TANGER INC. 10-Q

Item 1 - Financial Statements of Tanger Properties Limited Partnership TANGER PROPERTIES LIMITED PARTNERSHIP AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (In thousands, except unit data, unaudited) June 30, 2022 December 31, 2021 Assets Rental property: Land $ 277,041 $ 268,269 Buildings, improvements and fixtures 2,537,507 2,532,489 Construction in progress 13,346 — 2,827,894 2,800,758 Accumulated depreciation ( 1,189,576 ) ( 1,145,388 ) Total rental property, net 1,638,318 1,655,370 Cash and cash equivalents 194,208 161,152 Investments in unconsolidated joint ventures 80,041 82,647 Deferred lease costs and other intangibles, net 67,482 73,720 Operating lease right-of-use assets 79,228 79,807 Prepaids and other assets 95,641 104,362 Total assets $ 2,154,918 $ 2,157,058 Liabilities and Equity Liabilities Debt: Senior, unsecured notes, net $ 1,037,086 $ 1,036,181 Unsecured term loan, net 298,783 298,421 Mortgages payable, net 60,146 62,474 Unsecured lines of credit — — Total debt 1,396,015 1,397,076 Accounts payable and accrued expenses 76,185 92,669 Operating lease liabilities 88,330 88,874 Other liabilities 81,813 78,650 Total liabilities 1,642,343 1,657,269 Commitments and contingencies Equity Partners’ Equity: General partner, 1,100,000 units outstanding at June 30, 2022 and 1,100,000 units at December 31, 2021, respectively 4,543 4,539 Limited partners, 4,761,559 and 4,761,559 Class A common units, and 103,294,792 and 102,984,734 Class B common units outstanding at June 30, 2022 and December 31, 2021, respectively 518,081 514,023 Accumulated other comprehensive loss ( 10,049 ) ( 18,773 ) Total partners’ equity 512,575 499,789 Noncontrolling interests in consolidated partnerships — — Total equity 512,575 499,789 Total liabilities and equity $ 2,154,918 $ 2,157,058 The accompanying notes are an integral part of these consolidated financial statements. 11 TANGER PROPERTIES LIMITED PARTNERSHIP AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (In thousands, except per unit data, unaudited) Three months ended June 30, Six months ended June 30, 2022 2021 2022 2021 Revenues: Rental revenues $ 101,409 $ 96,824 $ 206,018 $ 194,291 Management, leasing and other services 1,436 1,359 2,963 2,731 Other revenues 2,993 3,090 5,725 4,945 Total revenues 105,838 101,273 214,706 201,967 Expenses: Property operating 32,697 31,250 69,455 66,561 General and administrative 19,329 15,700 34,796 32,493 Depreciation and amortization 26,220 27,732 52,463 55,882 Total expenses 78,246 74,682 156,714 154,936 Other income (expense): Interest expense ( 11,576 ) ( 13,338 ) ( 23,210 ) ( 27,700 ) Loss on early extinguishment of debt — ( 14,039 ) — ( 14,039 ) Other income (expense) 2,576 654 2,759 ( 2,851 ) Total other income (expense) ( 9,000 ) ( 26,723 ) ( 20,451 ) ( 44,590 ) Income (loss) before equity in earnings of unconsolidated joint ventures 18,592 ( 132 ) 37,541 2,441 Equity in earnings of unconsolidated joint ventures 2,227 2,728 4,740 4,497 Net income 20,819 2,596 42,281 6,938 Noncontrolling interests in consolidated partnerships — — — — Net income available to partners 20,819 2,596 42,281 6,938 Net income available to limited partners 24,706 2,569 41,856 6,864 Net income available to general partner $ ( 3,887 ) $ 27 $ 425 $ 74 Basic earnings per common unit: Net income $ 0.19 $ 0.02 $ 0.39 $ 0.06 Diluted earnings per common unit: Net income $ 0.19 $ 0.02 $ 0.38 $ 0.06 The accompanying notes are an integral part of these consolidated financial statements. 12 TANGER PROPERTIES LIMITED PARTNERSHIP AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (In thousands, unaudited) Three months ended June 30, Six months ended June 30, 2022 2021 2022 2021 Net income $ 20,819 $ 2,596 $ 42,281 $ 6,938 Other comprehensive income: Foreign currency translation adjustments ( 2,441 ) 1,365 ( 1,215 ) 6,004 Changes in fair value of cash flow hedges 2,265 237 9,939 2,235 Other comprehensive income (loss) ( 176 ) 1,602 8,724 8,239 Comprehensive income 20,643 4,198 51,005 15,177 Comprehensive (income) attributable to noncontrolling interests in consolidated partnerships — — — — Comprehensive income attributable to the Operating Partnership $ 20,643 $ 4,198 $ 51,005 $ 15,177 The accompanying notes are an integral part of these consolidated financial statements. 13 TANGER PROPERTIES LIMITED PARTNERSHIP AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF EQUITY (In thousands, except unit and per unit data, unaudited) General partner Limited partners Accumulated other comprehensive loss Total partners’ equity Noncontrolling interests in consolidated partnerships Total equity Balance, March 31, 2021 $ 5,077 $ 499,339 $ ( 21,402 ) $ 483,014 $ — $ 483,014 Net income 27 2,569 — 2,596 — 2,596 Other comprehensive income — — 1,602 1,602 — 1,602 Compensation under Incentive Award Plan — 2,765 — 2,765 — 2,765 Issuance of 15,500 common units upon exercise of options — 89 — 89 — 89 Issuance of 2,810,503 common units — 52,221 — 52,221 — 52,221 Common distributions ($ 0.1775 per unit) ( 195 ) ( 18,607 ) — ( 18,802 ) — ( 18,802 ) Balance, June 30, 2021 $ 4,909 $ 538,376 $ ( 19,800 ) $ 523,485 $ — $ 523,485 General partner Limited partners Accumulated other comprehensive loss Total partners’ equity Noncontrolling interests in consolidated partnerships Total equity Balance, December 31, 2020 $ 3,334 $ 383,588 $ ( 28,039 ) $ 358,883 $ — $ 358,883 Net income 74 6,864 — 6,938 — 6,938 Other comprehensive income — — 8,239 8,239 — 8,239 Compensation under Incentive Award Plan — 6,674 — 6,674 — 6,674 Issuance of 15,500 common units upon exercise of options — 89 — 89 — 89 Grant of 469,675 restricted common share awards by the Company — — — — — — Issuance of 9,677,581 common units 1,874 179,002 — 180,876 — 180,876 Withholding of 111,977 common units for employee income taxes — ( 1,637 ) — ( 1,637 ) — ( 1,637 ) Common distributions ($ 0.3550 per unit) ( 373 ) ( 36,204 ) — ( 36,577 ) — ( 36,577 ) Balance, June 30, 2021 $ 4,909 $ 538,376 $ ( 19,800 ) $ 523,485 $ — $ 523,485 14 TANGER PROPERTIES LIMITED PARTNERSHIP AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF EQUITY (In thousands, except unit and per unit data, unaudited) General partner Limited partners Accumulated other comprehensive loss Total partners’ equity Noncontrolling interests in consolidated partnerships Total equity Balance, March 31, 2022 $ 8,650 $ 511,800 $ ( 9,873 ) $ 510,577 $ — $ 510,577 Net loss ( 3,887 ) 24,706 — 20,819 — 20,819 Other comprehensive loss — — ( 176 ) ( 176 ) — ( 176 ) Compensation under Incentive Award Plan — 4,299 — 4,299 — 4,299 Grant of 800 restricted common share awards by the Company — 5 — 5 — 5 Forfeiture of 13,062 common units — — — — — — Withholding of 62,007 common units for employee income taxes — ( 1,057 ) — ( 1,057 ) — ( 1,057 ) Common distributions ($ 0.20 per unit) ( 220 ) ( 21,672 ) — ( 21,892 ) — ( 21,892 ) Balance, June 30, 2022 $ 4,543 $ 518,081 $ ( 10,049 ) $ 512,575 $ — $ 512,575 General partner Limited partners Accumulated other comprehensive loss Total partners’ equity Noncontrolling interests in consolidated partnerships Total equity Balance, December 31, 2021 $ 4,539 $ 514,023 $ ( 18,773 ) $ 499,789 $ — $ 499,789 Net income 425 41,856 — 42,281 — 42,281 Other comprehensive income — — 8,724 8,724 — 8,724 Compensation under Incentive Award Plan — 7,045 — 7,045 — 7,045 Issuance of 2,700 common units upon exercise of options — 15 — 15 — 15 Withholding of 191,978 common units for employee income taxes — ( 3,203 ) — ( 3,203 ) — ( 3,203 ) Grant of 499,336 restricted common share awards by the Company — — — — — — Common distributions ($ 0.3825 per unit) ( 421 ) ( 41,655 ) — ( 42,076 ) — ( 42,076 ) Balance, June 30, 2022 $ 4,543 $ 518,081 $ ( 10,049 ) $ 512,575 $ — $ 512,575 The accompanying notes are an integral part of these consolidated financial statements. 