TANGER INC. 10-K/A

ITEM 2. PROPERTIES As of December 31, 2021, our consolidated portfolio consisted of 30 outlet centers totaling 11.5 million square feet located in 18 states. We own interests in six other outlet centers totaling approximately 2.1 million square feet through unconsolidated joint ventures, including two outlet centers in Canada. Our consolidated outlet centers range in size from 104,009 to 739,148 square feet. The outlet centers are generally located near tourist destinations or along major interstate highways to provide visibility and accessibility to potential customers. We believe that the outlet centers are well diversified geographically and by tenant and that we are not dependent upon any single property or tenant. The outlet center in Deer Park, New York is the only property that comprises 10% or more of our consolidated total assets as of December 31, 2021. No property comprises more than 10% of our consolidated revenues for the year ended December 31, 2021. See "Properties - Significant Property" for further details. We have an ongoing strategy of acquiring outlet centers, developing new outlet centers and expanding existing outlet centers. See “Management's Discussion and Analysis of Financial Condition and Results of Operations - Liquidity and Capital Resources” for a discussion of the cost of such programs and the sources of financing thereof. As of December 31, 2021, of the 30 outlet centers in our consolidated portfolio, we own the land underlying 24 and have ground leases on six. The following table sets forth information about the land leases on which all or a portion of the outlet centers are located: Outlet Center Acres Expiration Expiration including renewal terms at our option Myrtle Beach Hwy 17, SC 40.0 2027 2096 Atlantic City, NJ 21.3 2101 2101 Sevierville, TN 43.6 2086 2086 Riverhead, NY 47.0 2024 2039 Mashantucket, CT (Foxwoods) 8.1 2040 2090 Rehoboth Beach, DE 2.7 2044 (1) (1) Lease may be renewed at our option for additional terms of twenty years each. Generally, our leases with our outlet center tenants typically have an initial term that ranges from 5 to 10 years and provide for the payment of fixed monthly rent in advance. There are often contractual base rent increases during the initial term of the lease. In addition, the rental payments are customarily subject to upward adjustments based upon tenant sales volume. A component of most leases includes a pro-rata share or escalating fixed contributions by the tenant for property operating expenses, including common area maintenance, real estate taxes, insurance and advertising and promotion, thereby reducing exposure to increases in costs and operating expenses resulting from inflation. 25 The following table summarizes certain information with respect to our consolidated outlet centers as of December 31, 2021: State Number of Outlet Centers Square Feet % of Square Feet South Carolina 5 1,605,812 14 New York 2 1,468,429 13 Georgia 3 1,121,579 10 Pennsylvania 3 999,442 9 Texas 2 823,557 7 Michigan 2 671,565 6 Alabama 1 554,649 5 Delaware 1 549,890 5 New Jersey 1 487,718 4 Tennessee 1 447,810 4 North Carolina 2 422,895 3 Arizona 1 410,753 3 Florida 1 351,721 3 Missouri 1 329,861 3 Mississippi 1 324,720 3 Louisiana 1 321,066 3 Connecticut 1 311,229 3 New Hampshire 1 250,139 2 Total 30 11,452,835 100 26 The following table summarizes certain information with respect to our existing outlet centers in which we have an ownership interest as of December 31, 2021. Except as noted, all properties are fee owned: Location Legal Ownership % Square Feet % Occupied Consolidated Outlet Centers Deer Park, New York 100 739,148 95 Riverhead, New York (1) 100 729,281 95 Foley, Alabama 100 554,649 92 Rehoboth Beach, Delaware (1) 100 549,890 94 Atlantic City, New Jersey (1) (3) 100 487,718 80 San Marcos, Texas 100 471,816 95 Sevierville, Tennessee (1) 100 447,810 100 Savannah, Georgia 100 429,089 100 Myrtle Beach Hwy 501, South Carolina 100 426,523 98 Glendale, Arizona (Westgate) 100 410,753 100 Myrtle Beach Hwy 17, South Carolina (1) 100 404,710 100 Charleston, South Carolina 100 386,328 100 Lancaster, Pennsylvania 100 375,883 100 Pittsburgh, Pennsylvania 100 373,863 97 Commerce, Georgia 100 371,408 99 Grand Rapids, Michigan 100 357,127 89 Fort Worth, Texas 100 351,741 100 Daytona Beach, Florida 100 351,721 99 Branson, Missouri 100 329,861 99 Southaven, Mississippi (2) (3) 