Tanger Inc 10-Q for FY2024 Q3
Tanger Inc. (SKT)
10-Q
2024-11-07
For: 2024-09-30
View Original
Added on
April 09, 2026
About this 10-Q
Tanger Inc filed this 10-Q on November 7, 2024, covering the quarter ended September 30, 2024 (FY2024 Q3).
Headline figures
Quarter ended September 30, 2024, as reported in this filing, compared with the same period a year earlier where the filing states it.
- Revenue
- $133M
- up 13.3% from $117.35M a year earlier
- Net income
- $24.86M
- down 10.0% from net income of $27.62M a year earlier
- Diluted EPS
- $0.22
- down 15.4% from $0.26 a year earlier
United States
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |||||||||||
For the quarterly period ended September 30, 2024
OR
| 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 Inc.)
Commission file number: 333-3526-01 (Tanger Properties Limited Partnership)
(Exact name of registrant as specified in its charter)
| (Tanger Inc.) | ||||||||
| (Tanger Properties Limited Partnership) | ||||||||
| (State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) | |||||||
(Address of principal executive offices) (Zip Code)
(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)
Securities registered pursuant to Section 12(b) of the Act:
Tanger Inc.:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||||||
$0.01 par value | ||||||||
Tanger Properties Limited Partnership:
None
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 Inc. | ☒ | No | ☐ | |||||||||||
| Tanger Properties Limited Partnership | ☒ | No | ☐ | |||||||||||
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 Inc. | ☒ | No | ☐ | |||||||||||
| Tanger Properties Limited Partnership | ☒ | No | ☐ | |||||||||||
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 Inc. | ||||||||||||||
| ☒ | Accelerated Filer | ☐ | ||||||||||||
| Non-accelerated Filer | ☐ | Smaller Reporting Company | ||||||||||||
| Emerging Growth Company | ||||||||||||||
| Tanger Properties Limited Partnership | ||||||||||||||
| Large Accelerated Filer | ☐ | Accelerated Filer | ☐ | |||||||||||
| ☒ | Smaller Reporting Company | |||||||||||||
| Emerging Growth Company | ||||||||||||||
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 Inc. | ☐ | ||||
| Tanger Properties Limited Partnership | ☐ | ||||
If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements
of the registrant included in the filing reflect the correction of an error to previously issued financial statements. ☐
Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b). ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
| Tanger Inc. | Yes | No | ☒ | |||||||||||
| Tanger Properties Limited Partnership | Yes | No | ☒ | |||||||||||
As of November 1, 2024, there were 110,692,577 common shares of Tanger Inc. outstanding, $0.01 par value.
EXPLANATORY NOTE
This report combines the unaudited quarterly reports on Form 10-Q for the quarter ended September 30, 2024 of Tanger Inc., a North Carolina corporation, and Tanger Properties Limited Partnership, a North Carolina limited partnership. Unless the context indicates otherwise, the term “Company” refers to Tanger 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 context requires.
The Company is one of the leading owners and operators of outlet and open-air retail 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 on developing, acquiring, owning, operating and managing outlet and open-air shopping centers. The shopping centers and other assets are held by, and all of the operations are conducted by, the Operating Partnership. 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, including its wholly-owned subsidiary, Tanger LP Trust, owns the majority of the units of partnership interest issued by the Operating Partnership. The Company controls the Operating Partnership as its sole general partner. Tanger LP Trust holds a limited partnership interest. As of September 30, 2024, the Company and its wholly owned subsidiaries owned 110,208,387 units of the Operating Partnership and other limited partners (the “Non-Company LPs”) collectively owned 4,707,958 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 of the Operating Partnership, 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.
We believe combining the Quarterly Reports on Form 10-Q of the Company and the Operating Partnership into this single Quarterly Report provides 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 Quarterly Report instead of two separate Quarterly Reports.
There are only a few differences between the Company and the Operating Partnership, which are reflected in the disclosure in this Quarterly 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, including through its wholly-owned subsidiary, 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 Quarterly Report.
The Operating Partnership holds all of the shopping 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, shareholders’ equity and partners’ 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 partners’ 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 Quarterly Report presents the following separate sections 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 and Partners’ Equity;
•Earnings Per Share and Earnings Per Unit;
•Accumulated Other Comprehensive Income of the Company and the Operating Partnership; and
2
•Liquidity and Capital Resources in the Management’s Discussion and Analysis of Financial Condition and Results of Operations.
This Quarterly Report also includes separate Item 4. Controls and Procedures sections and separate Exhibit 31 and Exhibit 32 certifications for each of the Company and the Operating Partnership in order to establish that the Principal Executive Officer and the Principal 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, as amended (the “Exchange Act”), and 18 U.S.C. §1350.
The separate sections in this Quarterly 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 Quarterly 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 Quarterly 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 INC. AND TANGER PROPERTIES LIMITED PARTNERSHIP
Index
| Page Number | |||||
| Part I. Financial Information | |||||
| Item 1. | |||||
FINANCIAL STATEMENTS OF TANGER INC. (Unaudited) | |||||
Consolidated Balance Sheets - as of September 30, 2024 and December 31, 2023 | |||||
Consolidated Statements of Operations - for the three and nine months ended September 30, 2024 and 2023 | |||||
Consolidated Statements of Comprehensive Income - for the three and nine months ended September 30, 2024 and 2023 | |||||
Consolidated Statements of Shareholders’ Equity - for the three and nine months ended September 30, 2024 and 2023 | |||||
Consolidated Statements of Cash Flows - for the nine months ended September 30, 2024 and 2023 | |||||
FINANCIAL STATEMENTS OF TANGER PROPERTIES LIMITED PARTNERSHIP (Unaudited) | |||||
Consolidated Balance Sheets - as of September 30, 2024 and December 31, 2023 | |||||
Consolidated Statements of Operations - for the three and nine months ended September 30, 2024 and 2023 | |||||
Consolidated Statements of Comprehensive Income - for the three and nine months ended September 30, 2024 and 2023 | |||||
Consolidated Statements of Equity - for the three and nine months ended September 30, 2024 and 2023 | |||||
Consolidated Statements of Cash Flows - for the nine months ended September 30, 2024 and 2023 | |||||
| Notes to Consolidated Financial Statements of Tanger 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 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, Use of Proceeds and Issuer Purchases of Equity Securities | |||||
Item 3. Defaults upon Senior Securities | |||||
Item 4. Mine Safety Disclosures | |||||
| Item 5. Other Information | |||||
| Item 6. Exhibits | |||||
| Signatures | |||||
4
PART I. - FINANCIAL INFORMATION
Item 1 - Financial Statements of Tanger Inc.
TANGER INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands, except share data, unaudited)
| September 30, 2024 | December 31, 2023 | |||||||||||||
| Assets | ||||||||||||||
| Rental property: | ||||||||||||||
| Land | $ | $ | ||||||||||||
| Buildings, improvements and fixtures | ||||||||||||||
| Construction in progress | ||||||||||||||
| Accumulated depreciation | ( | ( | ||||||||||||
| Total rental property, net | ||||||||||||||
| Cash and cash equivalents | ||||||||||||||
| Short-term investments | ||||||||||||||
| Investments in unconsolidated joint ventures | ||||||||||||||
| Deferred lease costs and other intangibles, net | ||||||||||||||
| Operating lease right-of-use assets | ||||||||||||||
| Prepaids and other assets | ||||||||||||||
| Total assets | $ | $ | ||||||||||||
| Liabilities and Equity | ||||||||||||||
| Liabilities | ||||||||||||||
| Debt: | ||||||||||||||
| Senior, unsecured notes, net | $ | $ | ||||||||||||
| Unsecured term loan, net | ||||||||||||||
| Mortgages payable, net | ||||||||||||||
| Unsecured lines of credit | ||||||||||||||
| Total debt | ||||||||||||||
| Accounts payable and accrued expenses | ||||||||||||||
| Operating lease liabilities | ||||||||||||||
| Other liabilities | ||||||||||||||
| Total liabilities | ||||||||||||||
| Commitments and contingencies | ||||||||||||||
| Equity | ||||||||||||||
| Tanger Inc.: | ||||||||||||||
Common shares, $ | ||||||||||||||
| Paid in capital | ||||||||||||||
| Accumulated distributions in excess of net income | ( | ( | ||||||||||||
| Accumulated other comprehensive loss | ( | ( | ||||||||||||
| Equity attributable to Tanger Inc. | ||||||||||||||
| Equity attributable to noncontrolling interests: | ||||||||||||||
| Noncontrolling interests in Operating Partnership | ||||||||||||||
| Noncontrolling interests in other consolidated partnerships | ||||||||||||||
| Total equity | ||||||||||||||
| Total liabilities and equity | $ | $ | ||||||||||||
The accompanying notes are an integral part of these consolidated financial statements.
5
TANGER INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except share data, unaudited)
| Three months ended September 30, | Nine months ended September 30, | |||||||||||||||||||||||||
| 2024 | 2023 | 2024 | 2023 | |||||||||||||||||||||||
| Revenues: | ||||||||||||||||||||||||||
| Rental revenues | $ | $ | $ | $ | ||||||||||||||||||||||
| Management, leasing and other services | ||||||||||||||||||||||||||
| Other revenues | ||||||||||||||||||||||||||
| Total revenues | ||||||||||||||||||||||||||
| Expenses: | ||||||||||||||||||||||||||
| Property operating | ||||||||||||||||||||||||||
| General and administrative | ||||||||||||||||||||||||||
| Depreciation and amortization | ||||||||||||||||||||||||||
| Total expenses | ||||||||||||||||||||||||||
| Other income (expense): | ||||||||||||||||||||||||||
| Interest expense | ( | ( | ( | ( | ||||||||||||||||||||||
| Other income (expense) | ( | |||||||||||||||||||||||||
| Total other income (expense) | ( | ( | ( | ( | ||||||||||||||||||||||
Income before equity in earnings of unconsolidated joint ventures | ||||||||||||||||||||||||||
| Equity in earnings of unconsolidated joint ventures | ||||||||||||||||||||||||||
| Net income | ||||||||||||||||||||||||||
| Noncontrolling interests in Operating Partnership | ( | ( | ( | ( | ||||||||||||||||||||||
| Noncontrolling interests in other consolidated partnerships | ( | |||||||||||||||||||||||||
| Net income attributable to Tanger Inc. | $ | $ | $ | $ | ||||||||||||||||||||||
| Basic earnings per common share: | ||||||||||||||||||||||||||
| Net income | $ | $ | $ | $ | ||||||||||||||||||||||
| Diluted earnings per common share: | ||||||||||||||||||||||||||
| Net income | $ | $ | $ | $ | ||||||||||||||||||||||
The accompanying notes are an integral part of these consolidated financial statements.
6
TANGER INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(In thousands, unaudited)
| Three months ended September 30, | Nine months ended September 30, | |||||||||||||||||||||||||
| 2024 | 2023 | 2024 | 2023 | |||||||||||||||||||||||
| Net income | $ | $ | $ | $ | ||||||||||||||||||||||
| Other comprehensive income (loss): | ||||||||||||||||||||||||||
| Foreign currency translation adjustments | ( | ( | ( | ( | ||||||||||||||||||||||
| Change in fair value of cash flow hedges | ( | ( | ( | ( | ||||||||||||||||||||||
| Other comprehensive income (loss) | ( | ( | ( | ( | ||||||||||||||||||||||
| Comprehensive income | ||||||||||||||||||||||||||
| Comprehensive income attributable to noncontrolling interests | ( | ( | ( | ( | ||||||||||||||||||||||
| Comprehensive income attributable to Tanger Inc. | $ | $ | $ | $ | ||||||||||||||||||||||
The accompanying notes are an integral part of these consolidated financial statements.
7
TANGER 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 Inc. | Noncontrolling interests in Operating Partnership | Noncontrolling interests in other consolidated partnerships | Total equity | ||||||||||||||||||||||
| Balance, June 30, 2023 | $ | $ | $ | ( | $ | ( | $ | $ | $ | $ | |||||||||||||||||||
| Net income | — | — | — | ||||||||||||||||||||||||||
| Other comprehensive loss | — | — | — | ( | ( | ( | — | ( | |||||||||||||||||||||
| Compensation under Incentive Award Plan | — | — | — | — | — | ||||||||||||||||||||||||
Issuance of | — | — | — | — | — | ||||||||||||||||||||||||
Common share offering of | — | — | — | — | |||||||||||||||||||||||||
Withholding of | ( | — | — | ( | — | — | ( | ||||||||||||||||||||||
| Adjustment for noncontrolling interests in Operating Partnership | — | — | — | ( | — | ||||||||||||||||||||||||
Common dividends ($ | — | — | ( | — | ( | — | ( | ||||||||||||||||||||||
| Distributions to noncontrolling interests | — | — | — | — | — | ( | ( | ||||||||||||||||||||||
| Balance, September 30, 2023 | $ | $ | $ | ( | $ | ( | $ | $ | $ | $ | |||||||||||||||||||
| Common shares | Paid in capital | Accumulated distributions in excess of earnings | Accumulated other comprehensive loss | Equity attributable to Tanger Inc. | Noncontrolling interests in Operating Partnership | Noncontrolling interests in other consolidated partnerships | Total equity | ||||||||||||||||||||||
| Balance, December 31, 2022 | $ | $ | $ | ( | $ | ( | $ | $ | $ | $ | |||||||||||||||||||
| Net income | — | — | — | ||||||||||||||||||||||||||
| Other comprehensive loss | — | — | — | ( | ( | ( | — | ( | |||||||||||||||||||||
| Compensation under Incentive Award Plan | — | — | — | — | — | ||||||||||||||||||||||||
Issuance of | — | — | — | — | — | ||||||||||||||||||||||||
Common share offering of | — | — | — | — | |||||||||||||||||||||||||
Grant of | ( | — | — | ( | — | — | ( | ||||||||||||||||||||||
Withholding of | ( | ( | — | — | ( | — | — | ( | |||||||||||||||||||||
| Adjustment for noncontrolling interests in Operating Partnership | — | — | — | ( | — | ||||||||||||||||||||||||
Common dividends ($ | — | — | ( | — | ( | — | ( | ||||||||||||||||||||||
| Distributions to noncontrolling interests | — | — | — | — | — | ( | ( | ( | |||||||||||||||||||||
| Balance, September 30, 2023 | $ | $ | $ | ( | $ | ( | $ | $ | $ | $ | |||||||||||||||||||
The accompanying notes are an integral part of these consolidated financial statements.