15 TANGER PROPERTIES LIMITED PARTNERSHIP AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands, unaudited) Six months ended June 30, 2022 2021 OPERATING ACTIVITIES Net income $ 42,281 $ 6,938 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 52,463 55,882 Amortization of deferred financing costs 1,541 2,320 Loss on early extinguishment of debt — 14,039 Equity in earnings of unconsolidated joint ventures ( 4,740 ) ( 4,497 ) Equity-based compensation expense 6,959 6,608 Amortization of debt (premiums) and discounts, net 241 210 Amortization (accretion) of market rent rate adjustments, net 314 25 Straight-line rent adjustments 1,035 1,521 Distributions of cumulative earnings from unconsolidated joint ventures 4,775 4,774 Other non-cash ( 2,418 ) 3,638 Changes in other assets and liabilities: Other assets 7,194 12,454 Accounts payable and accrued expenses ( 20,449 ) ( 12,633 ) Net cash provided by operating activities 89,196 91,279 INVESTING ACTIVITIES Additions to rental property ( 25,717 ) ( 11,836 ) Additions to investments in unconsolidated joint ventures — ( 7,000 ) Net proceeds from sale of real estate assets — 8,129 Net proceeds on sale of non-real estate assets 14,610 — Additions to non-real estate assets ( 4,176 ) ( 781 ) Distributions in excess of cumulative earnings from unconsolidated joint ventures 6,536 13,364 Additions to deferred lease costs ( 1,076 ) ( 4,562 ) Other investing activities 1,728 6,695 Net cash provided by (used in) investing activities ( 8,095 ) 4,009 FINANCING ACTIVITIES Cash distributions paid ( 42,076 ) ( 36,577 ) Proceeds from notes, mortgages and loans — — Repayments of notes, mortgages and loans ( 2,180 ) ( 201,861 ) Payment of make-whole premium related to early extinguishment of debt — ( 12,954 ) Employee income taxes paid related to shares withheld upon vesting of equity awards ( 3,203 ) ( 1,637 ) Additions to deferred financing costs — ( 123 ) Proceeds from exercise of options 15 89 Proceeds from the Company’s common share offering — 180,876 Payment for other financing activities ( 574 ) ( 574 ) Net cash provided by (used in) financing activities ( 48,018 ) ( 72,761 ) Effect of foreign currency on cash and cash equivalents ( 27 ) ( 73 ) Net increase (decrease) in cash and cash equivalents 33,056 22,454 Cash and cash equivalents, beginning of period 161,152 84,750 Cash and cash equivalents, end of period $ 194,208 $ 107,204 The accompanying notes are an integral part of these consolidated financial statements. 16 TANGER FACTORY OUTLET CENTERS, INC. AND SUBSIDIARIES TANGER PROPERTIES LIMITED PARTNERSHIP AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. Business Tanger Factory Outlet Centers, Inc. and subsidiaries is one of the largest owners and operators of outlet centers in the United States and Canada. We are a fully-integrated, self-administered and self-managed real estate investment trust (“REIT”) which, through our controlling interest in the Operating Partnership, focuses exclusively on developing, acquiring, owning, operating and managing outlet shopping centers. As of June 30, 2022, we owned and operated 30 consolidated outlet centers, with a total gross leasable area of approximately 11.5 million square feet. We also had partial ownership interests in 6 unconsolidated outlet centers totaling approximately 2.1 million square feet, including 2 outlet centers in Canada. Our outlet centers and other assets are held by, and all of our operations are conducted by, Tanger Properties Limited Partnership and subsidiaries. Accordingly, the descriptions of our business, employees and properties are also descriptions of the business, employees and properties of the Operating Partnership. Unless the context indicates otherwise, the term “Company” refers to Tanger Factory Outlet Centers, Inc. and subsidiaries and the term “Operating Partnership” refers to Tanger Properties Limited Partnership and subsidiaries. The terms “we”, “our” and “us” refer to the Company or the Company and the Operating Partnership together, as the text requires. The Company, including its wholly-owned subsidiary, Tanger LP Trust, owns the majority of the units of partnership interest issued by the Operating Partnership. The Company controls the Operating Partnership as its sole general partner. Tanger LP Trust holds a limited partnership interest. As of June 30, 2022, the Company and its wholly-owned subsidiaries owned 104,394,792 units of the Operating Partnership and other limited partners (the “Non-Company LPs”) collectively owned 4,761,559 Class A common limited partnership units. Each Class A common limited partnership unit held by the Non-Company LPs is exchangeable for one of the Company’s common shares, subject to certain limitations to preserve the Company’s REIT status. Class B common limited partnership units, which are held by Tanger LP Trust, are not exchangeable for common shares of the Company. 2. Summary of Significant Accounting Policies Basis of Presentation The unaudited consolidated financial statements included herein have been prepared pursuant to accounting principles generally accepted in the United States of America (“GAAP”) and should be read in conjunction with the consolidated financial statements and notes thereto of the Company’s and the Operating Partnership’s combined Annual Report on Form 10-K for the year ended December 31, 2021. The December 31, 2021 balance sheet data in this Form 10-Q was derived from audited financial statements. Certain information and note disclosures normally included in financial statements prepared in accordance with U.S. GAAP have been condensed or omitted pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”), although management believes that the disclosures are adequate to make the information presented not misleading. In the opinion of management, all adjustments (consisting only of normal recurring adjustments) necessary for a fair presentation of the financial statements for the interim periods have been made. The results of interim periods are not necessarily indicative of the results for a full year. The Company currently consolidates the Operating Partnership because it has (1) the power to direct the activities of the Operating Partnership that most significantly impact the Operating Partnership’s economic performance and (2) the obligation to absorb losses and the right to receive the residual returns of the Operating Partnership that could be potentially significant. 17 We consolidate properties that are wholly-owned and properties where we own less than 100% but control such properties. Control is determined using an evaluation based on accounting standards related to the consolidation of voting interest entities and variable interest entities (“VIE”). For joint ventures that are determined to be a VIE, we consolidate the entity where we are deemed to be the primary beneficiary. Determination of the primary beneficiary is based on whether an entity has (1) the power to direct the activities of the VIE that most significantly impact the entity’s economic performance, and (2) the obligation to absorb losses of the entity that could potentially be significant to the VIE or the right to receive benefits from the entity that could potentially be significant to the VIE. Our determination of the primary beneficiary considers all relationships between us and the VIE, including management agreements and other contractual arrangements. Investments in real estate joint ventures that we do not control but may exercise significant influence on are accounted for using the equity method of accounting. These investments are recorded initially at cost and subsequently adjusted for our equity in the joint venture’s net income or loss, cash contributions, distributions and other adjustments required under the equity method of accounting. For certain investments in real estate joint ventures, we record our equity in the venture’s net income or loss under the hypothetical liquidation at book value method of accounting due to the structures and the preferences we receive on the distributions from our joint ventures pursuant to the respective joint venture agreements for those joint ventures. Under this method, we recognize income and loss in each period based on the change in liquidation proceeds we would receive from a hypothetical