 159.9 million at June 30, 2021, serve as collateral for mortgages payable. As of June 30, 2021, we maintained unsecured lines of credit that provided for borrowings of up to $ 600.0 million. The unsecured lines of credit as of June 30, 2021 included a $ 20.0 million liquidity line and a $ 580.0 million syndicated line. Following the amendment to our unsecured lines of credit in July 2021, our unsecured lines of credit provide for borrowings of up to $ 520.0 million, including a $ 20.0 million liquidity line and a $ 500.0 million syndicated line. As of June 30, 2021 and following the July 2021 amendments, the syndicated line may be increased up to $ 1.2 billion through an accordion feature in certain circumstances.
We provide guarantees to lenders for our joint ventures, which include standard non-recourse carve out indemnifications for losses arising from items such as but not limited to fraud, physical waste, payment of taxes, environmental indemnities, misapplication of insurance proceeds or security deposits and failure to maintain required insurance. For construction and term loans, we may include a guaranty of completion as well as a principal guaranty ranging from 5 % to 100 % of principal. The principal guarantees include terms for release or reduction based upon satisfactory completion of construction and performance targets including occupancy thresholds and minimum debt service coverage tests. As of June 30, 2021, the maximum amount of unconsolidated joint venture debt guaranteed by the Company was $ 21.9 million.
The unsecured lines of credit and senior unsecured notes include covenants that require the maintenance of certain ratios, including debt service coverage and leverage, and limit the payment of dividends such that dividends and distributions will not exceed funds from operations, as defined in the agreements, for the prior fiscal year on an annual basis or 95 % of funds from operations on a cumulative basis. As of June 30, 2021, we believe we were in compliance with all of our debt covenants.
Unsecured term loan
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 outstanding balance to $ 300.0 million as of June 30, 2021.
Senior Notes 3.875%
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 and the write off of approximately $ 1.0 million of debt discount and debt origination costs. The make-whole premium and the write off of debt discount and debt origination costs was recorded as a loss on early extinguishment of debt within the consolidated statements of operations. Subsequent to the redemption, $ 100.0 million aggregate principal amount of the Notes remains outstanding.
Debt Maturities
Maturities of the existing long-term debt as of June 30, 2021 for the next five years and thereafter are as follows (in thousands):
Calendar Year Amount
For the remainder of 2021 $ 55,331
2022 4,436
2023 104,768
2024 555,140
2025 1,501
Thereafter 655,705
Subtotal 1,376,881
Net discount and debt origination costs ( 8,279 )
Total $ 1,368,602
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Given the financial implications of the COVID-19 pandemic, we have considered our short-term (one year or less from the date of filing these financial statements) liquidity needs and the adequacy of our estimated cash flows from operating activities and other financing sources to meet these needs. These other sources include but are not limited to: existing cash, ongoing relationships with certain financial institutions, our ability to sell debt or issue equity subject to market conditions and proceeds from the potential sale of non-core assets. We believe that we have access to the necessary financing to fund our short-term liquidity needs.
7. Derivative Financial Instruments
The following table summarizes the terms and fair values of our derivative financial instruments, as well as their classifications within the consolidated balance sheets (notional amounts and fair values in thousands):
Fair Value
Effective Date Maturity Date Notional Amount Bank Pay Rate Company Fixed Pay Rate June 30, 2021 December 31, 2020
Assets (Liabilities) (1) :
Interest rate swaps:
April 13, 2016 January 1, 2021 175,000 1 month LIBOR 1.03 % $ — $ ( 17 )
March 1, 2018 January 31, 2021 40,000 1 month LIBOR 2.47 % — ( 75 )
August 14, 2018 January 1, 2021 150,000 1 month LIBOR 2.20 % — ( 34 )
July 1, 2019 February 1, 2024 25,000 1 month LIBOR 1.75 % ( 868 ) ( 1,192 )
January 1, 2021 February 1, 2024 150,000 1 month LIBOR 0.60 % ( 794 ) ( 1,901 )
January 1, 2021 February 1, 2024 100,000 1 month LIBOR 0.22 % 438 ( 139 )
March 1, 2021 February 1, 2024 25,000 1 month LIBOR 0.24 % 101 —
Total $ ( 1,123 ) $ ( 3,358 )
(1) Asset balances are recorded in prepaids and other assets on the consolidated balance sheets and liabilities are recorded in other liabilities on the consolidated balance sheets.