50 324,720 100 Locust Grove, Georgia 100 321,082 100 Gonzales, Louisiana 100 321,066 93 Mebane, North Carolina 100 318,886 100 Howell, Michigan 100 314,438 78 Mashantucket, Connecticut (Foxwoods) (1) 100 311,229 79 Tilton, New Hampshire 100 250,139 81 Hershey, Pennsylvania 100 249,696 100 Hilton Head II, South Carolina 100 206,564 100 Hilton Head I, South Carolina 100 181,687 97 Blowing Rock, North Carolina 100 104,009 100 Total 11,452,835 95 (1) These properties or a portion thereof are subject to a ground lease. (2) Based on capital contribution and distribution provisions in the joint venture agreement, we expect our economic interest in the venture's cash flow to be greater than our legal ownership percentage. We currently receive substantially all the economic interest of the property. (3) Property encumbered by mortgage. See Notes 7 and 8 to the consolidated financial statements for further details of our debt obligations. 27 Location Legal Ownership % Square Feet % Occupied Unconsolidated joint venture properties Charlotte, North Carolina (1) 50 398,698 99 Ottawa, Ontario 50 357,209 96 Columbus, Ohio (1) 50 355,245 97 Texas City, Texas (Galveston/Houston) (1) 50 352,705 95 National Harbor, Maryland (1) 50 341,156 99 Cookstown, Ontario 50 307,883 93 Total 2,112,896 97 (1) Property encumbered by mortgage. See Note 5 to the consolidated financial statements for further details of our joint ventures' debt obligations. Base Rents and Occupancy Rates The following table sets forth our year end occupancy and average annual base rent per square foot during each of the last five calendar years for our consolidated outlet centers: 2021 2020 (2) 2019 2018 2017 Occupancy 95 % 92 % 97 % 97 % 97 % Average annual base rent per square foot $ 23.79 $ 21.10 $ 25.35 $ 25.51 $ 25.81 (1) Average annual base rent per square foot is calculated based on base rental revenues recognized during the year on a straight-line basis including non-cash adjustments to base rent required by United States Generally Accepted Accounting Principles ("GAAP") and the effects of inducements and rent concessions divided by the weighted average square feet of the consolidated portfolio. (2) The decline in the average annual base rent per square foot in 2020 compared to previous years reflects the decline in occupancy from 97% in 2019 to 92% in 2020 and rent modifications primarily due to a number of tenants filing bankruptcy during 2020. 28 Lease Expirations The following table sets forth, as of December 31, 2021, scheduled lease expirations for our consolidated outlet centers, assuming none of the tenants exercise renewal options: Year No. of Leases Expiring Approx. Square Feet (in 000's) (1) Average Annualized Base Rent per sq. ft Annualized Base Rent (in 000's) (2) % of Annualized Base Rent Represented by Expiring Leases 2022 377 1,768 $ 25.44 $ 44,970 18 2023 280 1,383 26.95 37,280 16 2024 247 1,123 31.02 34,847 14 2025 248 1,349 27.00 36,416 15 2026 209 1,028 28.41 29,211 12 2027 118 583 31.47 18,359 7 2028 118 770 26.63 20,499 8 2029 76 328 30.90 10,142 4 2030 49 301 31.01 9,325 4 2031 26 133 25.15 3,343 1 2032 and after 10 170 16.47 2,805 1 1,758 8,936 $ 27.66 $ 247,197 100 (1) Excludes leases that have been entered into but which tenant has not yet taken possession, temporary leases and month-to-month leases totaling in the aggregate approximately 2.4 million square feet of our consolidated outlet centers. (2) Annualized base rent is defined as the minimum monthly payments due as of the end of the reporting period annualized, excluding periodic contractual fixed increases. Includes rents which are based on a percentage of sales in lieu of fixed contractual rents. Changes in rental income associated with individual signed leases on comparable spaces may be positive or negative, and we can provide no assurance that the rents on new leases or renewals of existing leases will increase from current levels, if at all. Expiring leases The following table sets forth information regarding the expiring leases for our consolidated outlet centers during each of the last five calendar years: Total Expiring Renewed by Existing Tenants Year (1) Square Feet (in 000's) % of Total Outlet Center Square Feet (2) Square Feet (in 000's) % of Expiring Square Feet 2021 1,728 15 1,359 79 2020 1,526 13 1,096 72 2019 1,320 11 1,020 77 2018 1,742 13 1,418 81 2017 1,549 12 1,296 84 (1) Excludes data