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Item 2. Management’s Discussion and Analysis

2022-05-09 compared with 2021-11-04 · 219 added, 383 removed, 429 unchanged (58% of the section changed)

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

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

The discussion of our results of operations reported in the unaudited, consolidated statements of operations compares the three months ended March 31, 2022 with the three months ended March 31, 2021.

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

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the outlook for the retail environment, potential bankruptcies, and other store closings;

consumer shopping trends and preferences;

the outcome of legal proceedings arising in the normal course of business;

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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.

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;

our inability to develop new outlet centers or expand existing outlet centers successfully;

the relative illiquidity of real property investments;

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risk associated with a possible terrorist activity or other acts or threats of violence, public health crises and threats to public safety;

risks related to the COVID-19 pandemic;

our dependence on rental income from real property;

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risks related to climate change;

investor and regulatory focus on environmental, sustainability and social initiatives;

risks related to uninsured losses;

risks related to changes in consumer spending habits;

risks associated with our Canadian investments;

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the effectiveness of our interest rate hedging arrangements;

uncertainty relating to the potential phasing out of LIBOR;

uncertainty relating to the phasing out of LIBOR;

our potential failure to qualify as a REIT;

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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, 2021.

This Management's Discussion and Analysis of Financial Condition and Results of Operations ("MD&A") is intended to provide a reader of our financial statements with a narrative from the perspective of our management regarding our financial condition and results of operations, liquidity and certain other factors that may affect our future results.

Our MD&A is presented in the following sections:

• General Overview

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

• Leasing Activity

• COVID-19 Pandemic

• Results of Operations

• Liquidity and Capital Resources of the Company

• Liquidity and Capital Resources of the Operating Partnership

• Critical Accounting Estimates

• Recent Accounting Pronouncements

• Non-GAAP Supplemental Measures

• Economic Conditions and Outlook

General Overview

As of March 31, 2022, we had 30 consolidated outlet centers in 18 states totaling 11.5 million square feet.

We also had 6 unconsolidated outlet centers totaling 2.1 million square feet, including 2 outlet centers in Canada.

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 September 30, 2021 (square feet in thousands):

Consolidated Outlet Centers Unconsolidated Joint Venture Outlet Centers

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As of January 1, 2021 11,873 31 2,212 7

Terrell Third Quarter (178) (1) — —

Other 3 — — —

As of December 31, 2020 11,873 31 2,212 7

Dispositions:

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Other (8) — — —

As of September 30, 2021

As of December 31, 2021 11,453 30 2,113 6

No activity — — — —

As of March 31, 2022

11,453 30 2,113 6

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

The following table summarizes certain information for our existing outlet centers in which we have an ownership interest as of March 31, 2022.

Except as noted, all properties are fee owned.

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Leasing Activity

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

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

# of Leases Square Feet

(in 000’s) Average

Straight-line Rent (psf) Average

Allowance (psf) Average Initial Term

(in years) Net Average

Straight-line Rent (psf) (4)

Re-tenant 84 327 $ 28.72 $ 27.04 5.85 $ 24.10

Renewal 245 1,248 $ 26.45 $ 1.60 3.22 $ 25.95

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

# of Leases Square Feet

(in 000’s) Average

Straight-line Rent (psf) Average

Allowance (psf) Average Initial Term

(in years) Net Average

Straight-line Rent (psf) (4)

Re-tenant 83 387 $ 32.85 $ 63.66 7.17 $ 23.97

Renewal 177 889 $ 27.32 $ 0.90 3.85 $ 27.09

(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.

In the fourth quarter of 2021, we revised our rent spread presentation from a commenced basis to an executed basis and we are presenting it for comparable and non-comparable space.

Comparable space excludes leases for space that was vacant for more than 12 months (non-comparable space).

We believe that this presentation provides additional information and improves comparability to other retail REITs.

Prior period results have been revised to conform with the current period presentation.

The following table provides information for our consolidated outlet centers related to leases for new stores that opened or renewals that were executed during the respective trailing twelve month periods ended March 31, 2022 and 2021:

Comparable Space for Executed Leases (1) (2)

Leasing Transactions Square Feet

(in 000’s) New

2022 297 1,498 $ 30.73 1.1 % $ 4.18 3.57

2021 228 1,170 $ 23.53 (7.9) % $ 3.72 2.47

Comparable and Non-Comparable Space for Executed Leases (1) (2)

Leasing Transactions Square Feet

(in 000’s) New

2022 353 1,713 $ 31.15 $ 11.73 4.02

2021 246 1,230 $ 23.50 $ 3.86 2.52

(1) For consolidated properties owned as of the period-end date.

Represents leases for new stores or renewals that were executed during the respective trailing 12-month periods and excludes license agreements, seasonal tenants, month-to-month leases and new developments.

(2) Comparable space excludes leases for space that was vacant for more than 12 months (non-comparable space).

(3) Represents average initial cash rent (base rent and common area maintenance (“CAM”)).

(4) Represents change in average initial and expiring cash rent (base rent and CAM).

(5) Includes other landlord costs.

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.

Our financial results for 2020 were significantly adversely impacted by COVID-19, however, during 2021 and 2022, our business and financial results improved, and metrics such as average overall occupancy rates, traffic to our centers, sales reported by our tenants, and collections of rental revenues returned to near, at, or in some cases above, pre-pandemic levels.

Nevertheless, the full extent of the adverse impact on, among other things, our results of operations and liquidity (including our ability to access capital markets), is unknown and will depend on future developments, which are highly uncertain and cannot be predicted.

