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, 2023 December 31, 2022 Assets Rental property: Land $ 275,081 $ 275,079 Buildings, improvements and fixtures 2,575,872 2,553,452 Construction in progress 128,361 27,340 2,979,314 2,855,871 Accumulated depreciation ( 1,295,139 ) ( 1,224,962 ) Total rental property, net 1,684,175 1,630,909 Cash and cash equivalents 188,103 212,011 Short-term investments 13,150 52,450 Investments in unconsolidated joint ventures 72,313 73,809 Deferred lease costs and other intangibles, net 54,096 58,574 Operating lease right-of-use assets 77,715 78,636 Prepaids and other assets 115,256 110,622 Total assets $ 2,204,808 $ 2,217,011 Liabilities and Equity Liabilities Debt: Senior, unsecured notes, net $ 1,039,377 $ 1,037,998 Unsecured term loan, net 322,162 321,525 Mortgages payable, net 65,293 68,971 Unsecured lines of credit — — Total debt 1,426,832 1,428,494 Accounts payable and accrued expenses 98,546 104,087 Operating lease liabilities 86,621 87,528 Other liabilities 80,379 82,968 Total liabilities 1,692,378 1,703,077 Commitments and contingencies Equity Partners’ Equity: General partner, 1,105,000 units outstanding at September 30, 2023 and 1,100,000 units at December 31, 2022, respectively 4,644 4,516 Limited partners, 4,737,982 and 4,737,982 Class A common units, and 104,226,191 and 103,397,920 Class B common units outstanding at September 30, 2023 and December 31, 2022, respectively 525,556 521,168 Accumulated other comprehensive loss ( 17,770 ) ( 11,750 ) Total partners’ equity 512,430 513,934 Noncontrolling interests in consolidated partnerships — — Total equity 512,430 513,934 Total liabilities and equity $ 2,204,808 $ 2,217,011 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, 2023 2022 2023 2022 Revenues: Rental revenues $ 110,835 $ 105,569 $ 319,005 $ 311,587 Management, leasing and other services 2,138 1,897 6,174 4,860 Other revenues 4,373 3,980 11,751 9,705 Total revenues 117,346 111,446 336,930 326,152 Expenses: Property operating 36,758 36,076 103,618 105,531 General and administrative 18,937 17,370 54,675 52,166 Depreciation and amortization 25,374 25,445 76,656 77,908 Total expenses 81,069 78,891 234,949 235,605 Other income (expense): Interest expense ( 11,688 ) ( 11,660 ) ( 35,997 ) ( 34,870 ) Other income (expense) 1,899 1,395 7,023 4,154 Total other income (expense) ( 9,789 ) ( 10,265 ) ( 28,974 ) ( 30,716 ) Income before equity in earnings of unconsolidated joint ventures 26,488 22,290 73,007 59,831 Equity in earnings of unconsolidated joint ventures 2,389 2,055 6,030 6,795 Net income 28,877 24,345 79,037 66,626 Noncontrolling interests in consolidated partnerships — — ( 248 ) — Net income available to partners 28,877 24,345 78,789 66,626 Net income available to limited partners 28,588 24,102 78,001 65,958 Net income available to general partner $ 289 $ 243 $ 788 $ 668 Basic earnings per common unit: Net income $ 0.26 $ 0.22 $ 0.71 $ 0.61 Diluted earnings per common unit: Net income $ 0.26 $ 0.22 $ 0.70 $ 0.60 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, 2023 2022 2023 2022 Net income $ 28,877 $ 24,345 $ 79,037 $ 66,626 Other comprehensive income (loss): Foreign currency translation adjustments ( 1,765 ) ( 4,875 ) ( 376 ) ( 6,090 ) Changes in fair value of cash flow hedges ( 1,845 ) 2,958 ( 5,644 ) 12,897 Other comprehensive income (loss) ( 3,610 ) ( 1,917 ) ( 6,020 ) 6,807 Comprehensive income 25,267 22,428 73,017 73,433 Comprehensive income attributable to noncontrolling interests in consolidated partnerships — — ( 248 ) — Comprehensive income attributable to the Operating Partnership $ 25,267 $ 22,428 $ 72,769 $ 73,433 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, 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 stock 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 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, 2023 $ 4,503 $ 517,400 $ ( 14,160 ) $ 507,743 $ — $ 507,743 Net income 289 28,588 — 28,877 — $ 28,877 Other comprehensive loss — — ( 3,610 ) ( 3,610 ) — ( 3,610 ) Compensation under Incentive Award Plan — 3,459 — 3,459 — 3,459 Withholding of 5,505 common units for employee income taxes — ( 120 ) — ( 120 ) — ( 120 ) Issuance of 5,000 general partner units and 101,615 limited partner units 122 2,349 — 2,471 — 2,471 Issuance of 44,300 common units upon exercise of options — 610 — 610 — 610 Common distributions ($ 0.245 per unit) ( 270 ) ( 26,730 ) — ( 27,000 ) — ( 27,000 ) Balance, September 30, 2023 $ 4,644 $ 525,556 $ ( 17,770 ) $ 512,430 $ — $ 512,430 General partner Limited partners Accumulated other comprehensive loss Total partners’ equity Noncontrolling interests in consolidated partnerships Total equity Balance, December 31, 2022 $ 4,516 $ 521,168 $ ( 11,750 ) $ 513,934 $ — $ 513,934 Net income 788 78,001 — 78,789 248 $ 79,037 Other comprehensive loss — — ( 6,020 ) ( 6,020 ) — ( 6,020 ) Compensation under Incentive Award Plan — 9,234 — 9,234 — 9,234 Issuance of 51,500 common units upon exercise of options — 653 — 653 — $ 653 Issuance of 5,000 general partner units and 101,615 limited partner units 122 2,349 — 2,471 — 2,471 Withholding of 367,776 common units for employee income taxes — ( 6,963 ) — ( 6,963 ) — ( 6,963 ) Common distributions ($ 0.7100 per unit) ( 782 ) ( 78,886 ) — ( 79,668 ) ( 248 ) ( 79,916 ) Balance, September 30, 2023 $ 4,644 $ 525,556 $ ( 17,770 ) $ 512,430 $ — $ 512,430 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, 2023 2022 OPERATING ACTIVITIES Net income $ 79,037 $ 66,626 Adjustments to reconcile net income (loss) to net cash provided by operating activities: Depreciation and amortization 76,656 77,908 Amortization of deferred financing costs 2,395 2,302 Equity in earnings of unconsolidated joint ventures ( 6,030 ) ( 6,795 ) Equity-based compensation expense 9,040 9,965 Amortization of debt (premiums) and discounts, net 537 372 Amortization (accretion) of market rent rate adjustments, net 545 499 Straight-line rent adjustments 1,409 1,190 Distributions of cumulative earnings from unconsolidated joint ventures 6,153 6,794 Other non-cash — ( 2,418 ) Changes in other assets and liabilities: Other assets ( 373 ) ( 17,737 ) Accounts payable and accrued expenses ( 17,499 ) ( 16,020 ) Net cash provided by operating activities 151,870 122,686 INVESTING ACTIVITIES Additions to rental property ( 120,070 ) ( 45,748 ) Additions to investments in unconsolidated joint ventures ( 2,612 ) — Net proceeds on sale of non-real estate assets — 14,610 Additions to short-term investments ( 7,679 ) — Proceeds from short-term investments 46,979 — Additions to non-real estate assets ( 7,126 ) ( 5,775 ) Distributions in excess of cumulative earnings from unconsolidated joint ventures 4,102 8,099 Additions to deferred lease costs ( 1,960 ) ( 1,686 ) Payments for other investing activities ( 2,199 ) ( 871 ) Proceeds from other investing activities 3,426 — Net cash used in investing activities ( 87,139 ) ( 31,371 ) FINANCING ACTIVITIES Cash distributions paid ( 79,667 ) ( 63,967 ) Proceeds from notes, mortgages and loans — — Repayments of notes, mortgages and loans ( 3,629 ) ( 3,300 ) Issuance of units, including transaction costs 2,471 — Employee income taxes paid related to shares withheld upon vesting of equity awards ( 6,963 ) ( 3,741 ) Additions to deferred financing costs — 1 Proceeds from exercise of options 653 43 Payment for other financing activities ( 941 ) ( 860 ) Distributions to noncontrolling interests in other consolidated partnerships ( 248 ) — Net cash used in financing activities ( 88,324 ) ( 71,824 ) Effect of foreign currency on cash and cash equivalents ( 315 ) ( 93 ) Net increase (decrease) in cash and cash equivalents ( 23,908 ) 19,398 Cash and cash equivalents, beginning of period 212,011 161,152 Cash and cash equivalents, end of period $ 188,103 $ 180,550 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 predominantly on developing, acquiring, owning, operating and managing outlet shopping centers. As of September 30, 2023, we owned and operated 29 consolidated outlet centers, with a total gross leasable area of approximately 11.3 million square feet, which were 98 % occupied and contained approximately 2,300 stores representing approximately 600 store brands, as well as one center under construction that opened in October 2023. We also had partial ownership interests in six unconsolidated outlet centers totaling approximately 2.1 million square feet, including two outlet centers in Canada. Our portfolio also includes two managed centers totaling approximately 800,000 square feet. Each of our outlet centers, except one joint venture property and one managed property, features the Tanger brand name. 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, 2023, the Company and its wholly-owned subsidiaries owned 105,331,191 units of the Operating Partnership and other limited partners (the “Non-Company LPs”) collectively owned 4,737,982 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, 2022. The December 31, 2022 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 $ 50.0 million as of September 30, 2023. 