TANGER INC. 10-Q

Item 2. 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 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. and Tanger Properties Limited Partnership because the results are virtually the same for both entities. The following discussion should be read in conjunction with the unaudited consolidated financial statements appearing elsewhere in this report. Historical results and percentage relationships set forth in the unaudited, consolidated statements of operations, including trends which might appear, are not necessarily indicative of future operations. 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. Cautionary Statements Certain statements made in this Management's Discussion and Analysis of Financial Condition and Results of Operations below are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, or the Exchange Act. We intend such forward-looking statements to be covered by the safe harbor provisions for forward-looking statements contained in the Private Securities Reform Act of 1995 and included this statement for purposes of complying with these safe harbor provisions. Forward-looking statements, which are based on certain assumptions and describe our future plans, strategies, beliefs and expectations, are generally identifiable by use of the words "believe", "expect", "intend", "anticipate", "estimate", "project", or similar expressions. Such forward-looking statements include, but are not limited to, statements regarding: the expected impact of the novel coronavirus (“COVID-19”) pandemic on our business, financial results and financial condition; our ability to raise additional capital, including via future issuances of equity and debt, and the use of proceeds from such issuances; our results of operations and financial condition; capital expenditure and working capital needs and the funding thereof; the repurchase of the Company's common shares, including the potential use of a 10b5-1 plan to facilitate repurchases; future dividend payments; the possibility of future asset impairments; potential developments, expansions, renovations, acquisitions or dispositions of outlet centers; compliance with debt covenants; renewal and re - lease of leased space; the outlook for the retail environment, potential bankruptcies, and other store closings; the outcome of legal proceedings arising in the normal course of business; and real estate joint ventures. You should not rely on forward-looking statements since they involve known and unknown risks, uncertainties and other important factors which are, in some cases, beyond our control and which could materially affect our actual results, performance or achievements. 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 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. 40 Other important factors which may cause actual results to differ materially from current expectations include, but are not limited to: our inability to develop new outlet centers or expand existing outlet centers successfully; risks related to the economic performance and market value of our outlet centers; the relative illiquidity of real property investments; impairment charges affecting our properties; our dispositions of assets may not achieve anticipated results; competition for the acquisition and development of outlet centers, and our inability to complete outlet centers we have identified; environmental regulations affecting our business; risk associated with a possible terrorist activity or other acts or threats of violence, public health crises and threats to public safety; our dependence on rental income from real property; our dependence on the results of operations of our retailers; the fact that certain of our properties are subject to ownership interests held by third parties, whose interests may conflict with ours; risks related to climate change; risks related to uninsured losses; risks related to changes in consumer spending habits; risks associated with our Canadian investments; risks associated with attracting and retaining key personnel; risks associated with debt financing; risk associated with our guarantees of debt for, or other support we may provide to, joint venture properties; the effectiveness of our interest rate hedging arrangements; uncertainty relating to the potential phasing out of LIBOR; our potential failure to qualify as a REIT; our legal obligation to make distributions to our shareholders; legislative or regulatory actions that could adversely affect our shareholders; our dependence on distributions from the Operating Partnership to meet our financial obligations, including dividends; the risk of a cyber-attack or an act of cyber-terrorism and other important factors which may cause actual results to differ materially from current expectations include, but are not limited to, those set forth under Item 1A - “Risk Factors” in the Company’s and the Operating Partnership’s Annual Report on Form 10-K for the year ended December 31, 2020. General Overview 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 June 30, 2021 (square feet in thousands): Consolidated Outlet Centers Unconsolidated Joint Venture Outlet Centers Outlet Center Quarter Opened/Disposed Square Feet Number of Outlet Centers Square Feet Number of Outlet Centers As of January 1, 2020 12,048 32 2,212 7 Dispositions: Terrell Third Quarter (178) (1) — — Other 3 — — — As of December 31, 2020 11,873 31 2,212 7 Disposition: Jeffersonville First Quarter (412) (1) Saint-Saveur First Quarter (99) (1) Other (5) As of June 30, 2021 11,456 30 2,113 6 41 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. Consolidated Outlet Centers Legal Square % Location Ownership % Feet Occupied Deer Park, New York 100 739,148 93 Riverhead, New York (1) 100 729,558 90 Foley, Alabama 100 554,649 88 Rehoboth Beach, Delaware (1) 100 552,841 92 Atlantic City, New Jersey (1) (3) 100 487,718 82 San Marcos, Texas 100 471,816 91 Sevierville, Tennessee (1) 100 447,810 98 Savannah, Georgia 100 429,089 96 Myrtle Beach Hwy 501, South Carolina 100 426,523 98 Glendale, Arizona (Westgate) 100 410,753 95 Myrtle Beach Hwy 17, South Carolina (1) 100 404,710 100 Charleston, South Carolina 100 386,328 99 Lancaster, Pennsylvania 100 375,857 99 Pittsburgh, Pennsylvania 100 373,863 90 Commerce, Georgia 100 