10-Q 1 skt10q6302017.htm 10-Q Document


United States
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
 
x
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
For the quarterly period ended June 30, 2017
OR
 
o
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
For the transition period from _________ to _________

Commission file number 1-11986 (Tanger Factory Outlet Centers, Inc.)
Commission file number 333-3526-01 (Tanger Properties Limited Partnership)

TANGER FACTORY OUTLET CENTERS, INC.
TANGER PROPERTIES LIMITED PARTNERSHIP
(Exact name of Registrant as specified in its charter)
North Carolina (Tanger Factory Outlet Centers, Inc.)
56-1815473
North Carolina (Tanger Properties Limited Partnership)
56-1822494
(State or other jurisdiction of incorporation or organization)
(I.R.S. Employer Identification No.)
 
 
3200 Northline Avenue, Suite 360, Greensboro, NC 27408
(Address of principal executive offices)
 
 
(336) 292-3010
(Registrant's telephone number, including area code)
Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Tanger Factory Outlet Centers, Inc.
Yes x   No o
Tanger Properties Limited Partnership
Yes  x   No  o
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
Tanger Factory Outlet Centers, Inc.
Yes x   No o
Tanger Properties Limited Partnership
Yes x   No  o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer”, “accelerated filer", “smaller reporting company” and "emerging growth company" in Rule 12b-2 of the Exchange Act.
Tanger Factory Outlet Centers, Inc.
Large accelerated filer x 
 
Accelerated filer o 
Non-accelerated filer o 
 
Smaller reporting company o 
(Do not check if a smaller reporting company)
 
Emerging growth company o
Tanger Properties Limited Partnership
Large accelerated filer o 
 
Accelerated filer o 
Non-accelerated filer x
 
Smaller reporting company o 
(Do not check if a smaller reporting company)
 
Emerging growth company o







If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Tanger Factory Outlet Centers, Inc.
o
Tanger Properties Limited Partnership
o
 
Indicate by check mark whether the registrant is a shell company (as defined by Rule 12b-2 of the Act).
Tanger Factory Outlet Centers, Inc.
Yes o   No x
Tanger Properties Limited Partnership
Yes o   No x

As of July 31, 2017, there were 94,958,136 common shares of Tanger Factory Outlet Centers, Inc. outstanding, $.01 par value.




EXPLANATORY NOTE
This report combines the unaudited quarterly reports on Form 10-Q for the quarter ended June 30, 2017 of Tanger Factory Outlet Centers, Inc. and Tanger Properties Limited 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.

Tanger Factory Outlet Centers, Inc. and subsidiaries is one of the largest owners and operators of outlet centers in the United States and Canada. The Company is a fully-integrated, self-administered and self-managed real estate investment trust ("REIT") which, through its controlling interest in the Operating Partnership, focuses exclusively on developing, acquiring, owning, operating and managing outlet shopping centers. The outlet centers and other assets are held by, and all of the operations are conducted by, the Operating Partnership and its subsidiaries. Accordingly, the descriptions of the business, employees and properties of the Company are also descriptions of the business, employees and properties of the Operating Partnership. As the Operating Partnership is the issuer of our registered debt securities, we are required to present a separate set of financial statements for this entity.

The Company owns the majority of the units of partnership interest issued by the Operating Partnership through its two wholly-owned subsidiaries, Tanger GP Trust and Tanger LP Trust. Tanger GP Trust is the sole general partner of the Operating Partnership. Tanger LP Trust holds a limited partnership interest. As of June 30, 2017, the Company, through its ownership of Tanger GP Trust and Tanger LP Trust, owned 94,958,136 units of the Operating Partnership and other limited partners (the "Non-Company LPs") collectively owned 5,027,781 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 status as a REIT. Class B common limited partnership units, which are held by Tanger LP Trust, are not exchangeable for common shares of the Company.

Management operates the Company and the Operating Partnership as one enterprise. The management of the Company consists of the same members as the management of the Operating Partnership. These individuals are officers of the Company and employees of the Operating Partnership. The individuals that comprise the Company's Board of Directors are also the same individuals that make up Tanger GP Trust's Board of Trustees.

We believe combining the quarterly reports on Form 10-Q of the Company and the Operating Partnership into this single report results in the following benefits:

enhancing investors' understanding of the Company and the Operating Partnership by enabling investors to view the business as a whole in the same manner as management views and operates the business;

eliminating duplicative disclosure and providing a more streamlined and readable presentation since a substantial portion of the disclosure applies to both the Company and the Operating Partnership; and

creating time and cost efficiencies through the preparation of one combined report instead of two separate reports.


3



There are only a few differences between the Company and the Operating Partnership, which are reflected in the disclosure in this report. We believe it is important, however, to understand these differences between the Company and the Operating Partnership in the context of how the Company and the Operating Partnership operate as an interrelated consolidated company.

As stated above, the Company is a REIT, whose only material asset is its ownership of partnership interests of the Operating Partnership through its wholly-owned subsidiaries, the Tanger GP Trust and Tanger LP Trust. As a result, the Company does not conduct business itself, other than issuing public equity from time to time and incurring expenses required to operate as a public company. However, all operating expenses incurred by the Company are reimbursed by the Operating Partnership, thus the only material item on the Company's income statement is its equity in the earnings of the Operating Partnership. Therefore, the assets and liabilities and the revenues and expenses of the Company and the Operating Partnership are the same on their respective financial statements, except for immaterial differences related to cash, other assets and accrued liabilities that arise from public company expenses paid by the Company. The Company itself does not hold any indebtedness but does guarantee certain debt of the Operating Partnership, as disclosed in this report.

