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Item 2. Management’s Discussion and Analysis

2022-11-28 compared with 2022-11-28 · 95 added, 203 removed, 553 unchanged (35% of the section changed)

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

The discussion of our results of operations reported in the unaudited, consolidated statements of operations compares the three and six months ended June 30, 2022 with the three and six months ended June 30, 2021.

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

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

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Cautionary Statements

Certain statements made in this Management's Discussion and Analysis of Financial Condition and Results of Operations below are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended, or the Exchange Act.

Certain statements made in this Management's Discussion and Analysis of Financial Condition and Results of Operations below are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, or the Exchange Act.

We intend such forward-looking statements to be covered by the safe harbor provisions for forward-looking statements contained in the Private Securities Reform Act of 1995 and included this statement for purposes of complying with these safe harbor provisions.

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Such forward-looking statements include, but are not limited to, statements regarding:

the expected impact of the novel coronavirus (“COVID-19”) pandemic, rising inflation, supply chain and labor issues, and rising interest rates on our business, financial results and financial condition;

the expected impact of the novel coronavirus (“COVID-19”) pandemic on our business, financial results and financial condition;

our ability to raise additional capital, including via future issuances of equity and debt, and the use of proceeds from such issuances;

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Other important factors which may cause actual results to differ materially from current expectations include, but are not limited to:

risks related to the economic performance and market value of our outlet centers, including changes in the national, regional and local economic climate, inflation and rising interest rates;

risks related to the economic performance and market value of our outlet centers;

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

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risks related to the COVID-19 pandemic;

risks associated with supply chain disruptions and labor shortages;

our dependence on rental income from real property;

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• Leasing Activity

• COVID-19 Pandemic

• Results of Operations

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General Overview

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

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

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

The table below details our new developments, expansions and dispositions of consolidated and unconsolidated outlet centers that significantly impacted our results of operations and liquidity from January 1, 2021 to June 30, 2022 (square feet in thousands):

Consolidated Outlet Centers Unconsolidated Joint Venture Outlet Centers

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

Other 1 — — —

As of June 30, 2022

No activity — — — —

As of March 31, 2022

11,453 30 2,113 6

The following table summarizes certain information for our existing outlet centers in which we have an ownership interest as of June 30, 2022.

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

Except as noted, all properties are fee owned.

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

The following table provides information for our consolidated outlet centers related to leases for new stores that opened or renewals that were executed during the respective trailing twelve month periods ended June 30, 2022 and 2021:

Comparable Space for Executed Leases (1) (2)

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(5) Includes other landlord costs.

COVID-19 Pandemic

The current novel COVID-19 pandemic (“COVID-19”) has had, and will continue to have, repercussions across local, national and global economies and financial markets.

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

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

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

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

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

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

We collected approximately 99% of the 2020 deferred rents by the end of 2021.

The extent of future tenant requests for rent relief and the impact on our results of operations and cash flows is uncertain and cannot be predicted at this time.

If store closures were to occur again in our domestic markets, this could have a material adverse impact on our financial position and results of operations.

RESULTS OF OPERATIONS

Comparison of the three months ended June 30, 2022 to the three months ended June 30, 2021

NET INCOME (LOSS)

Net income increased $18.2 million in the 2022 period to $20.8 million as compared to net income of $2.6 million for the 2021 period.

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

• the current period had a higher average occupancy rate,

• the current period includes $2.4 million of executive severance costs,

• the current period includes a gain of $2.4 million related to the sale of a non-real estate asset,

• the prior year period included a loss on the early extinguishment of debt of $14.0 million, and

• we sold one operating property in the first quarter of 2021, as discussed below.

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

RENTAL REVENUES

Rental revenues increased $4.6 million in the 2022 period compared to the 2021 period.

The following table sets forth the changes in various components of rental revenues (in thousands):

2022 2021 Increase/(Decrease)

Rental revenues from existing properties $ 101,058 $ 97,405 $ 3,653

Rental revenues from properties disposed 59 (85) 144

Straight-line rent adjustments 302 (478) 780

Lease termination fees 35 127 (92)

Amortization of above and below market rent adjustments, net (45) (145) 100

$ 101,409 $ 96,824 $ 4,585

Rental revenues increased primarily due to an increase in occupancy rate for the consolidated portfolio to 94.8% as of June 30, 2022 compared to 93.0% as of June 30, 2021.