liquidation of our investment based on depreciated book value. Therefore, income or loss may be allocated disproportionately as compared to the ownership percentages due to specified preferred return rate thresholds and may be more or less than actual cash distributions received and more or less than what we may receive in the event of an actual liquidation. We separately report investments in joint ventures for which accumulated distributions have exceeded investments in, and our share of net income or loss of, the joint ventures within other liabilities in the consolidated balance sheets because we are committed to provide further financial support to these joint ventures. The carrying amount of our investments in the Charlotte, Columbus, Galveston/Houston, and National Harbor joint ventures are less than zero because of financing or operating distributions that were greater than net income, as net income includes non-cash charges for depreciation and amortization. “Noncontrolling interests in the Operating Partnership” reflects the Non-Company LPs’ percentage ownership of the Operating Partnership’s units. “Noncontrolling interests in other consolidated partnerships” consist of outside equity interests in partnerships or joint ventures not wholly-owned by the Company or the Operating Partnership that are consolidated with the financial results of the Company and Operating Partnership because the Operating Partnership exercises control over the entities that own the properties. Noncontrolling interests are initially recorded in the consolidated balance sheets at fair value based upon purchase price allocations. Income is allocated to the noncontrolling interests based on the allocation provisions within the partnership or joint venture agreements. Accounts Receivable Individual leases are assessed for collectability and upon the determination that the collection of rents is not probable, accrued rent and accounts receivable are written-off as an adjustment to rental revenue. Revenue from leases where collection is deemed to be less than probable is recorded on a cash basis until collectability is determined to be probable. Further we assess whether operating lease receivables, at a portfolio level, are appropriately valued based upon an analysis of balances outstanding, historical bad debt levels and current economic trends including discussions with tenants for potential lease amendments. Our estimate of the collectability of accrued rents and accounts receivable is based on the best information available to us at the time of preparing the financial statements. Straight-line rent adjustments recorded as a receivable in prepaids and other assets on the consolidated balance sheets was approximately $ 51.9 million as of June 30, 2022. Impairment of Long-Lived Assets Rental property held and used by us is reviewed for impairment in the event that facts and circumstances indicate that the carrying amount of an asset may not be recoverable. In such an event, we compare the estimated future undiscounted cash flows associated with the asset to the asset's carrying amount, and if less, recognize an impairment loss in an amount by which the carrying amount exceeds its fair value. 18 If economic and market conditions deteriorate beyond our current expectations, as a result of the ongoing COVID-19 pandemic (“COVID-19”) or other macroeconomic factors, 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 outlet center, which is part of a casino property, continues to face leasing challenges that 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 in future periods. 3. Disposition of Properties The following table sets forth certain summarized information regarding properties sold during the six months ended June 30, 2022 and June 30, 2021: Property (1) Location Date Sold Square Feet (in 000’s) Net Sales Proceeds (in 000’s) Gain on Sale (in 000’s) 2021 Disposition: Jeffersonville Jeffersonville, Ohio January 2021 412 $ 8,100 $ — (1) The rental properties sold did not meet the criteria to be reported as discontinued operations. 4. Developments of Consolidated Outlet Centers The table below sets forth our consolidated outlet centers under development as of June 30, 2022: Project Approximate Square Feet (in 000’s) Costs Incurred to Date (in millions) Projected Opening New Development: Nashville 290 $ 18.3 Fall 2023 During the second quarter of 2022, we purchased land in the Nashville, Tennessee area for approximately $ 8.8 million and began construction on the development of our wholly-owned outlet center. 19 5. Investments in Unconsolidated Real Estate Joint Ventures The equity method of accounting is used to account for each of the individual joint ventures. We have an ownership interest in the following unconsolidated real estate joint ventures: As of June 30, 2022 Joint Venture Outlet Center Location Ownership % Square Feet (in 000’s) Carrying Value of Investment (in millions) Total Joint Venture Debt, Net (in millions) (1) Investments included in investments in unconsolidated joint ventures: RioCan Canada Various 50.0 % 665 $ 80.0 — $ 80.0 Investments included in other liabilities: Columbus (2) Columbus, OH 50.0 % 355 $ ( 1.2 ) $ 70.9 Charlotte (2) Charlotte, NC 50.0 % 399 ( 17.7 ) 99.6 National Harbor (2) National Harbor, MD 50.0 % 341 ( 12.3 ) 94.6 Galveston/Houston (2) Texas City, TX 50.0 % 353 ( 15.0 ) 64.4 $ ( 46.2 ) As of December 31, 2021 Joint Venture Outlet Center Location Ownership % Square Feet (in 000’s) Carrying Value of Investment (in millions) Total Joint Venture Debt, Net (in millions) (1) Investments included in investments in unconsolidated joint ventures: Columbus Columbus, OH 50.0 % 355 $ 0.2 $ 70.9 RioCan Canada Various 50.0 % 665 82.4 — $ 82.6 Investments included in other liabilities: Charlotte (2) Charlotte, NC 50.0 % 399 $ ( 16.2 ) $ 99.6 National Harbor (2) National Harbor, MD 50.0 % 341 ( 11.2 ) 94.5 Galveston/Houston (2) Texas City, TX 50.0 % 353 ( 14.0 ) 64.4 $ ( 41.4 ) (1) Net of debt origination costs of $ 1.0 million as of June 30, 2022 and $ 1.0 million as of December 31, 2021. (2) The negative carrying value is due to distributions exceeding contributions and increases or decreases from our equity in earnings of the joint venture. Fees we received for various services provided to our unconsolidated joint ventures were recognized in management, leasing and other services as follows (in thousands): Three months ended Six months ended June 30, June 30, 2022 2021 2022 2021 Fee: Management and marketing $ 552 $ 537 $ 1,088 $ 1,045 Leasing and other fees — 103 35 159 Expense reimbursements from unconsolidated joint ventures 884 719 1,840 1,527 Total Fees $ 1,436 $ 1,359 $ 2,963 $ 2,731 20 Our investments in real estate joint ventures are reduced by the percentage of the profits earned for leasing and development services associated with our ownership interest in each joint venture. Our carrying value of investments in unconsolidated joint ventures differs from our share of the assets reported in the “Condensed Combined Balance Sheets - Unconsolidated Joint Ventures” shown below due to adjustments to the book basis, including intercompany profits on sales of services that are capitalized by the unconsolidated joint ventures. The differences in basis (totaling $ 3.3 million and $ 3.4 million as of June 30, 2022 and December 31, 2021, respectively) are amortized over the various useful lives of the related assets. RioCan Canada In March 2021, the RioCan joint venture closed on the sale of its outlet center in Saint-Sauveur, for net proceeds of approximately $ 9.4 million. Our share of the proceeds was approximately $ 4.7 million. As a result of this transaction, we recorded a loss on the sale of $ 3.7 million. This includes a $ 3.6 million charge related to the foreign currency effect of the sale recorded in other income (expense), which had been previously recorded in other comprehensive income. Condensed combined summary financial information of unconsolidated joint ventures accounted for using the equity method is as follows (in thousands): Condensed