371,408 93 Grand Rapids, Michigan 100 357,127 88 Fort Worth, Texas 100 351,741 98 Daytona Beach, Florida 100 351,721 100 Branson, Missouri 100 329,861 100 Southaven, Mississippi (2) (3) 50 324,720 99 Locust Grove, Georgia 100 321,082 99 Gonzales, Louisiana 100 321,066 96 Mebane, North Carolina 100 318,886 100 Howell, Michigan 100 314,438 74 Mashantucket, Connecticut (Foxwoods) (1) 100 311,229 77 Tilton, New Hampshire 100 250,139 80 Hershey, Pennsylvania 100 249,696 97 Hilton Head II, South Carolina 100 206,564 100 Hilton Head I, South Carolina 100 181,670 91 Blowing Rock, North Carolina 100 104,009 88 Totals 11,456,020 93 (1) These properties or a portion thereof are subject to a ground lease. (2) Based on capital contribution and distribution provisions in the joint venture agreement, we expect our economic interest in the venture’s cash flow to be greater than our legal ownership percentage. We currently receive substantially all the economic interest of the property. (3) Property encumbered by mortgage. See Notes 5 and 6 to the consolidated financial statements for further details of our debt obligations. 42 Unconsolidated joint venture properties Legal Square % Location Ownership % Feet Occupied Charlotte, North Carolina (1) 50 398,644 97 Ottawa, Ontario 50 357,209 95 Columbus, Ohio (1) 50 355,245 96 Texas City, Texas (Galveston/Houston) (1) 50 352,705 95 National Harbor, Maryland (1) 50 341,156 99 Cookstown, Ontario 50 307,883 92 Total 2,112,842 96 (1) Property encumbered by mortgage. See Note 4 to the consolidated financial statements for further details of the joint venture debt obligations. 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 June 30, 2021 and 2020: Trailing twelve months ended June 30, 2021 (1),(2), (3) # of Leases Square Feet (in 000’s) Average Annual Straight-line Rent (psf) Average Tenant Allowance (psf) Average Initial Term (in years) Net Average Annual Straight-line Rent (psf) (4) Re-tenant 65 321 $ 26.35 $ 50.76 5.81 $ 17.61 Renewal 245 1,236 $ 26.60 $ 0.62 3.17 $ 26.40 Trailing twelve months ended June 30, 2020 (1),(2) # of Leases Square Feet (in 000’s) Average Annual Straight-line Rent (psf) Average Tenant Allowance (psf) Average Initial Term (in years) Net Average Annual Straight-line Rent (psf) (4) Re-tenant 111 510 $ 35.67 $ 48.85 7.72 $ 29.34 Renewal 185 935 $ 27.36 $ 0.95 3.91 $ 27.12 (1) Excludes license agreements, seasonal tenants, and month-to-month leases. (2) Excludes the Terrell outlet center sold in August 2020. (3) Excludes the Jeffersonville outlet center sold in January 2021. (4) Net average annual straight-line base rent is calculated by dividing the average tenant allowance costs per square foot by the average initial term and subtracting this calculated number from the average straight-line base rent per year amount. The average annual straight-line base rent disclosed in the table above includes all concessions, abatements and reimbursements of rent to tenants. The average tenant allowance disclosed in the table above includes other landlord costs. 43 COVID-19 Pandemic 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 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. 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 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 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: • 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 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): 2021 2020 Increase/(Decrease) Rental revenues from existing properties $ 97,405 $ 61,739 $ 35,666 Rental revenues from properties disposed (85) 1,526 (1,611) Straight-line rent adjustments (478) (2,549) 2,071 Lease termination fees 127 1,513 (1,386) Amortization of above and below market rent adjustments, net (145) 44 (189) $ 96,824 $ 62,273 $ 34,551 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. 44 MANAGEMENT, LEASING AND OTHER SERVICES 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): 2021 2020 Increase/(Decrease) Management and marketing $ 537 $ 144 $ 393 Leasing and other fees 103 15 88 Expense reimbursements from unconsolidated joint ventures 719 566 153 $ 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 $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): 2021 2020 Increase/(Decrease) Other revenues from existing properties $ 3,088 $ 961 $ 2,127 Other revenues from properties disposed 2 31 (29) $ 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 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): 2021 2020 Increase/(Decrease) Property operating expenses from existing properties $ 31,562 $ 26,002 $ 5,560 Properties operating expenses from properties disposed (1,726) 1,151 (2,877) Expenses related to unconsolidated joint ventures 719 566 153 Other property operating expenses 695 439 256 $ 31,250 $ 28,158 $ 3,092 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. 45 GENERAL AND ADMINISTRATIVE EXPENSES 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 $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): 2021 2020 Increase/(Decrease) Depreciation and amortization from existing properties $ 27,732 $ 28,365 $ (633) Depreciation and amortization from properties disposed — 281 (281) $ 27,732 $ 28,646 $ (914) 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. 46 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, • 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, • 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. and • 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. 47 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. 48 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. 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 following the onset of the pandemic. 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. 49 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. • 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. OTHER INCOME (EXPENSE) Other income (expense) decreased approximately $3.5 million in the 2021 period compared to the 2020 period. 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 foreign currency loss of approximately $3.6 million in other income (expense), which had been previously recorded in other comprehensive income. 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 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. 