Our results of operations, liquidity and cash flows have been and may continue to be in the future materially affected.

Due to the COVID-19 pandemic, a number of our tenants requested rent deferrals, rent abatements or other types of rent relief during this pandemic.

As a response, in late March 2020, we offered all tenants in our consolidated portfolio the option to defer 100% of April and May rents interest free, payable in equal installments due in January and February of 2021.

As of September 30, 2021, contractual fixed rents billed during 2020 that were deferred as a direct result of the COVID-19 pandemic and remain outstanding totaled $670,000.

Through October 29, 2021, the Company had collected 96% of 2020 rents deferred until 2021 and had collected 98% of the 2020 deferred rents due to be repaid during the nine months ended September 30, 2021.

As of December 31, 2020, approximately $10.3 million in deferred rents was outstanding in the consolidated portfolio.

We collected approximately 99% of the 2020 deferred rents by the end 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.

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RESULTS OF OPERATIONS

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

NET INCOME (LOSS)

Net income in the 2021 period decreased $24.8 million to a net loss of $11.1 million as compared to net income of $13.7 million for the 2020 period.

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

• the current period includes a loss on the early extinguishment of debt of $33.8 million,

• the 2020 period includes a $2.3 million gain recorded on the sale of our Terrell outlet center, and

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

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

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

• variable revenue derived from tenant sales was significantly higher in the current period as the COVID-19 pandemic impacted traffic to our centers in the 2020 period and our centers operated under reduced hours.

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.

Comparison of the three months ended March 31, 2022 to the three months ended March 31, 2021

Net income increased $17.1 million in the 2022 period to $21.5 million as compared to net income of $4.3 million for the 2021 period.

Significant items impacting the comparability for the two periods include the following:

• the current period includes a higher occupancy rate, higher variable revenues, and an increase in lease termination fees,

• the 2021 period included 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,

• the 2021 period included $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 one operating property in the first quarter of last year, as discussed below.

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

RENTAL REVENUES

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$ 104,609 $ 97,467 $ 7,142

Rental revenues from existing properties in the prior year period includes the impact of a $6.6 million COVID-19 pandemic-related revenue reduction.

In addition, variable revenues, which are derived from tenant sales, are higher in the current period as a result of the COVID-19 pandemic impacting traffic to our centers in the 2020 period and partially due to the centers operating under reduced hours in the 2020 period.

The 2020 period includes an increase in termination fees from certain of the early lease terminations as a result of space recaptured due to bankruptcies and brand-wide restructurings in the 2020 period.

During 2020, we recognized a write-off of revenue of approximately $2.4 million of straight-line rents associated with tenant bankruptcies and uncollectible accounts.

Rental revenues increased primarily due to an increase in occupancy rate for the consolidated portfolio to 94.1% as of March 31, 2022 compared to 91.7% as of March 31, 2021, and increased variable rents, which are derived from tenant sales, which were higher in the 2022 period.

Additionally, rental revenues were also impacted by the reversal of revenue reserves in the 2022 period of approximately $3.0 million, compared to $1.6 million in the same period of the prior year.

MANAGEMENT, LEASING AND OTHER SERVICES

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Expense reimbursements from unconsolidated joint ventures 956 807 149

$ 1,641 $ 1,194 $ 447

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 $1.8 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 $ 3,559 $ 1,730 $ 1,829

Other revenues from properties disposed — 38 (38)

$ 3,559 $ 1,768 $ 1,791

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 reductions in variable vending and other revenue sources as a result of the COVID-19 pandemic impacting traffic to our centers and partially due to the centers operating under reduced hours.

PROPERTY OPERATING EXPENSES

Property operating expenses increased $2.0 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 $ 35,040 $ 32,361 $ 2,679

Properties operating expenses from properties disposed — 1,127 (1,127)

Expenses related to unconsolidated joint ventures 1,039 708 331

Other property operating expenses 1,107 1,010 97

$ 37,186 $ 35,206 $ 1,980

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 the centers under reduced hours in 2020.

GENERAL AND ADMINISTRATIVE EXPENSES

General and administrative expenses increased $3.6 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 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.

DEPRECIATION AND AMORTIZATION

Depreciation and amortization costs decreased $3.0 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 from existing properties $ 26,944 $ 29,714 $ (2,770)

Depreciation and amortization from properties disposed — 189 (189)

$ 26,944 $ 29,903 $ (2,959)

Depreciation and amortization decreased at our existing properties due to the lower basis in our Foxwoods property due to impairments recorded in the first and fourth quarters of 2020 and due to tenant improvements and lease related intangibles, which are amortized over shorter lives becoming fully depreciated during the reporting periods.

INTEREST EXPENSE

Interest expense decreased $2.4 million in the 2021 period compared to the 2020 period for the following reasons:

• In August 2021, we completed a public offering of $400.0 million in senior notes due 2031 in an underwritten public offering.

The notes were priced at 98.552% of the principal amount to yield 2.917% to maturity.

The notes pay interest semi-annually at a rate of 2.750% per annum and mature on September 1, 2031.

• During the first nine months of 2021, we completed the early redemption of $250.0 million of our 3.875% senior notes due December 2023 and $250.0 million of our 3.75% senior notes due 2024.

• During the first nine 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 had lower average interest rates compared to the 2020 period.

• The 2020 period included interest expense related to borrowing in March 2020 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, and by August 2020, we had repaid the entire $599.8 million outstanding balance bringing the outstanding balance to zero as of September 30, 2020.