18 Impairment of Long-Lived Assets Rental property held and used by us is reviewed for impairment in the event that facts and circumstances indicate 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 than such carrying amount, recognize an impairment loss in an amount by which the carrying amount exceeds its fair value. The cash flow estimates used both for determining recoverability and estimating fair value are inherently judgmental and reflect current and projected trends in rental, occupancy, capitalization, and discount rates, and estimated holding periods for the applicable assets. The estimated fair value is based primarily on the income approach. The income approach involves discounting the estimated income stream and reversion (presumed sale) value of a property over an estimated holding period to a present value at a risk-adjusted rate. Discount rates and terminal capitalization rates utilized in this approach are derived from property-specific information, market transactions and other financial and industry data. If economic and market conditions deteriorate beyond our current expectations, or if our expected holding periods for assets change, subsequent tests for impairment could result in additional impairment charges in the future. For example, the Foxwoods 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. In addition, one of our other outlet centers has an estimated fair value significantly less than its recorded carrying value of approximately $ 110.6 million. We continue to monitor facts and circumstances and events in future periods that could affect inputs such as the expected holding period, operating cash flow forecasts and capitalization rates, to determine whether an impairment charge is necessary. We can provide no assurance that material impairment charges with respect to our properties will not occur in future periods. 3. Developments of Consolidated Outlet Centers The table below sets forth our consolidated outlet centers under development as of September 30, 2023: Project Approximate Square Feet (in 000’s) Estimated Total Net Cost (millions) Costs Incurred to Date (in millions) 1 Opening Date New Development: Nashville 291 $ 144 - $ 146 $ 119.0 October 2023 (1) I ncludes the land purchased for the Nashville, Tennessee outlet for approximately $ 8.8 million. This is included in Land on our consolidated balance sheet. On October 27, 2023, we opened Tanger Nashville approximately 96.5% leased. 19 4. 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, 2023 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 $ 72.3 — $ 72.3 Investments included in other liabilities: Charlotte (2) Charlotte, NC 50.0 % 399 ( 20.3 ) 99.6 National Harbor (2) National Harbor, MD 50.0 % 341 ( 13.8 ) 93.6 Galveston/Houston (2) Texas City, TX 50.0 % 353 ( 13.3 ) 57.1 Columbus (2) Columbus, OH 50.0 % 355 ( 2.9 ) 70.3 $ ( 50.3 ) As of December 31, 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 73.8 — $ 73.8 Investments included in other liabilities: Charlotte (2) Charlotte, NC 50.0 % 399 $ ( 18.8 ) $ 99.7 National Harbor (2) National Harbor, MD 50.0 % 341 ( 12.8 ) 94.6 Galveston/Houston (2) Texas City, TX 50.0 % 353 ( 15.5 ) 64.5 Columbus (2) Columbus, OH 50.0 % 355 ( 2.4 ) 70.3 $ ( 49.5 ) (1) Net of debt origination costs of $ 2.2 million as of September 30, 2023 and $ 1.5 million as of December 31, 2022. (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, 2023 2022 2023 2022 Fee: Management and marketing $ 553 $ 661 $ 1,662 $ 1,749 Leasing and other fees 99 61 197 96 Expense reimbursements from unconsolidated joint ventures 1,197 1,175 3,382 3,015 Total Fees $ 1,849 $ 1,897 $ 5,241 $ 4,860 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 $ 3.1 million and $ 3.2 million as of September 30, 2023 and December 31, 2022, respectively) are amortized over the various useful lives of the related assets. Galveston/Houston In June 2023, the Galveston/Houston joint venture completed the refinance of its mortgage. The new $ 58.0 million loan has a maturity date of June 2026 and an interest rate of Daily SOFR + 3.00 %. In conjunction with this refinance, the joint venture entered into a $ 29.0 million interest rate swap that fixes Daily SOFR at 4.44 % until December 2025. Condensed combined summary financial information of unconsolidated joint ventures accounted for using the equity method is as follows (in thousands): September 30, 2023 December 31, 2022 Assets Land $ 81,736 $ 81,716 Buildings, improvements and fixtures 460,538 458,190 Construction in progress 64 681 542,338 540,587 Accumulated depreciation ( 197,228 ) ( 182,731 ) Total rental property, net 345,110 357,856 Cash and cash equivalents 10,479 17,372 Deferred lease costs and other intangibles, net 2,654 2,895 Prepaids and other assets 12,901 10,612 Total assets $ 371,144 $ 388,735 Liabilities and Owners’ Equity Mortgages payable, net $ 320,636 $ 329,009 Accounts payable and other liabilities 12,963 15,374 Total liabilities 333,599 344,383 Owners’ equity 37,545 44,352 Total liabilities and owners’ equity $ 371,144 $ 388,735 21 Three months ended Nine months ended Condensed Combined Statements of Operations - Unconsolidated Joint Ventures September 30, September 30, 2023 2022 2023 2022 Revenues $ 23,548 $ 22,418 $ 67,481 $ 65,925 Expenses: Property operating 9,059 8,992 26,315 25,730 General and administrative 23 77 212 210 Depreciation and amortization 5,151 5,631 15,546 16,653 Total expenses 14,233 14,700 42,073 42,593 Other income (expense): Interest expense ( 4,603 ) ( 3,721 ) ( 13,523 ) ( 9,795 ) Other income 153 111 422 117 Total other expense ( 4,450 ) ( 3,610 ) ( 13,101 ) ( 9,678 ) Net income $ 4,865 $ 4,108 $ 12,307 $ 13,654 The Company and Operating Partnership’s share of: Net income $ 2,389 $ 2,055 $ 6,030 $ 6,795 Depreciation and amortization (real estate related) $ 2,608 $ 2,871 $ 7,893 $ 8,416 5. Debt Guaranteed by the Company All of the Company’s debt is held by the Operating Partnership and its consolidated subsidiaries. The Company guar antees 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, 2023. 