MANAGEMENT, LEASING AND OTHER SERVICES

Management, leasing and other services increased $77,000 in the 2022 period compared to the 2021 period.

The following table sets forth the changes in various components of management, leasing and other services (in thousands):

2022 2021 Increase/(Decrease)

Management and marketing $ 552 $ 537 $ 15

Leasing and other fees — 103 (103)

Expense reimbursements from unconsolidated joint ventures 884 719 165

$ 1,436 $ 1,359 $ 77

OTHER REVENUES

Other revenues decreased $97,000 in the 2022 period as compared to the 2021 period.

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

2022 2021 Increase/(Decrease)

Other revenues from existing properties $ 2,993 $ 3,088 $ (95)

Other revenues from properties disposed — 2 (2)

$ 2,993 $ 3,090 $ (97)

PROPERTY OPERATING EXPENSES

Property operating expenses increased $1.4 million in the 2022 period compared to the 2021 period.

The following table sets forth the changes in various components of property operating expenses (in thousands):

2022 2021 Increase/(Decrease)

Property operating expenses from existing properties $ 31,255 $ 31,562 $ (307)

Properties operating expenses from properties disposed — (1,726) 1,726

Expenses related to unconsolidated joint ventures 884 719 165

Other property operating expenses 558 695 (137)

$ 32,697 $ 31,250 $ 1,447

Property operating expenses increased in the 2022 period primarily because property operating expenses for the 2021 included $1.7 million in net proceeds received from the successful appeal of property taxes for tax years prior to disposition.

The 2022 period included no such refunds.

GENERAL AND ADMINISTRATIVE EXPENSES

General and administrative expenses increased $3.6 million in the 2022 period compared to the 2021 period.

The increase was primarily due to $2.4 million of compensation costs related to executive severance that occurred in the 2022 period.

In addition, expenses increased on a comparative basis from the hiring of certain executives and other key employees during the second half of 2021 to drive operational and growth initiatives.

DEPRECIATION AND AMORTIZATION

Depreciation and amortization costs decreased $1.5 million in the 2022 period compared to the 2021 period, primarily due to certain construction and development related assets, as well as lease related intangibles recorded as part of the acquisition price of acquired properties, which are amortized over shorter lives, became fully depreciated during the reporting periods.

INTEREST EXPENSE

Interest expense decreased $1.8 million in the 2022 period compared to the 2021 period for the following reasons:

• During August and September 2021, we completed a public offering of $400.0 million 2.750% of senior notes and completed the early redemption of $100.0 million of 3.875% senior notes and $250.0 million of 3.75% senior notes.

• During April 2021, we completed the redemption of $150.0 million of 3.875% senior notes.

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

LOSS ON EARLY EXTINGUISHMENT OF DEBT

In April 2021, we completed a partial redemption of $150.0 million of 3.875% senior notes.

As part of completing the redemption, we paid a make-whole premium of $13.0 million and expensed approximately $1.0 million of unamortized debt origination costs and debt discount related to the senior notes.

OTHER INCOME (EXPENSE)

Other income (expense) increased approximately $1.9 million in the 2022 period, primarily due to the gain on sale of a non-real estate asset for $2.4 million.

EQUITY IN EARNINGS OF UNCONSOLIDATED JOINT VENTURES

Equity in earnings of unconsolidated joint ventures decreased approximately $501,000 in the 2022 period compared to the 2021 period.

The decrease is primarily due to the 2021 period including the recognition of termination rents at two joint venture centers and the increase in variable interest rates in 2022 that has negatively impacted two of our joint ventures that have variable rate mortgages.