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

LOSS ON EARLY EXTINGUISHMENT OF DEBT

For the three months ended September 30, 2021, we recorded a make-whole premium of $31.9 million and the write off of approximately $1.9 million of debt discount and debt origination costs due to the early redemption of our remaining 2023 notes and all of our 2024 notes.

GAIN ON SALE OF ASSETS

In August 2020, we sold a non-core outlet center in Terrell, Texas for net proceeds of $7.6 million, which resulted in a gain on sale of assets of $2.3 million.

The proceeds from the sale of this unencumbered asset were used to pay down balances outstanding under our unsecured lines of credit.

EQUITY IN EARNINGS (LOSSES) OF UNCONSOLIDATED JOINT VENTURES

Equity in earnings (losses) of unconsolidated joint ventures increased approximately $2.3 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 (losses) from existing properties $ 2,261 $ (12) $ 2,273

Equity in losses from property disposed — (30) 30

$ 2,261 $ (42) $ 2,303

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

Comparison of the nine months ended September 30, 2021 to the nine months ended September 30, 2020

NET INCOME (LOSS)

Net loss decreased $34.2 million in the 2021 period to net loss of $4.1 million as compared to net loss of $38.3 million for the 2020 period.

Significant items impacting the comparability for the two period include the following:

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

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

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

• we recognized in the 2020 period a $2.3 million gain on the sale of our Terrell outlet center,

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

• the current period includes a loss on the early extinguishment of debt of $47.9 million related to the redemption of all of our 2023 and 2024 bonds,

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

• The current period includes higher variable revenues, which derived from tenant sales, and other revenues as a result of COVID-19 pandemic on the 2020 period, which included mandated store closures by local and state authorities during the second quarter, continued lower traffic levels to our centers in the third quarter as well as due to our centers operating under reduced hours.

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 $30.5 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 $ 299,823 $ 262,234 $ 37,589

Rental revenues from properties disposed 519 5,547 (5,028)

Straight-line rent adjustments (1,137) (2,417) 1,280

Lease termination fees 2,224 8,000 (5,776)

Amortization of above and below market rent adjustments, net 127 (2,282) 2,409

$ 301,556 $ 271,082 $ 30,474

Rental revenues from existing properties in the prior year period included the impact of a $40.5 million COVID-19 pandemic-related revenue reduction.

In addition, variable revenues, which are derived from tenant sales, are higher in the current period as a result of COVID-19 pandemic on the 2020 period, which included mandated store closures by local and state authorities during the second quarter, continued lower traffic levels to our centers in the third quarter and partially due to the centers operating under reduced hours.

In addition in the prior year, we recognized a write-off of revenue of approximately $6.1 million of straight-line rents associated with the tenant bankruptcies and uncollectible accounts.

MANAGEMENT, LEASING AND OTHER SERVICES

Management, leasing and other services increased $1.0 million 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 $ 1,575 $ 1,156 $ 419

Leasing and other fees 231 50 181

Expense reimbursements from unconsolidated joint ventures 2,566 2,156 410

Total Fees $ 1,527 $ 1,372 $ 155

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 $4.1 million in the 2021 period as compared to the 2020 period.

Other revenues increased $877,000 in the 2022 period as compared to the 2021 period.

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

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$ 2,732 $ 1,855 $ 877

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, as well as the COVID-19 pandemic impacting traffic to our centers and the centers operating under reduced hours.

Other revenues from existing properties increased in the 2022 period due to an increase in other revenue streams, such as paid media, sponsorships and on-site signage, on a local and national level.

PROPERTY OPERATING EXPENSES

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$ 36,758 $ 35,311 $ 1,447

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 during the 2020 period.

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.

Property operating expenses at existing properties increased in the 2022 period compared to the 2021 period, primarily due to the timing of certain advertising and promotional costs, and higher CAM and insurance costs.

These items were partially offset by lower real estate taxes.

GENERAL AND ADMINISTRATIVE EXPENSES

General and administrative expenses increased $12.0 million in the 2021 period compared to the 2020 period.

General and administrative expenses decreased $1.3 million in the 2022 period compared to the 2021 period.

The 2021 period includes $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 includes 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.

This decrease was partially offset by the hiring of certain executives and other key employees throughout 2021 to drive operational and growth initiatives.

DEPRECIATION AND AMORTIZATION

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$ 26,243 $ 28,150 $ (1,907)

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 and due to tenant improvements and lease related intangibles, which are amortized over shorter lives, becoming fully depreciated during the reporting periods.

Depreciation and amortization costs decreased at existing properties as certain construction and development related assets, as well as lease related intangibles recorded as part of the acquisition price of acquired properties, which are amortized over shorter lives, became fully depreciated during the reporting periods.

INTEREST EXPENSE

Interest expense decreased $2.7 million in the 2022 period compared to the 2021 period for the following reasons:

• In August 2021, we completed a public offering of $400.0 million in senior notes due 2031 in an underwritten public offering.

The notes were priced at 98.552% of the principal amount to yield 2.917% to maturity.

The notes pay interest semi-annually at a rate of 2.750% per annum and mature on September 1, 2031.

• During the first nine months of 2021, we completed the early redemption of $250.0 million of our 3.875% senior notes due December 2023 and $250.0 million of our 3.75% senior notes due 2024.

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

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

LOSS ON EARLY EXTINGUISHMENT OF DEBT

For the nine months ended September 30, 2021, we recorded make-whole premiums of $44.9 million and the write offs of approximately $2.9 million of debt discount and debt origination costs due to the early redemption of our notes originally due in 2023 and 2024.