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, 2023 December 31, 2022 Unsecured lines of credit $ — $ — Unsecured term loan $ 325,000 $ 325,000 22 6. Debt of the Operating Partnership The debt of the Operating Partnership consisted of the following (in thousands): As of As of September 30, 2023 December 31, 2022 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 $ 348,323 $ 350,000 $ 347,894 Senior notes 3.875 % July 2027 300,000 298,444 300,000 298,142 Senior notes 2.750 % September 2031 400,000 392,610 400,000 391,962 Mortgages payable: Atlantic City (2) (3) 6.44 % - 7.65 % December 2024- December 2026 13,562 13,889 17,109 17,625 Southaven Adj SOFR + 2.00 % October 2026 51,700 51,404 51,700 51,346 Unsecured term loan Adj SOFR + 0.95 % January 2027 325,000 322,162 325,000 321,525 Unsecured lines of credit Adj SOFR + 1.00 % July 2025 — — — — $ 1,440,262 $ 1,426,832 $ 1,443,809 $ 1,428,494 (1) Including premiums and net of debt discount and debt origination costs. Excludes $ 2.8 million and $ 3.5 million of unamortized debt origination costs related to the unsecured lines of credit for the periods ended September 30, 2023 and December 31, 2022, respectively, recorded in prepaids and other assets in the Consolidated Balance Sheet. (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 $ 139.2 million at September 30, 2023, serve as collateral for mortgages payable. As of September 30, 2023, 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, 2023 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 17.2 % of principal. As of September 30, 2023, 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, 2023, we believe we were in compliance with all of our debt covenants. In May 2023, Fitch Ratings assigned a first-time ‘BBB’ long-term issuer default rating to the Company and the Operating Partnership, along with a Stable rating outlook. Fitch also assigned a ‘BBB’ rating to Operating Partnership’s senior unsecured debt, which includes our lines of credit, a term loan and senior notes. As a result, the applicable pricing margin on each of our unsecured lines of credit and our term loan was reduced by 25 basis points (including a 5 basis point reduction in the facility fee on the unsecured lines of credit). 23 Debt Maturities Maturities and principal amortization of the existing long-term debt as of September 30, 2023 for the next five years and thereafter are as follows (in thousands): Calendar Year Amount For the remainder of 2023 $ 1,226 2024 5,130 2025 1,501 2026 407,405 2027 625,000 Thereafter 400,000 Subtotal 1,440,262 Net discount and debt origination costs ( 13,430 ) Total $ 1,426,832 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 7. 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, 2023 December 31, 2022 Assets (Liabilities) (1) : Interest rate swaps: July 1, 2019 February 1, 2024 $ 25,000 Daily Adjusted SOFR 1.68 % $ 324 $ 853 January 1, 2021 February 1, 2024 150,000 Daily Adjusted SOFR 0.53 % 2,534 6,966 January 1, 2021 February 1, 2024 100,000 Daily Adjusted SOFR 0.15 % 1,817 5,043 March 1, 2021 February 1, 2024 25,000 Daily Adjusted SOFR 0.18 % 452 1,256 February 1, 2024 (2) February 1, 2026 - January 1, 2027 150,000 Daily Adjusted SOFR 3.60 % 3,217 — Total $ 8,344 $ 14,118 (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. (2) During the first nine months of 2023, we entered into $ 150.0 million of forward-starting interest rate swaps with an effective date of February 1, 2024 and maturity dates ranging from February 1, 2026 to January 1, 2027. In October 2023, we entered into an additional $ 50 million forward-starting interest rate swaps with an effective date of February 1, 2024 and an adjusted average SOFR rate of 4.61 %. In November 2023, we entered into an additional $ 50 million of forward-starting interest rate swaps with an effective date of February 1, 2024 and an average adjusted SOFR rate of 4.45 %. These are not reflected in the tables above or in our consolidated financial statements as of September 30, 2023. The maturity of these swaps is from August 2026 to January 2027. The derivative financial instruments are comprised of interest rate swaps, which are designated and qualify as cash flow hedges, with various counterparties. 