Company Quick10K Filing
Quick10K
Tanger Factory Outlet Centers
Closing Price ($) Shares Out (MM) Market Cap ($MM)
$18.17 94 $1,710
10-Q 2019-03-31 Quarter: 2019-03-31
10-K 2018-12-31 Annual: 2018-12-31
10-Q 2018-09-30 Quarter: 2018-09-30
10-Q 2018-06-30 Quarter: 2018-06-30
10-Q 2018-03-31 Quarter: 2018-03-31
10-K 2017-12-31 Annual: 2017-12-31
10-Q 2017-09-30 Quarter: 2017-09-30
10-Q 2017-06-30 Quarter: 2017-06-30
10-Q 2017-03-31 Quarter: 2017-03-31
10-K 2016-12-31 Annual: 2016-12-31
10-Q 2016-09-30 Quarter: 2016-09-30
10-Q 2016-06-30 Quarter: 2016-06-30
10-Q 2016-03-31 Quarter: 2016-03-31
10-K 2015-12-31 Annual: 2015-12-31
10-Q 2015-09-30 Quarter: 2015-09-30
10-Q 2015-06-30 Quarter: 2015-06-30
10-Q 2015-03-31 Quarter: 2015-03-31
10-K 2014-12-31 Annual: 2014-12-31
10-Q 2014-09-30 Quarter: 2014-09-30
10-Q 2014-06-30 Quarter: 2014-06-30
10-Q 2014-03-31 Quarter: 2014-03-31
10-K 2013-12-31 Annual: 2013-12-31
8-K 2019-06-04 Officers, Regulation FD, Exhibits
8-K 2019-05-17 Officers, Shareholder Vote, Regulation FD, Exhibits
8-K 2019-05-06 Earnings, Regulation FD, Exhibits
8-K 2019-02-13 Earnings, Regulation FD, Exhibits
8-K 2018-11-01 Earnings, Regulation FD, Exhibits
8-K 2018-10-25 Enter Agreement, Off-BS Arrangement, Exhibits
8-K 2018-07-30 Earnings, Officers, Regulation FD, Exhibits
8-K 2018-05-18 Shareholder Vote, Regulation FD, Exhibits
8-K 2018-05-01 Earnings, Regulation FD, Exhibits
8-K 2018-04-12 Regulation FD, Exhibits
8-K 2018-02-13 Earnings, Regulation FD, Exhibits
8-K 2018-01-09 Enter Agreement, Off-BS Arrangement, Exhibits
MIDD Middleby 7,530
PE Parsley Energy 6,530
COKE Coca Cola Bottling 3,460
SHO Sunstone Hotel Investors 3,240
OMER Omeros 910
CRESY Cresud 526
GIG GigCapital 190
UQM UQM Technologies 93
PCC Powercomm Holdings 0
AXIM Axim Biotechnologies 0
SKT 2019-03-31
Part I. - Financial Information
Item 1 - Financial Statements of Tanger Factory Outlet Centers, Inc.
Item 1 - Financial Statements of 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
Part II. Other Information
Item 1. Legal Proceedings
Item 1A. Risk Factors
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Item 6. Exhibits
EX-31.1 skt10q03312019ex311.htm
EX-31.2 skt10q03312019ex312.htm
EX-31.3 skt10q03312019ex313.htm
EX-31.4 skt10q03312019ex314.htm
EX-32.1 skt10q03312019ex321.htm
EX-32.2 skt10q03312019ex322.htm
EX-32.3 skt10q03312019ex323.htm
EX-32.4 skt10q03312019ex324.htm

Tanger Factory Outlet Centers Earnings 2019-03-31

SKT 10Q Quarterly Report

Balance SheetIncome StatementCash Flow

10-Q 1 skt10q3312019.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 March 31, 2019
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)
N/A
(Former name, former address and former fiscal year, if changed since last report)

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 every Interactive Data File required to be submitted 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 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 
 
 
Emerging growth company o
Tanger Properties Limited Partnership
Large accelerated filer o 
 
Accelerated filer o 
Non-accelerated filer x
 
Smaller reporting company o 
 
 
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

Securities registered pursuant to Section 12(b) of the Act:

Tanger Factory Outlet Centers, Inc,:
Title of each class
Trading Symbol(s)
Name of each exchange on which registered
Common Shares,
$0.01 par value
SKT
New York Stock Exchange
Tanger Properties Limited Partnership:
None

As of May 2, 2019, there were 94,102,666 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 March 31, 2019 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 controls the Operating Partnership as its sole general partner. Tanger LP Trust holds a limited partnership interest. As of March 31, 2019, the Company, through its ownership of Tanger GP Trust and Tanger LP Trust, owned 94,102,666 units of the Operating Partnership and other limited partners (the "Non-Company LPs") collectively owned 4,960,684 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.