50 LIQUIDITY AND CAPITAL RESOURCES OF THE COMPANY In this “Liquidity and Capital Resources of the Company” section, the term “the Company” refers only to Tanger Factory Outlet Centers, Inc. on an unconsolidated basis, excluding the Operating Partnership. The Company’s business is operated primarily through the Operating Partnership. The Company issues public equity from time to time, but does not otherwise generate any capital itself or conduct any business itself, other than incurring certain expenses in operating as a public company, which are fully reimbursed by the Operating Partnership. The Company does not hold any indebtedness, and its only material asset is its ownership of partnership interests of the Operating Partnership. The Company’s principal funding requirement is the payment of dividends on its common shares. The Company’s principal source of funding for its dividend payments is distributions it receives from the Operating Partnership. Through its ownership of the sole general partner of the Operating Partnership, the Company has the full, exclusive and complete responsibility for the Operating Partnership’s day-to-day management and control. The Company causes the Operating Partnership to distribute all, or such portion as the Company may in its discretion determine, of its available cash in the manner provided in the Operating Partnership’s partnership agreement. The Company receives proceeds from equity issuances from time to time, but is required by the Operating Partnership’s partnership agreement to contribute the proceeds from its equity issuances to the Operating Partnership in exchange for partnership units of the Operating Partnership. We are a well-known seasoned issuer with a shelf registration that expires in February 2024 that allows the Company to register unspecified various classes of equity securities and the Operating Partnership to register unspecified, various classes of debt securities. As circumstances warrant, the Company may issue equity from time to time on an opportunistic basis, dependent upon market conditions and available pricing. The Operating Partnership may use the proceeds to repay debt, including borrowings under its lines of credit, to develop new or existing properties, to make acquisitions of properties or portfolios of properties, to invest in existing or newly created joint ventures or for general corporate purposes. The liquidity of the Company is dependent on the Operating Partnership’s ability to make sufficient distributions to the Company. The Operating Partnership is a party to loan agreements with various bank lenders that require the Operating Partnership to comply with various financial and other covenants before it may make distributions to the Company. The Company also guarantees some of the Operating Partnership’s debt. If the Operating Partnership fails to fulfill its debt requirements, which trigger the Company’s guarantee obligations, then the Company may be required to fulfill its cash payment commitments under such guarantees. However, the Company’s only material asset is its investment in the Operating Partnership. The Company believes the Operating Partnership’s sources of working capital, specifically its cash flow from operations and cash on hand, are adequate for it to make its distribution payments to the Company and, in turn, for the Company to make any minimum dividend payments to its shareholders and to finance its continued operations, growth strategy and additional expenses we expect to incur for at least the next twelve months. However, there can be no assurance that the Operating Partnership’s sources of capital will continue to be available at all or in amounts sufficient to meet its needs, including its ability to make distribution payments to the Company. The unavailability of capital could adversely affect the Operating Partnership’s ability to pay its distributions to the Company which will, in turn, adversely affect the Company’s ability to pay cash dividends to its shareholders. 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 “Risk Factors” section of our Annual Report on Form 10-K for the year ended December 31, 2020. For the Company to maintain its qualification as a REIT, it must pay dividends to its shareholders aggregating annually at least 90% of its taxable income (excluding capital gains). While historically the Company has satisfied this distribution requirement by making cash distributions to its shareholders, it may choose to satisfy this requirement by making distributions of cash or other property, including, in limited circumstances, the Company’s own shares. 51 As a result of this distribution requirement, the Operating Partnership cannot rely on retained earnings to fund its on-going operations to the same extent that other companies whose parent companies are not real estate investment trusts can. The Company may need to continue to raise capital in the equity markets to fund the Operating Partnership’s working capital needs, as well as potential new developments, expansions and renovations of existing properties, acquisitions, or investments in existing or newly created joint ventures. The Company currently consolidates the Operating Partnership because it has (1) the power to direct the activities of the Operating Partnership that most significantly impact the Operating Partnership’s economic performance and (2) the obligation to absorb losses and the right to receive the residual returns of the Operating Partnership that could be potentially significant. The Company does not have significant assets other than its investment in the Operating Partnership. Therefore, the assets and liabilities and the revenues and expenses of the Company and the Operating Partnership are the same on their respective financial statements, except for immaterial differences related to cash, other assets and accrued liabilities that arise from public company expenses paid by the Company. However, all debt is held directly or indirectly at the Operating Partnership level, and the Company has guaranteed some of the Operating Partnership’s unsecured debt as discussed below. Because the Company consolidates the Operating Partnership, the section entitled “Liquidity and Capital Resources of the Operating Partnership” should be read in conjunction with this section to understand the liquidity and capital resources of the Company on a consolidated basis and how the Company is operated as a whole. In February 2021, we commenced an at-the-market share offering program (“ATM Offering”) under our shelf registration statement on Form S-3. 