Comparison of the six months ended June 30, 2022 to the six months ended June 30, 2021

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

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

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

• the current period had a higher average occupancy rate and an increase in lease termination fees,

• the 2021 period included a loss on the early extinguishment of debt of $14.0 million,

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

• the 2021 period included a foreign currency loss of approximately $3.6 million in other income (expense), which had been previously recorded in other comprehensive income associated with the sale of our RioCan joint venture outlet center in Saint-Sauveur,

• the current period includes a gain of $2.4 million related to the sale of a non-real estate asset,

• the 2022 period included $2.4 million of executive severance costs and the 2021 period included $2.4 million of compensation cost related to a voluntary retirement plan offer which required eligible participants to give notice of acceptance by December 1, 2020 for an effective retirement date of March 31, 2021 and other executive severance, and

• we sold one operating property in the first quarter of 2021, as discussed below.

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

• we sold one operating property in the first quarter of last year, as discussed below.

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

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

Rental revenues increased primarily due to an increase in occupancy rate for the consolidated portfolio to 94.8% as of June 30, 2022 compared to 93.0% as of June 30, 2021.

Termination fees were recognized for several tenants in the 2022 period.

The 2021 period had fewer tenants with termination fees.

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

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

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

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

The 2021 period for properties disposed includes net proceeds received from the successful appeal of property taxes for tax years prior to disposition.The 2022 period included no such refunds.

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

These items were partially offset by lower real estate taxes.

GENERAL AND ADMINISTRATIVE EXPENSES

General and administrative expenses increased $2.3 million in the 2022 period compared to the 2021 period.

The increase is primarily driven by the hiring of certain executives and other key employees throughout 2021 to drive operational and growth initiatives.

The 2022 period included $2.4 million of executive severance costs and the 2021 period included $2.4 million of compensation cost related to employees that accepted a voluntary retirement plan with an effective retirement date of March 31, 2021 and other executive severance.

In addition, travel costs have increased compared to 2021 with the decrease in restrictions from COVID-19 and other corporate employee benefit costs have increased as well.

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

The 2021 period includes $2.4 million of compensation cost related to employees that accepted a voluntary retirement plan with an effective retirement date of March 31, 2021 and other executive severance.

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

DEPRECIATION AND AMORTIZATION

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

• During April 2021, we completed the redemption of $150.0 million of 3.875% senior notes.

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

LOSS ON EARLY EXTINGUISHMENT OF DEBT

In April 2021, we completed a partial redemption of $150.0 million of 3.875% senior notes.

OTHER INCOME (EXPENSE)

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

The increase was primarily due to a $2.4 million gain on sale of a non-real estate asset and the 2021 period including a $3.6 million foreign currency loss from the sale by the RioCan joint venture of its outlet center in Saint-Sauveur, Quebec in which we had a 50% ownership interest.

In March 2021, the RioCan joint venture closed on the sale of its outlet center in Saint-Sauveur, for net proceeds of approximately $9.4 million.

Our share of the proceeds was approximately $4.7 million.

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

EQUITY IN EARNINGS OF UNCONSOLIDATED JOINT VENTURES

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$ 2,513 $ 1,769 $ 744

The increase in equity in earnings from existing properties is primarily due to strong variable rent performance at certain joint ventures in 2022 partially offset by the 2021 period including the recognition of termination rents at two joint venture centers and the increase in variable interest rates in 2022 that has negatively impacted two of our joint ventures that have variable rate mortgages.

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

LIQUIDITY AND CAPITAL RESOURCES OF THE COMPANY

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The Company receives proceeds from equity issuances from time to time, but is required by the Operating Partnership’s partnership agreement to contribute the proceeds from its equity issuances to the Operating Partnership in exchange for partnership units of the Operating Partnership.

We are a well-known seasoned issuer (as defined in the Securities Act) with a shelf registration that expires in February 2024 that allows the Company to register unspecified various classes of equity securities and the Operating Partnership to register unspecified, various classes of debt securities.

We are a well-known seasoned issuer with a shelf registration that expires in February 2024 that allows the Company to register unspecified various classes of equity securities and the Operating Partnership to register unspecified, various classes of debt securities.

As circumstances warrant, the Company may issue equity from time to time on an opportunistic basis, dependent upon market conditions and available pricing.

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The unavailability of capital could adversely affect the Operating Partnership’s ability to pay its distributions to the Company which will, in turn, adversely affect the Company’s ability to pay cash dividends to its shareholders.

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

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

For the Company to maintain its qualification as a REIT, it must pay dividends to its shareholders aggregating annually at least 90% of its taxable income (excluding capital gains).