8
TANGER 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 Inc. | Noncontrolling interests in Operating Partnership | Noncontrolling interests in other consolidated partnerships | Total equity | ||||||||||||||||||||||
| Balance, June 30, 2024 | $ | $ | $ | ( | $ | ( | $ | $ | $ | — | $ | ||||||||||||||||||
| Net income | — | — | — | — | |||||||||||||||||||||||||
| Other comprehensive loss | — | — | — | ( | ( | ( | — | ( | |||||||||||||||||||||
| Compensation under Incentive Award Plan | — | — | — | — | — | ||||||||||||||||||||||||
Issuance of | — | — | — | — | — | ||||||||||||||||||||||||
Common share offering of | — | — | — | — | |||||||||||||||||||||||||
Forfeiture of | — | — | — | — | — | — | — | — | |||||||||||||||||||||
Withholding of | — | ( | — | — | ( | — | — | ( | |||||||||||||||||||||
| Contributions from noncontrolling interests | — | — | — | — | — | — | — | — | |||||||||||||||||||||
| Adjustment for noncontrolling interests in other consolidated partnerships | — | ( | — | — | ( | — | |||||||||||||||||||||||
Common dividends ($ | — | — | ( | — | ( | — | — | ( | |||||||||||||||||||||
| Distributions to noncontrolling interests | — | — | — | — | — | ( | — | ( | |||||||||||||||||||||
Balance, September 30, 2024 | $ | $ | $ | ( | $ | ( | $ | $ | $ | — | $ | ||||||||||||||||||
9
TANGER 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 Inc. | Noncontrolling interests in Operating Partnership | Noncontrolling interests in other consolidated partnerships | Total equity | ||||||||||||||||||||||
| Balance, December 31, 2023 | $ | $ | $ | ( | $ | ( | $ | $ | $ | — | $ | ||||||||||||||||||
| Net income | — | — | — | ( | |||||||||||||||||||||||||
| Other comprehensive loss | — | — | — | ( | ( | ( | — | ( | |||||||||||||||||||||
| Compensation under Incentive Award Plan | — | — | — | — | — | ||||||||||||||||||||||||
Issuance of | — | — | — | — | — | ||||||||||||||||||||||||
Common share offering of | — | — | — | — | |||||||||||||||||||||||||
Grant of | ( | — | — | — | — | — | — | ||||||||||||||||||||||
Issuance of | ( | — | — | — | — | — | |||||||||||||||||||||||
Withholding of | ( | ( | — | — | ( | — | — | ( | |||||||||||||||||||||
| Contributions from noncontrolling interests | — | — | — | — | — | — | |||||||||||||||||||||||
| Adjustment for noncontrolling interests in other consolidated partnerships | — | ( | — | — | ( | — | |||||||||||||||||||||||
Common dividends ($ | — | — | ( | — | ( | — | — | ( | |||||||||||||||||||||
| Distributions to noncontrolling interests | — | — | — | — | — | ( | — | ( | |||||||||||||||||||||
Balance, September 30, 2024 | $ | $ | $ | ( | $ | ( | $ | $ | $ | — | $ | ||||||||||||||||||
The accompanying notes are an integral part of these consolidated financial statements.
10
TANGER INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands, unaudited)
| Nine months ended September 30, | ||||||||||||||
| 2024 | 2023 | |||||||||||||
| OPERATING ACTIVITIES | ||||||||||||||
| Net income | $ | $ | ||||||||||||
| Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||||||||
| Depreciation and amortization | ||||||||||||||
| Amortization of deferred financing costs | ||||||||||||||
| Equity in earnings of unconsolidated joint ventures | ( | ( | ||||||||||||
| Equity-based compensation expense | ||||||||||||||
| Amortization of debt discounts, net | ||||||||||||||
| Amortization (accretion) of market rent rate adjustments, net | ||||||||||||||
| Straight-line rent adjustments | ( | |||||||||||||
| Distributions of cumulative earnings from unconsolidated joint ventures | ||||||||||||||
| Changes in other assets and liabilities: | ||||||||||||||
| Other assets | ||||||||||||||
| Accounts payable and accrued expenses | ( | ( | ||||||||||||
| Net cash provided by operating activities | ||||||||||||||
| INVESTING ACTIVITIES | ||||||||||||||
| Additions to rental property | ( | ( | ||||||||||||
| Additions to investments in unconsolidated joint ventures | ( | |||||||||||||
| Proceeds from short-term investments | ||||||||||||||
| Additions to short-term investments | ( | |||||||||||||
| Additions to non-real estate assets | ( | ( | ||||||||||||
| Distributions in excess of cumulative earnings from unconsolidated joint ventures | ||||||||||||||
| Additions to deferred lease costs | ( | ( | ||||||||||||
| Payments for other investing activities | ( | ( | ||||||||||||
| Proceeds from other investing activities | ||||||||||||||
| Net cash used in investing activities | ( | ( | ||||||||||||
| FINANCING ACTIVITIES | ||||||||||||||
| Cash dividends paid | ( | ( | ||||||||||||
| Distributions to noncontrolling interests in Operating Partnership | ( | ( | ||||||||||||
| Proceeds from revolving credit facility | ||||||||||||||
| Repayments of revolving credit facility | ( | |||||||||||||
| Repayments of notes, mortgages and loans | ( | ( | ||||||||||||
Issuance of common shares, including transaction costs | ||||||||||||||
| Employee income taxes paid related to shares withheld upon vesting of equity awards | ( | ( | ||||||||||||
| Additions to deferred financing costs | ( | |||||||||||||
| Proceeds from exercise of options | ||||||||||||||
| Payment for other financing activities | ( | ( | ||||||||||||
Contributions from noncontrolling interests in other consolidated partnerships | ||||||||||||||
| Distributions to noncontrolling interests in other consolidated partnerships | ( | |||||||||||||
| Net cash used in financing activities | ( | ( | ||||||||||||
| Effect of foreign currency rate changes on cash and cash equivalents | ( | |||||||||||||
| Net decrease in cash and cash equivalents | ( | ( | ||||||||||||
| Cash and cash equivalents, beginning of period | ||||||||||||||
| Cash and cash equivalents, end of period | $ | $ | ||||||||||||
The accompanying notes are an integral part of these consolidated financial statements.
11
Item 1 - Financial Statements of Tanger Properties Limited Partnership
TANGER PROPERTIES LIMITED PARTNERSHIP AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands, except unit data, unaudited)
| September 30, 2024 | December 31, 2023 | |||||||||||||
| Assets | ||||||||||||||
| Rental property: | ||||||||||||||
| Land | $ | $ | ||||||||||||
| Buildings, improvements and fixtures | ||||||||||||||
| Construction in progress | ||||||||||||||
| Accumulated depreciation | ( | ( | ||||||||||||
| Total rental property, net | ||||||||||||||
| Cash and cash equivalents | ||||||||||||||
| Short-term investments | ||||||||||||||
| Investments in unconsolidated joint ventures | ||||||||||||||
| Deferred lease costs and other intangibles, net | ||||||||||||||
| Operating lease right-of-use assets | ||||||||||||||
| Prepaids and other assets | ||||||||||||||
| Total assets | $ | $ | ||||||||||||
| Liabilities and Equity | ||||||||||||||
| Liabilities | ||||||||||||||
| Debt: | ||||||||||||||
| Senior, unsecured notes, net | $ | $ | ||||||||||||
| Unsecured term loan, net | ||||||||||||||
| Mortgages payable, net | ||||||||||||||
| Unsecured lines of credit | ||||||||||||||
| Total debt | ||||||||||||||
| Accounts payable and accrued expenses | ||||||||||||||
| Operating lease liabilities | ||||||||||||||
| Other liabilities | ||||||||||||||
| Total liabilities | ||||||||||||||
| Commitments and contingencies | ||||||||||||||
| Equity | ||||||||||||||
| Partners’ Equity: | ||||||||||||||
General partner, | ||||||||||||||
Limited partners, | ||||||||||||||
| Accumulated other comprehensive loss | ( | ( | ||||||||||||
| Total partners’ equity | ||||||||||||||
| Noncontrolling interests in consolidated partnerships | ||||||||||||||
| Total equity | ||||||||||||||
| Total liabilities and equity | $ | $ | ||||||||||||
The accompanying notes are an integral part of these consolidated financial statements.
12
TANGER PROPERTIES LIMITED PARTNERSHIP AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per unit data, unaudited)
| Three months ended September 30, | Nine months ended September 30, | |||||||||||||||||||||||||
| 2024 | 2023 | 2024 | 2023 | |||||||||||||||||||||||
| Revenues: | ||||||||||||||||||||||||||
| Rental revenues | $ | $ | $ | $ | ||||||||||||||||||||||
| Management, leasing and other services | ||||||||||||||||||||||||||
| Other revenues | ||||||||||||||||||||||||||
| Total revenues | ||||||||||||||||||||||||||
| Expenses: | ||||||||||||||||||||||||||
| Property operating | ||||||||||||||||||||||||||
| General and administrative | ||||||||||||||||||||||||||
| Depreciation and amortization | ||||||||||||||||||||||||||
| Total expenses | ||||||||||||||||||||||||||
| Other income (expense): | ||||||||||||||||||||||||||
| Interest expense | ( | ( | ( | ( | ||||||||||||||||||||||
| Other income (expense) | ( | |||||||||||||||||||||||||
| Total other income (expense) | ( | ( | ( | ( | ||||||||||||||||||||||
| Income before equity in earnings of unconsolidated joint ventures | ||||||||||||||||||||||||||
| Equity in earnings of unconsolidated joint ventures | ||||||||||||||||||||||||||
| Net income | ||||||||||||||||||||||||||
| Noncontrolling interests in consolidated partnerships | ( | |||||||||||||||||||||||||
| Net income available to partners | ||||||||||||||||||||||||||
| Net income available to limited partners | ||||||||||||||||||||||||||
| Net income available to general partner | $ | $ | $ | $ | ||||||||||||||||||||||
| Basic earnings per common unit: | ||||||||||||||||||||||||||
| Net income | $ | $ | $ | $ | ||||||||||||||||||||||
| Diluted earnings per common unit: | ||||||||||||||||||||||||||
| Net income | $ | $ | $ | $ | ||||||||||||||||||||||
The accompanying notes are an integral part of these consolidated financial statements.
13
TANGER PROPERTIES LIMITED PARTNERSHIP AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(In thousands, unaudited)
| Three months ended September 30, | Nine months ended September 30, | |||||||||||||||||||||||||
| 2024 | 2023 | 2024 | 2023 | |||||||||||||||||||||||
| Net income | $ | $ | $ | $ | ||||||||||||||||||||||
| Other comprehensive income (loss): | ||||||||||||||||||||||||||
| Foreign currency translation adjustments | ( | ( | ( | ( | ||||||||||||||||||||||
| Changes in fair value of cash flow hedges | ( | ( | ( | ( | ||||||||||||||||||||||
| Other comprehensive income (loss) | ( | ( | ( | ( | ||||||||||||||||||||||
| Comprehensive income | ||||||||||||||||||||||||||
| Comprehensive income attributable to noncontrolling interests in consolidated partnerships | ( | |||||||||||||||||||||||||
| Comprehensive income attributable to the Operating Partnership | $ | $ | $ | $ | ||||||||||||||||||||||
The accompanying notes are an integral part of these consolidated financial statements.
14
TANGER PROPERTIES LIMITED PARTNERSHIP AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EQUITY
(In thousands, except unit and per unit data, unaudited)
| General partner | Limited partners | Accumulated other comprehensive loss | Total partners’ equity | Noncontrolling interests in consolidated partnerships | Total equity | ||||||||||||||||||
| Balance, June 30, 2023 | $ | $ | $ | ( | $ | $ | $ | ||||||||||||||||
| Net income | — | ||||||||||||||||||||||
| Other comprehensive loss | — | — | ( | ( | — | ( | |||||||||||||||||
| Compensation under Incentive Award Plan | — | — | — | ||||||||||||||||||||
Withholding of | — | ( | — | ( | — | ( | |||||||||||||||||
Issuance of | — | — | |||||||||||||||||||||
Issuance of | — | — | — | ||||||||||||||||||||
Common distributions ($ | ( | ( | — | ( | ( | ||||||||||||||||||
| Balance, September 30, 2023 | $ | $ | $ | ( | $ | $ | $ | ||||||||||||||||
| General partner | Limited partners | Accumulated other comprehensive loss | Total partners’ equity | Noncontrolling interests in consolidated partnerships | Total equity | ||||||||||||||||||
| Balance, December 31, 2022 | $ | $ | $ | ( | $ | $ | $ | ||||||||||||||||
| Net income | — | ||||||||||||||||||||||
| Other comprehensive loss | — | — | ( | ( | — | ( | |||||||||||||||||
| Compensation under Incentive Award Plan | — | — | — | ||||||||||||||||||||
Issuance of | — | — | — | ||||||||||||||||||||
Issuance of | — | — | |||||||||||||||||||||
Withholding of | — | ( | — | ( | — | ( | |||||||||||||||||
Common distributions ($ | ( | ( | — | ( | ( | ( | |||||||||||||||||
| Balance, September 30, 2023 | $ | $ | $ | ( | $ | $ | $ | ||||||||||||||||
15
| General partner | Limited partners | Accumulated other comprehensive loss | Total partners’ equity | Noncontrolling interests in consolidated partnerships | Total equity | ||||||||||||||||||
| Balance, June 30, 2024 | $ | $ | $ | ( | $ | $ | $ | ||||||||||||||||
| Net income | — | ||||||||||||||||||||||
| Other comprehensive loss | — | — | ( | ( | — | ( | |||||||||||||||||
| Compensation under Incentive Award Plan | — | — | — | ||||||||||||||||||||
Issuance of | — | — | — | ||||||||||||||||||||
Issuance of | — | — | — | ||||||||||||||||||||
Forfeiture of | — | — | — | — | |||||||||||||||||||
Withholding of | — | ( | — | ( | — | ( | |||||||||||||||||
Common distributions ($ | ( | ( | — | ( | ( | ||||||||||||||||||
| Balance, September 30, 2024 | $ | $ | $ | ( | $ | $ | $ | ||||||||||||||||
| General partner | Limited partners | Accumulated other comprehensive loss | Total partners’ equity | Noncontrolling interests in consolidated partnerships | Total equity | ||||||||||||||||||
| Balance, December 31, 2023 | $ | $ | $ | ( | $ | $ | $ | ||||||||||||||||
| Net income | — | ( | |||||||||||||||||||||
| Other comprehensive loss | — | — | ( | ( | — | ( | |||||||||||||||||
| Compensation under Incentive Award Plan | — | — | — | ||||||||||||||||||||
Issuance of | — | — | — | ||||||||||||||||||||
Issuance of | — | — | |||||||||||||||||||||
Grant of | — | — | — | — | — | ||||||||||||||||||
Issuance of | — | — | — | — | — | — | |||||||||||||||||
Withholding of | — | ( | — | ( | — | ( | |||||||||||||||||
| Contributions from noncontrolling interests in consolidated partnerships | — | — | — | — | |||||||||||||||||||
Common distributions ($ | ( | ( | — | ( | ( | ||||||||||||||||||
| Balance, September 30, 2024 | $ | $ | $ | ( | $ | $ | $ | ||||||||||||||||
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)
| Nine months ended September 30, | ||||||||||||||
| 2024 | 2023 | |||||||||||||
| OPERATING ACTIVITIES | ||||||||||||||
| Net income | $ | $ | ||||||||||||
| Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||||||||
| Depreciation and amortization | ||||||||||||||
| Amortization of deferred financing costs | ||||||||||||||
| Equity in earnings of unconsolidated joint ventures | ( | ( | ||||||||||||
| Equity-based compensation expense | ||||||||||||||
| Amortization of debt (premiums) and discounts, net | ||||||||||||||
| Amortization (accretion) of market rent rate adjustments, net | ||||||||||||||
| Straight-line rent adjustments | ( | |||||||||||||
| Distributions of cumulative earnings from unconsolidated joint ventures | ||||||||||||||
| Changes in other assets and liabilities: | ||||||||||||||
| Other assets | ( | |||||||||||||
| Accounts payable and accrued expenses | ( | ( | ||||||||||||
| Net cash provided by operating activities | ||||||||||||||
| INVESTING ACTIVITIES | ||||||||||||||
| Additions to rental property | ( | ( | ||||||||||||
| Additions to investments in unconsolidated joint ventures | ( | |||||||||||||
| Additions to short-term investments | ( | |||||||||||||
| Proceeds from short-term investments | ||||||||||||||
| Additions to non-real estate assets | ( | ( | ||||||||||||
| Distributions in excess of cumulative earnings from unconsolidated joint ventures | ||||||||||||||
| Additions to deferred lease costs | ( | ( | ||||||||||||
| Payments for other investing activities | ( | ( | ||||||||||||
| Proceeds from other investing activities | ||||||||||||||
| Net cash used in investing activities | ( | ( | ||||||||||||
| FINANCING ACTIVITIES | ||||||||||||||
| Cash distributions paid | ( | ( | ||||||||||||
| Proceeds from revolving credit facility | ||||||||||||||
| Repayments of revolving credit facility | ( | |||||||||||||
| Repayments of notes, mortgages and loans | ( | ( | ||||||||||||
Issuance of units, including transaction costs | ||||||||||||||
| Employee income taxes paid related to shares withheld upon vesting of equity awards | ( | ( | ||||||||||||
| Additions to deferred financing costs | ( | |||||||||||||
| Proceeds from exercise of options | ||||||||||||||
| Payment for other financing activities | ( | ( | ||||||||||||
Contributions from noncontrolling interests in other consolidated partnerships | ||||||||||||||
| Distributions to noncontrolling interests in other consolidated partnerships | ( | |||||||||||||
| Net cash used in financing activities | ( | ( | ||||||||||||
| Effect of foreign currency on cash and cash equivalents | ( | |||||||||||||
| Net decrease in cash and cash equivalents | ( | ( | ||||||||||||
| Cash and cash equivalents, beginning of period | ||||||||||||||
| Cash and cash equivalents, end of period | $ | $ | ||||||||||||
17
TANGER INC. AND SUBSIDIARIES
TANGER PROPERTIES LIMITED PARTNERSHIP AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Business
Tanger Inc. and its subsidiaries, which we refer to as the Company, is one of the leading owners and operators of outlet and open-air retail centers in the United States and Canada. We are a fully-integrated, self-administered and self-managed real estate investment trust, which, through our controlling interest in Tanger Properties Limited Partnership and its subsidiaries, which we refer to as the Operating Partnership, focuses on developing, acquiring, owning, operating and managing outlet and open-air shopping centers. As of September 30, 2024, we owned and operated 31 consolidated outlet centers and one open-air lifestyle center, with a total gross leasable area of approximately 12.7 million square feet, which were 97 % occupied and contained over 2,500 stores representing approximately 660 store brands. We also had partial ownership interests in 6 unconsolidated centers totaling approximately 2.1 million square feet, including 2 centers in Canada. The portfolio also includes two managed centers, totaling approximately 760,000 square feet. Each of our centers, except one joint venture center, features the Tanger brand name. All references to gross leasable area, square feet, occupancy, stores and store brands contained in the notes to the consolidated financial statements are unaudited.