The Operating Partnership holds all of the outlet centers and other assets, including the ownership interests in consolidated and unconsolidated joint ventures. The Operating Partnership conducts the operations of the business and is structured as a partnership with no publicly traded equity. Except for net proceeds from public equity issuances by the Company, which are contributed to the Operating Partnership in exchange for partnership units, the Operating Partnership generates the capital required through its operations, its incurrence of indebtedness or through the issuance of partnership units.

Noncontrolling interests, shareholder's equity and partner's capital are the main areas of difference between the consolidated financial statements of the Company and those of the Operating Partnership. The limited partnership interests in the Operating Partnership held by the Non-Company LPs are accounted for as partner's capital in the Operating Partnership's financial statements and as noncontrolling interests in the Company's financial statements.

To help investors understand the significant differences between the Company and the Operating Partnership, this report presents the following separate sections, as applicable, for each of the Company and the Operating Partnership:

Consolidated financial statements;

The following notes to the consolidated financial statements:

Debt of the Company and the Operating Partnership;

Shareholders' Equity, if applicable, and Partners' Equity;

Earnings Per Share and Earnings Per Unit;

Accumulated Other Comprehensive Income of the Company and the Operating Partnership;

Liquidity and Capital Resources in the Management's Discussion and Analysis of Financial Condition and Results of Operations.

This report also includes separate Item 4. Controls and Procedures sections and separate Exhibit 31 and 32 certifications for each of the Company and the Operating Partnership in order to establish that the Chief Executive Officer and the Chief Financial Officer of each entity have made the requisite certifications and that the Company and Operating Partnership are compliant with Rule 13a-15 or Rule 15d-15 of the Securities Exchange Act of 1934 and 18 U.S.C. §1350.

The separate sections in this report for the Company and the Operating Partnership specifically refer to the Company and the Operating Partnership. In the sections that combine disclosure of the Company and the Operating Partnership, this report refers to actions or holdings as being actions or holdings of the Company. Although the Operating Partnership is generally the entity that enters into contracts and joint ventures and holds assets and debt, reference to the Company is appropriate because the business is one enterprise and the Company operates the business through the Operating Partnership.


4



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. The separate discussions of the Company and the Operating Partnership in this report should be read in conjunction with each other to understand the results of the Company on a consolidated basis and how management operates the Company.

5



TANGER FACTORY OUTLET CENTERS, INC. AND TANGER PROPERTIES LIMITED PARTNERSHIP
Index
 
Page Number
Part I. Financial Information
Item 1.
 
FINANCIAL STATEMENTS OF TANGER FACTORY OUTLET CENTERS, INC. (Unaudited)
 
Consolidated Balance Sheets - as of June 30, 2017 and December 31, 2016
Consolidated Statements of Operations - for the three and six months ended June 30, 2017 and 2016
Consolidated Statements of Comprehensive Income - for the three and six months ended June 30, 2017 and 2016
Consolidated Statements of Shareholders' Equity - for the six months ended June 30, 2017 and 2016
Consolidated Statements of Cash Flows - for the six months ended June 30, 2017 and 2016
 
 
FINANCIAL STATEMENTS OF TANGER PROPERTIES LIMITED PARTNERSHIP (Unaudited)
 
Consolidated Balance Sheets - as of June 30, 2017 and December 31, 2016
Consolidated Statements of Operations - for the three and six months ended June 30, 2017 and 2016
Consolidated Statements of Comprehensive Income - for the three and six months ended June 30, 2017 and 2016
Consolidated Statements of Equity - for the six months ended June 30, 2017 and 2016
Consolidated Statements of Cash Flows - for the six months ended June 30, 2017 and 2016
 
 
Condensed Notes to Consolidated Financial Statements of Tanger Factory Outlet Centers, Inc. and Tanger Properties Limited Partnership
 
 
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
 
 
Item 3. Quantitative and Qualitative Disclosures about Market Risk
 
 
Item 4. Controls and Procedures (Tanger Factory Outlet Centers, Inc. and Tanger Properties Limited Partnership)
 
Part II. Other Information
 
 
Item 1. Legal Proceedings
 
 
Item 1A. Risk Factors
 
 
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
 
 
Item 4. Mine Safety Disclosure
 
 
Item 6. Exhibits
 
 
Signatures

6



PART I. - FINANCIAL INFORMATION

Item 1 - Financial Statements of Tanger Factory Outlet Centers, Inc.

TANGER FACTORY OUTLET CENTERS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands, except share data, unaudited)
 
 
June 30, 2017
 
December 31, 2016
Assets
 
 

 
 

Rental property:
 
 

 
 

Land
 
$
262,166

 
$
272,153

Buildings, improvements and fixtures
 
2,651,419

 
2,647,477

Construction in progress
 
94,490

 
46,277

 
 
3,008,075

 
2,965,907

Accumulated depreciation
 
(849,652
)
 
(814,583
)
Total rental property, net
 
2,158,423

 
2,151,324

Cash and cash equivalents
 
8,362

 
12,222

Investments in unconsolidated joint ventures
 
131,172

 
128,104

Deferred lease costs and other intangibles, net
 
139,675

 
151,579

Prepaids and other assets
 
91,861

 
82,985

Total assets
 
$
2,529,493

 
$
2,526,214

Liabilities and Equity
 
 
 
 
Liabilities
 
 

 
 

Debt:
 
 

 
 

Senior, unsecured notes, net
 
$
1,136,296

 
$
1,135,309

Unsecured term loan, net
 
322,793

 
322,410

Mortgages payable, net
 
171,215

 
172,145

Unsecured lines of credit, net
 
98,698

 
58,002

Total debt
 
1,729,002

 
1,687,866

Accounts payable and accrued expenses
 
71,383

 
78,143

Other liabilities
 
67,979

 
54,764

Total liabilities
 
1,868,364

 
1,820,773

Commitments and contingencies
 


 


Equity
 
 

 
 

Tanger Factory Outlet Centers, Inc.:
 
 

 
 

Common shares, $.01 par value, 300,000,000 shares authorized, 94,958,136 and 96,095,891 shares issued and outstanding at June 30, 2017 and December 31, 2016, respectively
 
950

 
961

Paid in capital
 
787,255

 
820,251

Accumulated distributions in excess of net income 
 
(136,225
)
 
(122,701
)
Accumulated other comprehensive loss
 
(24,247
)
 
(28,295
)
Equity attributable to Tanger Factory Outlet Centers, Inc.
 