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The Operating Partnership currently intends to use the net proceeds from the sale of shares pursuant to the ATM Offering for working capital and general corporate purposes.

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

Three months ended March 31,

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

— 2,810,503 — 9,677,581

Average price per share $ — $ 19.02

$ — $ 18.85 $ — $ 18.97

Aggregate gross proceeds (in thousands) $ — $ 130,638

Aggregate net proceeds after selling commissions and fees (in thousands) $ — $ 128,655

$ — $ 52,221 $ — $ 180,876

(1) In July 2021, we had an additional 331,682 shares settle at an average price per share of $18.85 with aggregate net proceeds after commissions and fees of $6.2 million.

In May 2021, the Company’s Board of Directors authorized the repurchase of up to $80.0 million of the Company’s outstanding shares through May 31, 2023.

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

The Company did not repurchase any shares for both the three and 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.

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

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

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

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

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We manage our capital structure to reflect a long term investment approach and utilize multiple sources of capital to meet our requirements.

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

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

Capital Expenditures

The following table details our capital expenditures for consolidated outlet centers for the six months ended June 30, 2022 and 2021 (in thousands):

Six months ended June 30,

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

Three months ended March 31,

2022 2021 Change

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

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

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

New Development of Consolidated Outlet Centers

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.

The center, which will be approximately 290,000 square feet, is expected to be completed in the fall of 2023.

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

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

Potential Future Developments, Acquisitions and Dispositions

As of the date of the filing of this report, we are in the pre-development period for other potential new developments.

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

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

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

As of June 30, 2022 we have partial ownership interests in six unconsolidated outlet centers totaling approximately 2.1 million square feet, including two outlet centers in Canada.

As of March 31, 2022 we have partial ownership interests in six unconsolidated outlet centers totaling approximately 2.1 million square feet, including two outlet centers in Canada.

See Note 4 to the consolidated financial statements for details of our individual joint ventures, including, but not limited to, carrying values of our investments, fees we receive for services provided to the joint ventures, recent development and financing transactions and condensed combined summary financial information.

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Contractual Obligations

There were no material changes in our commitments during the six months ended June 30, 2022 under contractual obligations from those disclosed in our Annual Report on Form 10-K for the year ended December 31, 2021, other than the following updates to our contractual obligations for future debt and interest payments over the next five years and thereafter as of June 30, 2022.

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

Future Debt Obligations

As described further in Note 7 of the notes to the consolidated financial statements, as of June 30, 2022, scheduled maturities of our existing long-term debt for the remainder of 2022, 2023, 2024, 2025 and 2026 are $2.3 million, $44.9 million, $305.1 million, $1.5 million and $355.7 million, respectively.

As of June 30, 2022, scheduled maturities after 2026 aggregate to $700.0 million.

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

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

Future Interest Payments

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

Based on applicable interest rates and scheduled debt maturities as of June 30, 2022, these interest obligations total approximately $198.3 million and range from approximately $17.3 million to $40.4 million on an annual basis over the next five years.

If prevailing interest rates continue to rise, then future interest payments related to our variable debt outstanding would increase.

The following table sets forth our changes in cash flows from June 30, 2022 and 2021 (in thousands):

Six months ended June 30,

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

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

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

Three months ended March 31,

2022 2021 Change

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

Net cash used in financing activities (48,018) (72,761) 24,743

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

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

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Operating Activities

In 2022, our net cash provided by operating activities decreased year over year primarily due to changes in working capital.

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

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

Investing Activities

The decrease in net cash provided by (used in) investing activities was primarily due to the purchase of land at our new center in Nashville, Tennessee, paired with increased additions to rental properties in the 2022 period.

The 2021 period included net proceeds of approximately $8.1 million received in 2021 from the sale of our Jeffersonville outlet center, while the 2022 period included lower distributions in excess of cumulative earnings from unconsolidated joint ventures and lower other investing activities.

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

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

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

The above changes were all partially offset by net proceeds on the sale of non-real estate assets of $14.6 million that occurred in 2022.

Financing Activities

Net cash used in financing activities decreased during the first six months of 2022 primarily due to 2021 activity that included a partial redemption of $150.0 million aggregate principal amount of our $250.0 million 3.875% senior notes due December 2023, for $163.0 million in cash, which included a make-whole premium of $13.0 million.

