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) September 30, 2022 December 31, 2021 Assets Rental property: Land $ 277,041 $ 268,269 Buildings, improvements and fixtures 2,551,741 2,532,489 Construction in progress 14,133 — 2,842,915 2,800,758 Accumulated depreciation ( 1,212,218 ) ( 1,145,388 ) Total rental property, net 1,630,697 1,655,370 Cash and cash equivalents 180,550 161,152 Investments in unconsolidated joint ventures 74,703 82,647 Deferred lease costs and other intangibles, net 63,996 73,720 Operating lease right-of-use assets 78,933 79,807 Prepaids and other assets 128,569 104,362 Total assets $ 2,157,448 $ 2,157,058 Liabilities and Equity Liabilities Debt: Senior, unsecured notes, net $ 1,037,541 $ 1,036,181 Unsecured term loan, net 298,964 298,421 Mortgages payable, net 58,958 62,474 Unsecured lines of credit — — Total debt 1,395,463 1,397,076 Accounts payable and accrued expenses 76,250 92,669 Operating lease liabilities 88,046 88,874 Other liabilities 82,030 78,650 Total liabilities 1,641,789 1,657,269 Commitments and contingencies Equity Partners’ Equity: General partner, 1,100,000 units outstanding at September 30, 2022 and 1,100,000 units at December 31, 2021, respectively 4,566 4,539 Limited partners, 4,761,559 and 4,761,559 Class A common units, and 103,246,428 and 102,984,734 Class B common units outstanding at September 30, 2022 and December 31, 2021, respectively 523,059 514,023 Accumulated other comprehensive loss ( 11,966 ) ( 18,773 ) Total partners’ equity 515,659 499,789 Noncontrolling interests in consolidated partnerships — — Total equity 515,659 499,789 Total liabilities and equity $ 2,157,448 $ 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 September 30, Nine months ended September 30, 2022 2021 2022 2021 Revenues: Rental revenues $ 105,569 $ 107,265 $ 311,587 $ 301,556 Management, leasing and other services 1,897 1,641 4,860 4,372 Other revenues 3,980 3,559 9,705 8,504 Total revenues 111,446 112,465 326,152 314,432 Expenses: Property operating 36,076 37,186 105,531 103,747 General and administrative 17,370 14,817 52,166 47,310 Depreciation and amortization 25,445 26,944 77,908 82,826 Total expenses 78,891 78,947 235,605 233,883 Other income (expense): Interest expense ( 11,660 ) ( 13,282 ) ( 34,870 ) ( 40,982 ) Loss on early extinguishment of debt — ( 33,821 ) — ( 47,860 ) Other income (expense) 1,395 253 4,154 ( 2,598 ) Total other income (expense) ( 10,265 ) ( 46,850 ) ( 30,716 ) ( 91,440 ) Income (loss) before equity in earnings of unconsolidated joint ventures 22,290 ( 13,332 ) 59,831 ( 10,891 ) Equity in earnings of unconsolidated joint ventures 2,055 2,261 6,795 6,758 Net income (loss) 24,345 ( 11,071 ) 66,626 ( 4,133 ) Noncontrolling interests in consolidated partnerships — — — — Net income (loss) available to partners 24,345 ( 11,071 ) 66,626 ( 4,133 ) Net income (loss) available to limited partners 24,102 ( 10,959 ) 65,958 ( 4,095 ) Net income (loss) available to general partner $ 243 $ ( 112 ) $ 668 $ ( 38 ) Basic earnings per common unit: Net income (loss) $ 0.22 $ ( 0.11 ) $ 0.61 $ ( 0.05 ) Diluted earnings per common unit: Net income (loss) $ 0.22 $ ( 0.11 ) $ 0.60 $ ( 0.05 ) 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 September 30, Nine months ended September 30, 2022 2021 2022 2021 Net income (loss) $ 24,345 $ ( 11,071 ) $ 66,626 $ ( 4,133 ) Other comprehensive income (loss): Foreign currency translation adjustments ( 4,875 ) ( 2,142 ) ( 6,090 ) 3,862 Changes in fair value of cash flow hedges 2,958 108 12,897 2,343 Other comprehensive income (loss) ( 1,917 ) ( 2,034 ) 6,807 6,205 Comprehensive income (loss) 22,428 ( 13,105 ) 73,433 2,072 Comprehensive (income) attributable to noncontrolling interests in consolidated partnerships — — — — Comprehensive income (loss) attributable to the Operating Partnership $ 22,428 $ ( 13,105 ) $ 73,433 $ 2,072 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, June 30, 2021 $ 4,909 $ 538,376 $ ( 19,800 ) $ 523,485 $ — $ 523,485 Net loss ( 112 ) ( 10,959 ) — ( 11,071 ) — ( 11,071 ) Other comprehensive loss — — ( 2,034 ) ( 2,034 ) — ( 2,034 ) Compensation under Incentive Award Plan — 3,012 — 3,012 — 3,012 Issuance of 17,240 common units upon exercise of options — 99 — 99 — 99 Issuance of 331,682 common units — 6,093 — 6,093 — 6,093 Withholding of 8,756 common units for employee income taxes — ( 150 ) — ( 150 ) — ( 150 ) Grant of 23,488 restricted common share awards by the Company — — — — — — Common distributions ($ 0.3600 per unit) (1) ( 396 ) ( 38,878 ) — ( 39,274 ) — ( 39,274 ) Balance, September 30, 2021 $ 4,401 $ 497,593 $ ( 21,834 ) $ 480,160 $ — $ 480,160 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 loss ( 38 ) ( 4,095 ) — ( 4,133 ) — ( 4,133 ) Other comprehensive income — — 6,205 6,205 — 6,205 Compensation under Incentive Award Plan — 9,686 — 9,686 — 9,686 Issuance of 32,740 common units upon exercise of options — 188 — 188 — 188 Issuance of 10,009,263 common units 1,874 185,095 — 186,969 — 186,969 Withholding of 120,733 common units for employee income taxes — ( 1,787 ) — ( 1,787 ) — ( 1,787 ) Grant of 493,163 restricted common share awards by the Company — — — — — — Common distributions ($ 0.7150 per unit) (2) ( 769 ) ( 75,082 ) — ( 75,851 ) — ( 75,851 ) Balance, September 30, 2021 $ 4,401 $ 497,593 $ ( 21,834 ) $ 480,160 $ — $ 480,160 (1) Includes a $ 0.1775 cash distribution per common unit declared and paid during the third quarter of 2021 and a cash distribution declared in September 2021 payable in November 2021 of $ 0.1825 per common unit. (2) Includes a $ 0.5325 cash distribution per common unit declared and paid during the first nine months of 2021 and a cash distribution declared in September 2021 payable in November 2021 of $ 0.1825 per common unit. 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, June 30, 2022 $ 4,543 $ 518,081 $ ( 10,049 ) $ 512,575 $ — $ 512,575 Net income 243 24,102 — 24,345 — 24,345 Other comprehensive loss — — ( 1,917 ) ( 1,917 ) — ( 1,917 ) Compensation under Incentive Award Plan — 3,057 — 3,057 — 3,057 Issuance of 5,000 common units upon exercise of options — 28 — 28 — 28 Withholding of 37,792 common units for employee income taxes — ( 538 ) — ( 538 ) — ( 538 ) Common distributions ($ 0.20 per unit) ( 220 ) ( 21,671 ) — ( 21,891 ) — ( 21,891 ) Balance, September 30, 2022 $ 4,566 $ 523,059 $ ( 11,966 ) $ 515,659 $ — $ 515,659 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 668 65,958 — 66,626 — 66,626 Other comprehensive income — — 6,807 6,807 — 6,807 Compensation under Incentive Award Plan — 10,102 — 10,102 — 10,102 Issuance of 7,700 common units upon exercise of options — 43 — 43 — 43 Withholding of 229,770 common units for employee income taxes — ( 3,741 ) — ( 3,741 ) — ( 3,741 ) Grant of 483,764 restricted common share awards by the Company — — — — — — Common distributions ($ 0.5825 per unit) ( 641 ) ( 63,326 ) — ( 63,967 ) — ( 63,967 ) Balance, September 30, 2022 $ 4,566 $ 523,059 $ ( 11,966 ) $ 515,659 $ — $ 515,659 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) Nine months ended September 30, 2022 2021 OPERATING ACTIVITIES Net income (loss) $ 66,626 $ ( 4,133 ) Adjustments to reconcile net income (loss) to net cash provided by operating activities: Depreciation and amortization 77,908 82,826 Amortization of deferred financing costs 2,302 3,170 Loss on early extinguishment of debt — 47,860 Equity in earnings of unconsolidated joint ventures ( 6,795 ) ( 6,758 ) Equity-based compensation expense 9,965 9,602 Amortization of debt (premiums) and discounts, net 372 333 Amortization (accretion) of market rent rate adjustments, net 499 151 Straight-line rent adjustments 1,190 1,137 Distributions of cumulative earnings from unconsolidated joint ventures 6,794 7,068 Other non-cash ( 2,418 ) 3,638 Changes in other assets and liabilities: Other assets ( 17,737 ) 5,506 Accounts payable and accrued expenses ( 16,020 ) ( 6,671 ) Net cash provided by operating activities 122,686 143,729 INVESTING ACTIVITIES Additions to rental property ( 45,748 ) ( 23,685 ) 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 ( 5,775 ) ( 1,664 ) Distributions in excess of cumulative earnings from unconsolidated joint ventures 8,099 16,023 Additions