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. The Operating Partnership currently intends 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 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. 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 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. 52 LIQUIDITY AND CAPITAL RESOURCES OF THE OPERATING PARTNERSHIP General Overview In this “Liquidity and Capital Resources of the Operating Partnership” section, the terms “we”, “our” and “us” refer to the Operating Partnership or the Operating Partnership and the Company together, as the text requires. Property rental income represents our primary source to pay property operating expenses, debt service, capital expenditures and distributions, excluding non-recurring capital expenditures and acquisitions. To the extent that our cash flow from operating activities is insufficient to cover such non-recurring capital expenditures and acquisitions, we finance such activities from borrowings under our unsecured lines of credit, to the extent available, or from the proceeds from the Operating Partnership’s debt offerings and the Company’s equity offerings. We believe we achieve a strong and flexible financial position by attempting to: (1) maintain a prudent leverage position relative to our portfolio when pursuing new development, expansion and acquisition opportunities, (2) extend and sequence debt maturities, (3) manage our interest rate risk through a proper mix of fixed and variable rate debt, (4) maintain access to liquidity by using our unsecured lines of credit in a conservative manner and (5) preserve internally generated sources of capital by strategically divesting of underperforming assets and maintaining a conservative distribution payout ratio. We manage our capital structure to reflect a long term investment approach and utilize multiple sources of capital to meet our requirements. 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. Cash Flows The following table sets forth our changes in cash flows (in thousands): Six months ended June 30, 2021 2020 Change Net cash provided by operating activities $ 91,279 $ 14,217 $ 77,062 Net cash provided by (used in) investing activities 4,009 (16,821) 20,830 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 Net increase in cash and cash equivalents $ 22,454 $ 321,907 $ (299,453) Operating Activities The increase in net cash provided by operating activities was primarily due to the collection of rent deferred from April and May of 2020 during the beginning of the COVID-19 pandemic. 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 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. In addition, we had lower additions to rental properties in the 2021 period. 53 Financing Activities 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, 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): Six months ended June 30, 2021 2020 Change Capital expenditures analysis: New outlet center developments and expansions $ 174 $ 942 $ (768) Major outlet center renovations 75 3,932 (3,857) Second generation tenant allowances 2,194 6,368 (4,174) Other capital expenditures 6,446 5,271 1,175 8,889 16,513 (7,624) Conversion from accrual to cash basis 2,947 (37) 2,984 Additions to rental property-cash basis $ 11,836 $ 16,476 $ (4,640) • Major outlet center renovations in the 2020 period included costs related to bringing two magnet tenants to our Lancaster outlet center. Potential Future Developments, Acquisitions and Dispositions We are in the initial study period for potential new developments, including a potential site in Nashville, Tennessee. We may also use joint venture arrangement to develop other potential sites. While temporarily deferred during the pandemic crisis, we have recently restarted our marketing efforts for the planned Nashville development, and as restrictions are lifted potential tenants are making site visits. However, there can be no assurance that these potential future projects will ultimately be developed. In the case of projects to be wholly-owned by us, we would expect to fund these projects from amounts available under our unsecured lines of credit, but may also fund them with capital from additional public debt and equity offerings. For projects to be developed through joint venture arrangements, we may use collateralized construction loans to fund a portion of the project, with our share of the equity requirements funded from sources described above. See “Off-Balance Sheet Arrangements” for a discussion of unconsolidated joint venture development activities. We intend to continue to grow our portfolio by developing, expanding or acquiring additional outlet centers. However, you should note that any developments or expansions that we, or a joint venture that we have an ownership interest in, have planned or anticipated may not be started or completed as scheduled, or may not result in accretive net income or funds from operations (“FFO”). See the section “Non-GAAP Supplemental Earnings Measures - Funds From Operations” below for further discussion of FFO. In addition, we regularly evaluate acquisition or disposition proposals and engage from time to time in negotiations for acquisitions or dispositions of properties. We may also enter into letters of intent for the purchase or sale of properties. Any prospective acquisition or disposition that is being evaluated or which is subject to a letter of intent may not be consummated, or if consummated, may not result in an increase in earnings or liquidity. 