The derivative financial instruments are comprised of interest rate swaps, which are designated and qualify as cash flow hedges, each with a separate counterparty. We do not use derivatives for trading or speculative purposes and currently do not have any derivatives that are not designated as hedges.
Changes in the fair value of derivatives designated and qualifying as cash flow hedges is recorded in accumulated other comprehensive loss and subsequently reclassified into earnings in the period that the hedged forecasted transaction affects earnings.
The following table represents the effect of the derivative financial instruments on the accompanying consolidated financial statements (in thousands):
Three months ended June 30, Six months ended June 30,
2021 2020 2021 2020
Interest Rate Swaps:
Amount of gain (loss) recognized in other comprehensive income (loss) $ 237 $ ( 498 ) $ 2,235 $ ( 6,174 )
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8. Fair Value Measurements
Fair value guidance establishes a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value. These tiers are defined as follows:
Tier Description
Level 1 Observable inputs such as quoted prices in active markets
Level 2 Inputs other than quoted prices in active markets that are either directly or indirectly observable
Level 3 Unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions
Fair Value Measurements on a Recurring Basis
The following table sets forth our assets and liabilities that are measured at fair value within the fair value hierarchy (in thousands):
Level 1 Level 2 Level 3
Quoted Prices in Active Markets for Identical Assets or Liabilities Significant Observable Inputs Significant Unobservable Inputs
Total
Fair value as of June 30, 2021:
Assets:
Short-term government securities ( cash and cash equivalents)
$ 101,900 $ 101,900 $ — $ —
Interest rate swaps (prepaids and other assets) 539 — 539 —
Total assets $ 102,439 $ 101,900 $ 539 $ —
Liabilities:
Interest rate swaps (other liabilities) $ 1,662 $ — $ 1,662 $ —
Total liabilities $ 1,662 $ — $ 1,662 $ —
Level 1 Level 2 Level 3
Quoted Prices in Active Markets for Identical Assets or Liabilities Significant Observable Inputs Significant Unobservable Inputs
Total
Fair value as of December 31, 2020:
Asset:
Short-term government securities ( cash and cash equivalents)
$ 87,081 $ 87,081 $ — $ —
Total assets $ 87,081 $ 87,081 $ — $ —
Liabilities:
Interest rate swaps (other liabilities) $ 3,358 $ — $ 3,358 $ —
Total liabilities $ 3,358 $ — $ 3,358 $ —
Short-term government securities
Short-term government securities are highly liquid investments, which are classified as Level 1 in the fair value hierarchy because they are valued using quoted market prices in an active market.
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Interest rate swaps
Fair values of interest rate swaps are estimated using Level 2 inputs based on current market data received from financial sources that trade such instruments and are based on prevailing market data and derived from third party proprietary models based on well recognized financial principles including counterparty risks, credit spreads and interest rate projections, as well as reasonable estimates about relevant future market conditions.
Fair Value Measurements on a Nonrecurring Basis
The following table sets forth our assets that are measured at fair value on a nonrecurring basis within the fair value hierarchy (in thousands):
Level 1 Level 2 Level 3
Quoted Prices in Active Markets for Identical Assets or Liabilities Significant Observable Inputs Significant Unobservable Inputs
Total
Fair value as of March 31, 2020:
Asset:
Long-lived assets $ 60,000 $ — $ — $ 60,000
During the first quarter 2020, we recorded a $ 45.7 million impairment charge in our consolidated statement of operations which equaled the excess of the carrying value of our Foxwoods outlet center over its estimated fair value. In the fourth quarter of 2020, we recorded an additional impairment of $ 19.2 million. The estimated fair value was based on the income approach. The income approach involves discounting the estimated income stream and reversion (presumed sale) value of a property over an estimated holding period to a present value at a risk-adjusted rate. Discount rates and terminal capitalization rates utilized in this approach were derived from property-specific information, market transactions and other financial and industry data. The terminal capitalization rate and discount rate are significant unobservable inputs in determining the fair value. The terminal capitalization rate used in the calculation was 7.8 % and the discount rate used was 8.5 %. These inputs are classified under Level 3 in the fair value hierarchy above. Should the significant assumptions utilized above to determine fair value continue to deteriorate, additional impairments in the future could be possible.