GAIN ON SALE OF ASSETS

In August 2020, we sold a non-core outlet center in Terrell, Texas for net proceeds $7.6 million, which resulted in a gain on sale of assets of $2.3 million.

The proceeds from the sale of this unencumbered asset were used to pay down balances outstanding under our unsecured lines of credit.

• During August and September 2021, we completed a public offering of $400.0 million 2.750% of senior notes and completed the early redemption of $250.0 million of 3.875% senior notes and $250.0 million of 3.75% senior notes.

• During 2021, we paid down approximately $50.0 million of borrowings under our unsecured term loan.

OTHER INCOME (EXPENSE)

Other income (expense) decreased approximately $3.4 million in the 2021 period compared to the 2020 period.

Other income (expense) increased approximately $3.7 million in the 2022 period compared to the 2021 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.

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

EQUITY IN EARNINGS (LOSSES) OF UNCONSOLIDATED JOINT VENTURES

Equity in earnings (losses) of unconsolidated joint ventures increased approximately $8.2 million in the 2021 period compared to the 2020 period.

EQUITY IN EARNINGS OF UNCONSOLIDATED JOINT VENTURES

Equity in earnings of unconsolidated joint ventures increased approximately $744,000 in the 2022 period compared to the 2021 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.

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Equity in earnings from existing properties $ 2,513 $ 1,513 $ 1,000

Equity in losses from property disposed — (3,011) 3,011

Equity in earnings from property disposed — 256 (256)

$ 2,513 $ 1,769 $ 744

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.

The increase in equity in earnings from existing properties is primarily due to increase in variable rental revenues at our joint ventures and a refund received from a property tax appeal at one of the centers.

LIQUIDITY AND CAPITAL RESOURCES OF THE COMPANY

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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.

Through its status as 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.

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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.

In February 2021, we established 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”).

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

Three months ended September 30, Nine months ended September 30,

2021 2020 2021 2020

Three months ended March 31,

Number of common shares settled during the period — 6,867,078

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The Company may, from time to time, enter into Rule 10b5-1 plans to facilitate the repurchase of its shares under this authorization.

The Company did not repurchase any shares for both the three and nine months ended September 30, 2021 and 2020.

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

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.

In September 2021, the Company's Board of Directors declared a quarterly cash dividend of $0.1825 per common share payable on November 15, 2021 to each shareholder of record on October 29, 2021, and the Trustees of Tanger GP Trust declared a $0.1825 cash distribution per Operating Partnership unit to the Operating Partnership's unitholders.

As a result of the declaration, a liability in the amount of approximately $19.9 million was recorded in accounts payable and accrued expenses in the consolidated balance sheet as of September 30, 2021.

The Company did not repurchase any shares for both the three months ended March 31, 2022 and 2021.

The remaining amount authorized to be repurchased under the program as of March 31, 2022 was approximately $80.0 million.

In January 2022, the Company's Board of Directors declared a $0.1825 cash dividend per common share payable on February 15, 2022 to each shareholder of record on January 31, 2022, and in its capacity as General Partner of the Operating Partnership, a $0.1825 cash distribution per Operating Partnership unit to the Operating Partnership's unitholders.

In April 2022, the Company's Board of Directors declared a $0.20 cash dividend per common share payable on May 13, 2022 to each shareholder of record on April 29, 2022, and in its capacity as General Partner of the Operating Partnership a $0.20 cash distribution per Operating Partnership unit to the Operating Partnership's unitholders.

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.

Summary of Our Major Sources and Uses of Cash and Cash Equivalents

General Overview

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.

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Our ability to access capital on favorable terms as well as to use cash from operations to continue to meet our liquidity needs, all of which are highly uncertain and cannot be predicted, could be affected by various risks and uncertainties, including, but not limited to, the effects of the COVID-19 pandemic and other risks detailed in the “Risk Factors” section of our Annual Report on Form 10-K for the year ended December 31, 2021.

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

Nine months ended September 30,

2021 2020 Change

Net cash provided by operating activities $ 143,729 $ 92,033 $ 51,696

Net cash used in investing activities (1,928) (12,287) 10,359

Net cash used in financing activities (83,607) (76,345) (7,262)

Effect of foreign currency rate changes on cash and equivalents (131) (208) 77

Net increase in cash and cash equivalents $ 58,063 $ 3,193 $ 54,870

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 2021, the majority of which was due in the first quarter of 2021.

In addition, our cash collections normalized during 2021, whereas the second and third quarters of 2020 had uncollected and deferred contractual rents as a result of COVID-19.

Investing Activities

The decrease in net cash used in investing activities was primarily due to increased distributions in excess of cumulative earnings from unconsolidated joint ventures.

Financing Activities

Net cash used in financing activities increased during the first nine months of 2021 as we completed the early redemption of $250.0 million of our 3.875% senior notes due December 2023 and $250.0 million of our 3.75% senior notes due 2024, including make whole premiums of $44.9 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.

The increase in net cash used in financing activities was partially offset by proceeds received during 2021 from our August 2021 public offering of $400.0 million in senior notes due 2031 and sales of commons shares under our ATM program generating net proceeds of approximately $187.0 million and also due to lower dividend payments in 2021 compared to 2020.