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, 2023 2022 2023 2022 Interest Rate Swaps: Amount of gain (loss) recognized in other comprehensive income (loss) $ ( 1,845 ) $ 2,957 $ ( 5,644 ) $ 12,896 25 8. 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, 2023: Assets: Interest rate swaps (prepaids and other assets) $ 8,344 — $ 8,344 — 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, 2022: Asset: Interest rate swaps (prepaids and other assets) $ 14,118 $ — $ 14,118 $ — 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. 26 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, 2023 December 31, 2022 Level 1 Quoted Prices in Active Markets for Identical Assets or Liabilities $ — $ — Level 2 Significant Observable Inputs 867,458 876,542 Level 3 Significant Unobservable Inputs 389,825 391,820 Total fair value of debt $ 1,257,283 $ 1,268,362 Recorded value of debt $ 1,426,832 $ 1,428,494 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 SOFR 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, short-term investments, 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. Short-term government securities and our certificates of deposit included in short-term investments 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. 9. Shareholders’ Equity of the Company Dividend Declaration In July 2023, the Company's Board of Directors declared a $ 0.245 cash dividend per common share payable on August 15, 2023 to each shareholder of record on July 31, 2023, and in its capacity as General Partner of the Operating Partnership, a $ 0.245 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, 2023, we had approximately $ 57.4 million remaining available for sale under the ATM Offering program. 27 The following table sets forth information regarding settlements under our ATM Offering program: Three months ended September 30, Nine months ended September 30, 2023 2022 2023 2022 Number of common shares settled during the period 106,615 — 106,615 — Average price per share $ 24.89 $ — $ 24.89 $ — Aggregate gross proceeds (in thousands) $ 2,654 $ — $ 2,654 $ — Aggregate net proceeds after commissions and fees (in thousands) $ 2,621 $ — $ 2,621 $ — Share Repurchase Program In May 2023, the Company’s Board of Directors authorized the repurchase of up to $ 100.0 million of the Company’s outstanding shares through May 31, 2025, replacing the previously authorized plan to repurchase up to $ 80.0 million of the Company’s outstanding shares through May 31, 2023. 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 in both the three and nine months ended September 30, 2023 and 2022. The remaining amount authorized to be repurchased under the program as of September 30, 2023 was approximately $ 100.0 million. 28 10. 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, 2023 and September 30, 2022: Limited Partnership Units General Partnership Units Class A Class B Total 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 Balance June 30, 2023 1,100,000 4,737,982 104,085,781 108,823,763 Options exercised — — 44,300 44,300 Issuance of units 5,000 — 101,615 101,615 Forfeitures of restricted common share awards by the Company — — — — Units withheld for employee income taxes — — ( 5,505 ) ( 5,505 ) Balance September 30, 2023 1,105,000 4,737,982 104,226,191 108,964,173 Balance December 31, 2022 1,100,000 4,737,982 103,397,920 108,135,902 Options exercised — — 51,500 51,500 Issuance of units 5,000 — 101,615 101,615 Grant of restricted common share awards by the Company, net of forfeitures — — 1,042,932 1,042,932 Units withheld for employee income taxes — — ( 367,776 ) ( 367,776 ) Balance September 30, 2023 1,105,000 4,737,982 104,226,191 108,964,173 29 11. 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, 2023 2022 2023 2022 Numerator: Net income attributable to Tanger Factory Outlet Centers, Inc. $ 27,624 $ 23,276 $ 75,367 $ 63,699 Less allocation of earnings to participating securities ( 414 ) ( 232 ) ( 854 ) ( 669 ) Net income available to common shareholders of Tanger Factory Outlet Centers, Inc. $ 27,210 $ 23,044 $ 74,513 $ 63,030 Denominator: Basic weighted average common shares 104,461 103,749 104,308 103,655 Effect of notional units 1,026 527 898 473 Effect of outstanding options 832 661 783 701 Diluted weighted average common shares 106,319 104,937 105,989 104,829 Basic earnings per common share: Net income $ 0.26 $ 0.22 $ 0.71 $ 0.61 Diluted earnings per common share: Net income $ 0.26 $ 0.22 $ 0.70 $ 0.60 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 the three and nine months ended September 30, 2023, no notional units were excluded from the computation and for the three and nine months ended September 30, 2022, approximately 601,000 notional units were excluded from the