627,733

 
670,216

Equity attributable to noncontrolling interests:
 
 
 
 
Noncontrolling interests in Operating Partnership
 
33,237

 
35,066

Noncontrolling interests in other consolidated partnerships
 
159

 
159

Total equity
 
661,129

 
705,441

Total liabilities and equity
 
$
2,529,493

 
$
2,526,214


The accompanying notes are an integral part of these consolidated financial statements.

7



TANGER FACTORY OUTLET CENTERS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except share data, unaudited)
 
 
Three months ended June 30,
 
Six months ended June 30,
 
 
2017
 
2016
 
2017
 
2016
Revenues:
 
 
 
 
 
 

 
 
Base rentals
 
$
80,788

 
$
75,003

 
$
161,118

 
$
147,626

Percentage rentals
 
1,805

 
2,326

 
3,660

 
4,476

Expense reimbursements
 
34,023

 
30,754

 
70,621

 
63,996

Management, leasing and other services
 
609

 
1,332

 
1,188

 
2,453

Other income
 
2,389

 
1,918

 
4,395

 
3,587

Total revenues
 
119,614

 
111,333

 
240,982

 
222,138

Expenses:
 
 
 


 
 
 
 

Property operating
 
37,116

 
35,012

 
77,503

 
72,886

General and administrative
 
11,500

 
11,675

 
22,912

 
23,240

Abandoned pre-development costs
 

 

 
627

 

Depreciation and amortization
 
32,905

 
26,306

 
64,199

 
52,873

Total expenses
 
81,521

 
72,993

 
165,241

 
148,999

Operating income
 
38,093

 
38,340


75,741


73,139

Other income (expense):
 
 
 
 
 
 
 
 
Interest expense
 
(16,520
)
 
(13,800
)
 
(33,007
)
 
(28,684
)
Gain on sale of assets
 
6,943

 

 
6,943

 
4,887

Gain on previously held interest in acquired joint venture
 

 
49,258

 

 
49,258

Other non-operating income (expense)
 
57

 
38

 
92

 
354

Income before equity in earnings of unconsolidated joint ventures
 
28,573

 
73,836

 
49,769

 
98,954

Equity in earnings of unconsolidated joint ventures
 
2,374

 
3,466

 
4,692

 
6,965

Net income
 
30,947

 
77,302


54,461


105,919

Noncontrolling interests in Operating Partnership
 
(1,557
)
 
(3,897
)
 
(2,735
)
 
(5,341
)
Noncontrolling interests in other consolidated partnerships
 

 
12

 

 
(11
)
Net income attributable to Tanger Factory Outlet Centers, Inc.
 
$
29,390

 
$
73,417


$
51,726


$
100,567

 
 
 
 
 
 
 
 
 
Basic earnings per common share:
 
 
 
 
 
 
 
 
Net income
 
$
0.31

 
$
0.76

 
$
0.54

 
$
1.05

Diluted earnings per common share:
 
 
 
 
 
 
 
 
Net income
 
$
0.31

 
$
0.76

 
$
0.54

 
$
1.04

 
 
 
 
 
 
 
 
 
Dividends declared per common share
 
$
0.3425

 
$
0.3250

 
$
0.6675

 
$
0.6100

The accompanying notes are an integral part of these consolidated financial statements.

8



TANGER FACTORY OUTLET CENTERS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(In thousands, unaudited)
 
 
Three months ended June 30,
 
Six months ended June 30,
 
 
2017
 
2016
 
2017
 
2016
Net income
 
$
30,947

 
$
77,302

 
$
54,461

 
$
105,919

Other comprehensive income:
 
 
 
 
 
 
 
 
Foreign currency translation adjustments
 
3,074

 
47

 
4,084

 
8,701

Change in fair value of cash flow hedges
 
(544
)
 
(2,443
)
 
178

 
(3,829
)
Other comprehensive income (loss)
 
2,530

 
(2,396
)
 
4,262

 
4,872

Comprehensive income
 
33,477

 
74,906

 
58,723

 
110,791

Comprehensive income attributable to noncontrolling interests
 
(1,702
)
 
(3,765
)
 
(2,949
)
 
(5,599
)
Comprehensive income attributable to Tanger Factory Outlet Centers, Inc.
 
$
31,775

 
$
71,141

 
$
55,774

 
$
105,192

The accompanying notes are an integral part of these consolidated financial statements.


9



TANGER FACTORY OUTLET CENTERS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
(In thousands, except share and per share data, unaudited)

 
 
Common shares
Paid in capital
Accumulated distributions in excess of earnings
Accumulated other comprehensive loss
Equity attributable to Tanger Factory Outlet Centers, Inc.
Noncontrolling interests in Operating Partnership
Noncontrolling
interests in
other consolidated partnerships
Total
 equity
Balance,
December 31, 2015
 
$
959

$
806,379

$
(195,486
)
$
(36,715
)
$
575,137

$
30,309

$
586

$
606,032

Net income
 


100,567


100,567

5,341

11

105,919

Other comprehensive income
 



4,625

4,625

247


4,872

Compensation under Incentive Award Plan
 

8,152



8,152



8,152

Issuance of 35,300 common shares upon exercise of options
 

1,041



1,041



1,041

Grant of 173,124 restricted common share awards, net of forfeitures
 
2

(2
)