Combined Balance Sheets - Unconsolidated Joint Ventures June 30, 2022 December 31, 2021 Assets Land $ 83,641 $ 83,568 Buildings, improvements and fixtures 465,644 467,918 Construction in progress 231 744 549,516 552,230 Accumulated depreciation ( 175,431 ) ( 166,096 ) Total rental property, net 374,085 386,134 Cash and cash equivalents 14,856 19,030 Deferred lease costs and other intangibles, net 3,190 3,517 Prepaids and other assets 10,432 13,109 Total assets $ 402,563 $ 421,790 Liabilities and Owners’ Equity Mortgages payable, net $ 329,535 $ 329,460 Accounts payable and other liabilities 13,128 15,231 Total liabilities 342,663 344,691 Owners’ equity 59,900 77,099 Total liabilities and owners’ equity $ 402,563 $ 421,790 21 Three months ended Six months ended Condensed Combined Statements of Operations - Unconsolidated Joint Ventures June 30, June 30, 2022 2021 2022 2021 Revenues $ 21,666 $ 22,601 $ 43,507 $ 43,594 Expenses: Property operating 8,435 8,448 16,738 16,862 General and administrative 40 58 133 86 Depreciation and amortization 5,540 5,763 11,021 11,664 Total expenses 14,015 14,269 27,892 28,612 Other income (expense): Interest expense ( 3,158 ) ( 2,910 ) ( 6,073 ) ( 5,855 ) Gain on sale of assets — — — 503 Other income 3 96 6 154 Total other expense ( 3,155 ) ( 2,814 ) ( 6,067 ) ( 5,198 ) Net income $ 4,496 $ 5,518 $ 9,548 $ 9,784 The Company and Operating Partnership’s share of: Net income $ 2,227 $ 2,728 $ 4,740 $ 4,497 Depreciation and amortization (real estate related) $ 2,791 $ 2,913 $ 5,545 $ 5,909 6. Debt Guaranteed by the Company All of the Company’s debt is held by the Operating Partnership and its consolidated subsidiaries. The Company guarantees the Operating Partnership’s obligations with respect to its unsecured lines of credit which have a total borrowing capacity of $ 520.0 million as of June 30, 2022. The Company also guarantees the Operating Partnership’s unsecured term loan. The Operating Partnership had the following principal amounts outstanding on the debt guaranteed by the Company (in thousands): As of June 30, 2022 December 31, 2021 Unsecured lines of credit $ — $ — Unsecured term loan $ 300,000 $ 300,000 22 7. Debt of the Operating Partnership The debt of the Operating Partnership consisted of the following (in thousands): As of As of June 30, 2022 December 31, 2021 Stated Interest Rate(s) Maturity Date Principal Book Value (1) Principal Book Value (1) Senior, unsecured notes: Senior notes 3.125 % September 2026 $ 350,000 $ 347,611 $ 350,000 $ 347,329 Senior notes 3.875 % July 2027 300,000 297,941 300,000 297,742 Senior notes 2.750 % September 2031 400,000 391,534 400,000 391,110 Mortgages payable: Atlantic City (2) (3) 6.44 % - 7.65 % December 2024- December 2026 19,369 20,034 21,550 22,387 Southaven LIBOR + 1.80 % April 2023 40,144 40,112 40,144 40,087 Unsecured term loan LIBOR + 1.25 % April 2024 300,000 298,783 300,000 298,421 Unsecured lines of credit LIBOR + 1.20 % July 2025 — — — — $ 1,409,513 $ 1,396,015 $ 1,411,694 $ 1,397,076 (1) Including premiums and net of debt discount and debt origination costs. (2) The effective interest rate assigned during the purchase price allocation to the Atlantic City mortgages assumed during the acquisition in 2011 was 5.05 %. (3) Principal and interest due monthly with remaining principal due at maturity. Certain of our properties, which had a net book value of approximately $ 147.5 million at June 30, 2022, serve as collateral for mortgages payable. As of June 30, 2022, we maintained unsecured lines of credit that provided for borrowings of up to $ 520.0 million. The unsecured lines of credit as of June 30, 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 provide guarantees to lenders for our joint ventures, which include standard non-recourse carve out indemnifications for losses arising from items such as but not limited to fraud, physical waste, payment of taxes, environmental indemnities, misapplication of insurance proceeds or security deposits and failure to maintain required insurance. For construction and term loans, we may include a guaranty of completion as well as a principal guaranty ranging from 0 % to 17 % of principal. The principal guarantees include terms for release or reduction based upon satisfactory completion of construction and performance targets including occupancy thresholds and minimum debt service coverage tests. As of June 30, 2022, the maximum amount of unconsolidated joint venture debt guaranteed by the Company was $ 21.9 million. The unsecured lines of credit and senior unsecured notes include covenants that require the maintenance of certain ratios, including debt service coverage and leverage, and limit the payment of dividends such that dividends and distributions will not exceed funds from operations, as defined in the agreements, for the prior fiscal year on an annual basis or 95 % of funds from operations on a cumulative basis. As of June 30, 2022, we believe we were in compliance with all of our debt covenants. 23 Debt Maturities Maturities of the existing long-term debt as of June 30, 2022 for the next five years and thereafter are as follows (in thousands): Calendar Year Amount For the remainder of 2022 $ 2,260 2023 44,917 2024 305,130 2025 1,501 2026 355,705 Thereafter 700,000 Subtotal 1,409,513 Net discount and debt origination costs ( 13,498 ) Total $ 1,396,015 We have considered our short-term (one year or less from the date of filing these financial statements) liquidity needs and the adequacy of our estimated cash flows from operating activities and other financing sources to meet these needs. These other sources include but are not limited to: existing cash, ongoing relationships with certain financial institutions, our ability to sell debt or issue equity subject to market conditions and proceeds from the potential sale of non-core assets. We believe that we have access to the necessary financing to fund our short-term liquidity needs. 24 8. Derivative Financial Instruments The following table summarizes the terms and fair values of our derivative financial instruments, as well as their classifications within the consolidated balance sheets (notional amounts and fair values in thousands): Fair Value Effective Date Maturity Date Notional Amount Bank Pay Rate Company Fixed Pay Rate June 30, 2022 December 31, 2021 Assets (Liabilities) (1) : Interest rate swaps: July 1, 2019 February 1, 2024 $ 25,000 1 month LIBOR 1.75 % $ 525 $ ( 459 ) January 1, 2021 February 1, 2024 150,000 1 month LIBOR 0.60 % 5,847 828 January 1, 2021 February 1, 2024 100,000 1 month LIBOR 0.22 % 4,476 1,331 March 1, 2021 February 1, 2024 25,000 1 month LIBOR 0.24 % 1,117 326 Total $ 11,965 $ 2,026 (1) Asset balances are recorded in prepaids and other assets on the consolidated balance sheets and liabilities are recorded in other liabilities on the consolidated balance sheets. The derivative financial instruments are comprised of interest rate swaps, which are designated and qualify as cash flow hedges, each with a separate counterparty. We do not use derivatives for trading or speculative purposes and currently do not have any derivatives that are not designated as hedges. Changes in the fair value of derivatives designated and qualifying as cash flow hedges are recorded in accumulated other comprehensive loss and subsequently reclassified into earnings in the period that the hedged forecasted transaction affects earnings. The following table represents the effect of the derivative financial instruments on the accompanying consolidated financial statements (in thousands): Three months ended June 30, Six months ended June 30, 2022 2021 2022 2021 Interest Rate Swaps: Amount of gain (loss) recognized in other comprehensive income (loss) $ 2,265 $ 237 $ 9,939 $ 2,235 25 9. Fair Value Measurements Fair value guidance establishes a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value. These tiers are defined as follows: Tier Description Level 1 Observable inputs such as quoted prices in active markets Level 2 Inputs other than quoted prices in active markets