computation because these notional units either would not have been issuable if the end of the reporting period were the end of the contingency period or as they were anti-dilutive. With respect to outstanding options, the effect of dilutive common shares is determined using the treasury stock method, whereby outstanding options are assumed exercised at the beginning of the reporting period and the exercise proceeds from such options and the average measured but unrecognized compensation cost during the period are assumed to be used to repurchase our common shares at the average market price during the period. For the three and nine months ended September 30, 2023, approximately 333,300 and 475,200 options, respectively, were excluded from the computation and for the three and nine months ended September 30, 2022, approximately 274,000 options were excluded from the computation, as they were anti-dilutive. The assumed exchange of the partnership units held by the Non-Company LPs as of the beginning of the year, which would result in the elimination of earnings allocated to the noncontrolling interest in the Operating Partnership, would have no impact on earnings per share since the allocation of earnings to a common limited partnership unit, as if exchanged, is equivalent to earnings allocated to a common share. Certain of the Company’s unvested restricted common share awards contain non-forfeitable rights to dividends or dividend equivalents. The impact of these unvested restricted common share awards on earnings per share has been calculated using the two-class method whereby earnings are allocated to the unvested restricted common share awards based on dividends declared and the unvested restricted common shares’ participation rights in undistributed earnings. Unvested restricted common shares that do not contain non-forfeitable rights to dividends or dividend equivalents are included in the diluted earnings per share computation if the effect is dilutive, using the treasury stock method. 30 12. 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, 2023 2022 2023 2022 Numerator: Net income attributable to partners of the Operating Partnership $ 28,877 $ 24,345 $ 78,789 $ 66,626 Less allocation of earnings to participating securities ( 414 ) ( 232 ) ( 854 ) ( 669 ) Net income available to common unitholders of the Operating Partnership $ 28,463 $ 24,113 $ 77,935 $ 65,957 Denominator: Basic weighted average common units 109,199 108,511 109,046 108,417 Effect of notional units 1,026 527 898 473 Effect of outstanding options 832 661 783 701 Diluted weighted average common units 111,057 109,699 110,727 109,591 Basic earnings per common unit: Net income $ 0.26 $ 0.22 $ 0.71 $ 0.61 Diluted earnings per common unit: Net income $ 0.26 $ 0.22 $ 0.70 $ 0.60 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 the three and nine months ended September 30, 2023, no notional units were excluded from the computation and for the three and nine months ended September 30, 2022, approximately 601,000 notional units were excluded from the computation because these notional units either would not have been issuable if the end of the reporting period were the end of the contingency period or as they were anti-dilutive. With respect to outstanding options, the effect of dilutive common units is determined using the treasury stock method, whereby outstanding options are assumed exercised at the beginning of the reporting period and the exercise proceeds from such options and the average measured but unrecognized compensation cost during the period are assumed to be used to repurchase our common units at the average market price during the period. The market price of a common unit is considered to be equivalent to the market price of a Company common share. For the three and nine months ended September 30, 2023, approximately 333,300 and 475,200 options, respectively, were excluded from the computation and for the three and nine months ended September 30, 2022, approximately 274,000 options were excluded from the computation, as they were anti-dilutive. Certain of the Company’s unvested restricted common share awards contain non-forfeitable rights to distributions or distribution equivalents. The impact of the corresponding unvested restricted unit awards on earnings per unit has been calculated using the two-class method whereby earnings are allocated to the unvested restricted unit awards based on distributions declared and the unvested restricted units’ participation rights in undistributed earnings. Unvested restricted common units that do not contain non-forfeitable rights to dividends or dividend equivalents are included in the diluted earnings per unit computation if the effect is dilutive, using the treasury stock method. 31 13. 