Capital Expenditures

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

Nine months ended September 30,

The following table details our capital expenditures for consolidated outlet centers for the three months ended March 31, 2022 and 2021 (in thousands):

Three months ended March 31,

2022 2021 Change

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$ 2,439 $ 131 $ 2,308

Major outlet center renovations (2)

227 5,217 (4,990)

Renovations — 23 (23)

Second generation tenant allowances 1,252 778 474

(5) 8,549 (8,554)

Other capital expenditures (2)

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Additions to rental property-cash basis $ 5,867 $ 7,357 $ (1,490)

(1) New outlet center developments and expansions in the 2021 period included a land acquisition at our Westgate outlet center.

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

(3) In the 2021 period, second generation tenant allowances are presented net of $3.3 million tenant allowance reversals, which were the result of a lease modification.

(4) The increase in other capital expenditures in 2021 was primarily due to our decision in 2020 to defer all capital projects except essential and life-safety projects, due to the impact on cash flows caused by the COVID-19 pandemic.

(1) The increase in new outlet center developments and expansions is primarily due to pre-development costs at our potential site in Nashville, TN and other projects.

(2) The decrease in other capital expenditures in 2022 was primarily due to timing of projects and our decision in 2020 to defer all capital projects except essential and life-safety projects to 2021 due to the impact on cash flows caused by the COVID-19 pandemic.

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.

As of the date of this filing, we are in the pre-development period for potential new developments, including a site in Nashville, TN.

We may also use a joint venture arrangement to develop other potential sites.

However, there can be no assurance that these potential future projects will ultimately be developed.

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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.

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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.

Unconsolidated Real Estate Joint Ventures

From time to time, we form joint venture arrangements to develop outlet centers.

As of March 31, 2022 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.

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 0% to 17% 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.

Our joint ventures are generally subject to buy-sell provisions which are customary for joint venture agreements in the real estate industry.

Either partner may initiate these provisions (subject to any applicable lock up period), which could result in either the sale of our interest or the use of available cash or additional borrowings to acquire the other party's interest.

Under these provisions, one partner sets a price for the property, then the other partner has the option to either (1) purchase their partner's interest based on that price or (2) sell its interest to the other partner based on that price.

Since the partner other than the partner who triggers the provision has the option to be the buyer or seller, we do not consider this arrangement to be a mandatory redeemable obligation.

Contractual Obligations

There were no material changes in our commitments during the three months ended March 31, 2022 under contractual obligations from those disclosed in our Annual Report on Form 10-K for the year ended December 31, 2021, other than the following updates to our contractual obligations for future debt and interest payments over the next five years and thereafter as of March 31, 2022.

Future Debt Obligations

As described further in Note 6 of the notes to the consolidated financial statements, as of March 31, 2022, scheduled maturities of our existing long-term debt for the remainder of 2022, 2023, 2024, 2025 and 2026 are $3.4 million, $44.9 million, $305.1 million, $1.5 million and $355.7 million, respectively.

As of March 31, 2022, scheduled maturities after 2026 aggregate to $700.0 million.

Future Interest Payments

We are obligated to make periodic interest payments at fixed and variable rates, depending on the terms of the applicable debt agreements.

Based on applicable interest rates and scheduled debt maturities as of March 31, 2022, these interest obligations total approximately $239.0 million and range from approximately $30.2 million to $40.8 million on an annual basis over the next five years.

If prevailing interest rates result in higher interest rates, then future interest payments related to our variable debt outstanding would increase.

The following table sets forth our changes in cash flows from March 31, 2022 and 2021 (in thousands):

Three months ended March 31,

2022 2021 Change

Net cash provided by operating activities $ 18,688 $ 31,201 $ (12,513)

Net cash provided by (used in) investing activities (3,340) 2,717 (6,057)

Net cash provided by (used in) financing activities (23,914) 82,956 (106,870)

Effect of foreign currency rate changes on cash and equivalents (8) (60) 52

Net increase (decrease) in cash and cash equivalents $ (8,574) $ 116,814 $ (125,388)

Operating Activities

In 2022, our net cash provided by operating activities decreased year over year due to changes in accounts payable and accrued expenses.

The decrease was partially offset by an increase in rental revenues primarily due an increase in occupancy rates, variable rental revenues and reversals of revenue reserves.

Investing Activities

The decrease in net cash provided by (used in) investing activities was primarily due to the net proceeds of approximately $8.1 received in 2021 from the sale of our Jeffersonville outlet center, lower distributions in excess of cumulative earnings from unconsolidated joint ventures and lower other investing activities.

In addition, we made a $7.0 million contribution to the Galveston/Houston joint venture in 2021 to reduce the principal balance of the mortgage loan.

No property sales or contributions to joint ventures occurred in 2022.

Financing Activities

Net cash used provided by (used in) financing activities decreased during the first three months of 2022 primarily due to proceeds received from our common share offering of $128.7 million in March 2021.

Additionally, in March 2021, we paid down a portion of our unsecured term loan with cash on hand.

For the three months ended March 31, 2022, there was an increase in dividends paid and an increase in deferred financing costs.

Financing Arrangements

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

As of March 31, 2022, unsecured borrowings represented 96% 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.

As of March 31, 2022, we maintained unsecured lines of credit that provided for borrowings of up to $520.0 million.

The unsecured lines of credit as of March 31, 2022 included a $20.0 million liquidity line and a $500.0 million syndicated line.

The syndicated line may be increased up to $1.2 billion through an accordion feature in certain circumstances.

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.

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

As of September 30, 2021, the Company’s total liquidity was approximately $663.1 million, including cash and cash equivalents on the Company’s balance sheet and the full undrawn capacity under its $520 million unsecured lines of credit.

As of March 31, 2022, the Company’s total liquidity was approximately $672.8 million, including cash and cash equivalents on the Company’s balance sheet and the full undrawn capacity under its $520 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 term loan due April 2024.