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.

2




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.

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.

3



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 March 31, 2019 and December 31, 2018
Consolidated Statements of Operations - for the three months ended March 31, 2019 and 2018
Consolidated Statements of Comprehensive Income - for the three months ended March 31, 2019 and 2018
Consolidated Statements of Shareholders' Equity - for the three months ended March 31, 2019 and 2018
Consolidated Statements of Cash Flows - for the three months ended March 31, 2019 and 2018
 
 
FINANCIAL STATEMENTS OF TANGER PROPERTIES LIMITED PARTNERSHIP (Unaudited)
 
Consolidated Balance Sheets - as of March 31, 2019 and December 31, 2018
Consolidated Statements of Operations - for the three months ended March 31, 2019 and 2018
Consolidated Statements of Comprehensive Income - for the three months ended March 31, 2019 and 2018
Consolidated Statements of Equity - for the three months ended March 31, 2019 and 2018
Consolidated Statements of Cash Flows - for the three months ended March 31, 2019 and 2018
 
 
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 6. Exhibits
 
 
Signatures

4



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)
 
 
March 31, 2019
 
December 31, 2018
Assets
 
 

 
 

Rental property:
 
 

 
 

Land
 
$
267,910

 
$
278,428

Buildings, improvements and fixtures
 
2,639,764

 
2,764,649

Construction in progress
 

 
3,102

 
 
2,907,674

 
3,046,179

Accumulated depreciation
 
(941,193
)
 
(981,305
)
Total rental property, net
 
1,966,481

 
2,064,874

Cash and cash equivalents
 
1,616

 
9,083

Investments in unconsolidated joint ventures
 
97,654

 
95,969

Deferred lease costs and other intangibles, net
 
106,170

 
116,874

Operating lease right-of-use assets
 
87,679

 

Prepaids and other assets
 
94,224

 
98,102

Total assets
 
$
2,353,824

 
$
2,384,902

Liabilities and Equity
 
 
 
 
Liabilities
 
 

 
 

Debt:
 
 

 
 

Senior, unsecured notes, net
 
$
1,137,145

 
$
1,136,663

Unsecured term loan, net
 
346,950

 
346,799

Mortgages payable, net
 
86,572

 
87,471

Unsecured lines of credit, net
 
12,117

 
141,985

Total debt
 
1,582,784

 
1,712,918

Accounts payable and accrued expenses
 
87,536

 
82,676

Operating lease liabilities
 
92,354

 

Other liabilities
 
87,707

 
83,773

Total liabilities
 
1,850,381

 
1,879,367

Commitments and contingencies
 


 


Equity
 
 

 
 

Tanger Factory Outlet Centers, Inc.:
 
 

 
 

Common shares, $.01 par value, 300,000,000 shares authorized, 94,102,666 and 93,941,783 shares issued and outstanding at March 31, 2019 and December 31, 2018, respectively
 
941

 
939

Paid in capital
 
780,936

 
778,845

Accumulated distributions in excess of net income 
 
(276,491
)
 
(272,454
)
Accumulated other comprehensive loss
 
(27,153
)
 
(27,151
)
Equity attributable to Tanger Factory Outlet Centers, Inc.
 
478,233

 
480,179

Equity attributable to noncontrolling interests:
 
 
 
 
Noncontrolling interests in Operating Partnership
 
25,210

 
25,356

Noncontrolling interests in other consolidated partnerships
 

 

Total equity
 
503,443

 
505,535

Total liabilities and equity
 
$
2,353,824

 
$
2,384,902


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

5



TANGER FACTORY OUTLET CENTERS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except share data, unaudited)
 
 
Three months ended March 31,
 
 
2019
 
2018
Revenues:
 
 

 
 
Rental revenues
 
$
119,954

 
$
120,656

Management, leasing and other services
 
1,342

 
1,199

Other revenues
 
1,859

 
1,680

Total revenues
 
123,155

 
123,535

Expenses:
 
 
 
 

Property operating
 
42,377

 
42,218

General and administrative
 
12,145

 
11,112

Depreciation and amortization
 
31,760

 
33,123

Total expenses
 
86,282

 
86,453

Other income (expense):
 
 
 
 
Interest expense
 
(16,307
)
 
(15,800
)
Gain on sale of assets
 
43,422

 

Other income
 
224

 
209

Total other income (expense)
 
27,339

 
(15,591
)
Income before equity in earnings of unconsolidated joint ventures
 
64,212

 
21,491

Equity in earnings of unconsolidated joint ventures
 
1,629

 
2,194

Net income
 
65,841


23,685

Noncontrolling interests in Operating Partnership
 
(3,315
)
 
(1,217
)
Noncontrolling interests in other consolidated partnerships
 
(195
)
 
370

Net income attributable to Tanger Factory Outlet Centers, Inc.
 