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 (the “Plan”), which covers our non-employee directors, officers, employees and consultants. Effective May 19, 2023, the Plan was amended and restated to, among other things, increase the number of shares authorized for issuance under the plan to 21.3 million shares and extend the term of the plan by an additional ten years . 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, 2023 2022 2023 2022 Restricted common shares (1) $ 1,912 $ 1,705 $ 5,649 $ 5,919 Notional unit performance awards (1) 1,393 1,227 3,039 3,802 Options 83 74 352 244 Total equity-based compensation $ 3,388 $ 3,006 $ 9,040 $ 9,965 (1) The nine months ended September 30, 2023 includes the reversal of compensation costs related to the voluntary resignation of an executive officer. 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, 2023 2022 2023 2022 Equity-based compensation expense capitalized $ 72 $ 51 $ 194 $ 137 Restricted Common Share and Restricted Share Unit Awards During March 2023, the Company granted approximately 323,829 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 $ 17.53 per share. The restricted common shares vest ratably over a three year period on March 15th of each year for executive officers and over a one year period on March 15th for non-employee directors. 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 368,000 and 229,700 for the nine months ended September 30, 2023 and 2022, 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 $ 7.0 million and $ 3.7 million for the nine months ended September 30, 2023 and 2022, respectively. These amounts are reflected as financing activities within the consolidated statements of cash flows. 32 2023 Performance Share Plan During March 2023, the Compensation Committee of the Company approved the general terms of the Tanger Factory Outlet Centers, Inc. 2023 Performance Share Plan (the “2023 PSP”) covering the Company's executive officers whereby a maximum of approximately 489,122 restricted common shares may be earned if certain share price appreciation goals are achieved over a three year measurement period. The 2023 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 2023 PSP performance targets and other relevant information about the 2023 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 489,122 March grant date fair value per share $ 12.08 (1) The number of restricted common shares received under the 2023 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 2023 PSP awards granted during the nine months ended September 30, 2023 were determined at the grant dates using a Monte Carlo simulation pricing model and the following assumptions: Risk free interest rate (1) 3.9 % Expected dividend yield (2) 4.6 % Expected volatility (3) 62 % (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. 2020 Performance Share Plan On February 10, 2023, the measurement period for the 2020 Performance Share Plan (the “2020 PSP") expired. Based on the Company’s absolute share price appreciation and relative total shareholder return over the three year measurement period, we issued 758,814 restricted common shares in February 2023, with 439,051 vesting immediately and the remaining 319,763 vesting in February 2024, contingent upon continued employment with the Company through the vesting date. 33 14. 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, 2023 and for 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, 2023 $ ( 23,187 ) $ 9,845 $ ( 13,342 ) $ ( 1,291 ) $ 473 $ ( 818 ) Other comprehensive income before reclassifications ( 1,688 ) — ( 1,688 ) ( 77 ) — ( 77 ) Reclassification out of accumulated other comprehensive income (loss) into other income (expense) for foreign currency and interest expense for cash flow hedges — ( 1,765 ) ( 1,765 ) — ( 80 ) ( 80 ) Balance September 30, 2023 $ ( 24,875 ) $ 8,080 $ ( 16,795 ) $ ( 1,368 ) $ 393 $ ( 975 ) 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, 2022 $ ( 24,516 ) $ 13,479 $ ( 11,037 ) $ ( 1,351 ) $ 638 $ ( 713 ) Other comprehensive income before reclassifications ( 359 ) — ( 359 ) ( 17 ) — ( 17 ) Reclassification out of accumulated other comprehensive income (loss) into other income (expense) for foreign currency and interest expense for cash flow hedges — ( 5,399 ) ( 5,399 ) — ( 245 ) ( 245 ) Balance September 30, 2023 $ ( 24,875 ) $ 8,080 $ ( 16,795 ) $ ( 1,368 ) $ 393 $ ( 975 ) 34 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 ) We expect within the next twelve months to reclassify into earnings as a decrease to interest expense approximately $ 6.3 million of the amounts recorded within accumulated other comprehensive income related to the interest rate swap agreements in effect as of September 30, 2023. 35 15. 