Redemption of the 2023 and 2024 Senior Notes and public offering of aggregate $400.0 Million Unsecured Senior Notes due 2031

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 this redemption, $100.0 million aggregate principal amount of the Notes remained outstanding, until the redemption in August 2021, described below.

In August 2021, we completed a public offering of $400.0 million in senior notes due 2031.

The notes were priced at 98.552% of the principal amount to yield 2.917% to maturity.

The notes pay interest semi-annually at a rate of 2.750% per annum and mature on September 1, 2031.

The aggregate net proceeds from the offering, after deducting the underwriting discount and offering expenses, were approximately $390.7 million.

We used the net proceeds from the sale of the notes to redeem all remaining 3.875% senior notes due 2023, $100.0 million in aggregate principal amount outstanding, and all 3.750% senior notes due 2024, $250.0 million in aggregate principal outstanding.The redemptions occurred in September 2021 and included a make-whole premium of $31.9 million and the write off of approximately $1.9 million of debt discount and debt origination costs.

The remaining proceeds were used for general corporate purposes.

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 balance outstanding to $300.0 million as of September 30, 2021.

Unsecured Lines of Credit Amendments and Extension

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 from July 1, 2020 to 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.

Other Financing Activity

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.

In October 2021, the joint venture that owns the Southaven, MS outlet center exercised its option to extend the maturity of the Southaven, MS mortgage to April 2023 and paid down the principal balance by $11.3 million to $40.1 million.

The interest rate remains LIBOR + 1.80%.

The outlet center is consolidated for financial reporting purposes and we funded the entire $11.3 million.

Equity Offerings under the ATM Offering Program

In February 2021, the Company implemented the ATM Offering program whereby it may offer and sell the Company's common shares having an aggregate gross sales price of up to $250.0 million.

During 2021, under this program, the Company sold 10.0 million shares at a weighted average price of $18.97 per share, generating net proceeds of $187.1 million and leaving a remaining authorization of $60.1 million.

The proceeds were contributed to the Operating Partnership and then used primarily to reduce indebtedness as described in the sections immediately below.

There were no shares sold under the ATM program for the three months ended March 31, 2022.

Debt Covenants

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.

We have historically been, and at September 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.

We have historically been, and at March 31, 2022 are, in compliance with all of our debt covenants.

Our continued compliance with these covenants depends on many factors and could be impacted by current or future economic conditions, including those 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.

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

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

As of March 31, 2022, we believe our most restrictive covenants are contained in our senior, unsecured notes.

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

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Total unencumbered assets to unsecured debt > 150% 232 %

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

Consolidated Income Available for Debt Service to Annual Debt Service Charge > 1.5 x 5.5

In addition, key financial covenants for our lines of credit and term loan, include the following as of March 31, 2022:

Required Actual

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Secured Indebtedness to Adjusted Unencumbered Asset Value < 35% 5 %

EBITDA to Fixed Charges >1.5 4.1

EBITDA to Fixed Charges > 1.5 x 4.4

Total Unsecured Indebtedness to Adjusted Unencumbered Asset Value <60% 35 %

Unencumbered Interest Coverage Ratio >1.5 4.7

Unencumbered Interest Coverage Ratio > 1.5 x 5.3

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 nine months ended September 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 September 30, 2021 (in thousands):

Contractual Obligations Remainder of 2021 2022 2023 2024 2025 Thereafter Total

$ 54,381 $ 4,436 $ 4,768 $ 305,140 $ 1,501 $ 1,055,705 $ 1,425,931

Interest payments (2)

$ 10,545 $ 41,586 $ 41,255 $ 37,320 $ 34,741 $ 87,868 $ 253,315

(1) These amounts represent total future cash payments related to debt obligations outstanding as of September 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 September 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.

Our joint ventures are typically encumbered by a mortgage on the joint venture property.

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 September 30, 2021 (dollars in millions):

The following table details information regarding the outstanding debt of the unconsolidated joint ventures and guarantees of such debt provided by us as of March 31, 2022 (dollars in millions):

Joint Venture Total Joint

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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

Galveston/Houston 64.5 July 2023 LIBOR + 1.85% 15.5 % 10.0

National Harbor 95.0 January 2030 4.63 % — % —

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$ 329.5 $ 21.9

(1) 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%.

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 September 30, 2021.

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.

For example, the Foxwoods property is part of a casino property and continues to face leasing challenges which could lead to further declines in occupancy, rental revenues and cash flows in the future.

Such challenges, or a change in our expected holding period, could result in additional impairment charges recognized for the Foxwoods property.

We can provide no assurance that material impairment charges with respect to our properties will not occur during the remainder of 2021 or future periods.

Critical Accounting Estimates

The preparation of financial statements and related disclosures in conformity with U.S.

generally accepted accounting principles (“GAAP”) and the Company’s discussion and analysis of its financial condition and operating results require the Company’s management to make judgments, assumptions and estimates that affect the amounts reported.

Management bases its estimates on historical experience and on various other assumptions it believes to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities.

Actual results may differ from these estimates, and such differences may be material.

Management believes the Company’s critical accounting estimates are those related to impairment of long-lived assets, impairment of investments, revenue recognition and collectibility of operating lease receivables.

Management considers these estimates critical because they are both important to the portrayal of the Company’s financial condition and operating results, and they require management to make judgments and estimates about inherently uncertain matters.

The Company’s senior management has reviewed these critical accounting estimates and related disclosures with the Audit Committee of the Company’s Board of Directors.