Issuance of 24,040 deferred shares
 








Withholding of 60,382 common shares for employee income taxes
 
(1
)
(1,920
)


(1,921
)


(1,921
)
Contributions from noncontrolling interests
 






35

35

Adjustment for noncontrolling interests in Operating Partnership
 

(182
)


(182
)
182



Adjustment for noncontrolling interests in other consolidated partnerships
 

2



2


(2
)

Acquisition of noncontrolling interest in other consolidated partnership
 

(1,617
)


(1,617
)

(325
)
(1,942
)
Common dividends ($.61 per share)
 


(58,546
)

(58,546
)


(58,546
)
Distributions to noncontrolling interests
 





(3,083
)
(145
)
(3,228
)
Balance,
June 30, 2016
 
$
960

$
811,853

$
(153,465
)
$
(32,090
)
$
627,258

$
32,996

$
160

$
660,414

 
 
 
 
 
 
 
 
 
 
The accompanying notes are an integral part of these consolidated financial statements.
 
 
 
 
 
 
 
 
 
 
 
 











 
 








 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

10



TANGER FACTORY OUTLET CENTERS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
(In thousands, except share and per share data, unaudited)
 
 
Common shares
Paid in capital
Accumulated distributions in excess of earnings
Accumulated other comprehensive loss
Equity attributable to Tanger Factory Outlet Centers, Inc.
Noncontrolling interests in Operating Partnership
Noncontrolling
interests in
other consolidated partnerships
Total
 equity
Balance, December 31, 2016
 
$
961

$
820,251

$
(122,701
)
$
(28,295
)
$
670,216

$
35,066

$
159

$
705,441

Net income
 


51,726


51,726

2,735


54,461

Other comprehensive income
 



4,048

4,048

214


4,262

Compensation under Incentive Award Plan
 

7,306



7,306



7,306

Issuance of 1,800 common shares upon exercise of options
 

54



54



54

Grant of 428,312 restricted common share awards
 
4

(4
)






Repurchase of 1,497,981 common shares, including transaction costs

 
(15
)
(39,339
)


(39,354
)


(39,354
)
Withholding of
69,886 common shares for employee income taxes
 

(2,435
)


(2,435
)


(2,435
)
Adjustment for noncontrolling interests in Operating Partnership
 

1,422



1,422

(1,422
)


Common dividends ($.6675 per share)
 


(65,250
)

(65,250
)


(65,250
)
Distributions to noncontrolling interests
 





(3,356
)

(3,356
)
Balance,
June 30, 2017
 
$
950

$
787,255

$
(136,225
)
$
(24,247
)
$
627,733

$
33,237

$
159

$
661,129


The accompanying notes are an integral part of these consolidated financial statements.




11



TANGER FACTORY OUTLET CENTERS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands, unaudited)
 
 
Six months ended June 30,
 
 
2017
 
2016
OPERATING ACTIVITIES
 
 
 
 

Net income
 
$
54,461

 
$
105,919

Adjustments to reconcile net income to net cash provided by operating activities:
 
 
 
 
Depreciation and amortization
 
64,199

 
52,873

Amortization of deferred financing costs
 
1,749

 
1,505

Gain on sale of assets
 
(6,943
)
 
(4,887
)
Gain on previously held interest in acquired joint venture
 

 
(49,258
)
Equity in earnings of unconsolidated joint ventures
 
(4,692
)
 
(6,965
)
Equity-based compensation expense
 
6,796

 
7,655

Amortization of debt (premiums) and discounts, net
 
245

 
1,075

Amortization (accretion) of market rent rate adjustments, net
 
1,691

 
1,303

Straight-line rent adjustments
 
(3,293
)
 
(3,321
)
Distributions of cumulative earnings from unconsolidated joint ventures
 
4,952

 
7,468

Changes in other assets and liabilities:
 
 
 
 
Other assets
 
787

 
(1,011
)
Accounts payable and accrued expenses
 
(9,198
)
 
(7,335
)
Net cash provided by operating activities
 
110,754

 
105,021

INVESTING ACTIVITIES
 
 
 
 
Additions to rental property
 
(88,761
)
 
(68,582
)
Acquisitions of interests in unconsolidated joint ventures, net of cash acquired
 

 
(34,187
)
Additions to investments in unconsolidated joint ventures
 
(3,617
)
 
(19,363
)
Net proceeds on sale of assets
 
39,213

 
25,785

Change in restricted cash
 

 
121,306

Additions to non-real estate assets
 
(7,959
)
 
(2,379
)
Distributions in excess of cumulative earnings from unconsolidated joint ventures
 
6,330

 
7,874

Additions to deferred lease costs
 
(2,845
)
 
(2,919
)
Other investing activities
 
2,591

 
(1,676
)
Net cash provided by (used in) investing activities
 
(55,048
)
 
25,859

FINANCING ACTIVITIES
 
 
 
 
Cash dividends paid
 
(65,250
)
 
(78,675
)
Distributions to noncontrolling interests in Operating Partnership
 
(3,356
)
 
(4,144
)
Proceeds from revolving credit facility
 
326,254

 
509,550

Repayments of revolving credit facility
 
(286,127
)
 
(440,650
)
Proceeds from notes, mortgages and loans
 
454

 
88,165

Repayments of notes, mortgages and loans
 
(1,483
)
 
(168,901
)
Repayment of deferred financing obligation
 

 
(28,388
)
Repurchase of common shares, including transaction costs
 
(39,354
)
 

Employee income taxes paid related to shares withheld upon vesting of equity awards
 
(2,435
)
 
(1,921
)
Additions to deferred financing costs
 
(50
)
 
(1,883
)
Proceeds from exercise of options
 
54

 
1,041

Other financing activities
 
11,718

 
(64
)
Net cash used in financing activities
 
(59,575
)
 
(125,870
)
Effect of foreign currency rate changes on cash and cash equivalents
 
9

 
539

Net increase (decrease) in cash and cash equivalents
 
(3,860
)
 
5,549

Cash and cash equivalents, beginning of period
 
12,222

 
21,558

Cash and cash equivalents, end of period
 
$
8,362

 
$
27,107

The accompanying notes are an integral part of these consolidated financial statements.