54 Financing Arrangements 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. We intend to retain the ability to raise additional capital, including public debt or equity, to pursue attractive investment opportunities that may arise and to otherwise act in a manner that we believe to be in the best interests of our shareholders and unitholders. The Company and Operating Partnership are well-known seasoned issuers with a joint shelf registration statement on Form S-3, expiring in February 2024, that allows us to register unspecified amounts of different classes of securities. To generate capital to reinvest into other attractive investment opportunities, we may also consider the use of additional operational and developmental joint ventures, the sale or lease of outparcels on our existing properties and the sale of certain properties that do not meet our long-term investment criteria. Based on cash provided by operations, existing lines of credit, ongoing relationships with certain financial institutions and our ability to sell debt or issue equity subject to market conditions, we believe that we have access to the necessary financing to fund the planned capital expenditures for at least the next twelve months. We anticipate that adequate cash will be available to fund our operating and administrative expenses, regular debt service obligations, and the payment of dividends in accordance with REIT requirements in both the short and long-term. Although we receive most of our rental payments on a monthly basis, distributions to shareholders and unitholders are typically made quarterly and interest payments on the senior, unsecured notes are made semi-annually. Amounts accumulated for such payments will be used in the interim to reduce the outstanding borrowings under our existing unsecured lines of credit or invested in short-term money market or other suitable instruments. 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 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 senior notes due December 2023. 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 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. 55 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, 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; the immediately preceding six calendar month period annualized for the calculation date occurring on March 31, 2021; the immediately preceding nine calendar month period annualized for the calculation date occurring on June 30, 2021; and for all other calculation dates occurring during the term on the agreement, the immediately preceding twelve calendar month period. Some definitional modifications related to the calculation of certain covenants are permanent, including the netting of cash balances in excess of $30.0 million (or debt maturing in the next 24 months, if less) as well as using adjusted EBITDA, which adds back general and administrative expenses not attributable to the subsidiaries or properties and deducts a management fee of 3% of rental revenues in liability and asset calculations for certain covenants. The amendments revised the interest rate to provide a LIBOR floor of 0.25% for the portions of the lines of credit and bank term loan that are not fixed with an interest rate swap. 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. 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. Failure to comply with these covenants would result in a default which, if we were unable to cure or obtain a waiver from the lenders, could accelerate the repayment obligations. Further, in the event of default, the Company may be restricted from paying dividends to its shareholders in excess of dividends required to maintain its REIT qualification. Accordingly, an event of default could have a material and adverse impact on us. As a result, 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. 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: Senior unsecured notes financial covenants Required Actual Total consolidated debt to adjusted total assets <60% 41 % Total secured debt to adjusted total assets <40% 3 % Total unencumbered assets to unsecured debt >150% 233 % 56 In addition, key financial covenants for our lines of credit and term loan, include the following as of June 30, 2021: Required Actual Total Liabilities to Total Adjusted Asset Value <65% (1) 39 % Secured Indebtedness to Adjusted Unencumbered Asset Value <35% 6 % EBITDA to Fixed Charges >1.5 4.0 Total Unsecured Indebtedness to Adjusted Unencumbered Asset Value <65% (1) 35 % 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, 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 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 Debt (1) $ 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 We have partial ownership interests in six unconsolidated outlet centers totaling approximately 2.1 million square feet, including two outlet centers in Canada. See Note 4 to the consolidated financial statements for details of our individual joint ventures, including, but not limited to, carrying values of our investments, fees we receive for services provided to the joint ventures, recent development and financing transactions and condensed combined summary financial information. We may elect to fund cash needs of a joint venture through equity contributions (generally on a basis proportionate to our ownership interests), advances or partner loans, although such funding is not typically required contractually or otherwise. We separately report investments in joint ventures for which accumulated distributions have exceeded investments in, and our share of net income or loss of, the joint ventures within other liabilities in the consolidated balance sheets because we are committed and intend to provide further financial support to these joint ventures. We believe our joint ventures will be able to fund their operating and capital needs for the next twelve months based on their sources of working capital, specifically cash flow from operations, access to contributions from partners, and ability to refinance debt obligations, including the ability to exercise upcoming extensions of near term maturities. 57 Our joint ventures are typically encumbered by a mortgage on the joint venture property. 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. A default by a joint venture under its debt obligations may expose us to liability under the guaranty. For construction and mortgage 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 based upon satisfactory completion of construction and performance targets including occupancy thresholds and minimum debt service coverage tests. Our joint ventures may contain make whole provisions in the event that demands are made on any existing guarantees. 