Our Annual Report on Form 10-K for the year ended December 31, 2021 contains a discussion of our critical accounting estimates in the Management's Discussion and Analysis of Financial Condition and Results of Operations section.

There have been no material changes to these estimates during the three months ended March 31, 2022, other than discussed below.

Revenue recognition and collectibility of operating lease receivables

We, as a lessor, retain substantially all of the risks and benefits of ownership of our outlet centers and account for our leases as operating leases.

We accrue fixed lease income on a straight-line basis over the terms of the leases, when we believe substantially all lease income, including the related straight-line rent receivable, is probable of collection.

Our assessment of collectability requires the exercise of considerable judgment and incorporates available operational performance measures such as sales and the aging of billed amounts as well as other publicly available information with respect to our tenant’s financial condition, liquidity and capital resources, including declines in such conditions due to, or amplified by, the COVID-19 pandemic.

When a tenant seeks to reorganize its operations through bankruptcy proceedings, we assess the collectability of receivable balances including, among other things, the timing of a tenant’s bankruptcy filing and our expectations of the assumption by the tenant in bankruptcy proceeding of leases at the Company’s properties on substantially similar terms.

In the event that we determine accrued receivables are not probable of collection, lease income will be recorded on a cash basis, with the corresponding tenant receivable and straight-line rent receivable charged as a direct write-off against lease income in the period of the change in our collectability determination.

Recent Accounting Pronouncements

See Note 18 to the consolidated financial statements for information on recently adopted accounting standards and new accounting pronouncements issued.

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”).

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 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.

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We compensate for these limitations by relying primarily on our GAAP results and using FFO only as a supplemental measure.

Core Funds From Operations

We present Core FFO (formerly referred to as AFFO) as a supplemental measure of our performance.

If applicable, we present Core Funds From Operations (“Core FFO”) 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.

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

Three months ended Nine months ended

September 30, September 30,

2021 2020 2021 2020

Net income (loss) $ (11,071) $ 13,719 $ (4,133) $ (38,290)

Three months ended

Net income $ 21,462 $ 4,342

Adjusted for:

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Depreciation and amortization of real estate assets - unconsolidated joint ventures 2,754 2,996

Impairment charge - consolidated — — — 45,675

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

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

Gain on sale of assets — (2,324) — (2,324)

FFO 49,877 38,596

FFO attributable to noncontrolling interests in other consolidated partnerships — — — (190)

Allocation of earnings to participating securities (434) (392)

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

294 — 2,712 —

Loss on early extinguishment of debt (4)

33,821 — 47,860 —

Impact of above adjustment to the allocation of earnings to participating securities — (22)

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Basic weighted average common shares 103,520 94,812

Diluted weighted average common shares (for earnings per share computations) 103,269 92,649 99,446 92,596

Effect of notional units 802 288

Effect of outstanding options 753 — 736 —

Effect of outstanding options and restricted common shares 736 717

Diluted weighted average common shares (for earnings per share computations) 105,058 95,817

Exchangeable operating partnership units 4,762 4,794

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109,820 100,611

(1) The nine months ended September 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.

(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) 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) For the nine months ended September 30, 2021, includes compensation costs 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, as well as other executive severance costs incurred during the three and nine months ended September 30, 2021.

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

In September 2021, we completed a redemption of the remaining 2023 Notes, $100.0 million in aggregate principal amount outstanding, and all of our 3.750% senior notes due 2024, $250.0 million in aggregate principal outstanding, for $381.9 million in cash.

The loss on extinguishment of debt includes make-whole premiums of $44.9 million, of which $31.9 million occurred during the third quarter of 2021.

Portfolio Net Operating Income and Same Center NOI

(3) Includes compensation costs 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.

Portfolio Net Operating Income and Same Center Net Operating Income

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

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

Three months ended Nine months ended

September 30, September 30,

2021 2020 2021 2020

Net income (loss) $ (11,071) $ 13,719 $ (4,133) $ (38,290)

Three months ended

Net income $ 21,462 $ 4,342

Adjusted to exclude:

Equity in (earnings) losses of unconsolidated joint ventures (2,261) 42 (6,758) 1,490

Equity in earnings of unconsolidated joint ventures (2,513) (1,769)

Interest expense 11,634 14,362

Gain on sale of assets — (2,324) — (2,324)

Loss on early extinguishment of debt (1)

33,821 — 47,860 —

Other (income) expense (183) 3,505

Impairment charge — — — 45,675

Depreciation and amortization 26,243 28,150

2 unchanged sentences

Non-cash adjustments (1)

(244) 3,913 1,326 5,032

Lease termination fees (2,596) (673)

Portfolio NOI 73,858 66,583 209,967 175,467

Non-same center NOI (3)

Portfolio NOI - Consolidated 71,225 65,131

Non-same center NOI - Consolidated

Same Center NOI - Consolidated (2)

$ 71,288 $ 65,048

Same Center NOI $ 73,752 $ 66,148 $ 208,216 $ 173,885

(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 (the “2023 Notes”) for $163.0 million in cash.

The loss on extinguishment of debt includes make-whole premiums of $44.9 million, of which $31.9 million occurred during the third quarter of 2021.