$
62,331


$
22,838

 
 
 
 
 
Basic earnings per common share:
 
 
 
 
Net income
 
$
0.66

 
$
0.24

Diluted earnings per common share:
 
 
 
 
Net income
 
$
0.66

 
$
0.24

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

6



TANGER FACTORY OUTLET CENTERS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(In thousands, unaudited)
 
 
Three months ended March 31,
 
 
2019
 
2018
Net income
 
$
65,841

 
$
23,685

Other comprehensive income (loss):
 
 
 
 
Foreign currency translation adjustments
 
1,949

 
(3,095
)
Change in fair value of cash flow hedges
 
(1,952
)
 
2,739

Other comprehensive loss
 
(3
)
 
(356
)
Comprehensive income
 
65,838

 
23,329

Comprehensive income attributable to noncontrolling interests
 
(3,509
)
 
(829
)
Comprehensive income attributable to Tanger Factory Outlet Centers, Inc.
 
$
62,329

 
$
22,500

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


7



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, 2017
 
$
946

$
784,782

$
(184,865
)
$
(19,285
)
$
581,578

$
30,724

$

$
612,302

Net income
 


22,838


22,838

1,217

(370
)
23,685

Other comprehensive loss
 



(338
)
(338
)
(18
)

(356
)
Compensation under Incentive Award Plan
 

3,656



3,656



3,656

Grant of 355,184 restricted common share awards, net of forfeitures
 
3

(3
)






Repurchase of 443,700 common shares, including transaction costs
 
(4
)
(9,994
)


(9,998
)


(9,998
)
Withholding of 89,437 common shares for employee income taxes
 
(1
)
(2,067
)


(2,068
)


(2,068
)
Contributions from noncontrolling interests
 






445

445

Adjustment for noncontrolling interests in Operating Partnership
 

379



379

(379
)


Common dividends
($0.3425 per share)
 


(32,389
)

(32,389
)


(32,389
)
Distributions to noncontrolling interests
 





(1,711
)
(75
)
(1,786
)
Balance, March 31, 2018
 
$
944

$
776,753

$
(194,416
)
$
(19,623
)
$
563,658

$
29,833

$

$
593,491

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











 
 








 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

8



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, 2018
 
$
939

$
778,845

$
(272,454
)
$
(27,151
)
$
480,179

$
25,356

$

$
505,535

Net income
 


62,331


62,331

3,315

195

65,841

Other comprehensive loss
 



(2
)
(2
)
(1
)

(3
)
Compensation under Incentive Award Plan
 

3,910



3,910



3,910

Grant of 242,167 restricted common share awards, net of forfeitures
 
3

(3
)






Withholding of
81,284 common shares for employee income taxes
 
(1
)
(1,780
)


(1,781
)


(1,781
)
Contributions from noncontrolling interests
 






18

18

Adjustment for noncontrolling interests in Operating Partnership
 

(36
)


(36
)
36



Common dividends
($0.705 per share) (1)
 


(66,368
)

(66,368
)


(66,368
)
Distributions to noncontrolling interests
 





(3,496
)
(213
)
(3,709
)
Balance, March 31, 2019
 
$
941

$
780,936

$
(276,491
)
$
(27,153
)
$
478,233

$
25,210

$

$
503,443


(1)
Includes both a $0.35 cash dividend per common share declared and paid during the first quarter of 2019 and a cash dividend declared in February 2019 payable in May 2019 of $0.355 per common share.

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




9



TANGER FACTORY OUTLET CENTERS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands, unaudited)
 
 
Three months ended March 31,
 
 
2019
 
2018
OPERATING ACTIVITIES
 
 
 
 

Net income
 
$
65,841

 
$
23,685

Adjustments to reconcile net income to net cash provided by operating activities:
 
 
 
 
Depreciation and amortization
 
31,760

 
33,123

Amortization of deferred financing costs
 
747

 
783

Gain on sale of assets
 
(43,422
)
 

Equity in earnings of unconsolidated joint ventures
 
(1,629
)
 
(2,194
)
Equity-based compensation expense
 
3,818

 
3,392

Amortization of debt (premiums) and discounts, net
 
109

 
101

Amortization (accretion) of market rent rate adjustments, net
 
480

 
562

Straight-line rent adjustments
 
(1,970
)
 