to deferred lease costs ( 1,686 ) ( 5,333 ) Other investing activities ( 871 ) 11,602 Net cash used in investing activities ( 31,371 ) ( 1,928 ) FINANCING ACTIVITIES Cash distributions paid ( 63,967 ) ( 55,938 ) Proceeds from notes, mortgages and loans — 394,208 Repayments of notes, mortgages and loans ( 3,300 ) ( 552,811 ) Payment of make-whole premium related to early extinguishment of debt — ( 44,872 ) Employee income taxes paid related to shares withheld upon vesting of equity awards ( 3,741 ) ( 1,787 ) Additions to deferred financing costs 1 ( 8,703 ) Proceeds from exercise of options 43 188 Proceeds from the Company’s common share offering — 186,969 Payment for other financing activities ( 860 ) ( 861 ) Net cash used in financing activities ( 71,824 ) ( 83,607 ) Effect of foreign currency on cash and cash equivalents ( 93 ) ( 131 ) Net increase in cash and cash equivalents 19,398 58,063 Cash and cash equivalents, beginning of period 161,152 84,750 Cash and cash equivalents, end of period $ 180,550 $ 142,813 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 September 30, 2022, we owned and operated 30 consolidated outlet centers, with a total gross leasable area of approximately 11.5 million square feet, one managed center and one center under construction. 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 September 30, 2022, the Company and its wholly-owned subsidiaries owned 104,346,428 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 $ 51.8 million as of September 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 nine months ended September 30, 2022 and September 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 September 30, 2022: Project Approximate Square Feet (in 000’s) Costs Incurred to Date (in millions) Projected Opening New Development: Nashville 290 $ 21.8 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 September 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 $ 74.7 — $ 74.7 Investments included in other liabilities: Columbus (2) Columbus, OH 50.0 % 355 $ ( 1.0 ) $ 70.5 Charlotte (2) Charlotte, NC 50.0 % 399 ( 18.5 ) 99.6 National Harbor (2) National Harbor, MD 50.0 % 341 ( 12.3 ) 94.6 Galveston/Houston (2) Texas City, TX 50.0 % 353 ( 15.4 ) 64.4 $ ( 47.2 ) 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 $ 1.3 million as of September 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 Nine months ended September 30, September 30, 2022 2021 2022 2021 Fee: Management and marketing $ 661 $ 530 $ 1,749 $ 1,575 Leasing and other fees 61 72 96 231 Expense reimbursements from unconsolidated joint ventures 1,175 1,039 3,015 2,566 Total Fees $ 1,897 $ 1,641 $ 4,860 $ 4,372 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 September 30, 2022 and December 31, 2021, respectively) are amortized over the various useful lives of the related assets. Columbus In September 2022, the Columbus joint venture completed the refinance of its mortgage. The new $ 71.0 million non-recourse loan has a maturity date of October 2032 and a fixed interest rate of 6.25 %. 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 September 30, 2022 December 31, 2021 Assets Land $ 81,339 $ 83,568 Buildings, improvements and fixtures 454,993 467,918 Construction in progress 328 744 536,660 552,230 Accumulated depreciation ( 177,126 ) ( 166,096 ) Total rental property, net 359,534 386,134 Cash and cash equivalents 14,865 19,030 Deferred lease costs and other intangibles, net 3,001 3,517 Prepaids and other assets 12,375 13,109 Total assets $ 389,775 $ 421,790 Liabilities and Owners’ Equity Mortgages payable, net $ 329,165 $ 329,460 Accounts payable and other liabilities 13,166 15,231 Total liabilities 342,331 344,691 Owners’ equity 47,444 77,099 Total liabilities and owners’ equity $ 389,775 $ 421,790 21 Three months ended Nine months ended Condensed Combined Statements of Operations - Unconsolidated Joint Ventures September 30, September 30, 2022 2021 2022 2021 Revenues $ 22,418 $ 22,071 $ 65,925 $ 65,664 Expenses: Property operating 8,992 8,735 25,730 25,597 General and administrative 77 87 210 173 Depreciation and amortization 