Our shopping centers and other assets are held by, and all of our operations are conducted by the Operating Partnership. Accordingly, the descriptions of our business, employees and assets are also descriptions of the business, employees and assets of the Operating Partnership. Unless the context indicates otherwise, the term “Company” refers to Tanger 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. On November 16, 2023, we changed our legal name from Tanger Factory Outlet Centers, Inc. to Tanger Inc. We refer to Tanger Inc.’s current legal name throughout this Quarterly Report on Form 10-Q.
2. Summary of Significant Accounting Policies
Basis of Presentation
The unaudited consolidated financial statements included herein have been prepared pursuant to accounting principles generally accepted in the United States of America (“GAAP”) and should be read in conjunction with the consolidated financial statements and notes thereto of the Company’s and the Operating Partnership’s combined Annual Report on Form 10-K for the year ended December 31, 2023. The December 31, 2023 balance sheet data in this Form 10-Q was derived from the Company’s audited financial statements. Certain information and note disclosures normally included in financial statements prepared in accordance with U.S. GAAP have been condensed or omitted pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”), although management believes that the disclosures are adequate to make the information presented not misleading. In the opinion of management, all adjustments (consisting only of normal recurring adjustments) necessary for a fair presentation of the financial statements for the interim periods have been made. The results of interim periods are not necessarily indicative of the results for a full year.
18
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.
We consolidate properties that are wholly-owned and properties where we own less than 100% but control such properties. Control is determined using an evaluation based on accounting standards related to the consolidation of voting interest entities and variable interest entities (“VIE”). For joint ventures that are determined to be a VIE, we consolidate the entity where we are deemed to be the primary beneficiary. Determination of the primary beneficiary is based on whether an entity has (1) the power to direct the activities of the VIE that most significantly impact the entity’s economic performance, and (2) the obligation to absorb losses of the entity that could potentially be significant to the VIE or the right to receive benefits from the entity that could potentially be significant to the VIE. Our determination of the primary beneficiary considers all relationships between us and the VIE, including management agreements and other contractual arrangements.
Investments in real estate joint ventures that we do not control, but may exercise significant influence on, are accounted for using the equity method of accounting. These investments are recorded initially at cost and subsequently adjusted for our equity in the joint venture’s net income or loss, cash contributions, distributions and other adjustments required under the equity method of accounting.
For certain investments in real estate joint ventures, we record our equity in the venture’s net income or loss under the hypothetical liquidation at book value method of accounting due to the structures and the preferences we receive on the distributions from our joint ventures pursuant to the respective joint venture agreements for those joint ventures. Under this method, we recognize income and loss in each period based on the change in liquidation proceeds we would receive from a hypothetical liquidation of our investment based on depreciated book value. Therefore, income or loss may be allocated disproportionately as compared to the ownership percentages due to specified preferred return rate thresholds and may be more or less than actual cash distributions received and more or less than what we may receive in the event of an actual liquidation.
We separately report investments in joint ventures for which accumulated distributions have exceeded investments in, and our share of net income or loss of, the joint ventures within other liabilities in the consolidated balance sheets because we are committed to provide further financial support to these joint ventures. The carrying amount of our investments in the Charlotte, Columbus, Galveston/Houston, and National Harbor joint ventures are less than zero because of financing or operating distributions that were greater than net income, as net income includes non-cash charges for depreciation and amortization.
Accounts Receivable
19
Impairment of Long-Lived Assets
Rental property held and used by us is reviewed for impairment in the event that facts and circumstances indicate the carrying amount of an asset may not be recoverable. In such an event, we compare the estimated future undiscounted cash flows associated with the asset to the asset's carrying amount, and if less than such carrying amount, recognize an impairment loss in an amount by which the carrying amount exceeds its fair value. The cash flow estimates used both for determining recoverability and estimating fair value are inherently judgmental and reflect current and projected trends in rental, occupancy, capitalization, and discount rates, and estimated holding periods for the applicable assets. Impairment analyses are based on our current plans, intended holding periods and available market information at the time the analyses are prepared. If our estimates of the projected future cash flows change based on uncertain market conditions or holding periods, our evaluation of impairment losses may be different and such differences could be material to our consolidated financial statements.
Due to the financial impacts from the COVID-19 pandemic, we began performing the above described procedures on our Atlantic City, New Jersey center in 2020. While the center’s performance has improved since that time, we have continued to perform those procedures and concluded each quarter that the carrying amount of the asset was recoverable. We evaluate different holding period scenarios and apply probabilities to those scenarios to determine an average holding period of 9.75 years. Management has the intent, and we have the ability, to hold the property for at least this period, and we believe this period is reasonable based on the center’s performance and our history of being a long-term owner and operator of our centers. We believe the carrying value is recoverable because in our models the sum of the estimated future undiscounted cash flows, $59.6 million, and the estimated potential disposition proceeds of the sale of the center, $77.1 million (in aggregate totaling $136.7 million) exceeds the carrying value of $107.8 million by $28.9 million. The recorded carrying amount includes intangible lease costs from our 2011 acquisition of the center.
We will continue to monitor circumstances and events in future periods that could affect inputs such as the expected holding period, operating cash flow forecasts and capitalization rates, utilized to determine whether an impairment charge is necessary. As these inputs are difficult to predict and are subject to future events that may alter our assumptions, the future cash flows estimated by management in its impairment analysis may not be achieved, and actual losses or impairment may be realized in the future. If in the future we reduce our estimate of cash flow projections, we may need to record an asset impairment. We have not materially changed the assumptions used in the analysis during the first nine months of 2024. However, we can provide no assurance that material impairment charges with respect to our properties will not occur in future periods.
20
3. Investments in Unconsolidated Real Estate Joint Ventures
The equity method of accounting is used to account for each of the individual joint ventures. We have an ownership interest in the following unconsolidated real estate joint ventures:
| As of September 30, 2024 | ||||||||||||||||||||||||||||||||
| Joint Venture | 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 | Ontario, Canada | % | $ | |||||||||||||||||||||||||||||
| Investments included in other liabilities: | ||||||||||||||||||||||||||||||||
Charlotte(2) | Charlotte, NC | % | ( | |||||||||||||||||||||||||||||
National Harbor(2) | National Harbor, MD | % | ( | |||||||||||||||||||||||||||||
Galveston/Houston (2) | Texas City, TX | % | ( | |||||||||||||||||||||||||||||
Columbus(2) | Columbus, OH | % | ( | |||||||||||||||||||||||||||||
| % | $ | ( | $ | |||||||||||||||||||||||||||||
| As of December 31, 2023 | ||||||||||||||||||||||||||||||||
| Joint Venture | 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 | Ontario, Canada | % | ||||||||||||||||||||||||||||||
| Investments included in other liabilities: | ||||||||||||||||||||||||||||||||
Charlotte(2) | Charlotte, NC | % | $ | ( | $ | |||||||||||||||||||||||||||
National Harbor(2) | National Harbor, MD | % | ( | |||||||||||||||||||||||||||||
Galveston/Houston(2) | Texas City, TX | % | ( | |||||||||||||||||||||||||||||
Columbus(2) | Columbus, OH | % | ( | |||||||||||||||||||||||||||||
| % | $ | ( | $ | |||||||||||||||||||||||||||||
(1)Net of debt origination costs of $1.8 million as of September 30, 2024 and $2.1 million as of December 31, 2023.
(2)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 and intend to provide further financial support to these joint ventures. 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 and equity in earnings of the joint ventures.
Fees we received for various services provided to our unconsolidated joint ventures were recognized in management, leasing and other services as follows (in thousands):
| Three months ended | Nine months ended | |||||||||||||||||||||||||||||||||||||
| September 30, | September 30, | |||||||||||||||||||||||||||||||||||||
| 2024 | 2023 | 2024 | 2023 | |||||||||||||||||||||||||||||||||||
| Fee: | ||||||||||||||||||||||||||||||||||||||
| Management and marketing | $ | $ | $ | $ | ||||||||||||||||||||||||||||||||||
| Leasing and other fees | ||||||||||||||||||||||||||||||||||||||
| Expense reimbursements from unconsolidated joint ventures | ||||||||||||||||||||||||||||||||||||||
| Total Fees | $ | $ | $ | $ | ||||||||||||||||||||||||||||||||||
21
Our investments in real estate joint ventures are reduced by the percentage of the profits earned for leasing and development services associated with our ownership interest in each joint venture. Our carrying value of investments in unconsolidated joint ventures differs from our share of the assets reported in the “Condensed Combined Balance Sheets - Unconsolidated Joint Ventures” shown below due to adjustments to the book basis, including intercompany profits on sales of services that are capitalized by the unconsolidated joint ventures. The differences in basis (totaling $2.4 million and $2.8 million as of September 30, 2024 and December 31, 2023, respectively) 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):
| September 30, 2024 | December 31, 2023 | |||||||||||||
| Assets | ||||||||||||||
| Land | $ | $ | ||||||||||||
| Buildings, improvements and fixtures | ||||||||||||||
| Construction in progress | ||||||||||||||
| Accumulated depreciation | ( | ( | ||||||||||||
| Total rental property, net | ||||||||||||||
| Cash and cash equivalents | ||||||||||||||
| Deferred lease costs and other intangibles, net | ||||||||||||||
| Prepaids and other assets | ||||||||||||||
| Total assets | $ | $ | ||||||||||||
| Liabilities and Owners’ Equity | ||||||||||||||
| Mortgages payable, net | $ | $ | ||||||||||||
| Accounts payable and other liabilities | ||||||||||||||
| Total liabilities | ||||||||||||||
| Owners’ equity | ||||||||||||||
| Total liabilities and owners’ equity | $ | $ | ||||||||||||
| Three months ended | Nine months ended | |||||||||||||||||||||||||
| Condensed Combined Statements of Operations - Unconsolidated Joint Ventures | September 30, | September 30, | ||||||||||||||||||||||||
| 2024 | 2023 | 2024 | 2023 | |||||||||||||||||||||||
| Revenues | $ | $ | $ | $ | ||||||||||||||||||||||
| Expenses: | ||||||||||||||||||||||||||
| Property operating | ||||||||||||||||||||||||||
| General and administrative | ||||||||||||||||||||||||||
| Depreciation and amortization | ||||||||||||||||||||||||||
| Total expenses | ||||||||||||||||||||||||||
| Other income (expense): | ||||||||||||||||||||||||||
| Interest expense | ( | ( | ( | ( | ||||||||||||||||||||||
| Other income | ||||||||||||||||||||||||||
| Total other expense | ( | ( | ( | ( | ||||||||||||||||||||||
| Net income | $ | $ | $ | $ | ||||||||||||||||||||||
| The Company and Operating Partnership’s share of: | ||||||||||||||||||||||||||
| Net income | $ | $ | $ | $ | ||||||||||||||||||||||
| Depreciation and amortization (real estate related) | $ | $ | $ | $ | ||||||||||||||||||||||
22
4. 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 $620.0 million as of September 30, 2024. The Company also guarantees the Operating Partnership’s unsecured term loan.
The Operating Partnership had the following principal amounts outstanding on the debt guaranteed by the Company (in thousands):
| As of | ||||||||||||||
| September 30, 2024 | December 31, 2023 | |||||||||||||
| Unsecured lines of credit | $ | $ | ||||||||||||
| Unsecured term loan | $ | $ | ||||||||||||
5. Debt of the Operating Partnership
The debt of the Operating Partnership consisted of the following (in thousands):
| As of | As of | |||||||||||||||||||||||||||||||||||||||||||||||||
| September 30, 2024 | December 31, 2023 | |||||||||||||||||||||||||||||||||||||||||||||||||
| Stated Interest Rate(s) | Maturity Date | Maturity Date With Extension Option | Principal | Book Value(1) | Principal | Book Value(1) | ||||||||||||||||||||||||||||||||||||||||||||
| Senior, unsecured notes: | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Senior notes | September 2026 | $ | $ | $ | $ | |||||||||||||||||||||||||||||||||||||||||||||
| Senior notes | July 2027 | |||||||||||||||||||||||||||||||||||||||||||||||||
| Senior notes | September 2031 | |||||||||||||||||||||||||||||||||||||||||||||||||
Unsecured term loan(4) | Adj SOFR | + | January 2027 | January 2028 | ||||||||||||||||||||||||||||||||||||||||||||||
| Mortgages payable: | ||||||||||||||||||||||||||||||||||||||||||||||||||
Atlantic City(2) (3) | % | - | December 2024- December 2026 | |||||||||||||||||||||||||||||||||||||||||||||||
| Southaven | Adj SOFR | + | October 2026 | October 2027 | ||||||||||||||||||||||||||||||||||||||||||||||
| Unsecured lines of credit | Adj SOFR | + | April 2028 | April 2029 | ||||||||||||||||||||||||||||||||||||||||||||||
Total | $ | $ | $ | $ | ||||||||||||||||||||||||||||||||||||||||||||||
(1)Includes premiums, discounts and unamortized debt origination costs. These costs were $10.8 million and $12.8 million as of September 30, 2024 and December 31, 2023, respectively. This excludes $7.8 million and $2.1 million of unamortized debt origination costs related to the unsecured lines of credit for the periods ended September 30, 2024 and December 31, 2023, respectively, recorded in prepaids and other assets in the consolidated balance sheet.