(1,948
)
Distributions of cumulative earnings from unconsolidated joint ventures
 
1,455

 
2,198

Changes in other assets and liabilities:
 
 
 
 
Other assets
 
873

 
1,714

Accounts payable and accrued expenses
 
(24,894
)
 
(11,412
)
Net cash provided by operating activities
 
33,168

 
50,004

INVESTING ACTIVITIES
 
 
 
 
Additions to rental property
 
(9,906
)
 
(19,714
)
Additions to investments in unconsolidated joint ventures
 
(779
)
 
(514
)
Net proceeds from sale of assets
 
128,248

 

Additions to non-real estate assets
 
(174
)
 
(303
)
Distributions in excess of cumulative earnings from unconsolidated joint ventures
 
8,157

 
4,494

Additions to deferred lease costs
 
(1,209
)
 
(1,014
)
Other investing activities
 
2,936

 
2,969

Net cash provided by (used) in investing activities
 
127,273

 
(14,082
)
FINANCING ACTIVITIES
 
 
 
 
Cash dividends paid
 
(32,910
)
 
(32,389
)
Distributions to noncontrolling interests in Operating Partnership
 
(1,735
)
 
(1,711
)
Proceeds from revolving credit facility
 
135,200

 
149,200

Repayments of revolving credit facility
 
(265,300
)
 
(129,700
)
Repayments of notes, mortgages and loans
 
(825
)
 
(9,379
)
Repurchase of common shares, including transaction costs
 

 
(9,998
)
Employee income taxes paid related to shares withheld upon vesting of equity awards
 
(1,781
)
 
(2,068
)
Additions to deferred financing costs
 
(65
)
 
(2,606
)
Proceeds from other financing activities
 
18

 
445

Payment for other financing activities
 
(500
)
 
(362
)
Net cash used in financing activities
 
(167,898
)
 
(38,568
)
Effect of foreign currency rate changes on cash and cash equivalents
 
(10
)
 
(28
)
Net decrease in cash and cash equivalents
 
(7,467
)
 
(2,674
)
Cash and cash equivalents, beginning of period
 
9,083

 
6,101

Cash and cash equivalents, end of period
 
$
1,616

 
$
3,427

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

10



Item 1 - Financial Statements of Tanger Properties Limited Partnership

TANGER PROPERTIES LIMITED PARTNERSHIP AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands, except unit data, unaudited)
 
 
March 31, 2019
 
December 31, 2018
Assets
 
 

 
 

Rental property:
 
 

 
 

Land
 
$
267,910

 
$
278,428

Buildings, improvements and fixtures
 
2,639,764

 
2,764,649

Construction in progress
 

 
3,102

 
 
2,907,674

 
3,046,179

Accumulated depreciation
 
(941,193
)
 
(981,305
)
Total rental property, net
 
1,966,481

 
2,064,874

Cash and cash equivalents
 
1,570

 
8,991

Investments in unconsolidated joint ventures
 
97,654

 
95,969

Deferred lease costs and other intangibles, net
 
106,170

 
116,874

Operating lease right-of-use assets
 
87,679

 

Prepaids and other assets
 
93,826

 
97,832

Total assets
 
$
2,353,380

 
$
2,384,540

Liabilities and Equity
 

 
 
Liabilities
 
 
 
 
Debt:
 
 
 
 
Senior, unsecured notes, net
 
$
1,137,145

 
$
1,136,663

Unsecured term loan, net
 
346,950

 
346,799

Mortgages payable, net
 
86,572

 
87,471

Unsecured lines of credit, net
 
12,117

 
141,985

Total debt
 
1,582,784

 
1,712,918

Accounts payable and accrued expenses
 
87,092

 
82,314

Operating lease liabilities
 
92,354

 

Other liabilities
 
87,707

 
83,773

Total liabilities
 
1,849,937

 
1,879,005

Commitments and contingencies
 


 


Equity
 
 
 
 
Partners' Equity:
 
 
 
 
General partner, 1,000,000 units outstanding at March 31, 2019 and December 31, 2018
 
5,227

 
4,914

Limited partners, 4,960,684 and 4,960,684 Class A common units, and 93,102,666 and 92,941,783 Class B common units outstanding at March 31, 2019 and December 31, 2018, respectively
 
526,850

 
529,252

Accumulated other comprehensive loss
 
(28,634
)
 
(28,631
)
Total partners' equity
 
503,443

 
505,535

Noncontrolling interests in consolidated partnerships
 

 