5,631 5,749 16,653 17,413 Total expenses 14,700 14,571 42,593 43,183 Other income (expense): Interest expense ( 3,721 ) ( 2,913 ) ( 9,795 ) ( 8,769 ) Gain on sale of assets — — — 503 Other income 111 2 117 157 Total other expense ( 3,610 ) ( 2,911 ) ( 9,678 ) ( 8,109 ) Net income $ 4,108 $ 4,589 $ 13,654 $ 14,372 The Company and Operating Partnership’s share of: Net income $ 2,055 $ 2,261 $ 6,795 $ 6,758 Depreciation and amortization (real estate related) $ 2,871 $ 2,908 $ 8,416 $ 8,817 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 September 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 September 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 September 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 $ 347,752 $ 350,000 $ 347,329 Senior notes 3.875 % July 2027 300,000 298,041 300,000 297,742 Senior notes 2.750 % September 2031 400,000 391,747 400,000 391,110 Mortgages payable: Atlantic City (2) (3) 6.44 % - 7.65 % December 2024- December 2026 18,250 18,837 21,550 22,387 Southaven LIBOR + 1.80 % April 2023 40,144 40,122 40,144 40,087 Unsecured term loan LIBOR + 1.25 % April 2024 300,000 298,964 300,000 298,421 Unsecured lines of credit LIBOR + 1.20 % July 2025 — — — — $ 1,408,394 $ 1,395,463 $ 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 $ 143.2 million at September 30, 2022, serve as collateral for mortgages payable. As of September 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 September 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 term loans, we may include a guaranty of completion as well as a principal guaranty ranging from 0 % to 15.5 % of principal. As of September 30, 2022, the maximum amount of unconsolidated joint venture debt guaranteed by the Company was $ 10.0 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 September 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 September 30, 2022 for the next five years and thereafter are as follows (in thousands): Calendar Year Amount For the remainder of 2022 $ 1,141 2023 44,917 2024 305,130 2025 1,501 2026 355,705 Thereafter 700,000 Subtotal 1,408,394 Net discount and debt origination costs ( 12,931 ) Total $ 1,395,463 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 September 30, 2022 December 31, 2021 Assets (Liabilities) (1) : Interest rate swaps: July 1, 2019 February 1, 2024 $ 25,000 1 month LIBOR 1.75 % $ 847 $ ( 459 ) January 1, 2021 February 1, 2024 150,000 1 month LIBOR 0.60 % 7,349 828 January 1, 2021 February 1, 2024 100,000 1 month LIBOR 0.22 % 5,386 1,331 March 1, 2021 February 1, 2024 25,000 1 month LIBOR 0.24 % 1,340 326 Total $ 14,922 $ 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 September 30, Nine months ended September 30, 2022 2021 2022 2021 Interest Rate Swaps: Amount of gain (loss) recognized in other comprehensive income (loss) $ 2,957 $ 108 $ 12,896 $ 2,343 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 September 30, 2022: Assets: Short-term government securities ( cash and cash equivalents) $ 174,488 $ 174,488 $ — $ — Bank certificate of deposit (prepaids and other assets) 20,000 20,000 — — Interest rate swaps (prepaids and other assets) 14,922 — 14,922 — Total assets $ 209,410 $ 194,488 $ 14,922 $ — 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 and our certificate of deposit 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): September 30, 2022 December 31, 2021 Level 1 Quoted Prices in Active Markets for Identical Assets or Liabilities $ — $ — Level 2 Significant Observable Inputs 866,497 1,079,234 Level 3 Significant Unobservable Inputs 358,240 366,103 Total fair value of debt $ 1,224,737 $ 1,445,337 Recorded value of debt $ 1,395,463 $ 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 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. 