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 June 30, 2021 (dollars in millions): Joint Venture Total Joint Venture Debt Maturity Date Interest Rate Percent Guaranteed by the Operating Partnership Maximum Guaranteed Amount by the Company Charlotte $ 100.0 July 2028 4.27% — % $ — Columbus 71.0 November 2022 LIBOR + 1.85% 16.8 % 11.9 Galveston/Houston (1) 64.5 July 2023 LIBOR + 1.85% 15.5 % 10.0 National Harbor 95.0 January 2030 4.63 % — % — Debt origination costs (1.2) $ 329.3 $ 21.9 (1) In February 2021, the Galveston/Houston joint venture amended the 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%. CRITICAL ACCOUNTING POLICIES AND ESTIMATES 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 June 30, 2021. 58 NON-GAAP SUPPLEMENTAL MEASURES Funds From Operations Funds From Operations (“FFO”) is a widely used measure of the operating performance for real estate companies that supplements net income (loss) determined in accordance with generally accepted accounting principles in the United States (“GAAP”). We determine FFO based on the definition set forth by the National Association of Real Estate Investment Trusts (“NAREIT”), of which we are a member. In December 2018, NAREIT issued “NAREIT Funds From Operations White Paper - 2018 Restatement” which clarifies, where necessary, existing guidance and consolidates alerts and policy bulletins into a single document for ease of use. NAREIT defines FFO as net income (loss) available to the Company’s common shareholders computed in accordance with GAAP, excluding (i) depreciation and amortization related to real estate, (ii) gains or losses from sales of certain real estate assets, (iii) gains and losses from change in control, (iv) impairment write-downs of certain real estate assets and investments in entities when the impairment is directly attributable to decreases in the value of depreciable real estate held by the entity and (v) after adjustments for unconsolidated partnerships and joint ventures calculated to reflect FFO on the same basis. FFO is intended to exclude historical cost depreciation of real estate as required by GAAP which assumes that the value of real estate assets diminishes ratably over time. Historically, however, real estate values have risen or fallen with market conditions. Because FFO excludes depreciation and amortization of real estate assets, gains and losses from property dispositions and extraordinary items, it provides a performance measure that, when compared year over year, reflects the impact to operations from trends in occupancy rates, rental rates, operating costs, development activities and interest costs, providing perspective not immediately apparent from net income (loss). We present FFO because we consider it an important supplemental measure of our operating performance. In addition, a portion of cash bonus compensation to certain members of management is based on our FFO or Core FFO, which is described in the section below. We believe it is useful for investors to have enhanced transparency into how we evaluate our performance and that of our management. In addition, FFO is frequently used by securities analysts, investors and other interested parties in the evaluation of REITs, many of which present FFO when reporting their results. FFO is also widely used by us and others in our industry to evaluate and price potential acquisition candidates. We believe that FFO payout ratio, which represents regular distributions to common shareholders and unit holders of the Operating Partnership expressed as a percentage of FFO, is useful to investors because it facilitates the comparison of dividend coverage between REITs. NAREIT has encouraged its member companies to report their FFO as a supplemental, industry-wide standard measure of REIT operating performance. FFO has significant limitations as an analytical tool, and you should not consider it in isolation, or as a substitute for analysis of our results as reported under GAAP. Some of these limitations are: • FFO does not reflect our cash expenditures, or future requirements, for capital expenditures or contractual commitments; • FFO does not reflect changes in, or cash requirements for, our working capital needs; • Although depreciation and amortization are non-cash charges, the assets being depreciated and amortized will often have to be replaced in the future, and FFO does not reflect any cash requirements for such replacements; and • Other companies in our industry may calculate FFO differently than we do, limiting its usefulness as a comparative measure. Because of these limitations, FFO should not be considered as a measure of discretionary cash available to us to invest in the growth of our business or our dividend paying capacity. We compensate for these limitations by relying primarily on our GAAP results and using FFO only as a supplemental measure. 59 Core Funds From Operations We present Core FFO (formerly referred to as AFFO) as a supplemental measure of our performance. We define Core FFO as FFO further adjusted to eliminate the impact of certain items that we do not consider indicative of our ongoing operating performance. These further adjustments are itemized in the table below, if applicable. You are encouraged to evaluate these adjustments and the reasons we consider them appropriate for supplemental analysis. In evaluating Core FFO you should be aware that in the future we may incur expenses that are the same as or similar to some of the adjustments in this presentation. Our presentation of Core FFO should not be construed as an inference that our future results will be unaffected by unusual or non-recurring items. We present Core FFO because we believe it assists investors and analysts in comparing our performance across reporting periods on a consistent basis by excluding items that we do not believe are indicative of our core operating performance. In addition, we believe it is useful for investors to have enhanced transparency into how we evaluate management’s performance and the effectiveness of our business strategies. We use Core FFO when certain material, unplanned transactions occur as a factor in evaluating management’s performance and to evaluate the effectiveness of our business strategies, and may use Core FFO