Total equity
 
503,443

 
505,535

Total liabilities and equity
 
$
2,353,380

 
$
2,384,540

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 March 31,
 
 
2019
 
2018
Revenues:
 
 

 
 
Rental revenues
 
$
119,954

 
$
120,656

Management, leasing and other services
 
1,342

 
1,199

Other revenues
 
1,859

 
1,680

Total revenues

123,155


123,535

Expenses:
 
 
 
 
Property operating
 
42,377

 
42,218

General and administrative
 
12,145

 
11,112

Depreciation and amortization
 
31,760

 
33,123

Total expenses

86,282


86,453

Other income (expense):
 
 
 
 
Interest expense
 
(16,307
)
 
(15,800
)
Gain on sale of assets
 
43,422

 

Other income
 
224

 
209

Total other income (expense)
 
27,339

 
(15,591
)
Income before equity in earnings of unconsolidated joint ventures

64,212


21,491

Equity in earnings of unconsolidated joint ventures
 
1,629

 
2,194

Net income

65,841


23,685

Noncontrolling interests in consolidated partnerships
 
(195
)
 
370

Net income available to partners

65,646


24,055

Net income available to limited partners
 
64,983

 
23,814

Net income available to general partner

$
663


$
241

 
 
 
 
 
Basic earnings per common unit:
 
 
 
 

Net income
 
$
0.66

 
$
0.24

Diluted earnings per common unit:
 
 
 
 
Net income
 
$
0.66

 
$
0.24

 
 
 
 
 
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 March 31,
 
 
2019
 
2018
Net income
 
$
65,841

 
$
23,685

Other comprehensive income (loss):
 
 
 
 
Foreign currency translation adjustments
 
1,949

 
(3,095
)
Changes in fair value of cash flow hedges
 
(1,952
)
 
2,739

Other comprehensive loss
 
(3
)
 
(356
)
Comprehensive income
 
65,838

 
23,329

Comprehensive income (loss) attributable to noncontrolling interests in consolidated partnerships
 
(195
)
 
370

Comprehensive income attributable to the Operating Partnership
 
$
65,643

 
$
23,699

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, December 31, 2017
 
$
5,844

$
626,803

$
(20,345
)
$
612,302

$

$
612,302

Net income
 
241

23,814


24,055

(370
)
23,685

Other comprehensive loss
 


(356
)
(356
)

(356
)
Compensation under Incentive Award Plan
 

3,656


3,656


3,656

Grant of 355,184 restricted common share awards by the Company, net of forfeitures
 






Repurchase of 443,700 units, including transaction costs
 

(9,998
)

(9,998
)

(9,998
)
Withholding of 89,437 common units for employee income taxes
 

(2,068
)

(2,068
)

(2,068
)
Contributions from noncontrolling interests
 




445

445

Common distributions ($0.3425 per common unit)
 
(342
)
(33,758
)

(34,100
)

(34,100
)
Distributions to noncontrolling interests
 




(75
)
(75
)
Balance, March 31, 2018
 
$
5,743

$
608,449

$
(20,701
)
$
593,491

$

$
593,491

 
 
 
 
 
 
 
 
 
 
General partner
Limited partners
Accumulated other comprehensive loss
Total partners' equity
Noncontrolling interests in consolidated partnerships
Total equity
Balance, December 31, 2018
 
$
4,914

$
529,252

$
(28,631
)
$
505,535

$

$
505,535

Net income
 
663

64,983


65,646

195

65,841

Other comprehensive loss
 


(3
)
(3
)

(3
)
Compensation under Incentive Award Plan
 

3,910


3,910


3,910

Grant of 242,167 restricted common share awards by the Company
 






Withholding of 81,284 common units for employee income taxes
 

(1,781
)

(1,781
)

(1,781
)
Contributions from noncontrolling interests
 




18

18

Common distributions ($0.705
 per common unit) (1)
 
(350
)
(69,514
)

(69,864
)

(69,864
)
Distributions to noncontrolling interests
 




(213
)
(213
)
Balance, March 31, 2019
 
$
5,227

$
526,850

$
(28,634
)
$
503,443

$

$
503,443

 
 
 
 
 
 
 
 

(1)
Includes both a $0.35 cash dividend per common unit declared and paid during the first quarter of 2019 and a cash dividend declared in February 2019 payable in May 2019 of $0.355 per common unit.