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 September 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 September 30, Nine months ended September 30, 2022 2021 2022 2021 Number of common shares settled during the period — 331,682 — 10,009,263 Average price per share $ — $ 18.85 $ — $ 18.97 Aggregate gross proceeds (in thousands) $ — $ 6,253 $ — $ 189,868 Aggregate net proceeds after commissions and fees (in thousands) $ — $ 6,092 $ — $ 186,969 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 nine months ended September 30, 2022 and 2021. The remaining amount authorized to be repurchased under the program as of September 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 nine months ended September 30, 2022 and September 30, 2021: Limited Partnership Units General Partnership Units Class A Class B Total Balance June 30, 2021 1,100,000 4,794,643 102,520,580 107,315,223 Options exercised — — 17,240 17,240 Issuance of units — — 331,682 331,682 Grant of restricted common share awards by the Company, net of forfeitures — — 23,488 23,488 Units withheld for employee income taxes — — ( 8,756 ) ( 8,756 ) Balance September 30, 2021 1,100,000 4,794,643 102,884,234 107,678,877 Balance December 31, 2020 1,000,000 4,794,643 92,569,801 97,364,444 Options exercised — — 32,740 32,740 Issuance of units 100,000 — 9,909,263 9,909,263 Grant of restricted common share awards by the Company, net of forfeitures — — 493,163 493,163 Units withheld for employee income taxes — — ( 120,733 ) ( 120,733 ) Balance September 30, 2021 1,100,000 4,794,643 102,884,234 107,678,877 Balance June 30, 2022 1,100,000 4,761,559 103,294,792 108,056,351 Options exercised — — 5,000 5,000 Forfeitures of restricted common share awards by the Company — — ( 15,572 ) ( 15,572 ) Units withheld for employee income taxes — — ( 37,792 ) ( 37,792 ) Balance September 30, 2022 1,100,000 4,761,559 103,246,428 108,007,987 Balance December 31, 2021 1,100,000 4,761,559 102,984,734 107,746,293 Options exercised — — 7,700 7,700 Grant of restricted common share awards by the Company, net of forfeitures — — 483,764 483,764 Units withheld for employee income taxes — — ( 229,770 ) ( 229,770 ) Balance September 30, 2022 1,100,000 4,761,559 103,246,428 108,007,987 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 September 30, Nine months ended September 30, 2022 2021 2022 2021 Numerator: Net income (loss) attributable to Tanger Factory Outlet Centers, Inc. $ 23,276 $ ( 10,579 ) $ 63,699 $ ( 3,968 ) Less allocation of earnings to participating securities ( 232 ) ( 401 ) ( 669 ) ( 804 ) Net income (loss) available to common shareholders of Tanger Factory Outlet Centers, Inc. $ 23,044 $ ( 10,980 ) $ 63,030 $ ( 4,772 ) Denominator: Basic weighted average common shares 103,749 103,269 103,655 99,446 Effect of notional units 527 — 473 — Effect of outstanding options 661 — 701 — Diluted weighted average common shares 104,937 103,269 104,829 99,446 Basic earnings per common share: Net income (loss) $ 0.22 $ ( 0.11 ) $ 0.61 $ ( 0.05 ) Diluted earnings per common share: Net income (loss) $ 0.22 $ ( 0.11 ) $ 0.60 $ ( 0.05 ) 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 nine months ended September 30, 2022, approximately 601,000 notional units were excluded from the computation and for both the three and nine months ended September 30, 2021, approximately 1.8 million notional units were excluded from the computation because these notional units either would not have been issuable if the end of the reporting period were the end of the contingency period or as they were anti-dilutive. With respect to outstanding options, the effect of dilutive common shares is determined using the treasury stock method, whereby outstanding options are assumed exercised at the beginning of the reporting period and the exercise proceeds from such options and the average measured but unrecognized compensation cost during the period are assumed to be used to repurchase our common shares at the average market price during the period. For both the three and nine months ended September 30, 2022, approximately 274,000 options were excluded from the computation and for both the three and nine months ended September 30, 2021, approximately 1.6 million options were excluded from the computation, as they were anti-dilutive. The assumed exchange of the partnership units held by the Non-Company LPs as of the beginning of the year, which would result in the