12



Item 1 - Financial Statements of Tanger Properties Limited Partnership

TANGER PROPERTIES LIMITED PARTNERSHIP AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands, except unit data, unaudited)
 
 
June 30, 2017
 
December 31, 2016
Assets
 
 

 
 

Rental property:
 
 

 
 

Land
 
$
262,166

 
$
272,153

Buildings, improvements and fixtures
 
2,651,419

 
2,647,477

Construction in progress
 
94,490

 
46,277

 
 
3,008,075

 
2,965,907

Accumulated depreciation
 
(849,652
)
 
(814,583
)
Total rental property, net
 
2,158,423

 
2,151,324

Cash and cash equivalents
 
8,251

 
12,199

Investments in unconsolidated joint ventures
 
131,172

 
128,104

Deferred lease costs and other intangibles, net
 
139,675

 
151,579

Prepaids and other assets
 
91,657

 
82,481

Total assets
 
$
2,529,178

 
$
2,525,687

Liabilities and Equity
 

 
 
Liabilities
 
 
 
 
Debt:
 
 
 
 
Senior, unsecured notes, net
 
$
1,136,296

 
$
1,135,309

Unsecured term loan, net
 
322,793

 
322,410

Mortgages payable, net
 
171,215

 
172,145

Unsecured lines of credit, net
 
98,698

 
58,002

Total debt
 
1,729,002

 
1,687,866

Accounts payable and accrued expenses
 
71,068

 
77,616

Other liabilities
 
67,979

 
54,764

Total liabilities
 
1,868,049

 
1,820,246

Commitments and contingencies
 


 


Equity
 
 
 
 
Partners' Equity:
 
 
 
 
General partner, 1,000,000 units outstanding at June 30, 2017 and December 31, 2016
 
6,356

 
6,485

Limited partners, 5,027,781 and 5,027,781 Class A common units, and 93,958,136 and 95,095,891 Class B common units outstanding at June 30, 2017 and December 31, 2016, respectively
 
680,186

 
728,631

Accumulated other comprehensive loss
 
(25,572
)
 
(29,834
)
Total partners' equity
 
660,970

 
705,282

Noncontrolling interests in consolidated partnerships
 
159

 
159

Total equity
 
661,129

 
705,441

Total liabilities and equity
 
$
2,529,178

 
$
2,525,687

The accompanying notes are an integral part of these consolidated financial statements.

13



TANGER PROPERTIES LIMITED PARTNERSHIP AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per unit data, unaudited)
 
 
Three months ended June 30,
 
Six months ended June 30,
 
 
2017
 
2016
 
2017
 
2016
Revenues:
 
 
 
 
 
 

 
 
Base rentals
 
$
80,788

 
$
75,003

 
$
161,118

 
$
147,626

Percentage rentals
 
1,805

 
2,326

 
3,660

 
4,476

Expense reimbursements
 
34,023

 
30,754

 
70,621

 
63,996

Management, leasing and other services
 
609

 
1,332

 
1,188

 
2,453

Other income
 
2,389

 
1,918

 
4,395

 
3,587

Total revenues
 
119,614

 
111,333


240,982


222,138

Expenses:
 


 


 


 
 
Property operating
 
37,116

 
35,012

 
77,503

 
72,886

General and administrative
 
11,500

 
11,675

 
22,912

 
23,240

Abandoned pre-development costs
 

 

 
627

 

Depreciation and amortization
 
32,905

 
26,306

 
64,199

 
52,873

Total expenses
 
81,521

 
72,993


165,241


148,999

Operating income
 
38,093

 
38,340


75,741


73,139

Other income (expense):
 
 
 
 
 
 
 
 
Interest expense
 
(16,520
)
 
(13,800
)
 
(33,007
)
 
(28,684
)
Gain on sale of assets
 
6,943

 

 
6,943

 
4,887

Gain on previously held interest in acquired joint venture
 

 
49,258

 

 
49,258

Other non-operating income (expense)
 
57

 
38

 
92

 
354

Income before equity in earnings of unconsolidated joint ventures
 
28,573

 
73,836


49,769


98,954

Equity in earnings of unconsolidated joint ventures
 
2,374

 
3,466

 
4,692

 
6,965

Net income
 
30,947

 
77,302


54,461


105,919

Noncontrolling interests in consolidated partnerships
 

 
12

 

 
(11
)
Net income available to partners
 
30,947

 
77,314


54,461


105,908

Net income available to limited partners
 
30,641

 
76,549

 
53,922

 
104,860

Net income available to general partner
 
$
306

 
$
765


$
539


$
1,048

 
 
 
 
 
 
 
 
 
Basic earnings per common unit:
 
 
 
 
 
 
 
 

Net income
 
$
0.31

 
$
0.76

 
$
0.54

 
$
1.05

Diluted earnings per common unit:
 
 
 
 
 
 
 
 
Net income
 
$
0.31

 
$
0.76

 
$
0.54

 
$
1.05

 
 
 
 
 
 
 
 
 
Distribution declared per common unit
 
$
0.3425

 
$
0.3250

 
$
0.6675

 
$
0.6100

The accompanying notes are an integral part of these consolidated financial statements.