(2)The effective interest rate assigned during the purchase price allocation to the Atlantic City mortgages assumed during the acquisition in 2011 was 5.05 %.
(3)Principal and interest due monthly with remaining principal due at maturity.
(4)In June 2024, the interest rate spread improved by 1 basis point as the Company exceeded the sustainability metric threshold.
23
In April 2024, the Operating Partnership entered into amendments to its unsecured lines of credit, which, among other things, increased the borrowing capacity from $520 million to $620 million, with an accordion feature to increase total borrowing capacity to $1.2 billion, extended the maturity date from July 14, 2025 to April 12, 2028 (which may be extended by additional year by exercising extension options), and reduced the applicable pricing margin from Adjusted SOFR plus 100 basis points to Adjusted SOFR plus 85 basis points based on the Company's current credit rating.
Certain of our properties, which had a net book value of approximately $241.5 million at September 30, 2024, serve as collateral for mortgages payable. As of September 30, 2024, we maintained unsecured lines of credit that provided for borrowings of up to $620.0 million. The unsecured lines of credit as of September 30, 2024 included a $20.0 million liquidity line and a $600.0 million syndicated line. The syndicated line may be increased up to $1.2 billion through an accordion feature in certain circumstances.
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 FFO, as defined in the agreements, for the prior fiscal year on an annual basis or 95 % of FFO on a cumulative basis. As of September 30, 2024, we believe we were in compliance with all of our debt covenants.
Debt Maturities
Maturities and principal amortization of the existing long-term debt as of September 30, 2024 for the next five years and thereafter are as follows (in thousands):
| Calendar Year | Amount | |||||||
| For the remainder of 2024 | $ | |||||||
| 2025 | ||||||||
| 2026 | ||||||||
| 2027 | ||||||||
| 2028 | ||||||||
| Thereafter | ||||||||
| Subtotal | ||||||||
| Net discount and debt origination costs | ( | |||||||
| Total | $ | |||||||
We have considered our short-term (one-year or less from the date of filing these financial statements) liquidity needs and the adequacy of our estimated cash flows from operating activities and other financing sources to meet these needs. These other sources include but are not limited to: existing cash, ongoing relationships with certain financial institutions, our ability to sell debt or issue equity subject to market conditions and proceeds from the potential sale of non-core assets. We believe that we have access to the necessary financing to fund our short-term liquidity needs.
24
6. Derivative Financial Instruments
The following table summarizes the terms and fair values of our derivative financial instruments, as well as their classifications within the consolidated balance sheets (notional amounts and fair values in thousands):
| Fair Value | ||||||||||||||||||||||||||||||||||||||
| Effective Date | Maturity Date | Notional Amount | Bank Pay Rate | Company Fixed Pay Rate | September 30, 2024 | December 31, 2023 | ||||||||||||||||||||||||||||||||
Assets (Liabilities)(1): | ||||||||||||||||||||||||||||||||||||||
| July 1, 2019 | February 1, 2024 | $ | Daily SOFR | % | $ | $ | ||||||||||||||||||||||||||||||||
| January 1, 2021 | February 1, 2024 | Daily SOFR | % | |||||||||||||||||||||||||||||||||||
| January 1, 2021 | February 1, 2024 | Daily SOFR | % | |||||||||||||||||||||||||||||||||||
| March 1, 2021 | February 1, 2024 | Daily SOFR | % | |||||||||||||||||||||||||||||||||||
| Total | $ | % | $ | $ | ||||||||||||||||||||||||||||||||||
| February 1, 2024 | February 1, 2026 | Daily SOFR | % | |||||||||||||||||||||||||||||||||||
| February 1, 2024 | August 1, 2026 | Daily SOFR | % | ( | ||||||||||||||||||||||||||||||||||
| February 1, 2024 | January 1, 2027 | Daily SOFR | % | ( | ( | |||||||||||||||||||||||||||||||||
| Total | $ | % | $ | ( | $ | ( | ||||||||||||||||||||||||||||||||
(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, with various counterparties. We do not use derivatives for trading or speculative purposes and currently do not have any derivatives that are not designated as hedges.
Changes in the fair value of derivatives designated and qualifying as cash flow hedges 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 September 30, | Nine months ended September 30, | |||||||||||||||||||||||||||||||||||||
| 2024 | 2023 | 2024 | 2023 | |||||||||||||||||||||||||||||||||||
| Interest Rate Swaps (Effective Portion): | ||||||||||||||||||||||||||||||||||||||
| Amount of gain (loss) recognized in other comprehensive income (loss) | $ | ( | $ | ( | $ | ( | $ | ( | ||||||||||||||||||||||||||||||
25
7. Fair Value Measurements
Fair value guidance establishes a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value. These tiers are defined as follows:
| Tier | Description | |||||||
| Level 1 | Observable inputs such as quoted prices in active markets | |||||||
| Level 2 | Inputs other than quoted prices in active markets that are either directly or indirectly observable | |||||||
| Level 3 | Unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions | |||||||
Fair Value Measurements on a Recurring Basis
The following table sets forth our assets and liabilities that are measured at fair value within the fair value hierarchy (in thousands):
| Level 1 | Level 2 | Level 3 | ||||||||||||||||||||||||
| Quoted Prices in Active Markets for Identical Assets or Liabilities | Significant Observable Inputs | Significant Unobservable Inputs | ||||||||||||||||||||||||
| Total | ||||||||||||||||||||||||||
Fair value as of September 30, 2024: | ||||||||||||||||||||||||||
| Assets: | ||||||||||||||||||||||||||
| Interest rate swaps (prepaids and other assets) | $ | $ | $ | |||||||||||||||||||||||
| Total assets | $ | $ | $ | $ | ||||||||||||||||||||||
| Liabilities: | ||||||||||||||||||||||||||
| Interest rate swaps (other liabilities) | $ | ( | $ | $ | ( | $ | ||||||||||||||||||||
| Total liabilities | $ | ( | $ | $ | ( | $ | ||||||||||||||||||||
| 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, 2023: | ||||||||||||||||||||||||||
| Asset: | ||||||||||||||||||||||||||
| Interest rate swaps (prepaids and other assets) | $ | $ | $ | $ | ||||||||||||||||||||||
| Total assets | $ | $ | $ | $ | ||||||||||||||||||||||
| Liabilities: | ||||||||||||||||||||||||||
| Interest rate swaps (other liabilities) | $ | ( | $ | $ | ( | $ | ||||||||||||||||||||
| Total liabilities | $ | ( | $ | $ | ( | $ | ||||||||||||||||||||
Fair values of interest rate swaps are estimated using Level 2 inputs based on current market data received from financial sources that trade such instruments and are based on prevailing market data and derived from third party proprietary models based on well recognized financial principles including counterparty risks, credit spreads and interest rate projections, as well as reasonable estimates about relevant future market conditions.
26
Other Fair Value Disclosures
The estimated fair value within the fair value hierarchy and recorded value of our debt consisting of senior unsecured notes, unsecured term loans, secured mortgages and unsecured lines of credit were as follows (in thousands):
| September 30, 2024 | December 31, 2023 | |||||||||||||
| Level 1 Quoted Prices in Active Markets for Identical Assets or Liabilities | $ | $ | ||||||||||||
| Level 2 Significant Observable Inputs | ||||||||||||||
| Level 3 Significant Unobservable Inputs | ||||||||||||||
| Total fair value of debt | $ | $ | ||||||||||||
| Recorded value of debt | $ | $ | ||||||||||||
Our senior unsecured notes are publicly-traded which provides quoted market rates. However, due to the limited trading volume of these notes, we have classified these instruments as Level 2 in the hierarchy. Our other debt is classified as Level 3 given the unobservable inputs utilized in the valuation. Our unsecured term loan, unsecured lines of credit and variable interest rate mortgages are all SOFR based instruments. When selecting the discount rates for purposes of estimating the fair value of these instruments, we evaluated the original credit spreads and do not believe that the use of them differs materially from current credit spreads for similar instruments and therefore the recorded values of these debt instruments is considered their fair value.
8. Shareholders’ Equity of the Company
Dividend Declaration
In July 2024, the Company's Board of Directors (the “Board”) declared a $0.275 cash dividend per common share payable on August 15, 2024 to each shareholder of record on July 31, 2024, and in its capacity as General Partner of the Operating Partnership, authorized a $0.275 cash distribution per Operating Partnership unit to the Operating Partnership's unitholders.
At-the-Market Offering
Under our at-the-market stock offering (“ATM Offering”) program, which commenced February 2021, and was replaced with a new program in December 2023, we may offer and sell our common shares, $0.01 par value per share, having an aggregate gross sales price of up to $250.0 million. We may sell the common shares in amounts and at times to be determined by us but we have no obligation to sell any of the common shares. Actual sales, if any, will depend on a variety of factors to be determined by us from time to time, including, among other things, market conditions, the trading price of the common shares, capital needs and determinations by us of the appropriate sources of its funding. We currently intend to use the net proceeds from the sale of common shares pursuant to the ATM Offering program for working capital and general corporate purposes. As of September 30, 2024, we had approximately $195.1 million of common shares remaining available for sale under the ATM Offering program.
27
The following table sets forth information regarding issuances under our ATM Offering program:
| Three months ended September 30, | Nine months ended September 30, | |||||||||||||||||||||||||
| 2024 | 2023 | 2024 | 2023 | |||||||||||||||||||||||
| Number of common shares settled during the period | ||||||||||||||||||||||||||
| Average price per share | $ | $ | $ | $ | ||||||||||||||||||||||
| Aggregate gross proceeds (in thousands) | $ | $ | $ | $ | ||||||||||||||||||||||
| Aggregate net proceeds after commissions and fees (in thousands) | $ | $ | $ | $ | ||||||||||||||||||||||
In October 2024, we issued an additional 484,741 common shares under our ATM program at an average price of $33.38 per share, totaling approximately $16.2 million of gross proceeds.
Share Repurchase Program
In May 2023, the Board authorized the repurchase of up to $100.0 million of the Company’s outstanding common shares through May 31, 2025, replacing the previously authorized plan to repurchase up to $80.0 million of the Company's outstanding common shares through May 31, 2023. Repurchases may be made from time to time through open market, privately-negotiated, structured or derivative transactions (including accelerated share repurchase transactions), or other methods of acquiring common shares. The Company intends to structure open market purchases to occur within pricing and volume requirements of Rule 10b-18 of the Exchange Act. The Company may, from time to time, enter into Rule 10b5-1 plans to facilitate the repurchase of its common shares under this authorization. The Company did not 100.0 million.
28
9. Partners’ Equity of the Operating Partnership
All operating partnership units issued by the Operating Partnership have equal rights with respect to earnings, dividends and net assets. When the Company issues common shares upon the exercise of options, the grant of restricted common share awards, or the exchange of Class A common limited partnership units, the Operating Partnership issues a corresponding Class B common limited partnership unit to Tanger LP Trust, a wholly-owned subsidiary of the Company. Likewise, when the Company repurchases its outstanding common shares, the Operating Partnership repurchases a corresponding amount of Class B common limited partnership units held by Tanger LP Trust.
The following table sets forth the changes in outstanding partnership units for the three and nine months ended September 30, 2024 and September 30, 2023:
| Limited Partnership Units | ||||||||||||||||||||||||||
| General Partnership Units | Class A | Class B | Total | |||||||||||||||||||||||
| Balance June 30, 2023 | ||||||||||||||||||||||||||
| Options exercised | — | — | ||||||||||||||||||||||||
| Issuance of units | — | |||||||||||||||||||||||||
| Forfeitures of restricted common share awards by the Company | — | — | ||||||||||||||||||||||||
| Units withheld for employee income taxes | — | — | ( | ( | ||||||||||||||||||||||
| Balance September 30, 2023 | ||||||||||||||||||||||||||
| Balance December 31, 2022 | ||||||||||||||||||||||||||
| Options exercised | — | — | ||||||||||||||||||||||||
| Issuance of units | — | |||||||||||||||||||||||||
| Grant of restricted common share awards by the Company, net of forfeitures | — | — | ||||||||||||||||||||||||
| Units withheld for employee income taxes | — | — | ( | ( | ||||||||||||||||||||||
| Balance September 30, 2023 | ||||||||||||||||||||||||||
| Balance June 30, 2024 | ||||||||||||||||||||||||||
| Options exercised | — | — | ||||||||||||||||||||||||
| Issuance of units | — | — | ||||||||||||||||||||||||
| Forfeitures of restricted common share awards by the Company | — | — | ( | ( | ||||||||||||||||||||||
| Units withheld for employee income taxes | — | — | ( | ( | ||||||||||||||||||||||
| Balance September 30, 2024 | ||||||||||||||||||||||||||
| Balance December 31, 2023 | ||||||||||||||||||||||||||
| Options exercised | — | — | ||||||||||||||||||||||||
| Issuance of units | — | — | ||||||||||||||||||||||||
| Grant of restricted common share awards by the Company, net of forfeitures | — | — | ||||||||||||||||||||||||
| Issuance of deferred share units | — | — | ||||||||||||||||||||||||
| Units withheld for employee income taxes | — | — | ( | ( | ||||||||||||||||||||||
| Balance September 30, 2024 | ||||||||||||||||||||||||||
29
10. Earnings Per Share of the Company
The following table sets forth a reconciliation of the numerators and denominators in computing the Company’s earnings per share (in thousands, except per share amounts):
| Three months ended September 30, | Nine months ended September 30, | |||||||||||||||||||||||||
| 2024 | 2023 | 2024 | 2023 | |||||||||||||||||||||||
| Numerator: | ||||||||||||||||||||||||||
| Net income attributable to Tanger Inc. | $ | $ | $ | $ | ||||||||||||||||||||||
| Less allocation of earnings to participating securities | ( | ( | ( | ( | ||||||||||||||||||||||
| Net income available to common shareholders of Tanger Inc. | $ | $ | $ | $ | ||||||||||||||||||||||
| Denominator: | ||||||||||||||||||||||||||
| Basic weighted average common shares | ||||||||||||||||||||||||||
| Effect of notional units | ||||||||||||||||||||||||||
| Effect of outstanding options | ||||||||||||||||||||||||||
| Diluted weighted average common shares | ||||||||||||||||||||||||||
| Basic earnings per common share: | ||||||||||||||||||||||||||
| Net income | $ | $ | $ | $ | ||||||||||||||||||||||
| Diluted earnings per common share: | ||||||||||||||||||||||||||
| Net income | $ | $ | $ | $ | ||||||||||||||||||||||
We determine diluted earnings per share based on the weighted average number of common shares outstanding combined with the incremental weighted average shares that would have been outstanding assuming all potentially dilutive securities were converted into common shares at the earliest date possible.