elimination of earnings allocated to the noncontrolling interest in the Operating Partnership, would have no impact on earnings per share since the allocation of earnings to a common limited partnership unit, as if exchanged, is equivalent to earnings allocated to a common share. Certain of the Company’s unvested restricted common share awards contain non-forfeitable rights to dividends or dividend equivalents. The impact of these unvested restricted common share awards on earnings per share has been calculated using the two-class method whereby earnings are allocated to the unvested restricted common share awards based on dividends declared and the unvested restricted common shares’ participation rights in undistributed earnings. Unvested restricted common shares that do not contain non-forfeitable rights to dividends or dividend equivalents are included in the diluted earnings per share computation if the effect is dilutive, using the treasury stock method. 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 September 30, Nine months ended September 30, 2022 2021 2022 2021 Numerator: Net income (loss) attributable to partners of the Operating Partnership $ 24,345 $ ( 11,071 ) $ 66,626 $ ( 4,133 ) Less allocation of earnings to participating securities ( 232 ) ( 401 ) ( 669 ) ( 804 ) Net income (loss) available to common unitholders of the Operating Partnership $ 24,113 $ ( 11,472 ) $ 65,957 $ ( 4,937 ) Denominator: Basic weighted average common units 108,511 108,063 108,417 104,241 Effect of notional units 527 — 473 — Effect of outstanding options 661 — 701 — Diluted weighted average common units 109,699 108,063 109,591 104,241 Basic earnings per common unit: Net income (loss) $ 0.22 $ ( 0.11 ) $ 0.61 $ ( 0.05 ) Diluted earnings per common unit: Net income (loss) $ 0.22 $ ( 0.11 ) $ 0.60 $ ( 0.05 ) 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 nine months ended September 30, 2022, approximately 601,000 notional units were excluded from the computation and for both the three and nine months ended September 30, 2021, approximately 1.8 million notional units were excluded from the computation because these notional units either would not have been issuable if the end of the reporting period were the end of the contingency period or as they were anti-dilutive. With respect to outstanding options, the effect of dilutive common units is determined using the treasury stock method, whereby outstanding options are assumed exercised at the beginning of the reporting period and the exercise proceeds from such options and the average measured but unrecognized compensation cost during the period are assumed to be used to repurchase our common units at the average market price during the period. The market price of a common unit is considered to be equivalent to the market price of a Company common share. For both the three and nine months ended September 30, 2022, approximately 274,000 options were excluded from the computation and for both the three and nine months ended September 30, 2021, approximately 1.6 million options were excluded from the computation, as they were anti-dilutive. Certain of the Company’s unvested restricted common share awards contain non-forfeitable rights to distributions or distribution equivalents. The impact of the corresponding unvested restricted unit awards on earnings per unit has been calculated using the two-class method whereby earnings are allocated to the unvested restricted unit awards based on distributions declared and the unvested restricted units’ participation rights in undistributed earnings. Unvested restricted common units that do not contain non-forfeitable rights to dividends or dividend equivalents are included in the diluted earnings per unit computation if the effect is dilutive, using the treasury stock method. 