In addition, in March 2021 and June 2021, we paid down a total of $50.0 million of borrowings under our unsecured term loan with cash on hand.

These decreases were partially offset by the proceeds from our common share offering of $180.9 million in 2021 under our ATM offering program.

Additionally, for the six months ended June 30, 2022, there was an increase in dividends paid.

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

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

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

Financing Arrangements

As of June 30, 2022, unsecured borrowings represented 96% of our outstanding debt and 92% of the gross book value of our real estate portfolio was unencumbered.

As of March 31, 2022, unsecured borrowings represented 96% of our outstanding debt and 92% of the gross book value of our real estate portfolio was unencumbered.

The Company guarantees the Operating Partnership’s obligations under our lines of credit.

As of 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.

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

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

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

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

As of June 30, 2022, the Company’s total liquidity was approximately $714.2 million, including cash and cash equivalents on the Company’s balance sheet and the full undrawn capacity under its $520 million unsecured lines of credit.

We expect to have sufficient liquidity to meet our obligations for at least the next twelve months.

As of March 31, 2022, the Company’s total liquidity was approximately $672.8 million, including cash and cash equivalents on the Company’s balance sheet and the full undrawn capacity under its $520 million unsecured lines of credit.

We expect to have sufficient liquidity to meet our obligations for at least the next 12 months.

We believe our current balance sheet position is financially sound;

however, due to the economic uncertainty caused by the COVID-19 pandemic, rising interest rates and inflation, and the inherent uncertainty and unpredictability of the capital and credit markets, we can give no assurance that affordable access to capital will exist between now and when our next significant debt matures, which is our unsecured term loan due April 2024.

however, due to the economic uncertainty caused by the COVID-19 pandemic and the inherent uncertainty and unpredictability of the capital and credit markets, we can give no assurance that affordable access to capital will exist between now and when our next significant debt matures, which is our unsecured term loan due April 2024.

Equity Offerings under the ATM Offering Program

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

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

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

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

There were no shares sold under the ATM program for the three and six months ended June 30, 2022.

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

Debt Covenants

The Operating Partnership’s debt agreements require the maintenance of certain ratios, including debt service coverage and leverage, and limit the payment of dividends such that dividends and distributions will not exceed funds from operations, as defined in the agreements, for the prior fiscal year on an annual basis or 95% on a cumulative basis.

We have historically been, and at June 30, 2022 are, in compliance with all of our debt covenants.

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

Our continued compliance with these covenants depends on many factors and could be impacted by current or future economic conditions, including those associated with the COVID-19 pandemic.

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

As of June 30, 2022, we believe our most restrictive covenants are contained in our senior, unsecured notes.

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

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

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

In addition, key financial covenants for our lines of credit and term loan, include the following as of June 30, 2022:

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

Required Actual

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Debt of unconsolidated joint ventures

The following table details information regarding the outstanding debt of the unconsolidated joint ventures and guarantees of such debt provided by us as of June 30, 2022 (dollars in millions):

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

Joint Venture Total Joint

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

GAAP and the Company’s discussion and analysis of its financial condition and operating results require the Company’s management to make judgments, assumptions and estimates that affect the amounts reported.

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

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

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

There have been no material changes to these estimates during the three months and six months ended June 30, 2022, other than discussed below.

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

Revenue recognition and collectibility of operating lease receivables

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

Three months ended Six months ended

June 30, June 30,

2022 2021 2022 2021

Three months ended

Net income $ 21,462 $ 4,342

9 unchanged sentences

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

2,447 — 2,447 2,418

Gain on sale of non-real estate asset (4)

(2,418) — (2,418) —

Loss on early extinguishment of debt (5)

— 14,039 — 14,039

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

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Each Class A common limited partnership unit is exchangeable for one of the Company’s common shares, subject to certain limitations to preserve the Company’s REIT status.

(3) For the 2022 period, represents executive severance costs.

For the 2021 period, includes compensation costs related to a voluntary retirement plan offer that required eligible participants to give notice of acceptance by December 1, 2020 for an effective retirement date of March 31, 2021 and other executive severance costs.