that are either directly or indirectly observable Level 3 Unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions Fair Value Measurements on a Recurring Basis The following table sets forth our assets and liabilities that are measured at fair value within the fair value hierarchy (in thousands): Level 1 Level 2 Level 3 Quoted Prices in Active Markets for Identical Assets or Liabilities Significant Observable Inputs Significant Unobservable Inputs Total Fair value as of June 30, 2022: Assets: Short-term government securities ( cash and cash equivalents) $ 185,803 $ 185,803 $ — $ — Interest rate swaps (prepaids and other assets) 11,965 — 11,965 — Total assets $ 197,768 $ 185,803 $ 11,965 $ — Level 1 Level 2 Level 3 Quoted Prices in Active Markets for Identical Assets or Liabilities Significant Observable Inputs Significant Unobservable Inputs Total Fair value as of December 31, 2021: Asset: Short-term government securities ( cash and cash equivalents) $ 158,197 $ 158,197 $ — $ — Interest rate swaps (prepaids and other assets) $ 2,485 $ — $ 2,485 $ — Total assets $ 160,682 $ 158,197 $ 2,485 $ — Liabilities: Interest rate swaps (other liabilities) $ 459 $ — $ 459 $ — Total liabilities $ 459 $ — $ 459 $ — Short-term government securities Short-term government securities are highly liquid investments, which are classified as Level 1 in the fair value hierarchy because they are valued using quoted market prices in an active market. 26 Interest rate swaps Fair values of interest rate swaps are estimated using Level 2 inputs based on current market data received from financial sources that trade such instruments and are based on prevailing market data and derived from third party proprietary models based on well recognized financial principles including counterparty risks, credit spreads and interest rate projections, as well as reasonable estimates about relevant future market conditions. Other Fair Value Disclosures The estimated fair value within the fair value hierarchy and recorded value of our debt consisting of senior unsecured notes, unsecured term loans, secured mortgages and unsecured lines of credit were as follows (in thousands): June 30, 2022 December 31, 2021 Level 1 Quoted Prices in Active Markets for Identical Assets or Liabilities $ — $ — Level 2 Significant Observable Inputs 911,714 1,079,234 Level 3 Significant Unobservable Inputs 360,442 366,103 Total fair value of debt $ 1,272,156 $ 1,445,337 Recorded value of debt $ 1,396,015 $ 1,397,076 Our senior unsecured notes are publicly-traded which provides quoted market rates. However, due to the limited trading volume of these notes, we have classified these instruments as Level 2 in the hierarchy. Our other debt is classified as Level 3 given the unobservable inputs utilized in the valuation. Our unsecured term loan, unsecured lines of credit and variable interest rate mortgages are all LIBOR based instruments. When selecting the discount rates for purposes of estimating the fair value of these instruments, we evaluated the original credit spreads and do not believe that the use of them differs materially from current credit spreads for similar instruments and therefore the recorded values of these debt instruments is considered their fair value. The carrying values of cash and cash equivalents, receivables, accounts payable, accrued expenses and other assets and liabilities are reasonable estimates of their fair values because of the short maturities of these instruments. 27 10. Shareholders’ Equity of the Company Dividend Declaration 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. At-the-Market Offering Under our at-the-market share offering program (“ATM Offering”), which commenced February 2021, we may offer and sell our common shares, $ 0.01 par value per share, having an aggregate gross sales price of up to $ 250.0 million (the “Shares”). We may sell the Shares in amounts and at times to be determined by us but we have no obligation to sell any of the Shares. Actual sales, if any, will depend on a variety of factors to be determined by us from time to time, including, among other things, market conditions, the trading price of the common shares, capital needs and determinations by us of the appropriate sources of funding. We currently intend to use the net proceeds from the sale of shares pursuant to the ATM Offering for working capital and general corporate purposes. As of June 30, 2022, we had approximately $ 60.1 million remaining available for sale under the ATM Offering program. The following table sets forth information regarding settlements under our ATM offering program: Three months ended June 30, Six months ended June 30, 2022 2021 2022 2021 Number of common shares settled during the period (1) — 2,810,503 — 9,677,581 Average price per share (1) $ — $ 18.85 $ — $ 18.97 Aggregate gross proceeds (in thousands) $ — $ 52,977 $ — $ 183,615 Aggregate net proceeds after commissions and fees (in thousands) (1) $ — $ 52,221 $ — $ 180,876 (1) In July 2021, we had an additional 331,682 shares settle at an average price per share of $ 18.85 with aggregate net proceeds after commissions and fees of $ 6.2 million. Share Repurchase Program In May 2021, the Company’s Board of Directors authorized the repurchase of up to $ 80.0 million of the Company’s outstanding shares through May 31, 2023. This authorization replaced a previous repurchase authorization for approximately $ 80.0 million that expired in May 2021. In June 2020, we amended our debt agreements primarily to improve future covenant flexibility and such amendments included a prohibition on share repurchases for twelve months starting July 1, 2020 (the “Repurchase Covenant”). The Company temporarily suspended share repurchases for the twelve months starting July 1, 2020 and ending on June 30, 2021 in light of a repurchase covenant. On July 1, 2021, the Repurchase Covenant expired. Repurchases may be made from time to time through open market, privately-negotiated, structured or derivative transactions (including accelerated share repurchase transactions), or other methods of acquiring shares. The Company intends to structure open market purchases to occur within pricing and volume requirements of Rule 10b-18. The Company may, from time to time, enter into Rule 10b5-1 plans to facilitate the repurchase of its shares under this authorization. The Company did not repurchase any shares for both the three and six months ended June 30, 2022 and 2021. The remaining amount authorized to be repurchased under the program as of June 30, 2022 was approximately $ 80.0 million. 28 11. Partners’ Equity of the Operating Partnership All units of partnership interest issued by the Operating Partnership have equal rights with respect to earnings, dividends and net assets. When the Company issues common shares upon the exercise of options, the grant of restricted common share awards, or the exchange of Class A common limited partnership units, the Operating Partnership issues a corresponding Class B common limited partnership unit to Tanger LP Trust, a wholly-owned subsidiary of the Company. Likewise, when the Company repurchases its outstanding common shares, the Operating Partnership repurchases a corresponding Class B common limited partnership unit held by Tanger LP Trust. The following table sets forth the changes in outstanding partnership units for the three and six months ended June 30, 2022 and June 30, 2021: Limited Partnership Units General Partnership Units Class A Class B Total Balance March 31, 2021 1,100,000 4,794,643 99,694,577 104,489,220 Options exercised — — 15,500 15,500 Issuance of units — — 2,810,503 2,810,503 Balance June 30, 2021 1,100,000 4,794,643 102,520,580 107,315,223 Balance December 31, 2020 1,000,000 4,794,643 92,569,801 97,364,444 Options exercised — — 15,500 15,500 Grant of restricted common share awards by the Company, net of forfeitures — — 469,675 469,675 Issuance of units 100,000 — 9,577,581 9,577,581 Units withheld for employee income taxes — — ( 111,977 ) ( 111,977 ) Balance June 30, 2021 1,100,000 4,794,643 102,520,580 