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 Nine months ended September 30, September 30, 2022 2021 2022 2021 Restricted common shares (1) $ 1,705 $ 1,937 $ 5,919 $ 6,050 Notional unit performance awards (1) 1,227 962 3,802 3,257 Options 74 95 244 296 Total equity-based compensation $ 3,006 $ 2,994 $ 9,965 $ 9,603 (1) Each of the three and nine months ended September 30, 2022 and nine months ended September 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 Nine months ended September 30, September 30, 2022 2021 2022 2021 Equity-based compensation expense capitalized $ 51 $ 18 $ 137 $ 84 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 229,700 and 121,000 for the nine months ended September 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 $ 3.7 million and $ 1.8 million for the nine months ended September 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 nine months ended September 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 nine months ended September 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 June 30, 2022 $ ( 20,875 ) $ 11,455 $ ( 9,420 ) $ ( 1,137 ) $ 508 $ ( 629 ) Other comprehensive income (loss) before reclassifications ( 4,661 ) 4,054 ( 607 ) ( 214 ) 186 ( 28 ) Reclassification out of accumulated other comprehensive income (loss) into other income (expense) for foreign currency and interest expense for cash flow hedges — ( 1,226 ) ( 1,226 ) — ( 56 ) ( 56 ) Balance September 30, 2022 $ ( 25,536 ) $ 14,283 $ ( 11,253 ) $ ( 1,351 ) $ 638 $ ( 713 ) 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 ( 5,823 ) 12,995 7,172 ( 267 ) 596 329 Reclassification out of accumulated other comprehensive income (loss) into other income (expense) for foreign currency and interest expense for cash flow hedges — ( 664 ) ( 664 ) — ( 30 ) ( 30 ) Balance September 30, 2022 $ ( 25,536 ) $ 14,283 $ ( 11,253 ) $ ( 1,351 ) $ 638 $ ( 713 ) 34 The following table presents changes in the balances of each component of accumulated other comprehensive loss for the three and nine months ended September 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 June 30, 2021 $ ( 17,685 ) $ ( 1,058 ) $ ( 18,743 ) $ ( 991 ) $ ( 66 ) $ ( 1,057 ) Other comprehensive loss before reclassifications ( 2,047 ) ( 222 ) ( 2,269 ) ( 95 ) ( 11 ) ( 106 ) Reclassification out of accumulated other comprehensive income (loss) into other income (expense) for foreign currency and interest expense for cash flow hedges — 326 326 — 15 15 Balance September 30, 2021 $ ( 19,732 ) $ ( 954 ) $ ( 20,686 ) $ ( 1,086 ) $ ( 62 ) $ ( 1,148 ) 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 204 1,200 1,404 28 60 88 Reclassification out of accumulated other comprehensive income (loss) into other income (expense) for foreign currency and interest expense for cash flow hedges 3,463 1,032 4,495 167 51 218 Balance September 30, 2021 $ ( 19,732 ) $ ( 954 ) $ ( 20,686 ) $ ( 1,086 ) $ ( 62 ) $ ( 1,148 ) We expect within the next twelve months to reclassify into earnings as a decrease to interest expense approximately $ 10.5 million of the amounts recorded within accumulated other comprehensive loss related to the interest rate swap agreements in effect as of September 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 nine months ended September 30, 2022 (in thousands): Foreign Currency Cash flow hedges Accumulated Other Comprehensive Income (Loss) Balance June 30, 2022 $ ( 22,012 ) $ 11,963 $ ( 10,049 ) Other comprehensive income (loss) before reclassifications ( 4,875 ) 4,240 ( 635 ) Reclassification out of accumulated other comprehensive income (loss) into other income (expense) for foreign currency and interest expense for cash flow hedges — ( 1,282 ) ( 1,282 ) Balance September 30, 2022 $ ( 26,887 ) $ 14,921 $ ( 11,966 ) 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 ( 6,090 ) 13,591 7,501 Reclassification out of accumulated other comprehensive income (loss) into other income (expense) for foreign currency and interest expense for cash flow hedges — ( 694 ) ( 694 ) Balance September 30, 2022 $ ( 26,887 ) $ 14,921 $ ( 11,966 ) The following table presents changes in the balances of each component of accumulated other comprehensive loss for the three and nine months ended September 30, 2021 (in thousands): Foreign Currency Cash flow hedges Accumulated Other Comprehensive Income (Loss) Balance June 30, 2021 $ ( 18,676 ) $ ( 1,124 ) $ ( 19,800 ) Other