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

14



TANGER PROPERTIES LIMITED PARTNERSHIP AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands, unaudited)
 
 
Three months ended March 31,
 
 
2019
 
2018
OPERATING ACTIVITIES
 
 

 
 

Net income
 
$
65,841

 
$
23,685

Adjustments to reconcile net income to net cash provided by operating activities:
 
 
 
 
Depreciation and amortization
 
31,760

 
33,123

Amortization of deferred financing costs
 
747

 
783

Gain on sale of assets
 
(43,422
)
 

Equity in earnings of unconsolidated joint ventures
 
(1,629
)
 
(2,194
)
Equity-based compensation expense
 
3,818

 
3,392

Amortization of debt (premiums) and discounts, net
 
109

 
101

Amortization (accretion) of market rent rate adjustments, net
 
480

 
562

Straight-line rent adjustments
 
(1,970
)
 
(1,948
)
Distributions of cumulative earnings from unconsolidated joint ventures
 
1,455

 
2,198

Changes in other assets and liabilities:
 
 
 
 
Other assets
 
1,001

 
1,903

Accounts payable and accrued expenses
 
(24,976
)
 
(11,639
)
Net cash provided by operating activities
 
33,214

 
49,966

INVESTING ACTIVITIES
 
 
 
 
Additions to rental property
 
(9,906
)
 
(19,714
)
Additions to investments in unconsolidated joint ventures
 
(779
)
 
(514
)
Net proceeds from sale of assets
 
128,248

 

Additions to non-real estate assets
 
(174
)
 
(303
)
Distributions in excess of cumulative earnings from unconsolidated joint ventures
 
8,157

 
4,494

Additions to deferred lease costs
 
(1,209
)
 
(1,014
)
Other investing activities
 
2,936

 
2,969

Net cash provided by (used) in investing activities
 
127,273

 
(14,082
)
FINANCING ACTIVITIES
 
 
 
 
Cash distributions paid
 
(34,645
)
 
(34,100
)
Proceeds from revolving credit facility
 
135,200

 
149,200

Repayments of revolving credit facility
 
(265,300
)
 
(129,700
)
Repayments of notes, mortgages and loans
 
(825
)
 
(9,379
)
Repurchase of units, including transaction costs
 

 
(9,998
)
Employee income taxes paid related to shares withheld upon vesting of equity awards
 
(1,781
)
 
(2,068
)
Additions to deferred financing costs
 
(65
)
 
(2,606
)
Proceeds from other financing activities
 
18

 
445

Payment for other financing activities
 
(500
)
 
(362
)
Net cash used in financing activities
 
(167,898
)
 
(38,568
)
Effect of foreign currency on cash and cash equivalents
 
(10
)
 
(28
)
Net decrease in cash and cash equivalents
 
(7,421
)
 
(2,712
)
Cash and cash equivalents, beginning of period
 
8,991

 
6,050

Cash and cash equivalents, end of period
 
$
1,570

 
$
3,338

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

15



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 March 31, 2019, we owned and operated 32 consolidated outlet centers, with a total gross leasable area of approximately 12.0 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 March 31, 2019, the Company, through its ownership of Tanger GP Trust and Tanger LP Trust, owned 94,102,666 units of the Operating Partnership and other limited partners (the "Non-Company LPs") collectively owned 4,960,684 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, 2018. The December 31, 2018 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.

Certain prior period balances in the accompanying unaudited consolidated statements of operations have been reclassified or combined to conform to the current period presentation.

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.


16



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 (“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.

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, Galveston/Houston, and Columbus 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.







17



3. Disposition of Properties

During the three months ended March 31, 2019, the Company closed on the sale of four non-core outlet centers for total gross proceeds of $130.5 million.

The following table sets forth certain summarized information regarding the properties sold during the three months ended March 31, 2019:
Property
 
Location
 
Date Sold
 
Square Feet
(in 000's)
 
Net Sales Proceeds
(in 000's)
 
Gain on Sale (in 000's)
Nags Head, Ocean City, Park City, and Williamsburg
 
Nags Head, NC, Ocean City, MD, Park City, UT, and Williamsburg, IA
 
March 2019
 
878

 
$
128,248

 
$
43,422


The rental properties sold did not meet the criteria to be reported as discontinued operations.