Notional units granted under our equity compensation plan are considered contingently issuable common shares and are included in earnings per share if the effect is dilutive using the treasury stock method and the common shares would be issuable if the end of the reporting period were the end of the contingency period. For the three and nine months ended September 30, 2024, approximately 120,000 no
With respect to outstanding options, the effect of dilutive common shares is determined using the treasury stock method, whereby outstanding options are assumed exercised at the beginning of the reporting period and the exercise proceeds from such options and the average measured but unrecognized compensation cost during the period are assumed to be used to repurchase our common shares at the average market price during the period. For the three and nine months ended September 30, 2024, no 333,300 and 475,200 options, respectively, were excluded from the computation as they were anti-dilutive.
The assumed exchange of the partnership units held by the Non-Company LPs as of the beginning of the year, which would result in the elimination of earnings allocated to the noncontrolling interest in the Operating Partnership, would have no impact on earnings per share since the allocation of earnings to a common limited partnership unit, as if exchanged, is equivalent to earnings allocated to a common share.
Certain of the Company’s unvested restricted common share awards contain non-forfeitable rights to dividends or dividend equivalents. The impact of these unvested restricted common share awards on earnings per share has been calculated using the two-class method whereby earnings are allocated to the unvested restricted common share awards based on dividends declared and the unvested restricted common shares’ participation rights in undistributed earnings. Unvested restricted common shares that do not contain non-forfeitable rights to dividends or dividend equivalents are included in the diluted earnings per share computation if the effect is dilutive, using the treasury stock method.
30
11. Earnings Per Unit of the Operating Partnership
The following table sets forth a reconciliation of the numerators and denominators in computing earnings per unit (in thousands, except per unit amounts):
| Three months ended September 30, | Nine months ended September 30, | |||||||||||||||||||||||||
| 2024 | 2023 | 2024 | 2023 | |||||||||||||||||||||||
| Numerator: | ||||||||||||||||||||||||||
| Net income attributable to partners of the Operating Partnership | $ | $ | $ | $ | ||||||||||||||||||||||
| Less allocation of earnings to participating securities | ( | ( | ( | ( | ||||||||||||||||||||||
| Net income available to common unitholders of the Operating Partnership | $ | $ | $ | $ | ||||||||||||||||||||||
| Denominator: | ||||||||||||||||||||||||||
| Basic weighted average common units | ||||||||||||||||||||||||||
| Effect of notional units | ||||||||||||||||||||||||||
| Effect of outstanding options | ||||||||||||||||||||||||||
| Diluted weighted average common units | ||||||||||||||||||||||||||
| Basic earnings per common unit: | ||||||||||||||||||||||||||
| Net income | $ | $ | $ | $ | ||||||||||||||||||||||
| Diluted earnings per common unit: | ||||||||||||||||||||||||||
| Net income | $ | $ | $ | $ | ||||||||||||||||||||||
We determine diluted earnings per unit based on the weighted average number of common units outstanding combined with the incremental weighted average units that would have been outstanding assuming all potentially dilutive securities were converted into common units at the earliest date possible.
Notional units granted under our equity compensation plan are considered contingently issuable common units and are included in earnings per unit if the effect is dilutive using the treasury stock method and the common units would be issuable if the end of the reporting period were the end of the contingency period. For the three and nine months ended September 30, 2024, approximately 120,000 no notional units were excluded from the computation.
With respect to outstanding options, the effect of dilutive common units is determined using the treasury stock method, whereby outstanding options are assumed exercised at the beginning of the reporting period and the exercise proceeds from such options and the average measured but unrecognized compensation cost during the period are assumed to be used to repurchase our common units at the average market price during the period. The market price of a common unit is considered to be equivalent to the market price of a Company common share. For the three and nine months ended September 30, 2024, no options were excluded from the computation and for the three and nine months ended September 30, 2023, approximately 333,300 and 475,200 options, respectively, were excluded from the computation, as they were anti-dilutive.
Certain of the Company’s unvested restricted common share awards contain non-forfeitable rights to distributions or distribution equivalents. The impact of the corresponding unvested restricted unit awards on earnings per unit has been calculated using the two-class method whereby earnings are allocated to the unvested restricted unit awards based on distributions declared and the unvested restricted units’ participation rights in undistributed earnings. Unvested restricted common units that do not contain non-forfeitable rights to dividends or dividend equivalents are included in the diluted earnings per unit computation if the effect is dilutive, using the treasury stock method.
31
12. Equity-Based Compensation of the Company
We have a shareholder approved equity-based compensation plan, the Incentive Award Plan of Tanger Inc. and Tanger Properties Limited Partnership, as amended (the “Plan”), which covers our non-employee directors, officers, employees and consultants. Per the Operating Partnership’s limited partnership agreement, when a common share is issued by the Company, the Operating Partnership issues one corresponding operating partnership unit to the Company’s wholly-owned subsidiary, the Tanger LP Trust. Therefore, when the Company grants an equity-based award, the Operating Partnership treats each award as having been granted by the Operating Partnership. In the discussion below, the term “we” refers to the Company and the Operating Partnership together and the term “shares” is meant to also include corresponding units of the Operating Partnership.
We recorded equity-based compensation expense in general and administrative expenses in our consolidated statements of operations as follows (in thousands):
| Three months ended | Nine months ended | ||||||||||||||||||||||||||||||||||
| September 30, | September 30, | ||||||||||||||||||||||||||||||||||
| 2024 | 2023 | 2024 | 2023 | ||||||||||||||||||||||||||||||||
Restricted common shares1 | $ | $ | $ | $ | |||||||||||||||||||||||||||||||
Notional unit performance awards1 | |||||||||||||||||||||||||||||||||||
| Options | |||||||||||||||||||||||||||||||||||
| Total equity-based compensation | $ | $ | $ | $ | |||||||||||||||||||||||||||||||
(1) The nine months ended September 30, 2023 includes the reversal of compensation costs related to the voluntary resignation of an executive officer.
Equity-based compensation expense capitalized as a part of rental property and deferred lease costs were as follows (in thousands):
| Three months ended | Nine months ended | |||||||||||||||||||||||||||||||||||||
| September 30, | September 30, | |||||||||||||||||||||||||||||||||||||
| 2024 | 2023 | 2024 | 2023 | |||||||||||||||||||||||||||||||||||
| Equity-based compensation expense capitalized | $ | $ | $ | $ | ||||||||||||||||||||||||||||||||||
Restricted Common Share and Restricted Share Unit Awards
During February 2024, the Company granted approximately 253,000 restricted common shares to the Company’s non-employee directors and the Company’s executive officers. The grant date fair value of the awards was $26.78 per share. The restricted common shares vest ratably over a three-year one-year period on February 15th for non-employee directors. Compensation expense related to the amortization of the deferred compensation is being recognized in accordance with the vesting schedule of the restricted shares.
For certain restricted shares that vest and restricted share units that are settled during the period, we withhold shares with value equivalent up to the employees’ maximum statutory obligation for the applicable income and other employment taxes, and remit cash to the appropriate taxing authorities. The total number of shares withheld upon vesting or settlement were approximately 381,000 and 368,000 for the nine months ended September 30, 2024 and 2023, respectively. The total number of shares withheld was based on the value of the common shares on the vesting or settlement date as determined by our closing share price on the prior day. Total amounts paid for the employees’ tax obligation to taxing authorities were $10.7 million and $7.0 million for the nine months ended September 30, 2024 and 2023, respectively. These amounts are reflected as financing activities within the consolidated statements of cash flows.
32
2024 Performance Share Plan
During 2024, the Compensation Committee of the Company approved the general terms of the Tanger Inc. 2024 Performance Share Plan (the “2024 PSP”) covering the Company's executive officers whereby a maximum of approximately 367,000 three-year measurement period. The 2024 PSP is a long-term incentive compensation plan. Recipients may earn units which may convert into restricted common shares of the Company based on the Company’s absolute share price appreciation (or absolute total shareholder return) and its share price appreciation relative to its peer group (or relative total shareholder return) over a three-year measurement period. Any shares earned at the end of the three-year measurement period are subject to a time-based vesting schedule, with 50 % of the shares vesting immediately following the measurement period, and the remaining 50 % vesting one-year thereafter, contingent upon continued employment with the Company through the vesting date (unless terminated prior thereto (a) by the Company without cause, (b) by participant for good reason or, (c) due to death or disability).
The following table sets forth 2024 PSP performance targets and other relevant information about the 2024 PSP:
Performance targets (1) | ||||||||||||||
| Absolute portion of award: | ||||||||||||||
| Percent of total award | ||||||||||||||
| Absolute total shareholder return range | - | |||||||||||||
| Percentage of units to be earned | - | |||||||||||||
| Relative portion of award: | ||||||||||||||
| Percent of total award | ||||||||||||||
Percentile rank of peer group range(2) | - | |||||||||||||
| Percentage of units to be earned | - | |||||||||||||
| Maximum number of restricted common shares that may be earned | ||||||||||||||
| February grant date fair value per share | $ | |||||||||||||
(1)The number of restricted common shares received under the 2024 PSP will be determined on a pro-rata basis by linear interpolation between total shareholder return thresholds, both for absolute total shareholder return and for relative total shareholder return amongst the Company’s peer group.
(2)The peer group is based on companies included in the FTSE Nareit Retail Index.
The fair values of the 2024 PSP awards granted during the nine months ended were determined at the grant dates using a Monte Carlo simulation pricing model and the following assumptions:
Risk free interest rate (1) | % | |||||||
Expected dividend yield (2) | % | |||||||
Expected volatility (3) | % | |||||||
(1)Represents the interest rate as of the grant date on U.S. treasury bonds having the same life as the estimated life of the restricted unit grants.
(2)The dividend yield is calculated utilizing the average dividend yield over the previous three-year period and the current dividend yield as of the valuation date.
2021 Performance Share Plan
In February 2024, the measurement period for the 2021 Performance Share Plan (the “2021 PSP") concluded. Based on the Company’s absolute share price appreciation and relative total shareholder return over the three-year measurement period, we issued 479,097 restricted common shares in February 2024, with 343,996 vesting immediately and the remaining 135,101 vesting in February 2025. The vesting of those 135,101 shares is contingent upon continued employment with the Company through the vesting date (unless terminated prior thereto
33
(a) by the Company without cause, (b) by participant for good reason or (c) due to death or disability, in which cases vesting will accelerate).
13. Accumulated Other Comprehensive Income (Loss) of the Company
The following table presents changes in the balances of each component of accumulated other comprehensive income (loss) for the three and nine months ended September 30, 2024 and 2023 (in thousands):
| Tanger Inc. Accumulated Other Comprehensive Income (Loss) | Noncontrolling Interest in Operating Partnership Accumulated Other Comprehensive Income (Loss) | |||||||||||||||||||||||||||||||||||||
| Foreign Currency | Cash flow hedges | Total | Foreign Currency | Cash flow hedges | Total | |||||||||||||||||||||||||||||||||
| Balance June 30, 2024 | $ | ( | $ | $ | ( | $ | ( | $ | $ | ( | ||||||||||||||||||||||||||||
| Other comprehensive income before reclassifications | ( | ( | ||||||||||||||||||||||||||||||||||||
| Reclassifications out of accumulated other comprehensive income (loss) into other income (expense) for foreign currency and interest expense for cash flow hedges | ( | ( | ( | ( | ||||||||||||||||||||||||||||||||||
| Balance September 30, 2024 | $ | ( | $ | ( | $ | ( | $ | ( | $ | ( | $ | ( | ||||||||||||||||||||||||||
| Tanger Inc. Accumulated Other Comprehensive Income (Loss) | Noncontrolling Interest in Operating Partnership Accumulated Other Comprehensive Income (Loss) | |||||||||||||||||||||||||||||||||||||
| Foreign Currency | Cash flow hedges | Total | Foreign Currency | Cash flow hedges | Total | |||||||||||||||||||||||||||||||||
| Balance December 31, 2023 | $ | ( | $ | ( | $ | ( | $ | ( | $ | $ | ( | |||||||||||||||||||||||||||
| Other comprehensive income before reclassifications | ( | ( | ||||||||||||||||||||||||||||||||||||
Reclassification out of accumulated other comprehensive income (loss) into other income (expense) for foreign currency and interest expense for cash flow hedges | ( | ( | ( | ( | ||||||||||||||||||||||||||||||||||
| Balance September 30, 2024 | $ | ( | $ | ( | $ | ( | $ | ( | $ | ( | $ | ( | ||||||||||||||||||||||||||
| Tanger Inc. Accumulated Other Comprehensive Income (Loss) | Noncontrolling Interest in Operating Partnership Accumulated Other Comprehensive Income (Loss) | |||||||||||||||||||||||||||||||||||||
| Foreign Currency | Cash flow hedges | Total | Foreign Currency | Cash flow hedges | Total | |||||||||||||||||||||||||||||||||
| Balance June 30, 2023 | $ | ( | $ | $ | ( | $ | ( | $ | $ | ( | ||||||||||||||||||||||||||||
| Other comprehensive income before reclassifications | ( | ( | ( | ( | ||||||||||||||||||||||||||||||||||
Reclassification out of accumulated other comprehensive income (loss) into other income (expense) for foreign currency and interest expense for cash flow hedges | ( | ( | ( | ( | ||||||||||||||||||||||||||||||||||
| Balance September 30, 2023 | $ | ( | $ | $ | ( | $ | ( | $ | $ | ( | ||||||||||||||||||||||||||||
34
| Tanger Inc. Accumulated Other Comprehensive Income (Loss) | Noncontrolling Interest in Operating Partnership Accumulated Other Comprehensive Income (Loss) | |||||||||||||||||||||||||||||||||||||
| Foreign Currency | Cash flow hedges | Total | Foreign Currency | Cash flow hedges | Total | |||||||||||||||||||||||||||||||||
| Balance December 31, 2022 | $ | ( | $ | $ | ( | $ | ( | $ | $ | ( | ||||||||||||||||||||||||||||
| Other comprehensive income before reclassifications | ( | ( | ( | ( | ||||||||||||||||||||||||||||||||||
Reclassification out of accumulated other comprehensive income (loss) into other income (expense) for foreign currency and interest expense for cash flow hedges | ( | ( | ( | ( | ||||||||||||||||||||||||||||||||||
| Balance September 30, 2023 | $ | ( | $ | $ | ( | $ | ( | $ | $ | ( | ||||||||||||||||||||||||||||
We expect within the next twelve months to reclassify into earnings as a decrease to interest expense approximately $23,000 of the amounts recorded within accumulated other comprehensive income related to the interest rate swap agreements in effect as of September 30, 2024.