comprehensive loss before reclassifications ( 2,142 ) ( 233 ) ( 2,375 ) Reclassification out of accumulated other comprehensive income (loss) into other income (expense) for foreign currency and interest expense for cash flow hedges — 341 341 Balance September 30, 2021 $ ( 20,818 ) $ ( 1,016 ) $ ( 21,834 ) 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 232 1,260 1,492 Reclassification out of accumulated other comprehensive income (loss) into other income (expense) for foreign currency and interest expense for cash flow hedges 3,630 1,083 4,713 Balance September 30, 2021 $ ( 20,818 ) $ ( 1,016 ) $ ( 21,834 ) We expect within the next twelve months to reclassify into earnings as a decrease to interest expense approximately $ 10.5 million of the amounts recorded within accumulated other comprehensive loss related to the interest rate swap agreements in effect as of September 30, 2022. 36 17. Lease Agreements As of September 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 Nine months ended September 30, September 30, 2022 2021 2022 2021 Rental revenues - fixed $ 79,427 $ 76,295 $ 239,417 $ 223,062 Rental revenues - variable (1) 26,142 30,970 72,170 78,494 Rental revenues $ 105,569 $ 107,265 $ 311,587 $ 301,556 (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 September 30, 2022 September 30, 2021 Costs relating to construction included in accounts payable and accrued expenses $ 10,525 $ 10,018 Dividends payable were as follows (in thousands): As of As of September 30, 2022 September 30, 2021 Dividends payable $ — $ 19,913 Interest paid, net of interest capitalized was as follows (in thousands): Nine months ended September 30, 2022 2021 Interest paid $ 40,474 $ 42,806 37 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. As of September 30, 2022 we had not adopted any of the optional expedients or exceptions, however in October 2022 we elected to apply the hedge accounting expedients related to probability and the assessments of effectiveness for future LIBOR-indexed cash flows to assume that the index upon which future hedged transactions will be based matches the index on the corresponding derivatives. This was done as we modified all of our current interest rate derivative contract indexes from LIBOR to Adjusted SOFR. We have and will continue to elect to apply practical expedients related to contract modifications, changes in critical terms, and updates to the designated hedged risk(s) as qualifying changes are made to applicable debt and derivative instruments. Application of these expedients preserves the presentation of derivatives contracts consistent with past presentation. We continue to evaluate the impact of the guidance and may apply other applicable elections as additional changes in the market and with respect to our debt and derivative instruments occur. 20. Subsequent Events Memphis Consolidated Joint Venture In October 2022, the Southaven, MS joint venture amended and restated its secured term loan, increasing the outstanding balance to $ 51.7 million from $ 40.1 million, extending maturity from April 2023 to October 2026 plus a one year extension option, with an interest rate of Adjusted SOFR plus 200 basis points. Operating Partnership Term Loan In October 2022, we amended and restated our unsecured term loan. The outstanding balance was increased from $ 300.0 million to $ 325.0 million and the maturity was extended to January 2027 plus a one-year extension option. The interest rate changed from LIBOR + 1.25 % to Adjusted SOFR + 1.20 % based on our current credit rating. The amendment also incorporates a sustainability metric, reducing the applicable grid-based interest rate spread by one basis point annually, subject to meeting certain thresholds. Dividend Declaration In October 2022, the Company's Board of Directors declared a $ 0.22 cash dividend per common share payable on November 15, 2022 to each shareholder of record on October 31, 2022, and in its capacity as General Partner of the Operating Partnership a $ 0.22 cash distribution per Operating Partnership unit to the Operating Partnership's unitholders. 38