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 March 31, 2019
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
%
 
924

 
$
97.7

 
$
9.5

 
 
 
 
 
 
$
97.7

 


Investments included in other liabilities:
 
 
 
 
Columbus(2)
 
Columbus, OH
 
50.0
%
 
355

 
$
(2.6
)
 
$
84.8

Charlotte(2)
 
Charlotte, NC
 
50.0
%
 
399

 
(11.2
)
 
99.5

National Harbor(2)
 
National Harbor, MD
 
50.0
%
 
341

 
(5.0
)
 
94.4

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

 
(20.6
)
 
79.7

 
 
 
 
 
 
$
(39.4
)
 




18



As of December 31, 2018
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
%
 
924

 
$
96.0

 
$
9.3

 
 
 
 
 
 
$
96.0

 
 
Investments included in other liabilities:
 
 
 
 
 
 
Columbus (2)
 
Columbus, OH
 
50.0
%
 
355

 
$
(1.6
)
 
$
84.7

Charlotte(2)
 
Charlotte, NC
 
50.0
%
 
398

 
(10.8
)
 
99.5

National Harbor (2)
 
National Harbor, MD
 
50.0
%
 
341

 
(5.1
)
 
94.5

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

 
(15.0
)
 
79.6

 
 
 
 
 
 
$
(32.5
)
 



(1)
Net of debt origination costs and including premiums of $1.4 million as of March 31, 2019 and December 31, 2018.
(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
 

March 31,
 

2019

2018
Fee:
 
 

 
 

Management and marketing
 
$
566

 
$
567

Leasing and other fees
 
31

 
46

Expense reimbursements from unconsolidated joint ventures
 
745


586

Total Fees
 
$
1,342

 
$
1,199


Expense reimbursements from unconsolidated joint ventures were previously included in expense reimbursements in our 2018 10-Q. As these revenues are not related to leases, the 2018 amounts have been reclassified to management, leasing and other services on the consolidated statements of operations to conform to the current year presentation. See Note 17 for discussion of adoption of Accounting Standards Codification Topic 842 “Leases”.

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 $4.0 million and $4.1 million as of March 31, 2019 and December 31, 2018, respectively) are amortized over the various useful lives of the related assets.


19



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
 
March 31, 2019
 
December 31, 2018
Assets
 
 

 
 

Land
 
$
92,440

 
$
91,443

Buildings, improvements and fixtures
 
474,981

 
469,834

Construction in progress
 
3,455

 
2,841

 
 
570,876

 
564,118

Accumulated depreciation
 
(119,996
)
 
(113,713
)
Total rental property, net
 
450,880

 
450,405

Cash and cash equivalents
 
11,744

 
16,216

Deferred lease costs and other intangibles, net
 
8,098

 
8,437

Prepaids and other assets
 
15,963

 
25,648

Total assets
 
$
486,685

 
$
500,706

Liabilities and Owners' Equity
 
 

 
 

Mortgages payable, net
 
$
367,933

 
$
367,865

Accounts payable and other liabilities
 
11,933

 
13,414

Total liabilities
 
379,866

 
381,279

Owners' equity
 
106,819

 
119,427

Total liabilities and owners' equity
 
$
486,685

 
$
500,706



 
 
Three months ended
Condensed Combined Statements of Operations
 
March 31,
 - Unconsolidated Joint Ventures
 
2019
 
2018
Revenues
 
$
23,463

 
$
23,997

Expenses:
 
 

 
 
Property operating
 
9,790

 
9,928

General and administrative
 
90

 
198

Depreciation and amortization
 
6,110

 
6,363

Total expenses
 
15,990

 
16,489

Other income (expense):
 


 


Interest expense
 
(4,134
)
 
(3,077
)
Other income
 
66

 
52

Total other income (expense)
 
$
(4,068
)
 
$
(3,025
)
Net income
 
$
3,405

 
$
4,483

The Company and Operating Partnership's share of:
 

 
 

Net income
 
$
1,629

 
$
2,194

Depreciation and amortization (real estate related)
 
$
3,130

 
$
3,229


20



5. 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 $600.0 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):
 
 
As of
 
 
March 31, 2019
 
December 31, 2018
Unsecured lines of credit
 
$
15,000

 
$
145,100

Unsecured term loan
 
$
350,000

 
$
350,000


6. Debt of the Operating Partnership

The debt of the Operating Partnership consisted of the following (in thousands):
 
 
 
 
 
 
As of
 
As of
 
 
 
 
 
 
March 31, 2019
 
December 31, 2018
 
 
Stated Interest Rate(s)
 
Maturity Date
 
Principal
 
Book Value(1)
 
Principal
 
Book Value(1)
Senior, unsecured notes:
 
 
 
 

 
 
 
 
 
 
Senior notes
 
3.875
%
 
December 2023
 
$
250,000

 
$
246,823

 
$
250,000

 
$
246,664

Senior notes
 
3.750
%
 
December 2024
 
250,000

 
247,855

 
250,000

 
247,765

Senior notes
 
3.125
%
 
September 2026
 
350,000

 
345,805

 
350,000

 
345,669

Senior notes
 
3.875
%
 
July 2027
 
300,000

 
296,662

 
300,000

 
296,565

 
 