35
14. Accumulated Other Comprehensive Income (Loss) of the Operating Partnership
The following table presents changes in the balances of each component of accumulated other comprehensive income (loss) for the three and nine months ended September 30, 2024 (in thousands):
| Foreign Currency | Cash flow hedges | Accumulated Other Comprehensive Income (Loss) | ||||||||||||||||||
| Balance June 30, 2024 | $ | ( | $ | $ | ( | |||||||||||||||
| Other comprehensive income (loss) before reclassifications | ( | ( | ||||||||||||||||||
| Reclassification out of accumulated other comprehensive income (loss) into other income (expense) for foreign currency and interest expense for cash flow hedges | ( | ( | ||||||||||||||||||
| Balance September 30, 2024 | $ | ( | $ | ( | $ | ( | ||||||||||||||
| Foreign Currency | Cash flow hedges | Accumulated Other Comprehensive Income (Loss) | ||||||||||||||||||
| Balance December 31, 2023 | $ | ( | $ | ( | $ | ( | ||||||||||||||
| Other comprehensive income before reclassifications | ( | ( | ||||||||||||||||||
Reclassification out of accumulated other comprehensive income (loss) into other income (expense) for foreign currency and interest expense for cash flow hedges | ( | ( | ||||||||||||||||||
Balance September 30, 2024 | $ | ( | $ | ( | $ | ( | ||||||||||||||
| Foreign Currency | Cash flow hedges | Accumulated Other Comprehensive Income (Loss) | ||||||||||||||||||
| Balance June 30, 2023 | $ | ( | $ | $ | ( | |||||||||||||||
| Other comprehensive income (loss) before reclassifications | ( | ( | ||||||||||||||||||
| Reclassification out of accumulated other comprehensive income (loss) into other income (expense) for foreign currency and interest expense for cash flow hedges | ( | ( | ||||||||||||||||||
| Balance September 30, 2023 | $ | ( | $ | $ | ( | |||||||||||||||
| Foreign Currency | Cash flow hedges | Accumulated Other Comprehensive Income (Loss) | ||||||||||||||||||
| Balance December 31, 2022 | $ | ( | $ | $ | ( | |||||||||||||||
| Other comprehensive loss before reclassifications | ( | ( | ||||||||||||||||||
Reclassification out of accumulated other comprehensive income (loss) into other income (expense) for foreign currency and interest expense for cash flow hedges | ( | ( | ||||||||||||||||||
Balance September 30, 2023 | $ | ( | $ | $ | ( | |||||||||||||||
We expect within the next twelve months to reclassify into earnings as a decrease to interest expense approximately $23,000 of the amounts recorded within accumulated other comprehensive income related to the interest rate swap agreements in effect as of September 30, 2024.
36
15. Lease Agreements
As of September 30, 2024, we were the lessor to approximately 2,500 stores in our 32 consolidated centers, under operating leases with initial terms that expire from 2024 to 2039, with certain agreements containing extension options. Also, certain of our lease agreements require tenants to pay their portion of reimbursable expenses such as common area expenses, utilities, insurance and real estate taxes.
The components of rental revenues are as follows (in thousands):
| Three months ended | Nine months ended | ||||||||||||||||||||||
| September 30, | September 30, | ||||||||||||||||||||||
| 2024 | 2023 | 2024 | 2023 | ||||||||||||||||||||
| Rental revenues - fixed | $ | $ | $ | $ | |||||||||||||||||||
Rental revenues - variable (1) | |||||||||||||||||||||||
| Rental revenues | $ | $ | $ | $ | |||||||||||||||||||
(1)Primarily includes rents based on a percentage of tenant sales volume and reimbursable expenses such as common area expenses, utilities, insurance and real estate taxes.
16. Supplemental Cash Flow Information
We purchase capital equipment and incur costs relating to construction of facilities, including tenant finishing allowances. Expenditures included in accounts payable and accrued expenses were as follows (in thousands):
| As of | As of | |||||||||||||
| September 30, 2024 | September 30, 2023 | |||||||||||||
| Costs relating to construction included in accounts payable and accrued expenses | $ | $ | ||||||||||||
Interest paid, net of interest capitalized was as follows (in thousands):
| Nine months ended | ||||||||||||||
| September 30, | ||||||||||||||
| 2024 | 2023 | |||||||||||||
| Interest paid | $ | $ | ||||||||||||
37
17. New Accounting Pronouncements
Recently issued accounting standards
On August 22, 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2023-05, an update to Accounting Standards Codification (“ASC”) Topic 805, Business Combinations (“ASU 2023-05”). ASU 2023-05 clarifies existing guidance by requiring a joint venture to recognize and initially measure assets contributed and liabilities assumed at fair value, upon its formation. These amendments are effective prospectively for all joint venture formations with a formation date on or after January 1, 2025, with early adoption permitted. We are evaluating the impact of ASU 2023-05 on our consolidated financial statements. We will apply the provisions of ASU 2023-05 to new joint ventures, as applicable, but do not believe the adoption of ASU 2023-05 will have a material impact on our consolidated financial statements.
In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures (“ASU 2023-07”). ASU 2023-07 requires, among other updates, enhanced disclosures about significant segment expenses that are regularly provided to the chief operating decision maker. ASU 2023-07 also clarifies that entities with a single reportable segment are subject to both new and existing reporting requirements under Topic 280. This guidance is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024, and requires retrospective adoption. Early adoption is permitted. We are evaluating the impact of this guidance on our consolidated financial statements and related disclosures.
In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures (“ASU 2023-09”). ASU 2023-09 updates income tax disclosures related to the rate reconciliation and requires disclosure of income taxes paid by jurisdiction. ASU 2023-09 also makes several other changes to income tax disclosure requirements. The guidance is effective for fiscal years beginning after December 15, 2024. The guidance should be applied prospectively; however, retrospective application is permitted. Early adoption is permitted. We are evaluating the impact of this guidance on our consolidated financial statements and related disclosures.
18. Subsequent Events
Dividend Declaration
In October 2024, the Board declared a $0.275 0.275
38
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
The discussion of our results of operations reported in the unaudited, consolidated statements of operations compares the three and nine months ended September 30, 2024 with the three and nine months ended September 30, 2023. The results of operations discussion is combined for Tanger Inc. and Tanger Properties Limited Partnership because the results are virtually the same for both entities. The following discussion should be read in conjunction with the unaudited consolidated financial statements appearing elsewhere in this report. Historical results and percentage relationships set forth in the unaudited, consolidated statements of operations, including trends which might appear, are not necessarily indicative of future operations. Unless the context indicates otherwise, the term “Company” refers to Tanger 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.
Cautionary Statements
Certain statements made in this Quarterly Report contain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, or the Securities Act, and Section 21E of the Securities Exchange Act of 1934, as amended, or the Exchange Act. We intend such forward-looking statements to be covered by the safe harbor provisions for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995 and included this statement for purposes of complying with these safe harbor provisions. Forward-looking statements, which are based on certain assumptions and describe our future plans, strategies, beliefs and expectations, are generally identifiable by use of the words “anticipate,” “believe,” “can,” “continue,” “could,” “designed,” “estimate,” “expect,” “forecast,” “goal,” “intend,” “may,” “might,” “plan,” “possible,” “potential,” “predict,” “project,” “should,” “target,” “will,” “would,” or similar expressions. Such forward-looking statements include, but are not limited to, risks related to pandemics, supply chain and labor issues and rising interest rates on our business, financial results and financial condition; our ability to raise additional capital, including via future issuances of equity and debt, and the use of proceeds from such issuances; our results of operations and financial condition; capital expenditure and working capital needs and the funding thereof; the repurchase of the Company's common shares, including the potential use of a 10b5-1 plan to facilitate repurchases; future dividend payments; interest rates, the possibility of future asset impairments, development initiatives and strategic partnerships, the anticipated impact of the Company’s recently acquired assets in Huntsville and Asheville, as well as its recently opened Nashville development, compliance with debt covenants; renewal and re-lease of leased space; the outlook for the retail environment, potential bankruptcies, and other store closings; consumer shopping trends and preferences; the outcome of legal proceedings arising in the normal course of business; and real estate joint ventures. You should exercise caution in relying on forward-looking statements since they involve known and unknown risks, uncertainties and other important factors which are, in some cases, beyond our control and which could materially affect our actual results, performance or achievements.
39
Other important factors that may cause actual results to differ materially from current expectations include, but are not limited to: our inability to develop new retail centers or expand existing retail centers successfully; risks related to the economic performance and market value of our retail centers; the relative illiquidity of real property investments; impairment charges affecting our properties; our acquisitions or dispositions of assets may not achieve anticipated results; competition for the acquisition and development of retail centers, and our inability to complete the acquisitions of retail centers we may identify; competition for tenants with competing retail centers; the diversification of our tenant mix and our entry into the operation of full price retail may not achieve our expected results; environmental regulations affecting our business; risks associated with possible terrorist activity or other acts or threats of violence and threats to public safety; risks related to the impact of macroeconomic conditions, including rising interest rates and inflation, on our tenants and on our business, financial condition, liquidity, results of operations and compliance with debt covenants; our dependence on rental income from real property; the fact that certain of our leases include co-tenancy and/or sales-based provisions that may allow a tenant to pay reduced rent and/or terminate a lease prior to its natural expiration; our dependence on the results of operations of our retailers and their bankruptcy, early termination or closing could adversely affect us; the impact of geopolitical conflicts; the immediate and long-term impact of the outbreak of a highly infectious or contagious disease on our tenants and on our business (including the impact of actions taken to contain the outbreak or mitigate its impact); the fact that certain of our properties are subject to ownership interests held by third parties, whose interests may conflict with ours; risks related to climate change; increased costs and reputational harm associated with the increased focus on environmental, sustainability and social initiatives; risks related to uninsured losses; the risk that consumer, travel, shopping and spending habits may change; risks associated with our Canadian investments; risks associated with attracting and retaining key personnel; risks associated with debt financing; risks associated with our guarantees of debt for, or other support we may provide to, joint venture properties; the effectiveness of our interest rate hedging arrangements; our potential failure to qualify as a REIT; our legal obligation to pay dividends to our shareholders; legislative or regulatory actions that could adversely affect our shareholders, our dependence on distributions from the Operating Partnership to meet our financial obligations, including dividends; the risk of a cyber-attack or an act of cyber-terrorism or the impact of outages on our technology systems or technology systems generally; the uncertainties of costs to comply with regulatory changes (including potential costs to comply with proposed rules of the SEC to standardize climate-related disclosures); and other important factors which may cause actual results to differ materially from current expectations include, but are not limited to, those set forth under Item 1A - “Risk Factors” in the Company’s and the Operating Partnership’s Annual Report on Form 10-K for the year ended December 31, 2023.
We qualify all of our forward-looking statements by these cautionary statements. The forward-looking statements in this Quarterly Report are only predictions. We have based these forward-looking statements largely on our current expectations and projections about future events and financial trends that we believe may affect our business, financial condition and results of operations. Because forward-looking statements are inherently subject to risks and uncertainties, some of which cannot be predicted or quantified, you should not rely on these forward-looking statements as predictions of future events. The events and circumstances reflected in our forward-looking statements may not be achieved or occur and actual results could differ materially from those projected in the forward-looking statements. Except as required by applicable law, we do not plan to publicly update or revise any forward-looking statements contained herein, whether as a result of any new information, future events, changed circumstances or otherwise.
The following discussion should be read in conjunction with the consolidated financial statements appearing elsewhere in this report. Historical results and percentage relationships set forth in the consolidated statements of operations, including trends which might appear, are not necessarily indicative of future operations.
This Management's Discussion and Analysis of Financial Condition and Results of Operations ("MD&A") is intended to provide a reader of our financial statements with a narrative from the perspective of our management regarding our financial condition and results of operations, liquidity and certain other factors that may affect our future results. Our MD&A is presented in the following sections:
•General Overview
•Leasing Activity
•Results of Operations
•Liquidity and Capital Resources of the Company
•Liquidity and Capital Resources of the Operating Partnership
•Critical Accounting Estimates
•Recent Accounting Pronouncements
•Non-GAAP Supplemental Measures
•Economic Conditions and Outlook
40
General Overview
As of September 30, 2024, we owned and operated 31 consolidated outlet centers and one open-air lifestyle center, with a total gross leasable area of approximately 12.7 million square feet. We also had partial ownership interests in 6 unconsolidated centers totaling approximately 2.1 million square feet, including two centers in Canada. Our portfolio also includes two managed centers totaling approximately 760,000 square feet. The table below details our acquisitions, new developments, expansions and dispositions of consolidated and unconsolidated centers that significantly impacted our results of operations and liquidity from January 1, 2023 to September 30, 2024 (square feet in thousands):
| Consolidated Centers | Unconsolidated Joint Venture Centers | Managed Centers | ||||||||||||||||||||||||||||||||||||||||||
| Center | Quarter Acquired/Developed/Disposed | Square Feet | Number of Centers | Square Feet | Number of Centers | Square Feet | Number of Centers | |||||||||||||||||||||||||||||||||||||
| As of January 1, 2023 | 11,353 | 29 | 2,113 | 6 | 457 | 1 | ||||||||||||||||||||||||||||||||||||||
| Additions: | ||||||||||||||||||||||||||||||||||||||||||||
| Palm Beach, Florida | Third Quarter | — | — | — | — | 301 | 1 | |||||||||||||||||||||||||||||||||||||
| Nashville, Tennessee | Fourth Quarter | 291 | 1 | — | — | — | — | |||||||||||||||||||||||||||||||||||||
| Asheville, North Carolina | Fourth Quarter | 382 | 1 | — | — | — | — | |||||||||||||||||||||||||||||||||||||
| Huntsville, Alabama | Fourth Quarter | 651 | 1 | — | — | — | — | |||||||||||||||||||||||||||||||||||||
| Other | 13 | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||
| As of December 31, 2023 | 12,690 | 32 | 2,113 | 6 | 758 | 2 | ||||||||||||||||||||||||||||||||||||||
| Other | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||
As of September 30, 2024 | 12,690 | 32 | 2,113 | 6 | 758 | 2 | ||||||||||||||||||||||||||||||||||||||
41
The following table summarizes certain information for our existing consolidated centers in which we have an ownership interest as of September 30, 2024. Except as noted, all properties are owned in fee simple.