for properties sold in each respective year. (2) Represents the percentage of total square footage at the beginning of each year that is scheduled to expire during the respective year. 29 Leasing activity In 2021, we revised our rent spread presentation from a commenced basis to executed basis and we are presenting it for comparable space. Comparable space excludes leases for space that was vacant for more than 12 months (non-comparable space). We believe that this presentation provides additional information and improves comparability to other retail REITs. Prior period results have been revised to conform with the current period presentation. The following table sets forth leasing activity for each of the calendar years for comparable space for executed leases for consolidated outlet centers. (1) Renewals of Existing Leases Stores Re-leased to New Tenants Initial Rent (2) Initial Rent (2) ($ per sq. ft.) ($ per sq. ft.) Year Square Feet (in 000's) New Rent Spread % (3) Square Feet (in 000's) New Rent Spread % (3) 2021 978 $ 31.08 — 192 $ 29.27 (4) 2020 1,077 $ 22.90 (8) 91 $ 30.02 (5) 2019 967 $ 25.36 (7) 385 $ 28.34 (21) 2018 1,381 $ 30.57 (1) 299 $ 36.92 17 2017 1,570 $ 29.21 (1) 210 $ 36.91 — (1) For consolidated properties owned as of the period-end date. Represents leases for new stores or renewals that were executed during the respective calendar year and excludes license agreements, seasonal tenants and month-to-month leases. (2) Represents average initial cash rent (base rent and common area maintenance (“CAM”)). (3) Represents change in initial and expiring cash rent (base rent and CAM). See above for a description of the change in calculation from prior periods. Occupancy Costs We believe that our ratio of average tenant occupancy cost (which includes base rent, common area maintenance, real estate taxes, insurance, advertising and promotions) to average sales per square foot is low relative to other forms of retail distribution. The following table sets forth for tenants that report sales, for each of the last five calendar years, tenant occupancy costs per square foot as a percentage of reported tenant sales per square foot for our consolidated outlet centers: Year Occupancy Costs as a % of Tenant Sales 2021 8.1 2020 N/A (1) 2019 10.0 2018 9.9 2017 10.0 (1) As a result of the COVID-19 pandemic, retailers stores were closed for much of the second quarter of 2020 due to mandates by order of local and state authorities. Given the fewer than twelve months of sales reported by our tenants for 2020, an average tenant occupancy cost is not provided for this period. As of December 31, 2021, our occupancy cost was reduced to 8.1%. The decrease in occupancy costs compared to the previous 5 years is primarily due to the strong rebound in sales in the 2021 period, but has also been impacted favorably by the significant amount of stores permanently closing in our portfolio during 2019 and 2020, as a result of bankruptcies and brand-wide restructurings, which generally had occupancy costs higher than the portfolio average. 30 Tenants The following table sets forth certain information for our consolidated outlet centers with respect to our 25 largest tenants based on total annualized base rent as of December 31, 2021 (1) : Tenant Brands # of Stores Gross Leasable Area (GLA) % of Total GLA % of Total Annualized Base Rent (2) The Gap, Inc. Gap, Banana Republic, Old Navy 83 881,942 7.7 % 6.1 % Premium Apparel, LLC; The Talbots, Inc. LOFT, Ann Taylor, Lane Bryant, Talbots 77 426,970 3.7 % 4.2 % SPARC Group Aéropostale, Brooks Brothers, Eddie Bauer, Forever 21, Lucky Brands, Nautica 75 461,640 4.0 % 4.2 % PVH Corp. Tommy Hilfiger, Van Heusen, Calvin Klein 40 298,803 2.6 % 3.6 % Tapestry, Inc. Coach, Kate Spade, Stuart Weitzman 47 223,813 2.0 % 3.4 % Under Armour, Inc. Under Armour, Under Armour Kids 29 228,931 2.0 % 3.2 % American Eagle Outfitters, Inc. American Eagle Outfitters, Aerie 41 279,833 2.4 % 3.1 % Nike, Inc. Nike, Converse, Hurley 31 370,448 3.2 % 2.7 % Columbia Sportswear Company Columbia Sportswear 23 183,484 1.6 % 2.5 % Adidas AG Adidas, Reebok 32 206,425 1.8 % 2.3 % Capri Holdings Limited Michael Kors, Michael Kors Men’s 27 137,486 1.2 % 2.3 % Carter’s, Inc. Carters, OshKosh B Gosh 40 177,045 1.5 % 2.3 % Hanesbrands Inc. Hanesbrands, Maidenform, Champion 34 169,877 1.5 % 2.1 % Ralph Lauren Corporation Polo Ralph Lauren, Polo Children, Polo