 
 
 
 
 
 
 
 
 
 
 
Mortgages payable:
 
 
 
 
 
 
 
 
 
 
 
 
Atlantic City (2)(3)
 
5.14%-7.65%

 
November 2021- December 2026
 
33,454

 
35,375

 
34,279

 
36,298

     Southaven
 
LIBOR + 1.80%

 
April 2021
 
51,400

 
51,197

 
51,400

 
51,173

Unsecured term loan
 
LIBOR + 0.90%

 
April 2024
 
350,000

 
346,950

 
350,000

 
346,799

Unsecured lines of credit
 
LIBOR + 0.875%

 
October 2021
 
15,000

 
12,117

 
145,100

 
141,985

 
 
 
 
 
 
$
1,599,854

 
$
1,582,784

 
$
1,730,779

 
$
1,712,918

(1)
Including premiums and net of debt discount and debt origination costs.
(2)
The effective interest rate assigned during the purchase price allocation to the Atlantic City mortgages assumed during the acquisition in 2011 was 5.05%.
(3)
Principal and interest due monthly with remaining principal due at maturity.

Certain of our properties, which had a net book value of approximately $178.5 million at March 31, 2019, serve as collateral for mortgages payable. We maintain unsecured lines of credit that provide for borrowings of up to $600.0 million. The unsecured lines of credit include a $20.0 million liquidity line and a $580.0 million syndicated line. The syndicated line may be increased up to $1.2 billion through an accordion feature in certain circumstances. As of March 31, 2019, letters of credit totaling approximately $170,000 were issued under the lines of credit.


21



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 construction and term loans, we may include a guaranty of completion as well as a principal guaranty ranging from 5% to 100% of principal.  The principal guarantees include terms for release or reduction based upon satisfactory completion of construction and performance targets including occupancy thresholds and minimum debt service coverage tests. As of March 31, 2019, the maximum amount of unconsolidated joint venture debt guaranteed by the Company was $19.4 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 March 31, 2019, we believe we were in compliance with all of our debt covenants.

Debt Maturities

Maturities of the existing long-term debt as of March 31, 2019 for the next five years and thereafter are as follows (in thousands):
Calendar Year
 
Amount

For the remainder of 2019
 
$
2,545

2020
 
3,566

2021
 
72,193

2022
 
4,436

2023
 
254,768

Thereafter
 
1,262,346

Subtotal
 
1,599,854

Net discount and debt origination costs
 
(17,070
)
Total
 
$
1,582,784

  

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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
 
March 31, 2019
 
December 31, 2018
Assets (Liabilities)(1):
 
 
 
 
 
 
 
 
 
 
 
 
April 13, 2016
 
January 1, 2021
 
175,000

 
1 month LIBOR
 
1.03
%
 
$
3,773

 
$
4,948

March 1, 2018
 
January 31, 2021
 
40,000

 
1 month LIBOR
 
2.47
%
 
(156
)
 
(6
)
August 14, 2018
 
January 1, 2021
 
150,000

 
1 month LIBOR
 
2.20
%
 
180

 
807

Total
 
 
 
$
365,000

 
 
 
 
 
$
3,797

 
$
5,749

(1)
Asset balances are recorded in prepaids and other assets on the consolidated balance sheets and liabilities are recorded in other liabilities on the consolidated balance sheets.

The derivative financial instruments are comprised of interest rate swaps, which are designated and qualify as cash flow hedges, each with a separate counterparty. We do not use derivatives for trading or speculative purposes and currently do not have any derivatives that are not designated as hedges.

Changes in the fair value of derivatives designated and qualifying as cash flow hedges is 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 March 31,
 
 
2019
 
2018
Interest Rate Swaps (Effective Portion):
 
 
 
 
Amount of gain (loss) recognized in OCI on derivative
 
$
(1,952
)
 
$
2,739



23



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 March 31, 2019:
 
 
 
 
 
 
 
 
Asset:
 
 
 
 
 
 
 
 
Interest rate swaps (prepaids and other assets)
 
$
3,953

 
$

 
$
3,953

 
$

Total assets
 
$
3,953

 
$

 
$
3,953

 
$

 
 
 
 
 
 
 
 
 
Liabilities:
 
 
 
 
 
 
 
 
Interest rate swaps (other liabilities)
 
$
156

 
$

 
$
156

 
$

Total liabilities
 
$
156

 
$

 
$
156

 
$


 
 
 
 
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, 2018:
 
 
 
 
 
 
 
 
Asset:
 
 
 
 
 
 
 
 
Interest rate swaps (prepaids and other assets)
 
$
5,755