| Consolidated Centers | Legal | Square | % | |||||||||||||||||||||||
| Property Name | Location | Ownership % | Feet (4) | Occupied (4) | ||||||||||||||||||||||
Tanger Outlets Deer Park | Deer Park, NY | 100 | 737,473 | 100.0 | ||||||||||||||||||||||
Tanger Outlets Riverhead | Riverhead, NY (1) | 100 | 729,280 | 95.6 | ||||||||||||||||||||||
Bridge Street Town Centre, a Tanger Property | Huntsville, AL | 100 | 650,941 | 93.9 | ||||||||||||||||||||||
Tanger Outlets Foley | Foley, AL | 100 | 554,736 | 96.8 | ||||||||||||||||||||||
Tanger Outlets Rehoboth Beach | Rehoboth Beach, DE (1) | 100 | 547,937 | 94.3 | ||||||||||||||||||||||
Tanger Outlets Atlantic City | Atlantic City, NJ (1) (3) | 100 | 484,748 | 89.7 | ||||||||||||||||||||||
Tanger Outlets San Marcos | San Marcos, TX | 100 | 471,816 | 97.5 | ||||||||||||||||||||||
Tanger Outlets Sevierville | Sevierville, TN (1) | 100 | 450,079 | 98.3 | ||||||||||||||||||||||
Tanger Outlets Savannah | Savannah, GA | 100 | 449,583 | 99.8 | ||||||||||||||||||||||
Tanger Outlets Myrtle Beach Hwy 501 | Myrtle Beach, SC | 100 | 426,523 | 98.9 | ||||||||||||||||||||||
Tanger Outlets Phoenix | Glendale, AZ | 100 | 410,753 | 99.4 | ||||||||||||||||||||||
Tanger Outlets Myrtle Beach Hwy 17 | Myrtle Beach, SC (1) | 100 | 404,341 | 99.4 | ||||||||||||||||||||||
Tanger Outlets Charleston | Charleston, SC | 100 | 386,328 | 100.0 | ||||||||||||||||||||||
Tanger Outlets Asheville | Asheville, NC | 100 | 381,600 | 97.8 | ||||||||||||||||||||||
Tanger Outlets Lancaster | Lancaster, PA | 100 | 376,203 | 100.0 | ||||||||||||||||||||||
Tanger Outlets Pittsburgh | Pittsburgh, PA | 100 | 373,863 | 100.0 | ||||||||||||||||||||||
Tanger Outlets Commerce | Commerce, GA | 100 | 371,408 | 96.3 | ||||||||||||||||||||||
Tanger Outlets Grand Rapids | Grand Rapids, MI | 100 | 357,133 | 96.8 | ||||||||||||||||||||||
Tanger Outlets Fort Worth | Fort Worth, TX | 100 | 351,834 | 97.8 | ||||||||||||||||||||||
Tanger Outlets Daytona Beach | Daytona Beach, FL | 100 | 351,691 | 100.0 | ||||||||||||||||||||||
Tanger Outlets Branson | Branson, MO | 100 | 329,861 | 100.0 | ||||||||||||||||||||||
Tanger Outlets Memphis | Southaven, MS (2) (3) | 50 | 324,801 | 100.0 | ||||||||||||||||||||||
Tanger Outlets Atlanta | Locust Grove, GA | 100 | 321,082 | 98.4 | ||||||||||||||||||||||
Tanger Outlets Gonzales | Gonzales, LA | 100 | 321,066 | 100.0 | ||||||||||||||||||||||
Tanger Outlets Mebane | Mebane, NC | 100 | 319,762 | 100.0 | ||||||||||||||||||||||
Tanger Outlets Howell | Howell, MI | 100 | 314,438 | 92.5 | ||||||||||||||||||||||
Tanger Outlets Foxwoods | Mashantucket, CT (1) | 100 | 311,229 | 90.6 | ||||||||||||||||||||||
Tanger Outlets Nashville | Nashville, TN | 100 | 290,667 | 96.2 | ||||||||||||||||||||||
Tanger Outlets Tilton | Tilton, NH | 100 | 250,558 | 98.0 | ||||||||||||||||||||||
Tanger Outlets Hershey | Hershey, PA | 100 | 249,696 | 98.2 | ||||||||||||||||||||||
Tanger Outlets Hilton Head II | Hilton Head, SC | 100 | 206,564 | 90.3 | ||||||||||||||||||||||
Tanger Outlets Hilton Head I | Hilton Head, SC | 100 | 181,687 | 97.1 | ||||||||||||||||||||||
| Totals | 12,689,681 | 97.3 | (5) | |||||||||||||||||||||||
(1)These properties or a portion thereof are subject to a ground lease.
(2)Based on capital contribution and distribution provisions in the joint venture agreement, we expect our economic interest in this venture’s cash flow to exceed our legal ownership percentage. We currently receive substantially all the economic interest of the property.
(3)Property encumbered by mortgage. See Notes 4 and 5 to the consolidated financial statements for further details of our debt obligations.
(4)Excludes square footage and occupancy associated with ground leases to tenants.
(5)Total excludes the Nashville, TN center, which opened in October 2023 and has yet to stabilize.
42
| Unconsolidated joint venture properties | Legal | Square | % | ||||||||||||||||||||
Property Name | Location | Ownership % | Feet (4) | Occupied (4) | |||||||||||||||||||
Charlotte Premium Outlets (1) | Charlotte, NC | 50 | 398,654 | 99.1 | |||||||||||||||||||
Tanger Outlets Ottawa | Ottawa, ON | 50 | 357,213 | 99.7 | |||||||||||||||||||
Tanger Outlets Columbus (1) | Columbus, OH | 50 | 355,245 | 100.0 | |||||||||||||||||||
Tanger Outlets Houston (1) | Texas City, TX | 50 | 352,705 | 97.2 | |||||||||||||||||||
Tanger Outlets National Harbor (1) | National Harbor, MD | 50 | 341,156 | 100.0 | |||||||||||||||||||
Tanger Outlets Cookstown | Cookstown, ON | 50 | 307,883 | 92.3 | |||||||||||||||||||
Totals | 2,112,856 | 98.2 | |||||||||||||||||||||
(1)Property encumbered by a mortgage. See Note 3 to the consolidated financial statements for further details of the joint venture debt obligations.
| Location | Square Feet | ||||||||||||||||||||||||||||
| Managed Properties | |||||||||||||||||||||||||||||
Tanger Palm Beach(1) Palm Beach, FL | 758,156 | ||||||||||||||||||||||||||||
(1)Includes Tanger Palm Beach and TangerPlace Palm Beach.
Leasing Activity
The following table provides information for our consolidated centers related to leases for new stores that opened or renewals that were executed during the respective trailing twelve-month periods ended September 30, 2024 and 2023:
Comparable Space for Executed Leases (1) (2) | ||||||||||||||||||||
| Leasing Transactions | Square Feet (in 000’s) | New Initial Rent (psf) (3) | Rent Spread % (4) | Tenant Allowance (psf) (5) | Average Initial Term (in years) | |||||||||||||||
| Total space | ||||||||||||||||||||
| 2024 | 409 | 2,175 | $35.25 | 15.0 | % | $4.29 | 3.21 | |||||||||||||
| 2023 | 390 | 1,762 | $38.32 | 15.2 | % | $4.03 | 3.37 | |||||||||||||
Comparable and Non-Comparable Space for Executed Leases (1) (2) | ||||||||||||||||||||
| Leasing Transactions | Square Feet (in 000’s) | New Initial Rent (psf) (3) | Tenant Allowance (psf) (5) | Average Initial Term (in years) | ||||||||||||||||
| Total space | ||||||||||||||||||||
| 2024 | 459 | 2,416 | $35.83 | $9.94 | 3.68 | |||||||||||||||
| 2023 | 458 | 2,012 | $38.25 | $8.21 | 3.72 | |||||||||||||||
(1)For consolidated properties owned as of the period-end date. Represents leases for new stores or renewals that were executed during the respective trailing 12-month periods and excludes license agreements, seasonal tenants, month-to-month leases and new developments.
(2)Comparable space excludes leases for space that was vacant for more than 12 months (non-comparable space).
(3)Represents average initial cash rent (base rent and common area maintenance (“CAM”)).
(4)Represents change in average initial and expiring cash rent (base rent and CAM).
(5)Includes other landlord costs.
43
RESULTS OF OPERATIONS
Comparison of the three months ended September 30, 2024 to the three months ended September 30, 2023
NET INCOME
Net income decreased approximately $3.0 million in the 2024 period to $25.9 million as compared to net income of $28.9 million for the 2023 period. Significant items impacting the comparability of the two periods include the following:
•higher rental revenues from a strengthened tenant mix and higher new and renewal rental rates and the opening of our center in Nashville, TN and the acquisition of centers in Huntsville, AL and Asheville, NC during the fourth quarter of 2023
•higher operating expenses, depreciation and amortization from the new centers
•higher interest expense from newly effective variable interest rate swaps in 2024
•lower investment income during 2024 due to much lower cash balances compared to the 2023 period as the cash was used to acquire centers in Huntsville, AL and Asheville, NC and to complete the development of our center in Nashville, TN
In the tables below, information set forth for new developments and acquired properties includes our center in Nashville, TN that opened in October of 2023 and our centers in Asheville, NC and Huntsville, AL that were acquired in November of 2023.
RENTAL REVENUES
Rental revenues increased approximately $14.4 million in the 2024 period compared to the 2023 period. The following table sets forth the changes in various components of rental revenues (in thousands):
| 2024 | 2023 | Increase/(Decrease) | ||||||||||||||||||
| Rental revenues from existing properties | $ | 113,667 | $ | 110,766 | $ | 2,901 | ||||||||||||||
| Revenues from new developments and acquired properties | 10,918 | 249 | 10,669 | |||||||||||||||||
| Straight-line rent adjustments | 374 | (408) | 782 | |||||||||||||||||
| Lease termination fees | 335 | 392 | (57) | |||||||||||||||||
| Amortization of above and below market rent adjustments, net | (73) | (164) | 91 | |||||||||||||||||
| $ | 125,221 | $ | 110,835 | $ | 14,386 | |||||||||||||||
Rental revenues at existing properties were positively impacted by obtaining higher rents from new and existing tenants during the last twelve months and strengthening our tenant mix.
MANAGEMENT, LEASING AND OTHER SERVICES
Management, leasing and other services increased approximately $348,000 in the 2024 period compared to the 2023 period. The following table sets forth the changes in various components of management, leasing and other services (in thousands):
| 2024 | 2023 | Increase/(Decrease) | ||||||||||||||||||
| Management and marketing | $ | 879 | $ | 777 | $ | 102 | ||||||||||||||
| Leasing and other fees | 238 | 164 | 74 | |||||||||||||||||
| Expense reimbursements from unconsolidated joint ventures | 1,369 | 1,197 | 172 | |||||||||||||||||
| $ | 2,486 | $ | 2,138 | $ | 348 | |||||||||||||||
Management and leasing fee income increased in the 2024 period due to our addition of property management responsibilities for centers in Palm Beach, Florida.
44
OTHER REVENUES
Other revenues increased approximately $922,000 in the 2024 period as compared to the 2023 period. The following table sets forth the changes in various components of other revenues (in thousands):
| 2024 | 2023 | Increase/(Decrease) | ||||||||||||||||||
| Other revenues from existing properties | $ | 4,773 | $ | 4,373 | $ | 400 | ||||||||||||||
| Other revenues from new developments and acquired properties | 522 | — | 522 | |||||||||||||||||
| $ | 5,295 | $ | 4,373 | $ | 922 | |||||||||||||||
Other revenues from existing properties increased in the 2024 period due to an increase in other revenue streams, such as Tanger Loyalty program, paid media sponsorships and onsite signage, on a local and national level.
PROPERTY OPERATING EXPENSES
Property operating expenses increased approximately $3.5 million in the 2024 period compared to the 2023 period. The following table sets forth the changes in various components of property operating expenses (in thousands):
| 2024 | 2023 | Increase/(Decrease) | ||||||||||||||||||
| Property operating expenses from existing properties | $ | 34,176 | $ | 34,757 | $ | (581) | ||||||||||||||
Property operating expenses from new developments and acquired properties | 3,735 | 159 | 3,576 | |||||||||||||||||
| Expenses related to unconsolidated joint ventures | 1,369 | 1,197 | 172 | |||||||||||||||||
| Other property operating expenses | 967 | 645 | 322 | |||||||||||||||||
| $ | 40,247 | $ | 36,758 | $ | 3,489 | |||||||||||||||
GENERAL AND ADMINISTRATIVE EXPENSES
General and administrative expenses decreased approximately $722,000 from $18.9 million to $18.2 million in the 2024 period compared to the 2023 period. The decrease is due primarily to reduced executive share-based compensation expense and lower third-party professional fees.
DEPRECIATION AND AMORTIZATION
Depreciation and amortization costs increased approximately $10.0 million in the 2024 period compared to the 2023 period.
| 2024 | 2023 | Increase/(Decrease) | ||||||||||||||||||
| Depreciation and amortization from existing properties | $ | 27,007 | $ | 25,374 | $ | 1,633 | ||||||||||||||
| Depreciation and amortization from new developments and acquired properties | 8,370 | — | 8,370 | |||||||||||||||||
| $ | 35,377 | $ | 25,374 | $ | 10,003 | |||||||||||||||
The increase in depreciation and amortization from existing properties is primarily due to increased depreciation from second generation tenant allowances.
INTEREST EXPENSE
Interest expense increased $3.8 million to $15.5 million in the 2024 period from $11.7 million in the 2023 period. The increase was primarily due to the $325.0 million of Daily SOFR interest rate swaps that we entered into throughout 2023 that became effective on February 1, 2024 at average fixed pay rate of 3.90%. These swaps replaced $300.0 million of existing swaps that expired on February 1, 2024, which had an average fixed pay rate of 0.40%. In addition, we had outstanding balances averaging approximately $15.4 million on our lines of credit during the 2024 period. No amounts were outstanding on our lines of credit during the 2023 period. Finally, our Nashville, TN property opened during the fourth quarter of 2023 and therefore we did not capitalize interest costs related to it in the 2024 period as we did during the 2023 period.
45
OTHER INCOME (EXPENSE)
Other income (expense) decreased approximately $2.0 million from $1.9 million to ($52,000) in the 2024 period compared to the 2023 period. The 2023 period had higher investment income due to higher cash balances than were available in the 2024 period. The majority of the cash balances were utilized during the fourth quarter of 2023 for the acquisitions of the Asheville, NC and Huntsville, AL centers. In addition, cash was utilized throughout 2023 to complete the construction of our Nashville, TN center which opened in October 2023.
EQUITY IN EARNINGS OF UNCONSOLIDATED JOINT VENTURES
Equity in earnings of unconsolidated joint ventures decreased approximately $77,000 from $2.4 million from $2.3 million in the 2024 period compared to the 2023 period. The decrease is primarily related to higher depreciation at two of our joint venture centers.
Comparison of the nine months ended September 30, 2024 to the nine months ended September 30, 2023
NET INCOME
Net income decreased approximately $3.9 million in the 2024 period to $75.2 million as compared to net income of $79.0 million for the 2023 period. Significant items impacting the comparability of the two periods include the following:
•higher rental revenues from a strengthened tenant mix and higher new and renewal rates and the opening of our center in Nashville, TN and the acquisition of centers in Huntsville, AL and Asheville, NC during the fourth quarter of 2023
•higher general and administrative expenses primarily due to executive departure adjustments
•higher operating expenses and depreciation and amortization from the new centers
•higher interest expense from newly effective variable interest rate swaps in 2024
•lower investment income during 2024 due to much lower cash balances compared to the 2023 period
In the tables below, information set forth for new developments and acquired properties includes our center in Nashville, TN that opened in October of 2023 and our centers in Asheville, NC and Huntsville, AL that were acquired in November of 2023.
RENTAL REVENUES
Rental revenues increased approximately $46.3 million in the 2024 period compared to the 2023 period. The following table sets forth the changes in various components of rental revenues (in thousands):
| 2024 | 2023 | Increase/(Decrease) | ||||||||||||||||||
| Rental revenues from existing properties | $ | 331,812 | $ | 320,032 | $ | 11,780 | ||||||||||||||
| Revenues from new developments and acquired properties | 32,416 | 249 | 32,167 | |||||||||||||||||
| Straight-line rent adjustments | 361 | (1,409) | 1,770 | |||||||||||||||||
| Lease termination fees | 875 | 400 | 475 | |||||||||||||||||
| Amortization of above and below market rent adjustments, net | (115) | (267) | 152 | |||||||||||||||||
| $ | 365,349 | $ | 319,005 | $ | 46,344 | |||||||||||||||
Rental revenues at existing properties were positively impacted by obtaining higher rents from new and existing tenants during the last twelve months and strengthening our tenant mix.