Other Fair Value Disclosures
The estimated fair value within the fair value hierarchy and recorded value of our debt consisting of senior unsecured notes, unsecured term loans, secured mortgages and unsecured lines of credit were as follows (in thousands):
June 30, 2021 December 31, 2020
Level 1 Quoted Prices in Active Markets for Identical Assets or Liabilities $ — $ —
Level 2 Significant Observable Inputs 1,078,747 1,207,531
Level 3 Significant Unobservable Inputs 379,822 432,272
Total fair value of debt $ 1,458,569 $ 1,639,803
Recorded value of debt $ 1,368,602 $ 1,567,886
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Our senior unsecured notes are publicly-traded which provides quoted market rates. However, due to the limited trading volume of these notes, we have classified these instruments as Level 2 in the hierarchy. Our other debt is classified as Level 3 given the unobservable inputs utilized in the valuation. Our unsecured term loan, unsecured lines of credit and variable interest rate mortgages are all LIBOR based instruments. When selecting the discount rates for purposes of estimating the fair value of these instruments, we evaluated the original credit spreads and do not believe that the use of them differs materially from current credit spreads for similar instruments and therefore the recorded values of these debt instruments is considered their fair value.
The carrying values of cash and cash equivalents, receivables, accounts payable, accrued expenses and other assets and liabilities are reasonable estimates of their fair values because of the short maturities of these instruments.
9. Shareholders’ Equity of the Company
At-the-Market Offering
Under our at-the-market stock offering program (“ATM Offering”), which commenced February 2021, we may offer and sell our common shares, $ 0.01 par value per share (“Common Shares”), having an aggregate gross sales price of up to $ 250.0 million (the “Shares”). We may sell the Shares in amounts and at times to be determined by us but we have no obligation to sell any of the Shares. Actual sales, if any, will depend on a variety of factors to be determined by us from time to time, including, among other things, market conditions, the trading price of the Common Shares, capital needs and determinations by us of the appropriate sources of its funding. We currently intend to use the net proceeds from the sale of shares pursuant to the ATM Offering for working capital and general corporate purposes.
The following table sets forth information regarding settlements under our ATM offering program:
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 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.
Share Repurchase Program
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 $ 80.0 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. The Company intends to structure open market purchases to occur within pricing and volume requirements of Rule 10b-18. The Company may, from time to time, enter into Rule 10b5-1 plans to facilitate the repurchase of its shares under this authorization. The Company did not repurchase any shares for both the three and six months 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.
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10. Partners’ Equity of the Operating Partnership
All units of partnership interest issued by the Operating Partnership have equal rights with respect to earnings, dividends and net assets. When the Company issues common shares upon the exercise of options, the grant of restricted common share awards, or the exchange of Class A common limited partnership units, the Operating Partnership issues a corresponding Class B common limited partnership unit to Tanger LP Trust, a wholly-owned subsidiary of the Company. Likewise, when the Company repurchases its outstanding common shares, the Operating Partnership repurchases a corresponding Class B common limited partnership unit held by Tanger LP Trust.
The following table sets forth the changes in outstanding partnership units for the six months ended June 30, 2021 and June 30, 2020:
Limited Partnership Units
General Partnership Units Class A Class B Total
Balance March 31, 2020 1,000,000 4,911,173 92,076,701 96,987,874
Grant of restricted common share awards by the Company, net of forfeitures — — 389,308 389,308
Issuance of deferred units — — 6,258 6,258
Balance June 30, 2020 1,000,000 4,911,173 92,472,267 97,383,440
Balance December 31, 2019 1,000,000 4,911,173 91,892,260 96,803,433
Grant of restricted common share awards by the Company, net of forfeitures — — 630,346 630,346
Issuance of deferred units — — 6,258 6,258
Units withheld for employee income taxes — — ( 56,597 ) ( 56,597 )
Balance June 30, 2020 1,000,000 4,911,173 92,472,267 97,383,440
Balance March 31, 2021 1,100,000 4,794,643 99,694,577 104,489,220
Options exercised — — 15,500 15,500
Issuance of units — — 2,810,503 2,810,503
Balance June 30, 2021 1,100,000 4,794,643 102,520,580 107,315,223
Balance December 31, 2020 1,000,000 4,794,643 92,569,801 97,364,444
Options exercised — — 15,500 15,500
Grant of restricted common share awards by the Company, net of forfeitures — — 469,675 469,675
Issuance of units 100,000 — 9,577,581 9,577,581
Units withheld for employee income taxes — — ( 111,977 ) ( 111,977 )
Balance June 30, 2021 1,100,000 4,794,643 102,520,580 107,315,223