14



TANGER PROPERTIES LIMITED PARTNERSHIP AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(In thousands, unaudited)

 
 
Three months ended June 30,
 
Six months ended June 30,
 
 
2017
 
2016
 
2017
 
2016
Net income
 
$
30,947

 
$
77,302

 
$
54,461

 
$
105,919

Other comprehensive income:
 
 
 
 
 
 
 
 
Foreign currency translation adjustments
 
3,074

 
47

 
4,084

 
8,701

Changes in fair value of cash flow hedges
 
(544
)
 
(2,443
)
 
178

 
(3,829
)
Other comprehensive income (loss)
 
2,530

 
(2,396
)
 
4,262

 
4,872

Comprehensive income
 
33,477

 
74,906

 
58,723

 
110,791

Comprehensive income attributable to noncontrolling interests in consolidated partnerships
 

 
12

 

 
(11
)
Comprehensive income attributable to the Operating Partnership
 
$
33,477

 
$
74,918

 
$
58,723

 
$
110,780

The accompanying notes are an integral part of these consolidated financial statements.


15



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, December 31, 2015
 
$
5,726

$
638,422

$
(38,702
)
$
605,446

$
586

$
606,032

Net income
 
1,048

104,860


105,908

11

105,919

Other comprehensive income
 


4,872

4,872


4,872

Compensation under Incentive Award Plan
 

8,152


8,152


8,152

Issuance of 35,300 common units upon exercise of options
 

1,041


1,041


1,041

Grant of 173,124 restricted common share awards by the Company, net of forfeitures
 






Issuance of 24,040 deferred units
 






Withholding of 60,382 common units for employee income taxes
 

(1,921
)

(1,921
)

(1,921
)
Contributions from noncontrolling interests
 




35

35

Adjustments for noncontrolling interests in consolidated partnerships
 

2


2

(2
)

Acquisition of noncontrolling interest in other consolidated partnership
 

(1,617
)

(1,617
)
(325
)
(1,942
)
Common distributions ($.61 per common unit)
 
(610
)
(61,019
)

(61,629
)

(61,629
)
Distributions to noncontrolling interests
 




(145
)
(145
)
Balance, June 30, 2016
 
$
6,164

$
687,920

$
(33,830
)
$
660,254

$
160

$
660,414

 
 
 
 
 
 
 
 
 
 
General partner
Limited partners
Accumulated other comprehensive loss
Total partners' equity
Noncontrolling interests in consolidated partnerships
Total equity
Balance, December 31, 2016
 
$
6,485

$
728,631

$
(29,834
)
$
705,282

$
159

$
705,441

Net income
 
539

53,922


54,461


54,461

Other comprehensive income
 


4,262

4,262


4,262

Compensation under Incentive Award Plan
 

7,306


7,306


7,306

Issuance of 1,800 common units upon exercise of options
 

54


54


54

Grant of 428,312 restricted common share awards by the Company
 






Repurchase of 1,497,981 units, including transaction costs
 

(39,354
)

(39,354
)

(39,354
)
Withholding of 69,886 common units for employee income taxes
 

(2,435
)

(2,435
)

(2,435
)
Common distributions ($.6675 per common unit)
 
(668
)
(67,938
)

(68,606
)

(68,606
)
Balance, June 30, 2017
 
$
6,356

$
680,186

$
(25,572
)
$
660,970

$
159

$
661,129

 
 
 
 
 
 
 
 
The accompanying notes are an integral part of these consolidated financial statements.

16



TANGER PROPERTIES LIMITED PARTNERSHIP AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands, unaudited)
 
 
Six months ended June 30,
 
 
2017
 
2016
OPERATING ACTIVITIES
 
 

 
 

Net income
 
$
54,461

 
$
105,919

Adjustments to reconcile net income to net cash provided by operating activities:
 
 
 
 
Depreciation and amortization
 
64,199

 
52,873

Amortization of deferred financing costs
 
1,749

 
1,505

Gain on sale of assets
 
(6,943
)
 
(4,887
)
Gain on previously held interest in acquired joint venture
 

 
(49,258
)
Equity in earnings of unconsolidated joint ventures
 
(4,692
)
 
(6,965
)
Equity-based compensation expense
 
6,796

 
7,655

Amortization of debt (premiums) and discounts, net
 
245

 
1,075

Amortization (accretion) of market rent rate adjustments, net
 
1,691

 
1,303

Straight-line rent adjustments
 
(3,293
)
 
(3,321
)
Distributions of cumulative earnings from unconsolidated joint ventures
 
4,952

 
7,468

Changes in other assets and liabilities:
 
 
 
 
Other assets
 
487

 
(1,511
)
Accounts payable and accrued expenses
 
(8,986
)
 
(6,848
)
Net cash provided by operating activities
 
110,666

 
105,008

INVESTING ACTIVITIES
 
 
 
 
Additions to rental property
 
(88,761
)
 
(68,582
)
Acquisitions of interests in unconsolidated joint ventures, net of cash acquired
 

 
(34,187
)
Additions to investments in unconsolidated joint ventures
 
(3,617
)
 
(19,363
)
Net proceeds on sale of assets
 
39,213

 
25,785

Change in restricted cash
 

 
121,306

Additions to non-real estate assets
 
(7,959
)
 
(2,379
)
Distributions in excess of cumulative earnings from unconsolidated joint ventures
 
6,330

 
7,874

Additions to deferred lease costs
 
(2,845
)
 
(2,919
)
Other investing activities
 
2,591

 
(1,676
)
Net cash provided by (used in) investing activities
 
(55,048
)
 
25,859

FINANCING ACTIVITIES
 
 
 
 
Cash distributions paid
 
(68,606
)
 
(82,819
)
Proceeds from revolving credit facility
 
326,254

 
509,550

Repayments of revolving credit facility
 
(286,127
)
 