107,315,223 Balance March 31, 2022 1,100,000 4,761,559 103,369,061 108,130,620 Options exercised — — 800 800 Forfeitures of restricted common share awards by the Company — — ( 13,062 ) ( 13,062 ) Units withheld for employee income taxes — — ( 62,007 ) ( 62,007 ) Balance June 30, 2022 1,100,000 4,761,559 103,294,792 108,056,351 Balance December 31, 2021 1,100,000 4,761,559 102,984,734 107,746,293 Grant of restricted common share awards by the Company, net of forfeitures — — 499,336 499,336 Options exercised — — 2,700 2,700 Units withheld for employee income taxes — — ( 191,978 ) ( 191,978 ) Balance June 30, 2022 1,100,000 4,761,559 103,294,792 108,056,351 29 12. Earnings Per Share of the Company The following table sets forth a reconciliation of the numerators and denominators in computing the Company’s earnings per share (in thousands, except per share amounts): Three months ended June 30, Six months ended June 30, 2022 2021 2022 2021 Numerator: Net income attributable to Tanger Factory Outlet Centers, Inc. $ 19,905 $ 2,478 $ 40,423 $ 6,611 Less allocation of earnings to participating securities ( 222 ) ( 196 ) ( 437 ) ( 403 ) Net income available to common shareholders of Tanger Factory Outlet Centers, Inc. $ 19,683 $ 2,282 $ 39,986 $ 6,208 Denominator: Basic weighted average common shares 103,630 100,409 103,607 97,504 Effect of notional units 421 818 413 685 Effect of outstanding options 703 771 720 728 Diluted weighted average common shares 104,754 101,998 104,740 98,917 Basic earnings per common share: Net income $ 0.19 $ 0.02 $ 0.39 $ 0.06 Diluted earnings per common share: Net income $ 0.19 $ 0.02 $ 0.38 $ 0.06 We determine diluted earnings per share based on the weighted average number of common shares outstanding combined with the incremental weighted average shares that would have been outstanding assuming all potentially dilutive securities were converted into common shares at the earliest date possible. Notional units granted under our equity compensation plan are considered contingently issuable common shares and are included in earnings per share if the effect is dilutive using the treasury stock method and the common shares would be issuable if the end of the reporting period were the end of the contingency period. For both the three and six months ended June 30, 2022, approximately 961,000 notional units were excluded from the computation and for both the three and six months ended June 30, 2021, approximately 140,000 notional units were excluded from the computation because these notional units either would not have been issuable if the end of the reporting period were the end of the contingency period or as they were anti-dilutive. With respect to outstanding options, the effect of dilutive common shares is determined using the treasury stock method, whereby outstanding options are assumed exercised at the beginning of the reporting period and the exercise proceeds from such options and the average measured but unrecognized compensation cost during the period are assumed to be used to repurchase our common shares at the average market price during the period. For both the three and six months ended June 30, 2022, approximately 282,000 options were excluded from the computation and for both the three and six months ended June 30, 2021, approximately 360,000 options were excluded from the computation, as they were anti-dilutive. The assumed exchange of the partnership units held by the Non-Company LPs as of the beginning of the year, which would result in the elimination of earnings allocated to the noncontrolling interest in the Operating Partnership, would have no impact on earnings per share since the allocation of earnings to a common limited partnership unit, as if exchanged, is equivalent to earnings allocated to a common share. Certain of the Company’s unvested restricted common share awards contain non-forfeitable rights to dividends or dividend equivalents. The impact of these unvested restricted common share awards on earnings per share has been calculated using the two-class method whereby earnings are allocated to the unvested restricted common share awards based on dividends declared and the unvested restricted common shares’ participation rights in undistributed earnings. Unvested restricted common shares that do not contain non-forfeitable rights to dividends or dividend equivalents are included in the diluted earnings per share computation if the effect is dilutive, using the treasury stock method. 30 13. Earnings Per Unit of the Operating Partnership The following table sets forth a reconciliation of the numerators and denominators in computing earnings per unit (in thousands, except per unit amounts): Three months ended June 30, Six months ended June 30, 2022 2021 2022 2021 Numerator: Net income attributable to partners of the Operating Partnership $ 20,819 $ 2,596 $ 42,281 $ 6,938 Less allocation of earnings to participating securities ( 222 ) ( 196 ) ( 437 ) ( 403 ) Net income available to common unitholders of the Operating Partnership $ 20,597 $ 2,400 $ 41,844 $ 6,535 Denominator: Basic weighted average common units 108,391 105,204 108,369 102,299 Effect of notional units 421 818 413 685 Effect of outstanding options 703 771 720 728 Diluted weighted average common units 109,515 106,793 109,502 103,712 Basic earnings per common unit: Net income $ 0.19 $ 0.02 $ 0.39 $ 0.06 Diluted earnings per common unit: Net income $ 0.19 $ 0.02 $ 0.38 $ 0.06 We determine diluted earnings per unit based on the weighted average number of common units outstanding combined with the incremental weighted average units that would have been outstanding assuming all potentially dilutive securities were converted into common units at the earliest date possible. Notional units granted under our equity compensation plan are considered contingently issuable common units and are included in earnings per unit if the effect is dilutive using the treasury stock method and the common units would be issuable if the end of the reporting period were the end of the contingency period. For both the three and six months ended June 30, 2022, approximately 961,000 notional units were excluded from the computation and for both the three and six months ended June 30, 2021, approximately 140,000 notional units were excluded from the computation because these notional units either would not have been issuable if the end of the reporting period were the end of the contingency period or as they were anti-dilutive. With respect to outstanding options, the effect of dilutive common units is determined using the treasury stock method, whereby outstanding options are assumed exercised at the beginning of the reporting period and the exercise proceeds from such options and the average measured but unrecognized compensation cost during the period are assumed to be used to repurchase our common units at the average market price during the period. The market price of a common unit is considered to be equivalent to the market price of a Company common share. For both the three and six months ended June 30, 2022, approximately 282,000 options were excluded from the computation and for both the three and six months ended June 30, 2021, approximately 360,000 options were excluded from the computation, as they were anti-dilutive. Certain of the Company’s unvested restricted common share awards contain non-forfeitable rights to distributions or distribution equivalents. The impact of the corresponding unvested restricted unit awards on earnings per unit has been calculated using the two-class method whereby earnings are allocated to the unvested restricted unit awards based on distributions declared and the unvested restricted units’ participation rights in undistributed earnings. Unvested restricted common units that do not contain non-forfeitable rights to dividends or dividend equivalents are included in the diluted earnings per unit computation if the effect is dilutive, using the treasury stock method. 