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11. Earnings Per Share of the Company
The following table sets forth a reconciliation of the numerators and denominators in computing the Company’s earnings per share (in thousands, except per share amounts):
Three months ended June 30, Six months ended June 30,
2021 2020 2021 2020
Numerator:
Net income (loss) attributable to Tanger Factory Outlet Centers, Inc. $ 2,478 $ ( 22,688 ) $ 6,611 $ ( 49,570 )
Less allocation of earnings to participating securities ( 196 ) ( 176 ) ( 403 ) ( 692 )
Net income (loss) available to common shareholders of Tanger Factory Outlet Centers, Inc. $ 2,282 $ ( 22,864 ) $ 6,208 $ ( 50,262 )
Denominator:
Basic weighted average common shares 100,409 92,632 97,504 92,569
Effect of notional units 818 — 685 —
Effect of outstanding options 771 — 728 —
Diluted weighted average common shares 101,998 92,632 98,917 92,569
Basic earnings per common share:
Net income (loss) $ 0.02 $ ( 0.25 ) $ 0.06 $ ( 0.54 )
Diluted earnings per common share:
Net income (loss) $ 0.02 $ ( 0.25 ) $ 0.06 $ ( 0.54 )
We determine diluted earnings per share based on the weighted average number of common shares outstanding combined with the incremental weighted average shares that would have been outstanding assuming all potentially dilutive securities were converted into common shares at the earliest date possible.
Notional units granted under our equity compensation plan are considered contingently issuable common shares and are included in earnings per share if the effect is dilutive using the treasury stock method and the common shares would be issuable if the end of the reporting period were the end of the contingency period. For both the three and six months ended June 30, 2021, approximately 140,000 notional units were excluded from the computation and for both the three and six months ended June 30, 2020, approximately 1.7 million notional units were excluded from the computation because these notional units either would not have been issuable if the end of the reporting period were the end of the contingency period or as they were anti-dilutive.
With respect to outstanding options, the effect of dilutive common shares is determined using the treasury stock method, whereby outstanding options are assumed exercised at the beginning of the reporting period and the exercise proceeds from such options and the average measured but unrecognized compensation cost during the period are assumed to be used to repurchase our common shares at the average market price during the period. For both the three and six months ended June 30, 2021, approximately 360,000 options were excluded from the computation, as they were anti-dilutive. For both the three and six months ended June 30, 2020, approximately 1.5 million options were excluded from the computation, as they were anti-dilutive.
The assumed exchange of the partnership units held by the Non-Company LPs as of the beginning of the year, which would result in the elimination of earnings allocated to the noncontrolling interest in the Operating Partnership, would have no impact on earnings per share since the allocation of earnings to a common limited partnership unit, as if exchanged, is equivalent to earnings allocated to a common share.
Certain of the Company’s unvested restricted common share awards contain non-forfeitable rights to dividends or dividend equivalents. The impact of these unvested restricted common share awards on earnings per share has been calculated using the two-class method whereby earnings are allocated to the unvested restricted common share awards based on dividends declared and the unvested restricted common shares’ participation rights in undistributed earnings. Unvested restricted common shares that do not contain non-forfeitable rights to dividends or dividend equivalents are included in the diluted earnings per share computation if the effect is dilutive, using the treasury stock method.
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12. Earnings Per Unit of the Operating Partnership
The following table sets forth a reconciliation of the numerators and denominators in computing earnings per unit (in thousands, except per unit amounts):
Three months ended June 30, Six months ended June 30,
2021 2020 2021 2020
Numerator:
Net income (loss) attributable to partners of the Operating Partnership $ 2,596 $ ( 23,890 ) $ 6,938 $ ( 52,199 )
Less allocation of earnings to participating securities ( 196 ) ( 176 ) ( 403 ) ( 692 )
Net income (loss) available to common unitholders of the Operating Partnership $ 2,400 $ ( 24,066 ) $ 6,535 $ ( 52,891 )
Denominator:
Basic weighted average common units 105,204 97,543 102,299 97,480
Effect of notional units 818 — 685 —
Effect of outstanding options 771 — 728 —
Diluted weighted average common units 106,793 97,543 103,712 97,480
Basic earnings per common unit:
Net income (loss) $ 0.02 $ ( 0.25 ) $ 0.06 $ ( 0.54 )
Diluted earnings per common unit:
Net income (loss) $ 0.02 $ ( 0.25 ) $ 0.06 $ ( 0.54 )
We determine diluted earnings per unit based on the weighted average number of common units outstanding combined with the incremental weighted average units that would have been outstanding assuming all potentially dilutive securities were converted into common units at the earliest date possible.