(440,650
)
Proceeds from notes, mortgages and loans
 
454

 
88,165

Repayments of notes, mortgages and loans
 
(1,483
)
 
(168,901
)
Repayment of deferred financing obligation
 

 
(28,388
)
Repurchase of units, including transaction costs
 
(39,354
)
 

Employee income taxes paid related to shares withheld upon vesting of equity awards
 
(2,435
)
 
(1,921
)
Additions to deferred financing costs
 
(50
)
 
(1,883
)
Proceeds from exercise of options
 
54

 
1,041

Other financing activities
 
11,718

 
(64
)
Net cash used in financing activities
 
(59,575
)
 
(125,870
)
Effect of foreign currency on cash and cash equivalents
 
9

 
539

Net increase (decrease) in cash and cash equivalents
 
(3,948
)
 
5,536

Cash and cash equivalents, beginning of period
 
12,199

 
21,552

Cash and cash equivalents, end of period
 
$
8,251

 
$
27,088

The accompanying notes are an integral part of these consolidated financial statements.

17



TANGER FACTORY OUTLET CENTERS, INC. AND SUBSIDIARIES
TANGER PROPERTIES LIMITED PARTNERSHIP AND SUBSIDIARIES
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. Business
Tanger Factory Outlet Centers, Inc. and subsidiaries is one of the largest owners and operators of outlet centers in the United States and Canada. We are a fully-integrated, self-administered and self-managed real estate investment trust ("REIT") which, through our controlling interest in the Operating Partnership, focuses exclusively on developing, acquiring, owning, operating and managing outlet shopping centers. As of June 30, 2017, we owned and operated 35 consolidated outlet centers, with a total gross leasable area of approximately 12.4 million square feet. We also had partial ownership interests in 8 unconsolidated outlet centers totaling approximately 2.4 million square feet, including 4 outlet centers in Canada.

Our outlet centers and other assets are held by, and all of our operations are conducted by, Tanger Properties Limited Partnership and subsidiaries. Accordingly, the descriptions of our business, employees and properties are also descriptions of the business, employees and properties of the Operating Partnership. Unless the context indicates otherwise, the term "Company" refers to Tanger Factory Outlet Centers, Inc. and subsidiaries and the term, "Operating Partnership", refers to Tanger Properties Limited Partnership and subsidiaries. The terms "we", "our" and "us" refer to the Company or the Company and the Operating Partnership together, as the text requires.

The Company owns the majority of the units of partnership interest issued by the Operating Partnership through its two wholly-owned subsidiaries, Tanger GP Trust and Tanger LP Trust. Tanger GP Trust is the sole general partner of the Operating Partnership. Tanger LP Trust holds a limited partnership interest. As of June 30, 2017, the Company, through its ownership of Tanger GP Trust and Tanger LP Trust, owned 94,958,136 units of the Operating Partnership and other limited partners (the "Non-Company LPs") collectively owned 5,027,781 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. 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 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, 2016. The December 31, 2016 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 accounting principles generally accepted in the United States of America have been condensed or omitted pursuant to the SEC's rules and regulations, 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.


18



We consolidate properties that are wholly owned and properties where we own less than 100% but we control. 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 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 of these investments, we record our equity in the venture's net income or loss under the hypothetical liquidation at book value (“HLBV”) 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. In the event a basis difference is created between our underlying interest in the venture's net assets and our initial investment, we amortize such amount over the estimated life of the venture as a component of equity in earnings of unconsolidated joint ventures.

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 and Galveston/Houston 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 LP's 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.


19



3. Disposition of Property

The following table sets forth certain summarized information regarding the property sold during the six months ended June 30, 2017:
Property
 
Location
 
Date Sold
 
Square Feet
(in 000's)
 
Net Sales Proceeds
(in 000's)
 
Gain on Sale(in 000's)
Westbrook
 
Westbrook, CT
 
May 2017
 
290

 
$
39,212

 
$
6,943


The rental property sold did not meet the criteria for reporting discontinued operations, thus its results of operations have remained in continuing operations.


4. Developments of Consolidated Outlet Centers

The table below sets forth our consolidated outlet centers under development as of June 30, 2017:
Project
Approximate square feet
(in 000's)
Costs Incurred to Date
(in millions)
Projected Opening
New development:
 
 
 
Fort Worth
352

$
53.7

October 2017
 
 
 
 
Expansion:
 
 
 
Lancaster
123

32.9

September 2017
 
 
 
 
Total
475

$
86.6

 

Fort Worth

In September 2016, we purchased land in the greater Fort Worth, Texas area for approximately $11.2 million and began construction immediately on the development of a wholly-owned outlet center. The outlet center will be located within the 279-acre Champions Circle mixed-use development adjacent to Texas Motor Speedway.

Lancaster Expansion

In July 2016, we commenced construction on a 123,000 square foot expansion of our outlet center in Lancaster, Pennsylvania.

Interest Costs Capitalized

Interest costs capitalized for development activities, including development in our unconsolidated joint ventures, was $689,000 and $1.2 million for the three and six months ended June 30, 2017, respectively, and $634,000 and $1.1 million for the three and six months ended June 30, 2016, respectively.