Ralph Lauren Big & Tall 32 350,331 3.1 % 2.1 % Rack Room Shoes, Inc. Rack Room Shoes 26 193,632 1.7 % 2.0 % Skechers USA, Inc. Skechers 28 154,913 1.4 % 2.0 % Signet Jewelers Limited Kay Jewelers, Zales, Jared Vault 45 103,260 0.9 % 2.0 % V. F. Corporation The North Face, Vans, Timberland, Dickies, Work Authority 27 143,207 1.2 % 1.9 % Express Inc. Express Factory 24 168,000 1.5 % 1.8 % Chico’s, FAS Inc. Chicos, White House/Black Market, Soma Intimates 37 107,287 0.9 % 1.8 % H & M Hennes & Mauritz LP. H&M 18 385,321 3.4 % 1.8 % Luxottica Group S.p.A. Sunglass Hut, Oakley, Lenscrafters 52 76,178 0.7 % 1.7 % Levi Strauss & Co. Levi's 27 111,510 1.0 % 1.6 % Caleres Inc. Famous Footwear, Allen Edmonds 27 152,156 1.3 % 1.6 % Rue 21 Rue 21 19 114,559 1.0 % 1.4 % Total of Top 25 tenants 941 6,107,051 53.3 % 63.7 % (1) Excludes leases that have been entered into but for which the tenant has not yet taken possession, temporary leases and month-to-month leases. Includes all retail concepts of each tenant group for consolidated outlet centers; tenant groups are determined based on leasing relationships. (2) Annualized base rent is defined as the minimum monthly payments due as of the end of the reporting period annualized, excluding periodic contractual fixed increases. Includes rents that are based on a percentage of sales in lieu of fixed contractual rents. 31 Significant Property The Deer Park, New York outlet center is the only property that comprises 10% or more of our consolidated total assets. No property comprises more than 10% of our consolidated revenues. Tenants at the Deer Park outlet center principally conduct retail sales operations. The following table shows occupancy and certain base rental information related to this property as of December 31, 2021, 2020 and 2019: Deer Park Square Feet 2021 2020 2019 Outlet Center Occupancy 739,148 95 % 89 % 99 % Average base rental rates per weighted average square foot (1) $ 31.99 $ 19.25 $ 34.41 (1) Average annual base rent per square foot is calculated based on base rental revenues recognized during the year on a straight-line basis including non-cash adjustments to base rent required by GAAP and the effects of inducements and rent concessions divided by the weighted average square feet of the Deer Park Outlet Center. The increase in the average annual base rent per square foot in 2021 compared to 2020 reflects the increase in occupancy from 89% in 2020 to 95% in 2021 and temporary rent modifications primarily due to a number of tenants filing bankruptcy during 2020. Depreciation on the outlet centers is computed on the straight-line basis over the estimated useful lives of the assets. We generally use estimated lives up to 33 years for buildings, 15 years for land improvements and 7 years for equipment. Expenditures for ordinary repairs and maintenance are charged to operations as incurred while significant renovations and improvements, including tenant finishing allowances, which improve and/or extend the useful life of the asset are capitalized and depreciated over their estimated useful life. Real estate taxes assessed on this outlet center during 2021 amounted to $5.3 million. Real estate taxes for 2022 are estimated to be approximately $5.6 million. The following table sets forth, as of December 31, 2021, scheduled lease expirations for the Deer Park outlet center assuming that none of the tenants exercise renewal options: Year No. of Leases Expiring (1) Square Feet (in 000's) (1) Annualized Base Rent per Square Foot Annualized Base Rent (in 000's) (2) % of Gross Annualized Base Rent Represented by Expiring Leases 2022 11 40 $ 38.81 $ 1,542 8 2023 13 84 31.96 2,678 14 2024 15 135 34.63 4,674 24 2025 5 24 32.66 781 4 2026 6 17 49.64 847 4 2027 4 15 44.48 687 4 2028 10 105 42.88 4,491 23 2029 7 21 44.19 934 5 2030 4 28 42.60 1,214 6 2031 2 5 36.94 182 1 2032 and after 1 85 14.88 1,268 7 Total 78 559 $ 34.50 $ 19,298 100 % (1) Excludes leases that have been entered into but for which the tenant has not taken possession, vacant suites, temporary leases and month-to-month leases totaling in the aggregate approximately 180,000 square feet. (2) Annualized base rent is defined as the minimum monthly payments due as of the end of the reporting period annualized, excluding periodic contractual fixed increases. Includes rents that are based on a percentage of sales in lieu of fixed contractual rents. 32