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, 2023 (in thousands): Foreign Currency Cash flow hedges Accumulated Other Comprehensive Income (Loss) Balance June 30, 2023 $ ( 24,478 ) $ 10,318 $ ( 14,160 ) Other comprehensive income before reclassifications ( 1,765 ) — ( 1,765 ) Reclassification out of accumulated other comprehensive income (loss) into other income (expense) for foreign currency and interest expense for cash flow hedges — ( 1,845 ) ( 1,845 ) Balance September 30, 2023 $ ( 26,243 ) $ 8,473 $ ( 17,770 ) Foreign Currency Cash flow hedges Accumulated Other Comprehensive Income (Loss) Balance December 31, 2022 $ ( 25,867 ) $ 14,117 $ ( 11,750 ) Other comprehensive income before reclassifications ( 376 ) — ( 376 ) Reclassification out of accumulated other comprehensive income (loss) into other income (expense) for foreign currency and interest expense for cash flow hedges — ( 5,644 ) ( 5,644 ) Balance September 30, 2023 $ ( 26,243 ) $ 8,473 $ ( 17,770 ) 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, 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 ) We expect within the next twelve months to reclassify into earnings as a decrease to interest expense approximately $ 6.3 million of the amounts recorded within accumulated other comprehensive income related to the interest rate swap agreements in effect as of September 30, 2023. 36 16. Lease Agreements As of September 30, 2023, we were the lessor to approximately 2,300 stores in our 29 consolidated outlet centers, under operating leases with initial terms that expire from 2023 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, 2023 2022 2023 2022 Rental revenues - fixed $ 87,315 $ 79,427 $ 252,017 $ 239,417 Rental revenues - variable (1) 23,520 26,142 66,988 72,170 Rental revenues $ 110,835 $ 105,569 $ 319,005 $ 311,587 (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. 17. 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, 2023 September 30, 2022 Costs relating to construction included in accounts payable and accrued expenses $ 29,919 $ 10,525 Interest paid, net of interest capitalized was as follows (in thousands): Nine months ended September 30, 2023 2022 Interest paid $ 39,421 $ 40,474 37 18. 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. In December 2022, the FASB issued ASU 2022-06, Reference Rate Reform (Topic 848) - Deferral of the Sunset Date of Topic 848, which defers the sunset date on the topic of reference rate reform from December 31, 2022, to December 31, 2024. An entity may elect to apply the amendments on a full retrospective basis. 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 contracts, changing the 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. On August 22, 2023, the FASB issued Accounting Standards Update (“ASU”) 2023-05, an update to ASC Topic 805, Business Combinations. ASU 2023-05 clarifies existing guidance by requiring a joint venture to recognize and initially measure assets contributed and liabilities assumed at fair value, upon its formation. These amendments are effective prospectively for all joint venture formations with a formation date on or after January 1, 2025, with early adoption permitted. We are evaluating the impact of ASU 2023-05 on our consolidated financial statements. We will apply the provisions of ASU 2023-05 to new joint ventures, as applicable, but do not believe the adoption of ASU 2023-05 will have a material impact on our consolidated financial statements. 19. Subsequent Events Dividend Declaration In October 2023, the Company's Board of Directors (the “Board”) declared a $ 0.26 cash dividend per common share payable on November 15, 2023 to each shareholder of record on October 31, 2023, and a $ 0.26 cash distribution per Operating Partnership unit to the Operating Partnership's unitholders. Amendments to Charter and Bylaws As previously disclosed on a Current Report on Form 8-K filed with the SEC on November 7, 2023, the Company filed Articles of Amendment to its Articles of Incorporation with the North Carolina Secretary of State, to change the Company’s name to Tanger Inc., effective November 16, 2023. Also effective November 16, 2023, the Board of Directors of the Company has authorized and approved (i) an increase in the Company’s common share ownership limit from 4 % to 9.8 %, and (ii) amendments to the Company’s Bylaws to reflect the name change, to modify the advance notice and other procedural requirements for shareholder director nominations and other shareholder-proposed business in light of the universal proxy rules adopted by the SEC, to designate the North Carolina Business Court (or, if such court lacks jurisdiction, a federal court located within the State of North Carolina, or, if both lack jurisdiction, another superior state court located within the State of North Carolina) for certain actions or proceedings involving or relating to the Company, and to make other conforming, technical and non-substantive changes. 38