Notional units granted under our equity compensation plan are considered contingently issuable common units and are included in earnings per unit if the effect is dilutive using the treasury stock method and the common units would be issuable if the end of the reporting period were the end of the contingency period. For both the three and six months ended June 30, 2021 approximately 140,000 notional units were excluded from the computation and for both the three and six months ended June 30, 2020 approximately 1.7 million notional units were excluded from the computation because these notional units either would not have been issuable if the end of the reporting period were the end of the contingency period or as they were anti-dilutive.
With respect to outstanding options, the effect of dilutive common units is determined using the treasury stock method, whereby outstanding options are assumed exercised at the beginning of the reporting period and the exercise proceeds from such options and the average measured but unrecognized compensation cost during the period are assumed to be used to repurchase our common units at the average market price during the period. The market price of a common unit is considered to be equivalent to the market price of a Company common share. For both the three and six months ended June 30, 2021, approximately 360,000 options were excluded from the computation. For both the three and six months ended June 30, 2020, approximately 1.5 million options were excluded from the computation as they were anti-dilutive.
Certain of the Company’s unvested restricted common share awards contain non-forfeitable rights to distributions or distribution equivalents. The impact of the corresponding unvested restricted unit awards on earnings per unit has been calculated using the two-class method whereby earnings are allocated to the unvested restricted unit awards based on distributions declared and the unvested restricted units’ participation rights in undistributed earnings. Unvested restricted common units that do not contain non-forfeitable rights to dividends or dividend equivalents are included in the diluted earnings per unit computation if the effect is dilutive, using the treasury stock method.
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13. Equity-Based Compensation of the Company
We have a shareholder approved equity-based compensation plan, the Incentive Award Plan of Tanger Factory Outlet Centers, Inc. and Tanger Properties Limited Partnership (as amended and restated on April 4, 2014), as amended (the “Plan”), which covers our non-employee directors, officers, employees and consultants. Per the Operating Partnership agreement, when a common share is issued by the Company, the Operating Partnership issues one corresponding unit of partnership interest to the Company’s wholly-owned subsidiaries. Therefore, when the Company grants an equity-based award, the Operating Partnership treats each award as having been granted by the Operating Partnership. In the discussion below, the term “we” refers to the Company and the Operating Partnership together and the term “shares” is meant to also include corresponding units of the Operating Partnership.
We recorded equity-based compensation expense in general and administrative expenses in our consolidated statements of operations as follows (in thousands):
Three months ended Six months ended
June 30, June 30,
2021 2020 2021 2020
Restricted common shares (1)
$ 1,539 $ 1,895 $ 4,112 $ 4,121
Notional unit performance awards (1)
1,147 1,461 2,296 2,982
Options 77 75 200 116
Total equity-based compensation $ 2,763 $ 3,431 $ 6,608 $ 7,219
(1) The six months ended June 30, 2021 includes the accelerated recognition of compensation cost.
Equity-based compensation expense capitalized as a part of rental property and deferred lease costs were as follows (in thousands):
Three months ended Six months ended
June 30, June 30,
2021 2020 2021 2020
Equity-based compensation expense capitalized $ 2 $ 101 $ 66 $ 202
Restricted Common Share and Restricted Share Unit Awards
During February 2021, the Company granted approximately 385,000 restricted common shares and restricted share units to the Company’s non-employee directors and the Company’s senior executive officers. The grant date fair value of the awards was $ 14.60 per share. The restricted common shares vest ratably over a three year period on January 4th of each year for non-employee directors and on February 15th of each year for senior executive officers. Compensation expense related to the amortization of the deferred compensation is being recognized in accordance with the vesting schedule of the restricted shares.