31 14. Equity-Based Compensation of the Company We have a shareholder approved equity-based compensation plan, the Incentive Award Plan of Tanger Factory Outlet Centers, Inc. and Tanger Properties Limited Partnership (as amended and restated on April 4, 2014), as amended (the “Plan”), which covers our non-employee directors, officers, employees and consultants. Per the Operating Partnership agreement, when a common share is issued by the Company, the Operating Partnership issues one corresponding unit of partnership interest to the Company’s wholly-owned subsidiary, the Tanger LP Trust. Therefore, when the Company grants an equity-based award, the Operating Partnership treats each award as having been granted by the Operating Partnership. In the discussion below, the term “we” refers to the Company and the Operating Partnership together and the term “shares” is meant to also include corresponding units of the Operating Partnership. We recorded equity-based compensation expense in general and administrative expenses in our consolidated statements of operations as follows (in thousands): Three months ended Six months ended June 30, June 30, 2022 2021 2022 2021 Restricted common shares (1) $ 2,644 $ 1,539 $ 4,213 $ 4,112 Notional unit performance awards (1) 1,529 1,147 2,574 2,296 Options 78 77 172 200 Total equity-based compensation $ 4,251 $ 2,763 $ 6,959 $ 6,608 (1) Each of the three and six months ended June 30, 2022 and three and six months ended June 30, 2021, include the accelerated recognition of compensation cost. Equity-based compensation expense capitalized as a part of rental property and deferred lease costs were as follows (in thousands): Three months ended Six months ended June 30, June 30, 2022 2021 2022 2021 Equity-based compensation expense capitalized $ 47 $ 2 $ 86 $ 66 Restricted Common Share and Restricted Share Unit Awards During February 2022, the Company granted approximately 383,000 restricted common shares and restricted share units to the Company’s non-employee directors and the Company’s executive officers. The grant date fair value of the awards was $ 16.62 per share. The restricted common shares vest ratably over a three year period on January 4th of each year for non-employee directors and on February 15th of each year for executive officers. Compensation expense related to the amortization of the deferred compensation is being recognized in accordance with the vesting schedule of the restricted shares. For certain shares that vest during the period, we withhold shares with value equivalent up to the employees’ maximum statutory obligation for the applicable income and other employment taxes, and remit cash to the appropriate taxing authorities. The total number of shares withheld upon vesting were approximately 192,000 and 112,000 for the six months ended June 30, 2022 and 2021, respectively. The total number of shares withheld was based on the value of the restricted common shares on the vesting date as determined by our closing share price on the day prior to the vesting date. Total amounts paid for the employees’ tax obligation to taxing authorities were $ 3.2 million and $ 1.6 million for the six months ended June 30, 2022 and 2021, respectively. These amounts are reflected as financing activities within the consolidated statements of cash flows. 2022 Performance Share Plan During February 2022, the Compensation Committee of the Company approved the general terms of the Tanger Factory Outlet Centers, Inc. 2022 Performance Share Plan (the “2022 PSP”) covering the Company's executive officers whereby a maximum of approximately 555,000 restricted common shares may be earned if certain share price appreciation goals are achieved over a three year measurement period. 32 The 2022 PSP is a long-term incentive compensation plan. Recipients may earn units which may convert into restricted common shares of the Company based on the Company’s absolute share price appreciation (or absolute total shareholder return) and its share price appreciation relative to its peer group (or relative total shareholder return) over a three-year measurement period. Any shares earned at the end of the three-year measurement period are subject to a time-based vesting schedule, with 50 % of the shares vesting immediately following the measurement period, and the remaining 50 % vesting one year thereafter, contingent upon continued employment with the Company through the vesting date (unless terminated prior thereto (a) by the Company without cause, (b) by participant for good reason or, (c) due to death or disability). The following table sets forth 2022 PSP performance targets and other relevant information about the 2022 PSP: Performance targets (1) Absolute portion of award: Percent of total award 33.3 % Absolute total shareholder return range 26.0 % - 40.5 % Percentage of units to be earned 20 % - 100 % Relative portion of award: Percent of total award 66.7 % Percentile rank of peer group range (2) 30 th - 80 th Percentage of units to be earned 20 % - 100 % Maximum number of restricted common shares that may be earned 555,349 February grant date fair value per share $ 11.68 (1) The number of restricted common shares received under the 2022 PSP will be determined on a pro-rata basis by linear interpolation between total shareholder return thresholds, both for absolute total shareholder return and for relative total shareholder return amongst the Company’s peer group. (2) The peer group is based on companies included in the FTSE NAREIT Retail Index. The fair values of the 2022 PSP awards granted during the six months ended June 30, 2022 were determined at the grant dates using a Monte Carlo simulation pricing model and the following assumptions: Risk free interest rate (1) 1.7 % Expected dividend yield (2) 5.7 % Expected volatility (3) 65 % (1) Represents the interest rate as of the grant date on US treasury bonds having the same life as the estimated life of the restricted unit grants. (2) The dividend yield is calculated utilizing the average dividend yield over the previous three-year period and the current dividend yield as of the valuation date. (3) Based on a mix of historical and implied volatility for our common shares and the common shares of our peer index companies over the measurement period. 2019 Performance Share Plan On February 17, 2022, the measurement period for the 2019 Performance Share Plan (the “2019 PSP") expired. Based on the Company’s relative total shareholder return over the three year measurement period, we issued 96,592 restricted common shares in February 2022, with 58,569 vesting immediately and the remaining 38,023 vesting in February one year thereafter, contingent upon continued employment with the Company through the vesting date. Our absolute share price appreciation (or total shareholder return) for the 2019 OPP did not meet the minimum share price appreciation and no shares were earned under this component of the 2019 OPP. 33 15. Accumulated Other Comprehensive Income (Loss) of the Company The following table presents changes in the balances of each component of accumulated other comprehensive income (loss) for the three and six months ended June 30, 2022 (in thousands): Tanger Factory Outlet Centers, Inc. Accumulated Other Comprehensive Income (Loss) Noncontrolling Interest in Operating Partnership Accumulated Other Comprehensive Income (Loss) Foreign Currency Cash flow hedges Total Foreign Currency Cash flow hedges Total Balance March 31, 2022 $ ( 18,541 ) $ 9,289 $ ( 9,252 ) $ ( 1,030 ) $ 409 $ ( 621 ) Other comprehensive income (loss) before reclassifications ( 2,334 ) 1,885 ( 449 ) ( 107 ) 86 ( 21 ) Reclassification out of accumulated other comprehensive income (loss) into other income (expense) for foreign currency and interest expense for cash flow hedges — 281 281 — 13 13 Balance June 30, 2022 $ ( 20,875 ) $ 11,455 $ ( 9,420 ) $ ( 1,137 ) $ 508 $ ( 629 ) Tanger Factory Outlet Centers, Inc. Accumulated Other Comprehensive Income (Loss) Noncontrolling Interest in Operating Partnership Accumulated Other Comprehensive Income (Loss) Foreign Currency Cash flow hedges Total Foreign Currency Cash flow hedges