when determining incentive compensation. Core FFO has limitations as an analytical tool. Some of these limitations are: • Core FFO does not reflect our cash expenditures, or future requirements, for capital expenditures or contractual commitments; • Core FFO does not reflect changes in, or cash requirements for, our working capital needs; • Although depreciation and amortization are non-cash charges, the assets being depreciated and amortized will often have to be replaced in the future, and Core FFO does not reflect any cash requirements for such replacements; • Core FFO does not reflect the impact of certain cash charges resulting from matters we consider not to be indicative of our ongoing operations; and • Other companies in our industry may calculate Core FFO differently than we do, limiting its usefulness as a comparative measure. Because of these limitations, Core FFO should not be considered in isolation or as a substitute for performance measures calculated in accordance with GAAP. We compensate for these limitations by relying primarily on our GAAP results and using Core FFO only as a supplemental measure. 60 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 Six months ended June 30, June 30, 2021 2020 2021 2020 Net income (loss) $ 2,596 $ (23,890) $ 6,938 $ (52,009) Adjusted for: Depreciation and amortization of real estate assets - consolidated 27,185 28,057 54,739 56,858 Depreciation and amortization of real estate assets - unconsolidated joint ventures 2,913 3,017 5,909 6,035 Impairment charge - consolidated — — — 45,675 Loss on sale of joint venture property, including foreign currency effect (1) — — 3,704 — Impairment charge - unconsolidated joint ventures — 3,091 — 3,091 FFO 32,694 10,275 71,290 59,650 FFO attributable to noncontrolling interests in other consolidated partnerships — — — (190) Allocation of earnings to participating securities (302) (281) (694) (692) FFO available to common shareholders (2) $ 32,392 $ 9,994 $ 70,596 $ 58,768 As further adjusted for: Compensation related to voluntary retirement plan and other executive severance (3) — — 2,418 — 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) — Core FFO available to common shareholders (2) $ 46,325 $ 9,994 $ 86,925 $ 58,768 FFO available to common shareholders per share - diluted (2) $ 0.30 $ 0.10 $ 0.68 $ 0.60 Core FFO available to common shareholders per share - diluted (2) $ 0.43 $ 0.10 $ 0.84 $ 0.60 Weighted Average Shares: Basic weighted average common shares 100,409 92,632 97,504 92,569 Effect of notional units 818 — 685 — Effect of outstanding options and restricted common shares 771 — 728 — Diluted weighted average common shares (for earnings per share computations) 101,998 92,632 98,917 92,569 Exchangeable operating partnership units 4,795 4,911 4,795 4,911 Diluted weighted average common shares (for FFO per share computations) (2) 106,793 97,543 103,712 97,480 (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 and other executive severance costs. (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. 61 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, 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. We believe Portfolio NOI and Same Center NOI are non-GAAP metrics used by industry analysts, investors and management to measure the operating performance of our properties because they provide performance measures directly related to the revenues and expenses involved in owning and operating real estate assets and provide a perspective not immediately apparent from net income (loss), FFO or Core FFO. Because Same Center NOI excludes properties developed, redeveloped, acquired and sold; as well as non-cash adjustments, gains or losses on the sale of outparcels and termination rents; it highlights operating trends such as occupancy levels, rental rates and operating costs on properties that were operational for both comparable periods. Other REITs may use different methodologies for calculating Portfolio NOI and Same Center NOI, and accordingly, our Portfolio NOI and Same Center NOI may not be comparable to other REITs. Portfolio NOI and Same Center NOI should not be considered alternatives to net income (loss) or as an indicator of our financial performance since they do not reflect the entire operations of our portfolio, nor do they reflect the impact of general and administrative expenses, acquisition-related expenses, interest expense, depreciation and amortization costs, other non-property income and losses, the level of capital expenditures and leasing costs necessary to maintain the operating performance of our properties, or trends in development and construction activities which are significant economic costs and activities that could materially impact our results from operations. Because of these limitations, Portfolio NOI and Same Center NOI should not be viewed in isolation or as a substitute for performance measures calculated in accordance with GAAP. We compensate for these limitations by relying primarily on our GAAP results and using Portfolio NOI and Same Center NOI only as supplemental measures. 62 Below is a reconciliation of net income to Portfolio NOI and Same Center NOI for the consolidated portfolio (in thousands): 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) 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) Impairment charge — — — 45,675 Depreciation and amortization 27,732 28,646 55,882 58,063 Other non-property (income) expense 307 323 (93) 461 Corporate general and administrative expenses 15,746 11,715 32,517 24,294 Non-cash adjustments (2) 728 2,621 1,571 1,119 Lease termination fees (127) (1,514) (800) (1,677) Portfolio NOI 70,977 37,411 136,108 108,885 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. (3) Excluded from Same Center NOI: Outlet centers sold: Terrell August 2020 Jeffersonville January 2021 63 Adjusted EBITDA, EBITDAre and Adjusted EBITDAre We present Earnings Before Interest, Taxes, Depreciation and Amortization (“EBITDA”) as adjusted for items described below (“Adjusted EBITDA”), EBITDA for Real Estate (“EBITDAre”) and Adjusted EBITDAre, all non-GAAP measures, as supplemental measures of our operating performance. Each of these measures is defined as follows: We define Adjusted EBITDA as net income (loss) available to the Company’s common