For certain shares that vest during the period, we withhold shares with value equivalent up to the employees’ maximum statutory obligation for the applicable income and other employment taxes, and remit cash to the appropriate taxing authorities. The total number of shares withheld upon vesting were approximately 112,000 and 57,000 for the six months ended June 30, 2021 and 2020, respectively. The total number of shares withheld was based on the value of the restricted common shares on the vesting date as determined by our closing share price on the day prior to the vesting date. Total amounts paid for the employees’ tax obligation to taxing authorities were $ 1.6 million and $ 736,000 for the six months ended June 30, 2021 and 2020, respectively. These amounts are reflected as financing activities within the consolidated statements of cash flows.
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2021 Performance Share Plan
During February 2021, the Compensation Committee of the Company approved the general terms of the Tanger Factory Outlet Centers, Inc. 2021 Performance Share Plan (the “2021 PSP”) covering the Company's senior executive officers whereby a maximum of approximately 642,000 restricted common shares may be earned if certain share price appreciation goals are achieved over a three year measurement period. The 2021 PSP is a long-term incentive compensation plan. Recipients may earn units which may convert into restricted common shares of the Company based on the Company’s absolute share price appreciation (or absolute total shareholder return) and its share price appreciation relative to its peer group (or relative total shareholder return) over a three-year measurement period. Any shares earned at the end of the three-year measurement period are subject to a time-based vesting schedule, with 50 % of the shares vesting immediately following the measurement period, and the remaining 50 % vesting one year thereafter, contingent upon continued employment with the Company through the vesting date (unless terminated prior thereto (a) by the Company without cause, (b) by participant for good reason or, (c) due to death or disability).
The following table sets forth 2021 PSP performance targets and other relevant information about the 2021 PSP:
Performance targets (1)
Absolute portion of award:
Percent of total award 33.3 %
Absolute total shareholder return range 26.0 % - 40.5 %
Percentage of units to be earned 20 % - 100 %
Relative portion of award:
Percent of total award 66.7 %
Percentile rank of peer group range (2)
30 th - 80 th
Percentage of units to be earned 20 % - 100 %
Maximum number of restricted common shares that may be earned 642,423
February grant date fair value per share $ 9.65
(1) The number of restricted common shares received under the 2021 PSP will be determined on a pro-rata basis by linear interpolation between total shareholder return thresholds, both for absolute total shareholder return and for relative total shareholder return amongst the Company’s peer group.
(2) The peer group is based on companies included in the FTSE NAREIT Retail Index.
The fair values of the 2021 PSP awards granted during the six months ended June 30, 2021 were determined at the grant dates using a Monte Carlo simulation pricing model and the following assumptions:
Risk free interest rate (1)
0.2 %
Expected dividend yield (2)
6.5 %
Expected volatility (3)
61 %
(1) Represents the interest rate as of the grant date on US treasury bonds having the same life as the estimated life of the restricted unit grants.
(2) The dividend yield is calculated utilizing the dividends paid for the previous five-year period.
(3) Based on a mix of historical and implied volatility for our common shares and the common shares of our peer index companies over the measurement period.
2018 Outperformance Plan
On February 15, 2021, the measurement period for the 2018 Outperformance Plan ('the 2018 OPP") expired. Based on the Company’s relative total shareholder return over the three year measurement period, we issued 76,478 restricted common shares in February 2021, with 43,127 vesting immediately and the remaining 33,351 vesting in February one year thereafter, contingent upon continued employment with the Company through the vesting date. Our absolute share price appreciation (or total shareholder return) for the 2018 OPP did not meet the minimum share price appreciation and no shares were earned under this component of the 2018 OPP.