Total Balance December 31, 2021 $ ( 19,713 ) $ 1,952 $ ( 17,761 ) $ ( 1,084 ) $ 72 $ ( 1,012 ) Other comprehensive income (loss) before reclassifications ( 1,162 ) 8,941 7,779 ( 53 ) 410 357 Reclassification out of accumulated other comprehensive income (loss) into other income (expense) for foreign currency and interest expense for cash flow hedges — 562 562 — 26 26 Balance June 30, 2022 $ ( 20,875 ) $ 11,455 $ ( 9,420 ) $ ( 1,137 ) $ 508 $ ( 629 ) 34 The following table presents changes in the balances of each component of accumulated other comprehensive loss for the three and six months ended June 30, 2021 (in thousands): Tanger Factory Outlet Centers, Inc. Accumulated Other Comprehensive Income (Loss) Noncontrolling Interest in Operating Partnership Accumulated Other Comprehensive Income (Loss) Foreign Currency Cash flow hedges Total Foreign Currency Cash flow hedges Total Balance March 31, 2021 $ ( 18,984 ) $ ( 1,284 ) $ ( 20,268 ) $ ( 1,057 ) $ ( 77 ) $ ( 1,134 ) Other comprehensive income (loss) before reclassifications 1,299 ( 86 ) 1,213 66 ( 5 ) 61 Reclassification out of accumulated other comprehensive income (loss) into other income (expense) for foreign currency and interest expense for cash flow hedges — 312 312 — 16 16 Balance June 30, 2021 $ ( 17,685 ) $ ( 1,058 ) $ ( 18,743 ) $ ( 991 ) $ ( 66 ) $ ( 1,057 ) Tanger Factory Outlet Centers, Inc. Accumulated Other Comprehensive Income (Loss) Noncontrolling Interest in Operating Partnership Accumulated Other Comprehensive Income (Loss) Foreign Currency Cash flow hedges Total Foreign Currency Cash flow hedges Total Balance December 31, 2020 $ ( 23,399 ) $ ( 3,186 ) $ ( 26,585 ) $ ( 1,281 ) $ ( 173 ) $ ( 1,454 ) Other comprehensive income before reclassifications 2,251 1,422 3,673 123 71 194 Reclassification out of accumulated other comprehensive income (loss) into other income (expense) for foreign currency and interest expense for cash flow hedges 3,463 706 4,169 167 36 203 Balance June 30, 2021 $ ( 17,685 ) $ ( 1,058 ) $ ( 18,743 ) $ ( 991 ) $ ( 66 ) $ ( 1,057 ) We expect within the next twelve months to reclassify into earnings as a decrease to interest expense approximately $ 7.0 million of the amounts recorded within accumulated other comprehensive loss related to the interest rate swap agreements in effect as of June 30, 2022. 35 16. Accumulated Other Comprehensive Income (Loss) of the Operating Partnership The following table presents changes in the balances of each component of accumulated other comprehensive income (loss) for the three and six months ended June 30, 2022 (in thousands): Foreign Currency Cash flow hedges Accumulated Other Comprehensive Income (Loss) Balance March 31, 2022 $ ( 19,571 ) $ 9,698 $ ( 9,873 ) Other comprehensive income (loss) before reclassifications ( 2,441 ) 1,971 ( 470 ) Reclassification out of accumulated other comprehensive income (loss) into other income (expense) for foreign currency and interest expense for cash flow hedges — 294 294 Balance June 30, 2022 $ ( 22,012 ) $ 11,963 $ ( 10,049 ) Foreign Currency Cash flow hedges Accumulated Other Comprehensive Income (Loss) Balance December 31, 2021 $ ( 20,797 ) $ 2,024 $ ( 18,773 ) Other comprehensive income (loss)before reclassifications ( 1,215 ) 9,351 8,136 Reclassification out of accumulated other comprehensive income (loss) into other income (expense) for foreign currency and interest expense for cash flow hedges — 588 588 Balance June 30, 2022 $ ( 22,012 ) $ 11,963 $ ( 10,049 ) The following table presents changes in the balances of each component of accumulated other comprehensive loss for the three and six months ended June 30, 2021 (in thousands): Foreign Currency Cash flow hedges Accumulated Other Comprehensive Income (Loss) Balance March 31, 2021 $ ( 20,041 ) $ ( 1,361 ) $ ( 21,402 ) Other comprehensive income (loss) before reclassifications 1,365 ( 91 ) 1,274 Reclassification out of accumulated other comprehensive income (loss) into other income (expense) for foreign currency and interest expense for cash flow hedges — 328 328 Balance June 30, 2021 $ ( 18,676 ) $ ( 1,124 ) $ ( 19,800 ) Foreign Currency Cash flow hedges Accumulated Other Comprehensive Income (Loss) Balance December 31, 2020 $ ( 24,680 ) $ ( 3,359 ) $ ( 28,039 ) Other comprehensive income before reclassifications 2,374 1,493 3,867 Reclassification out of accumulated other comprehensive income (loss) into other income (expense) for foreign currency and interest expense for cash flow hedges 3,630 742 4,372 Balance June 30, 2021 $ ( 18,676 ) $ ( 1,124 ) $ ( 19,800 ) We expect within the next twelve months to reclassify into earnings as a decrease to interest expense approximately $ 7.0 million of the amounts recorded within accumulated other comprehensive loss related to the interest rate swap agreements in effect as of June 30, 2022. 36 17. Lease Agreements As of June 30, 2022, we were the lessor to approximately 2,200 stores in our 30 consolidated outlet centers, under operating leases with initial terms that expire from 2022 to 2039, with certain agreements containing extension options. We also have certain agreements that require tenants to pay their portion of reimbursable expenses such as common area expenses, utilities, insurance and real estate taxes. The components of rental revenues are as follows (in thousands): Three months ended Six months ended June 30, June 30, 2022 2021 2022 2021 Rental revenues - fixed $ 78,682 $ 71,847 $ 159,991 $ 146,766 Rental revenues - variable (1) 22,727 24,977 46,027 47,525 Rental revenues $ 101,409 $ 96,824 $ 206,018 $ 194,291 (1) Primarily includes rents based on a percentage of tenant sales volume and reimbursable expenses such as common area expenses, utilities, insurance and real estate taxes. 18. Supplemental Cash Flow Information We purchase capital equipment and incur costs relating to construction of facilities, including tenant finishing allowances. Expenditures included in accounts payable and accrued expenses were as follows (in thousands): As of As of June 30, 2022 June 30, 2021 Costs relating to construction included in accounts payable and accrued expenses $ 15,223 $ 16,790 Interest paid, net of interest capitalized was as follows (in thousands): Six months ended June 30, 2022 2021 Interest paid $ 21,586 $ 25,559 19. New Accounting Pronouncements Recently issued accounting standards On March 12, 2020, the FASB issued Accounting Standards Update (“ASU”) 2020-04, Reference Rate Reform (Topic 848) - Facilitation of the Effects of Reference Rate Reform on Financial Reporting, which provides optional expedients and exceptions for applying GAAP to contracts, hedging relationships and other transactions that reference LIBOR or other reference rates expected to be discontinued because of reference rate reform. This ASU is effective as of March 12, 2020 through December 31, 2022. In January 2021, the FASB issued ASU 2021-01, Reference Rate Reform (Topic 848), which refines the scope of Topic 848 and clarifies some of its guidance. Specifically, certain provisions in Topic 848, if elected by an entity, apply to derivative instruments that use an interest rate for margining, discounting, or contract price alignment that is modified as a result of reference rate reform. Amendments to the expedients and exceptions in Topic 848 capture the incremental consequences of the scope clarification and tailor the existing guidance to derivative instruments affected by the discounting transition. The amendments are effective immediately for all entities. An entity may elect to apply the amendments on a full retrospective basis. We have not adopted any of the optional expedients or exceptions through June 30, 2022, but will continue to evaluate the possible adoption of any such expedients or exceptions during the effective period as circumstances evolve. 37 20. Subsequent Events Dividend Declaration In July 2022, the Company's Board of Directors declared a $ 0.20 cash dividend per common share payable on August 15, 2022 to each shareholder of record on July 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. 38