20




5. Investments in Unconsolidated Real Estate Joint Ventures
The equity method of accounting is used to account for each of the individual joint ventures. We have an ownership interest in the following unconsolidated real estate joint ventures:

As of June 30, 2017
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)
Columbus
 
Columbus, OH
 
50.0
%
 
355

 
$
6.8

 
$
84.3

National Harbor
 
National Harbor, MD
 
50.0
%
 
341

 
2.8

 
86.3

RioCan Canada
 
Various
 
50.0
%
 
924

 
121.6

 
11.1

Investments included in total assets
 
 
 
 
 
$
131.2

 


 
 
 
 
 
 
 
 
 
 
 
Charlotte(3)
 
Charlotte, NC
 
50.0
%
 
398

 
$
(3.1
)
 
$
89.8

Galveston/Houston (2)(3)
 
Texas City, TX
 
50.0
%
 
353

 
(4.9
)
 
64.9

Investments included in other liabilities

 
 
 
 
 
$
(8.0
)
 



As of December 31, 2016
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)
Columbus
 
Columbus, OH
 
50.0
%
 
355

 
$
6.7

 
$
84.2

National Harbor
 
National Harbor, MD
 
50.0
%
 
341

 
4.1

 
86.1

RioCan Canada
 
Various
 
50.0
%
 
901

 
117.3

 
11.1

Investments included in total assets
 
 
 
 
 
$
128.1

 


 
 
 
 
 
 
 
 
 
 
 
Charlotte(3)
 
Charlotte, NC
 
50.0
%
 
398

 
$
(2.5
)
 
$
89.7

Galveston/Houston (2)(3)
 
Texas City, TX
 
50.0
%
 
353

 
(3.8
)
 
64.9

Investments included in other liabilities
 
 
 
 
 
$
(6.3
)
 


(1)
Net of debt origination costs and including premiums of $1.3 million and $1.6 million as of June 30, 2017 and December 31, 2016, respectively.
(2)
In June 2017, the joint venture exercised its extension option and extended the maturity date of the loan from July 2017 to July 2018. In July, the joint venture amended and restated the initial construction loan to increase the amount available to borrow from $70.0 million to $80.0 million and extended the maturity date until July 2020 with two one-year options. The amended and restated loan also changed the interest rate from LIBOR + 1.50% to an interest rate of LIBOR + 1.65%. At the closing of the amendment, the joint venture distributed approximately $14.5 million equally between the partners.
(3)
The negative carrying value is due to the distributions of proceeds from mortgage loans and quarterly distributions of excess cash flow exceeding the original contributions from the partners.


21



Fees we received for various services provided to our unconsolidated joint ventures were recognized in management, leasing and other services as follows (in thousands):
 
 
Three months ended

Six months ended
 
 
June 30,

June 30,
 
 
2017
 
2016

2017

2016
Fee:
 
 
 
 
 
 

 
 

Management and marketing
 
$
570

 
$
797

 
1,112

 
1,544

Development and leasing
 
35

 
353

 
$
67

 
$
545

Loan guarantee
 
4

 
182

 
9

 
364

Total Fees
 
$
609

 
$
1,332

 
$
1,188

 
$
2,453


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 "Summary 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 $3.7 million for both the period ended June 30, 2017 and the period ended December 31, 2016) are amortized over the various useful lives of the related assets.

Condensed combined summary financial information of unconsolidated joint ventures accounted for using the equity method is as follows (in thousands):
Condensed Combined Balance Sheets - Unconsolidated Joint Ventures
 
June 30, 2017
 
December 31, 2016
Assets
 
 

 
 

Land
 
$
90,741

 
$
88,015

Buildings, improvements and fixtures
 
520,223

 
503,548

Construction in progress, including land under development
 
8,479

 
13,037

 
 
619,443

 
604,600

Accumulated depreciation
 
(80,452
)
 
(67,431
)
Total rental property, net
 
538,991

 
537,169

Cash and cash equivalents
 
24,610

 
27,271

Deferred lease costs, net
 
12,216

 
13,612

Prepaids and other assets
 
11,522

 
12,567

Total assets
 
$
587,339

 
$
590,619

Liabilities and Owners' Equity
 
 

 
 

Mortgages payable, net
 
$
336,387

 
$
335,971

Accounts payable and other liabilities
 
12,905

 
20,011

Total liabilities
 
349,292

 
355,982

Owners' equity
 
238,047

 
234,637

Total liabilities and owners' equity
 
$
587,339

 
$
590,619






22



 
 
Three months ended
 
Six months ended
Condensed Combined Statements of Operations (1)
 
June 30,
 
June 30,
 - Unconsolidated Joint Ventures
 
2017
 
2016
 
2017
 
2016
Revenues
 
$
23,285

 
$
29,341

 
$
47,347

 
$
57,039

Expenses:
 
 
 
 
 
 

 
 
Property operating
 
8,877

 
11,078

 
18,255

 
21,396

General and administrative
 
96

 
179

 
216

 
295

Depreciation and amortization
 
6,943

 
9,408

 
14,456

 
18,208

Total expenses
 
15,916

 
20,665

 
32,927

 
39,899

Operating income
 
7,369

 
8,676

 
14,420

 
17,140

Interest expense
 
(2,460
)
 
(2,682
)
 
(4,720
)
 
(5,236
)
Other non-operating income
 
1

 
2

 
3

 
3

Net income
 
$
4,910

 
$
5,996

 
$
9,703

 
$
11,907

 
 
 
 
 
 
 
 
 
The Company and Operating Partnership's share of:
 
 

 
 

Net income
 
$
2,374

 
$
3,466

 
$
4,692

 
$
6,965

Depreciation and amortization expense (real estate related)
 
$
3,550

 
$
5,808

 
$
7,388

 
$
11,147

(1)
The three and six months ended June 30, 2017 includes results from the Columbus outlet center, which opened in June 2016. The three and six months ended June 30, 2016 includes results from our Westgate and Savannah outlet centers, which were previously held in unconsolidated joint ventures prior to acquiring our partners' interest in each venture in June 2016 and August 2016, respectively.

6. Debt Guaranteed by the Company

All of the Company's debt is held by the Operating Partnership and its consolidated subsidiaries.

The Company guarantees the Operating Partnership's obligations with respect to its unsecured lines of credit which have a total borrowing capacity of $520.0 million. 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):
 
 
June 30, 2017
 
December 31, 2016
Unsecured lines of credit
 
$