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14. Accumulated Other Comprehensive Income (Loss) of the Company
The following table presents changes in the balances of each component of accumulated other comprehensive loss for the three and six months ended June 30, 2021 (in thousands):
Tanger Factory Outlet Centers, Inc. Accumulated Other Comprehensive Income (Loss) Noncontrolling Interest in Operating Partnership Accumulated Other Comprehensive Income (Loss)
Foreign Currency Cash flow hedges Total Foreign Currency Cash flow hedges Total
Balance March 31, 2021 $ ( 18,984 ) $ ( 1,284 ) $ ( 20,268 ) $ ( 1,057 ) $ ( 77 ) $ ( 1,134 )
Other comprehensive income (loss) before reclassifications 1,299 ( 86 ) 1,213 66 ( 5 ) 61
Reclassification out of accumulated other comprehensive income (loss) into interest expense — 312 312 — 16 16
Balance June 30, 2021 $ ( 17,685 ) $ ( 1,058 ) $ ( 18,743 ) $ ( 991 ) $ ( 66 ) $ ( 1,057 )
Tanger Factory Outlet Centers, Inc. Accumulated Other Comprehensive Income (Loss) Noncontrolling Interest in Operating Partnership Accumulated Other Comprehensive Income (Loss)
Foreign Currency Cash flow hedges Total Foreign Currency Cash flow hedges Total
Balance December 31, 2020 $ ( 23,399 ) $ ( 3,186 ) $ ( 26,585 ) $ ( 1,281 ) $ ( 173 ) $ ( 1,454 )
Other comprehensive income before reclassifications 2,251 1,422 3,673 123 71 194
Reclassification out of accumulated other comprehensive income (loss) into other income (expense) for foreign currency and interest expense for cash flow hedges 3,463 706 4,169 167 36 203
Balance June 30, 2021 $ ( 17,685 ) $ ( 1,058 ) $ ( 18,743 ) $ ( 991 ) $ ( 66 ) $ ( 1,057 )
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The following table presents changes in the balances of each component of accumulated other comprehensive loss for the three and six months ended June 30, 2020 (in thousands):
Tanger Factory Outlet Centers, Inc. Accumulated Other Comprehensive Income (Loss) Noncontrolling Interest in Operating Partnership Accumulated Other Comprehensive Income (Loss)
Foreign Currency Cash flow hedges Total Foreign Currency Cash flow hedges Total
Balance March 31, 2020 $ ( 32,437 ) $ ( 5,791 ) $ ( 38,228 ) $ ( 1,759 ) $ ( 310 ) $ ( 2,069 )
Other comprehensive income (loss) before reclassifications 3,188 ( 1,565 ) 1,623 169 ( 83 ) 86
Reclassification out of accumulated other comprehensive income (loss) into other income (expense) for interest expense for cash flow hedges — 1,092 1,092 — 58 58
Balance June 30, 2020 $ ( 29,249 ) $ ( 6,264 ) $ ( 35,513 ) $ ( 1,590 ) $ ( 335 ) $ ( 1,925 )
Tanger Factory Outlet Centers, Inc. Accumulated Other Comprehensive Income (Loss) Noncontrolling Interest in Operating Partnership Accumulated Other Comprehensive Income (Loss)
Foreign Currency Cash flow hedges Total Foreign Currency Cash flow hedges Total
Balance December 31, 2019 $ ( 25,094 ) $ ( 401 ) $ ( 25,495 ) $ ( 1,369 ) $ ( 24 ) $ ( 1,393 )
Other comprehensive loss before reclassifications ( 4,155 ) ( 6,953 ) ( 11,108 ) ( 221 ) ( 369 ) ( 590 )
Reclassification out of accumulated other comprehensive income (loss) for interest expense for cash flow hedges — 1,090 1,090 — 58 58
Balance June 30, 2020
$ ( 29,249 ) $ ( 6,264 ) $ ( 35,513 ) $ ( 1,590 ) $ ( 335 ) $ ( 1,925 )
We expect within the next twelve months to reclassify into earnings as an increase to interest expense approximately $ 1.1 million of the amounts recorded within accumulated other comprehensive loss related to the interest rate swap agreements in effect as of June 30, 2021.