Portfolio NOI - Consolidated $ 71,225 $ 65,131

Pro rata share of unconsolidated joint ventures 6,904 6,419

Portfolio NOI - total portfolio at pro rata share 78,129 71,550

Non-same center NOI - total portfolio at pro rata share 63 (423)

Same Center NOI - total portfolio at pro rata share (2)

$ 78,192 $ 71,127

(1) 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:

(2) Sold outlet centers excluded from Same Center NOI:

Outlet centers sold:

Terrell August 2020

Jeffersonville January 2021

Jeffersonville January 2021 Consolidated

Saint-Sauveur, Quebec March 2021 Unconsolidated JV

Adjusted EBITDA, EBITDAre and Adjusted EBITDAre

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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 define Adjusted EBITDA as net income (loss) available to the Company’s common shareholders computed in accordance with GAAP before interest expense, income taxes (if applicable), depreciation and amortization, gains and losses on sale of operating properties, joint venture properties, outparcels and other assets, 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 officer severance, casualty gains and losses, gains and losses on early 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 (if applicable), 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 early extinguishment of debt, net, casualty gains and losses, compensation related to voluntary retirement plan and other executive officer severance, casualty gains and losses, gains and losses on sale of outparcels, 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.

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

Three months ended Nine months ended

September 30, September 30,

2021 2020 2021 2020

Net income (loss) $ (11,071) $ 13,719 $ (4,133) $ (38,290)

Three months ended

Net income $ 21,462 $ 4,342

Adjusted to exclude:

1 unchanged sentence

Depreciation and amortization 26,243 28,150

Impairment charge - consolidated — — — 45,675

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

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

Gain on sale of assets — (2,324) — (2,324)

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

294 — 2,712 —

Loss on early extinguishment of debt (3)

33,821 — 47,860 —

Adjusted EBITDA $ 59,339 $ 52,976

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

Three months ended Nine months ended

September 30, September 30,

2021 2020 2021 2020

Net income (loss) $ (11,071) $ 13,719 $ (4,133) $ (38,290)

Three months ended

Net income $ 21,462 $ 4,342

Adjusted to exclude:

1 unchanged sentence

Depreciation and amortization 26,243 28,150

Impairment charge - consolidated — — — 45,675

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

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

Gain on sale of assets — (2,324) — (2,324)

Pro-rata share of interest expense - unconsolidated joint ventures 1,458 1,472

1 unchanged sentence

EBITDAre $ 63,551 $ 55,026

Compensation related to executive officer retirement (2)

294 — 2,712 —

Loss on early extinguishment of debt (3)

33,821 — 47,860 —

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

Adjusted EBITDAre $ 63,551 $ 57,444

(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) For the nine months ended September 30, 2021, includes compensation costs 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.

For 2021, also includes other executive severance costs incurred during the three and nine months ended September 30, 2021.

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

The loss on extinguishment of debt includes make-whole premiums of $44.9 million, of which $31.9 million occurred during the third quarter of 2021.

(2) Includes compensation costs 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.

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.

We are closely monitoring the impact of the COVID-19 pandemic.

along with rising inflation, supply chain and labor issues, 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.”

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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 saw reductions in rental revenues during 2020 as a result of declines in the sales volumes of certain tenants.

However, during the first nine months of 2021, traffic and sales on average for our portfolio have returned to near or above pre-pandemic levels, resulting in significant increases in rental revenues compared to the prior year.

In addition, certain of our lease agreements include co-tenancy and/or sales-based provisions that may allow a tenant to pay reduced rent and/or terminate a lease prior to its natural expiration if we fail to maintain certain occupancy levels or retain specified named tenants, or if the tenant does not achieve certain specified sales targets.

If our occupancy declines, certain outlet centers may fall below the minimum co-tenancy thresholds and could trigger many tenants' contractual ability to pay reduced rents, which in turn may negatively impact our results of operations.

Our outlet centers typically include well-known, national, brand name companies.

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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 September 30, 2021, we had renewed approximately 54% of this space.

In addition, for the rolling twelve months ended September 30, 2021, we completed renewals and re-tenanted space totaling 1.6 million square feet at a blended 0.6% decrease in average base rental rates compared to the expiring rates.

During 2022, approximately 2.1 million square feet, or 17% of the total portfolio, including our share of unconsolidated joint ventures, will come up for renewal.

For the total portfolio, including the Company’s pro rata share of unconsolidated joint ventures, as of April 30, 2022, we had lease renewals executed or in process for 52.4% of the space scheduled to expire during 2022 compared to 53.6% of the space scheduled to expire during 2021 that was executed or in process as of April 30, 2021.

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, many retailers across the country are currently facing, or expect to face, potential logistics and staffing issues.

While we believe many of these retailers are proactively navigating this situation, the ultimate impact of labor and supply chain issues is unknown.

We are encouraged by the recent improvement in traffic and sales trends, which in many cases are exceeding 2019 levels.

Our sales per square foot for the rolling twelve months ended March 31, 2022 was near historical high levels.

However, many retailers across the country are currently facing, or expect to face, potential impact of rising inflation, logistics and staffing i ssues.

While we believe many of these retailers are proactively navigating this situation, the ultimate impact of inflation, labor and supply chain issues is unknown.

We may continue to experience 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 135,000 square feet within our consolidated portfolio during the nine months ended September 30, 2021 related to bankruptcies and brand-wide restructurings by retailers, compared to 586,000 square feet for the nine months ended September 30, 2020.

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 94.3% and 92.9% as of September 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.

As a result of COVID-19, inflation, rising interest rates, and other current or future economic conditions, occupancy could be negatively impacted in 2022.

Occupancy for our total portfolio, including our share of unconsolidated joint ventures, was 94.3% and 92.0% as of March 31, 2022 and 2021, respectively.

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

What changed 10-Q

Item 2. Management’s Discussion and Analysis