shareholders computed in accordance with GAAP before interest expense, income taxes, depreciation and amortization, gains and losses on sale of operating properties, joint venture properties and other assets, gains and losses on change of control, impairment write-downs of depreciated property and of investment in unconsolidated joint ventures caused by a decrease in value of depreciated property in the affiliate, compensation related to voluntary retirement plan and other executive severance, gains and losses on extinguishment of debt, net and other items that we do not consider indicative of the Company's ongoing operating performance. We determine EBITDAre based on the definition set forth by NAREIT, which is defined as net income (loss) available to the Company’s common shareholders computed in accordance with GAAP before interest expense, income taxes, depreciation and amortization, gains and losses on sale of operating properties, gains and losses on change of control and impairment write-downs of depreciated property and of investment in unconsolidated joint ventures caused by a decrease in value of depreciated property in the affiliate and after adjustments to reflect our share of the EBITDAre of unconsolidated joint ventures. Adjusted EBITDAre is defined as EBITDAre excluding gains and losses on extinguishment of debt, net, compensation related to voluntary retirement plan and other executive severance and other items that that we do not consider indicative of the Company's ongoing operating performance. We present Adjusted EBITDA, EBITDAre and Adjusted EBITDAre as we believe they are useful for investors, creditors and rating agencies as they provide additional performance measures that are independent of a Company’s existing capital structure to facilitate the evaluation and comparison of the Company’s operating performance to other REITs and provide a more consistent metric for comparing the operating performance of the Company’s real estate between periods. Adjusted EBITDA, EBITDAre and Adjusted EBITDAre have significant limitations as analytical tools, including: • They do not reflect our interest expense; • They do not reflect gains or losses on sales of operating properties or impairment write-downs of depreciated property and of investment in unconsolidated joint ventures caused by a decrease in value of depreciated property in the affiliate; • Adjusted EBITDA and Adjusted EBITDAre do not reflect gains and losses on extinguishment of debt and other items that may affect operations; and • Other companies in our industry may calculate these measures differently than we do, limiting its usefulness as a comparative measure. Because of these limitations, Adjusted EBITDA, EBITDAre and Adjusted EBITDAre should not be considered in isolation or as a substitute for performance measures calculated in accordance with GAAP. We compensate for these limitations by relying primarily on our GAAP results and using Adjusted EBITDA, EBITDAre and Adjusted EBITDAre only as supplemental measures. 64 Below is a reconciliation of Net Income to Adjusted EBITDA (in thousands): 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: Interest expense 13,338 16,943 27,700 32,139 Depreciation and amortization 27,732 28,646 55,882 58,063 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) — — 3,704 — Compensation related to voluntary retirement plan and other executive severance (2) — — 2,418 — 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 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: Interest expense 13,338 16,943 27,700 32,139 Depreciation and amortization 27,732 28,646 55,882 58,063 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) — — 3,704 — Pro-rata share of interest expense - unconsolidated joint ventures 1,455 1,616 2,928 3,484 Pro-rata share of depreciation and amortization - unconsolidated joint ventures 2,913 3,018 5,909 6,035 EBITDAre $ 48,034 $ 29,424 $ 103,061 $ 96,478 Compensation related to executive officer retirement (2) — — 2,418 — 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 and other executive severance costs. (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. 65 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 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. Such provisions include clauses for the escalation of base rent and clauses enabling us to receive percentage rentals based on tenants’ gross sales (above predetermined levels) which generally increase as prices rise. A component of most leases includes a pro-rata share or escalating fixed contributions by the tenant for property operating expenses, including common area maintenance, real estate taxes, insurance and advertising and promotion, thereby reducing exposure to increases in costs and operating expenses resulting from inflation. A portion of our rental revenues are derived from rents that directly depend on the sales volume of certain tenants. Accordingly, declines in these tenants’ sales would reduce the income produced by our properties. If the sales or profitability of our retail tenants decline sufficiently, whether due to a change in consumer preferences, health concerns, legislative changes that increase the cost of their operations or otherwise, such tenants may be unable to pay their existing rents as such rents would represent a higher percentage of their sales. As a result of the COVID-19 pandemic, we have seen reductions in rental revenues as a result of declines in the sales volumes of certain tenants. Our outlet centers typically include well-known, national, brand name companies. By maintaining a broad base of well-known tenants and a geographically diverse portfolio of properties located across the United States, we believe we reduce our operating and leasing risks. No one tenant (including affiliates) accounts for more than 8% of our square feet or 7% of our rental revenues. Due to the relatively short-term nature of our tenants’ leases, a significant portion of the leases in our portfolio come up for renewal each year. 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 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. 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 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 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. 66