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15. Accumulated Other Comprehensive Income (Loss) of the Operating Partnership
The following table presents changes in the balances of each component of accumulated other comprehensive loss for the three and six months ended June 30, 2021 (in thousands):
Foreign Currency Cash flow hedges Accumulated Other Comprehensive Income (Loss)
Balance March 31, 2021 $ ( 20,041 ) $ ( 1,361 ) $ ( 21,402 )
Other comprehensive income (loss) before reclassifications 1,365 ( 91 ) 1,274
Reclassification out of accumulated other comprehensive income (loss) into interest expense for cash flow hedges — 328 328
Balance June 30, 2021 $ ( 18,676 ) $ ( 1,124 ) $ ( 19,800 )
Foreign Currency Cash flow hedges Accumulated Other Comprehensive Income (Loss)
Balance December 31, 2020 $ ( 24,680 ) $ ( 3,359 ) $ ( 28,039 )
Other comprehensive income before reclassifications 2,374 1,493 3,867
Reclassification out of accumulated other comprehensive income (loss) into other income (expense) for foreign currency and interest expense for cash flow hedges 3,630 742 4,372
Balance June 30, 2021 $ ( 18,676 ) $ ( 1,124 ) $ ( 19,800 )
The following table presents changes in the balances of each component of accumulated other comprehensive loss for the three and six months ended June 30, 2020 (in thousands):
Foreign Currency Cash flow hedges Accumulated Other Comprehensive Income (Loss)
Balance March 31, 2020 $ ( 34,196 ) $ ( 6,101 ) $ ( 40,297 )
Other comprehensive income (loss) before reclassifications 3,357 ( 1,648 ) 1,709
Reclassification out of accumulated other comprehensive income (loss) into other income (expense) for interest expense for cash flow hedges — 1,150 1,150
Balance June 30, 2020 $ ( 30,839 ) $ ( 6,599 ) $ ( 37,438 )
Foreign Currency Cash flow hedges Accumulated Other Comprehensive Income (Loss)
Balance December 31, 2019 $ ( 26,463 ) $ ( 425 ) $ ( 26,888 )
Other comprehensive loss before reclassifications ( 4,376 ) ( 7,322 ) ( 11,698 )
Reclassification out of accumulated other comprehensive income (loss) into other income (expense) for interest expense for cash flow hedges — 1,148 1,148
Balance June 30, 2020 $ ( 30,839 ) $ ( 6,599 ) $ ( 37,438 )
We expect within the next twelve months to reclassify into earnings as an increase to interest expense approximately $ 1.1 million of the amounts recorded within accumulated other comprehensive loss related to the interest rate swap agreements in effect as of June 30, 2021.
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16. Lease Agreements
As of June 30, 2021, we were the lessor to over 2,100 stores in our 30 consolidated outlet centers, under operating leases with initial terms that expire from 2021 to 2035, with certain agreements containing extension options. We also have certain agreements that require tenants to pay their portion of reimbursable expenses such as common area expenses, utilities, insurance and real estate taxes.
The components of rental revenues are as follows (in thousands):
Three months ended Six months ended
June 30, June 30,
2021 2020 2021 2020
Rental revenues - fixed $ 71,847 $ 48,515 $ 146,766 $ 135,448
Rental revenues - variable (1)
24,977 13,758 47,525 35,383
Rental revenues $ 96,824 $ 62,273 $ 194,291 $ 170,831
(1) Primarily includes rents based on a percentage of tenant sales volume and reimbursable expenses such as common area expenses, utilities, insurance and real estate taxes.
17. Supplemental Cash Flow Information
We purchase capital equipment and incur costs relating to construction of facilities, including tenant finishing allowances. Expenditures included in accounts payable and accrued expenses were as follows (in thousands):
As of As of
June 30, 2021 June 30, 2020
Costs relating to construction included in accounts payable and accrued expenses $ 16,790 $ 22,106
Interest paid, net of interest capitalized was as follows (in thousands):
Six months ended June 30,
2021 2020
Interest paid $ 25,559 $ 29,749
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18. New Accounting Pronouncements
Recently issued accounting standards
On March 12, 2020, the FASB issued Accounting Standards Update (“ASU”) 2020-04, Reference Rate Reform (Topic 848) - Facilitation of the Effects of Reference Rate Reform on Financial Reporting, which provides optional expedients and exceptions for applying GAAP to contracts, hedging relationships and other transactions that reference LIBOR or other reference rates expected to be discontinued because of reference rate reform. This ASU is effective as of March 12, 2020 through December 31, 2022. In January 2021, the FASB issued ASU 2021-01, Reference Rate Reform (Topic 848), which refines the scope of Topic 848 and clarifies some of its guidance. Specifically, certain provisions in Topic 848, if elected by an entity, apply to derivative instruments that use an interest rate for margining, discounting, or contract price alignment that is modified as a result of reference rate reform. Amendments to the expedients and exceptions in Topic 848 capture the incremental consequences of the scope clarification and tailor the existing guidance to derivative instruments affected by the discounting transition. The amendments are effective immediately for all entities. An entity may elect to apply the amendments on a full retrospective basis. We have not adopted any of the optional expedients or exceptions through June 30, 2021, but will continue to evaluate the possible adoption of any such expedients or exceptions during the effective period as circumstances evolve.
19. Subsequent Events
Dividend Declaration
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.
Unsecured Lines of Credit Extension
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.
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Text extracted from the filing as submitted to EDGAR. Formatting, tables and exhibits are simplified for reading; the original document is authoritative for anything you rely on.