(4) Represents gain on sale of the corporate aircraft.

(5) In April 2021, the Company completed a partial redemption of $150.0 million aggregate principal amount of its $250.0 million 3.875% senior notes due December 2023, for $163.0 million in cash.

The loss on extinguishment of debt includes a make-whole premium of $13.0 million.

(3) Includes compensation costs related to a voluntary retirement plan offer that required eligible participants to give notice of acceptance by December 1, 2020 for an effective retirement date of March 31, 2021.

Portfolio Net Operating Income and Same Center Net Operating Income

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We define Same Center NOI as Portfolio NOI for the properties that were operational for the entire portion of both comparable reporting periods and which were not acquired, or subject to a material expansion or non-recurring event, such as a natural disaster, during the comparable reporting periods.

We present Portfolio NOI and Same Center NOI on both a consolidated and total portfolio, including pro rata share of unconsolidated joint ventures, basis.

We believe Portfolio NOI and Same Center NOI are non-GAAP metrics used by industry analysts, investors and management to measure the operating performance of our properties because they provide performance measures directly related to the revenues and expenses involved in owning and operating real estate assets and provide a perspective not immediately apparent from net income (loss), FFO or Core FFO.

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We compensate for these limitations by relying primarily on our GAAP results and using Portfolio NOI and Same Center NOI only as supplemental measures.

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

Three months ended Six months ended

June 30, June 30,

2022 2021 2022 2021

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

Three months ended

Net income $ 21,462 $ 4,342

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Interest expense 11,634 14,362

Loss on early extinguishment of debt (1)

— 14,039 — 14,039

Other (income) expense (183) 3,505

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Non-cash adjustments (1)

(157) 728 1,363 1,571

Lease termination fees (2,596) (673)

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Non-same center NOI - Consolidated

20 (1,562) 83 (1,645)

Same Center NOI - Consolidated (2)

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$ 78,192 $ 71,127

(1) In April 2021, the Company completed a partial redemption of $150.0 million aggregate principal amount of its $250.0 million 3.875% senior notes due December 2023, for $163.0 million in cash.

The loss on extinguishment of debt includes a make-whole premium of $13.0 million.

(1) Non-cash items include straight-line rent, above and below market rent amortization, straight-line rent expense on land leases and gains or losses on outparcel sales, as applicable.

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Each of these measures is defined as follows:

We define Adjusted EBITDA as net income (loss) available to the Company’s common shareholders computed in accordance with GAAP before interest expense, income taxes (if applicable), depreciation and amortization, gains and losses on sale of operating properties, joint venture properties, outparcels and other assets, impairment write-downs of depreciated property and of investment in unconsolidated joint ventures caused by a decrease in value of depreciated property in the affiliate, compensation related to voluntary retirement plan and other executive officer severance, gain on sale of non-real estate asset, casualty gains and losses, gains and losses on early extinguishment of debt, net and other items that we do not consider indicative of the Company's ongoing operating performance.

We define Adjusted EBITDA as net income (loss) available to the Company’s common shareholders computed in accordance with GAAP before interest expense, income taxes (if applicable), depreciation and amortization, gains and losses on sale of operating properties, joint venture properties, outparcels and other assets, impairment write-downs of depreciated property and of investment in unconsolidated joint ventures caused by a decrease in value of depreciated property in the affiliate, compensation related to voluntary retirement plan and other executive officer severance, casualty gains and losses, gains and losses on early extinguishment of debt, net and other items that we do not consider indicative of the Company's ongoing operating performance.

We determine EBITDAre based on the definition set forth by NAREIT, which is defined as net income (loss) available to the Company’s common shareholders computed in accordance with GAAP before interest expense, income taxes (if applicable), depreciation and amortization, gains and losses on sale of operating properties, gains and losses on change of control and impairment write-downs of depreciated property and of investment in unconsolidated joint ventures caused by a decrease in value of depreciated property in the affiliate and after adjustments to reflect our share of the EBITDAre of unconsolidated joint ventures.

Adjusted EBITDAre is defined as EBITDAre excluding gains and losses on early extinguishment of debt, net, casualty gains and losses, compensation related to voluntary retirement plan and other executive officer severance, gain on sale of non-real estate asset, casualty gains and losses, gains and losses on sale of outparcels, and other items that that we do not consider indicative of the Company's ongoing operating performance.

Adjusted EBITDAre is defined as EBITDAre excluding gains and losses on early extinguishment of debt, net, casualty gains and losses, compensation related to voluntary retirement plan and other executive officer severance, casualty gains and losses, gains and losses on sale of outparcels, and other items that that we do not consider indicative of the Company's ongoing operating performance.

We present Adjusted EBITDA, EBITDAre and Adjusted EBITDAre as we believe they are useful for investors, creditors and rating agencies as they provide additional performance measures that are independent of a Company’s existing capital structure to facilitate the evaluation and comparison of the Company’s operating performance to other REITs and provide a more consistent metric for comparing the operating performance of the Company’s real estate between periods.

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

Three months ended Six months ended

June 30, June 30,

2022 2021 2022 2021

Three months ended

Net income $ 21,462 $ 4,342

4 unchanged sentences

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

2,447 — 2,447 2,418

Gain on sale of non-real estate asset (3)

(2,418) — (2,418) —

Loss on early extinguishment of debt (4)

— 14,039 — 14,039

Adjusted EBITDA $ 59,339 $ 52,976

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

Three months ended Six months ended

June 30, June 30,

2022 2021 2022 2021

Three months ended

Net income $ 21,462 $ 4,342

7 unchanged sentences

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

2,447 — 2,447 2,418

Gain on sale of non-real estate asset (3)

(2,418) — (2,418) —

Loss on early extinguishment of debt (4)

— 14,039 — 14,039

Adjusted EBITDAre $ 63,551 $ 57,444

(1) Includes a $3.6 million charge related to the foreign currency effect of the sale of the Saint-Sauveur, Quebec property by the RioCan joint venture in March 2021.

(2) For the 2022 period, represents executive severance costs.

(3) Represents gain on sale of the corporate aircraft.

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

The loss on extinguishment of debt includes a make-whole premium of $13.0 million.

(2) Includes compensation costs related to a voluntary retirement plan offer that required eligible participants to give notice of acceptance by December 1, 2020 for an effective retirement date of March 31, 2021.

ECONOMIC CONDITIONS AND OUTLOOK

We are closely monitoring the impact of the COVID-19 pandemic, along with rising inflation, supply chain and labor issues, and rising interest rates on all aspects of our business and geographies, including how it will impact our tenants and business partners.

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

along with rising inflation, supply chain and labor issues, on all aspects of our business and geographies, including how it will impact our tenants and business partners.

For further discussion of COVID-19, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations - COVID-19 Pandemic.”

The majority of our leases contain provisions designed to mitigate the impact of inflation.

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By maintaining a broad base of well-known tenants and a geographically diverse portfolio of properties located across the United States, we believe we reduce our operating and leasing risks.

As of June 30, 2022 no one tenant (including affiliates) accounts for more than 8% of our square feet or 6% of our rental revenues.

No one tenant (including affiliates) accounts for more than 8% of our square feet or 7% of our rental revenues.

Due to the relatively short-term nature of our tenants’ leases, a significant portion of the leases in our portfolio come up for renewal each year.

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

For the total portfolio, including the Company’s pro rata share of unconsolidated joint ventures, as of July 31, 2022, we had lease renewals executed or in process for 66.4% of the space scheduled to expire during 2022 compared to 59.8% of the space scheduled to expire during 2021 that was executed or in process as of July 31, 2021.

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

The current challenging retail environment has impacted our business as our operations are subject to the operating results and operating decisions of our retail tenants.

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

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

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

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

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

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We believe outlet stores will continue to be a profitable and fundamental distribution channel for many brand name manufacturers.

While we continue to attract and retain additional tenants, if we were unable to successfully renew or re-lease a significant amount of this space on favorable economic terms or in a timely manner, our Same Center NOI could be negatively impacted.

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

Occupancy for our total portfolio, including our share of unconsolidated joint ventures, was 94.9% and 93.2% as of June 30, 2022 and 2021, respectively.

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

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

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

What changed 10-Q/A

Item 2. Management’s Discussion and Analysis