46
MANAGEMENT, LEASING AND OTHER SERVICES
Management, leasing and other services increased approximately $921,000 in the 2024 period compared to the 2023 period. The following table sets forth the changes in various components of management, leasing and other services (in thousands):
| 2024 | 2023 | Increase/(Decrease) | ||||||||||||||||||
| Management and marketing | $ | 2,597 | $ | 2,351 | $ | 246 | ||||||||||||||
| Leasing and other fees | 821 | 441 | 380 | |||||||||||||||||
| Expense reimbursements from unconsolidated joint ventures | 3,677 | 3,382 | 295 | |||||||||||||||||
| $ | 7,095 | $ | 6,174 | $ | 921 | |||||||||||||||
Management and leasing fee income increased in the 2024 period due to our addition of property management responsibilities for centers in West Palm Beach, Florida.
OTHER REVENUES
Other revenues increased approximately $1.1 million in the 2024 period as compared to the 2023 period. The following table sets forth the changes in various components of other revenues (in thousands):
| 2024 | 2023 | Increase/(Decrease) | ||||||||||||||||||
| Other revenues from existing properties | $ | 11,436 | $ | 11,751 | $ | (315) | ||||||||||||||
| Other revenues from new developments and acquired properties | 1,448 | — | 1,448 | |||||||||||||||||
| $ | 12,884 | $ | 11,751 | $ | 1,133 | |||||||||||||||
Other revenues from existing properties decreased in the 2024 period due to the timing of certain marketing revenue related events.
PROPERTY OPERATING EXPENSES
Property operating expenses increased approximately $9.6 million in the 2024 period compared to the 2023 period. The following table sets forth the changes in various components of property operating expenses (in thousands):
| 2024 | 2023 | Increase/(Decrease) | ||||||||||||||||||
| Property operating expenses from existing properties | $ | 96,219 | $ | 98,559 | $ | (2,340) | ||||||||||||||
| Properties operating expenses from new developments and acquired properties | 10,881 | 159 | 10,722 | |||||||||||||||||
| Expenses related to unconsolidated joint ventures | 3,677 | 3,382 | 295 | |||||||||||||||||
| Other property operating expenses | 2,484 | 1,518 | 966 | |||||||||||||||||
| $ | 113,261 | $ | 103,618 | $ | 9,643 | |||||||||||||||
Property operating expenses from existing properties decreased in the 2024 period in part due to certain expense refunds and the timing of certain operating expenses versus the comparative period.
GENERAL AND ADMINISTRATIVE EXPENSES
General and administrative expenses increased approximately $1.8 million in the 2024 period compared to the 2023 period. We recorded executive separation amounts totaling $1.6 million and ($806,000) in the 2024 period and the 2023 period, respectively. Exclusive of those adjustments, general and administrative expenses decreased approximately $516,000 due primarily to reduced executive share-based compensation expense and lower third-party professional fees.
47
DEPRECIATION AND AMORTIZATION
Depreciation and amortization costs increased approximately $26.8 million from $76.7 million to $103.4 million in the 2024 period compared to the 2023 period.
| 2024 | 2023 | Increase/(Decrease) | ||||||||||||||||||
| Depreciation and amortization from existing properties | $ | 77,957 | $ | 76,656 | $ | 1,301 | ||||||||||||||
| Depreciation and amortization from new developments and acquired properties | 25,454 | — | 25,454 | |||||||||||||||||
| $ | 103,411 | $ | 76,656 | $ | 26,755 | |||||||||||||||
The increase in depreciation and amortization from existing properties is primarily due to increased depreciation from second generation tenant allowances.
INTEREST EXPENSE
Interest expense increased approximately $9.5 million to $45.5 million in the 2024 period from $36.0 million in the 2023 period. The increase was primarily due to the $325.0 million of Daily SOFR interest rate swaps that we entered into throughout 2023 that became effective on February 1, 2024 at average fixed pay rate of 3.90%. These swaps replaced $300.0 million of existing swaps that expired on February 1, 2024 which had an average fixed pay rate of 0.40%. In addition, we had outstanding balances averaging approximately $29.4 million on our lines of credit during the 2024 period. No amounts were outstanding on our lines of credit during the 2023 period. Finally, our Nashville, TN property opened during the fourth quarter of 2023 and therefore we did not capitalize interest costs related to it in the 2024 period as we did during the 2023 period.
OTHER INCOME (EXPENSE)
Other income (expense) decreased approximately $6.3 million from $7.0 million to $755,000 in the 2024 period compared to the 2023 period. The 2023 period had higher investment income due to higher cash balances than were available in the 2024 period. The majority of the cash balances were utilized during the fourth quarter of 2023 for the acquisitions of the Asheville, NC and Huntsville, AL centers. In addition, cash was utilized throughout 2023 to complete the construction of our Nashville, TN center which opened in October 2023.
EQUITY IN EARNINGS OF UNCONSOLIDATED JOINT VENTURES
Equity in earnings of unconsolidated joint ventures increased approximately $1.8 million to $7.8 million from $6.0 million in the 2024 period compared to the 2023 period. The increase is primarily related to improved leasing execution period over period at two of our joint venture centers.
LIQUIDITY AND CAPITAL RESOURCES OF THE COMPANY
In this “Liquidity and Capital Resources of the Company” section, the term “the Company” refers only to Tanger Inc. on an unconsolidated basis, excluding the Operating Partnership.
The Company’s business is operated primarily through the Operating Partnership. The Company issues public equity from time to time, but does not otherwise generate any capital itself or conduct any business itself, other than incurring certain expenses in operating as a public company, which are fully reimbursed by the Operating Partnership. The Company does not hold any indebtedness, and its only material asset is its ownership of partnership interests of the Operating Partnership. The Company’s principal funding requirement is the payment of dividends on its common shares. The Company’s principal source of funding for its dividend payments is distributions it receives from the Operating Partnership.
Through its status as the sole general partner of the Operating Partnership, the Company has the full, exclusive and complete responsibility for the Operating Partnership’s day-to-day management and control. The Company causes the Operating Partnership to distribute all, or such portion as the Company may in its discretion determine, of its available cash in the manner provided in the Operating Partnership’s partnership agreement. The Company receives proceeds from equity issuances from time to time, but is required by the Operating Partnership’s partnership agreement to contribute the proceeds from its equity issuances to the Operating Partnership in exchange for partnership units of the Operating Partnership.
48
We are a well-known seasoned issuer (as defined in the Securities Act) with a shelf registration that expires in December 2026 that allows the Company to register unspecified, various classes of equity securities and the Operating Partnership to register unspecified, various classes of debt securities. We expect to file a new joint shelf registration statement on Form S-3 prior to the expiration of the current registration statement. As circumstances warrant, the Company may issue equity from time to time on an opportunistic basis, dependent upon market conditions and available pricing. The Operating Partnership may use the proceeds to repay debt, including borrowings under its lines of credit, to develop new or existing properties, to make acquisitions of properties or portfolios of properties, to invest in existing or newly created joint ventures or for general corporate purposes.
The liquidity of the Company is dependent on the Operating Partnership’s ability to make sufficient distributions to the Company. The Operating Partnership is a party to loan agreements with various bank lenders that require the Operating Partnership to comply with various financial and other covenants before it may make distributions to the Company. The Company also guarantees some of the Operating Partnership’s debt. If the Operating Partnership fails to fulfill its debt requirements, which trigger the Company’s guarantee obligations, then the Company may be required to fulfill its cash payment commitments under such guarantees. However, the Company’s only material asset is its investment in the Operating Partnership.
The Company believes the Operating Partnership's sources of working capital, specifically its cash flow from operations, cash on hand and, if necessary from time to time, borrowings available under its unsecured credit facilities, are adequate for it to make its distribution payments to the Company and, in turn, for the Company to make its dividend payments to its shareholders and to finance its continued operations, investment and growth strategy and additional expenses we expect to incur for at least the next twelve months. However, there can be no assurance that the Operating Partnership's sources of capital will continue to be available at all or in amounts sufficient to meet its needs, including its ability to make distribution payments to the Company. The unavailability of capital could adversely affect the Operating Partnership's ability to pay its distributions to the Company, which will in turn, adversely affect the Company's ability to pay cash dividends to its shareholders. Risks are detailed in “Risk Factors” section of our Annual Report on Form 10-K for the year ended December 31, 2023.
We operate in a manner intended to enable us to qualify as a REIT under the Internal Revenue Code of 1986, as amended, or the Code. For the Company to maintain its qualification as a REIT, it must pay dividends to its shareholders aggregating annually at least 90% of its taxable income. While historically the Company has satisfied this distribution requirement by making cash distributions to its shareholders, it may choose to satisfy this requirement by making distributions of cash or other property, including, in limited circumstances, the Company's own shares.
As a result of this distribution requirement, the Operating Partnership cannot rely on retained earnings to fund its on-going operations to the same extent that other companies whose parent companies are not real estate investment trusts can. The Company may need to continue to raise capital in the equity markets to fund the Operating Partnership’s working capital needs, as well as potential new developments, expansions and renovations of existing properties, acquisitions, or investments in existing or newly created joint ventures.
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 Company does not have significant assets other than its investment in 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. However, all debt is held directly or indirectly at the Operating Partnership level, and the Company has guaranteed some of the Operating Partnership’s unsecured debt as discussed below. Because the Company consolidates the Operating Partnership, the section entitled “Liquidity and Capital Resources of the Operating Partnership” should be read in conjunction with this section to understand the liquidity and capital resources of the Company on a consolidated basis and how the Company is operated as a whole.
49
ATM Offering Program
Under our ATM Offering program, which commenced in February 2021, and was replaced with a new program in December 2023, we may offer and sell our common shares, having an aggregate gross sales price of up to $250.0 million. We may sell the common shares in amounts and at times to be determined by us but we have no obligation to sell any of the common shares. Actual sales, if any, will depend on a variety of factors to be determined by us from time to time, including, among other things, market conditions, the trading price of the common shares, capital needs and determinations by us of the appropriate sources of its funding. We currently intend to use the net proceeds from any sale of common shares pursuant to the ATM Offering program for working capital and general corporate purposes. As of September 30, 2024, we had approximately $195.1 million remaining available for sale under our ATM Offering program.
The following table sets forth information regarding issuances under our ATM Offering program:
| Three months ended September 30, | Nine months ended September 30, | |||||||||||||||||||||||||
| 2024 | 2023 | 2024 | 2023 | |||||||||||||||||||||||
| Number of common shares settled during the period | 818,943 | 106,615 | 818,943 | 106,615 | ||||||||||||||||||||||
| Average price per share | $ | 30.53 | $ | 24.89 | $ | 30.53 | $ | 24.89 | ||||||||||||||||||
| Aggregate gross proceeds (in thousands) | $ | 25,000 | $ | 2,654 | $ | 25,000 | $ | 2,654 | ||||||||||||||||||
| Aggregate net proceeds after commissions and fees (in thousands) | $ | 24,687 | $ | 2,621 | $ | 24,687 | $ | 2,621 | ||||||||||||||||||
In October 2024, we issued an additional 484,741 common shares under our ATM Offering program, at an average share price of $33.38 per share, yielding approximately $16.2 million of gross proceeds.
Share Buyback Program
In May 2023, the Board authorized the repurchase of up to $100.0 million of the Company’s outstanding shares through May 31, 2025. Repurchases may be made from time to time through open market, privately-negotiated, structured or derivative transactions (including accelerated share repurchase transactions), or other methods of acquiring common shares. The Company intends to structure open market purchases to occur within pricing and volume requirements of Rule 10b-18. The Company may, from time to time, enter into Rule 10b5-1 plans to facilitate the repurchase of its common shares under this authorization. The Company did not repurchase any shares for the nine months ended September 30, 2024 or 2023. The remaining amount of common shares authorized to be repurchased under the program as of September 30, 2024 was approximately $100 million.
Dividends
In January 2024, the Board declared a $0.26 cash dividend per common share payable on February 15, 2024 to each shareholder of record on January 31, 2023, and in its capacity as General Partner of the Operating Partnership, authorized a $0.26 cash distribution per Operating Partnership unit to the Operating Partnership's unitholders.
In April 2024, the Board declared a $0.275 cash dividend per common share payable on May 15, 2024 to each shareholder of record on April 30, 2024, and in its capacity as General Partner of the Operating Partnership, authorized a $0.275 cash distribution per Operating Partnership unit to the Operating Partnership's unitholders.
In July 2024, the Board declared a $0.275 cash dividend per common share payable on August 15, 2024 to each shareholder of record on July 31, 2024, and in its capacity as General Partner of the Operating Partnership, authorized a $0.275 cash distribution per Operating Partnership unit to the Operating Partnership's unitholders.
In October 2024, the Board declared a $0.275 cash dividend per common share payable on November 15, 2024 to each shareholder on record on October 31, 2024, and in its capacity as General Partner of the Operating Partnership, authorized a $0.275 cash distribution per Operating Partnership unit to the Operating Partnership’s unitholders.
50
LIQUIDITY AND CAPITAL RESOURCES OF THE OPERATING PARTNERSHIP
In this “Liquidity and Capital Resources of the Operating Partnership” section, the terms “we”, “our” and “us” refer to the Operating Partnership or the Operating Partnership and the Company together, as the text requires.
Summary of Our Major Sources and Uses of Cash and Cash Equivalents
General Overview
Property rental income represents our primary source to pay property operating expenses, debt service, capital expenditures and distributions, excluding non-recurring capital expenditures, redevelopments, and acquisitions. To the extent that our cash flow from operating activities is insufficient to cover such non-recurring capital expenditures and acquisitions, we finance such activities from cash on hand, borrowings under our unsecured lines of credit, to the extent available, or from the proceeds from the Operating Partnership’s debt offerings and the Company’s equity offerings.
We believe we achieve a strong and flexible financial position by attempting to: (1) maintain a conservative leverage position relative to our portfolio when pursuing new development, expansion and acquisition opportunities, (2) extend and sequence debt maturities, (3) manage our interest rate risk through an appropriate mix of fixed and variable rate debt and interest rate hedging strategies, (4) maintain access to liquidity by using our lines of credit in a conservative manner and (5) preserve internally generated sources of capital by maintaining a conservative distribution payout ratio. We manage our capital structure to reflect a long-term investment approach and utilize multiple sources of capital to meet our requirements, including without limitation, cash on hand, retained cash flow from operations and debt and equity issuances.
Our ability to access capital on favorable terms could be affected by various risks and uncertainties, including, but not limited to, macroeconomic conditions, including rising interest rates and inflation, geopolitical conflict and other risks detailed in the “Risk Factors” section of our Annual Report on Form 10-K for the year ended December 31, 2023.
Capital Expenditures
The following table details our capital expenditures for consolidated centers for the nine months ended September 30, 2024 and 2023 (in thousands):
Nine months ended September 30, | ||||||||||||||||||||
| 2024 | 2023 | Change | ||||||||||||||||||
| Capital expenditures analysis: | ||||||||||||||||||||
New developments and expansions (1) | $ | 19,036 | $ | 95,054 | $ | (76,018) | ||||||||||||||
| Renovations | 5,378 | 3,945 | 1,433 | |||||||||||||||||
| Second generation tenant allowances | 20,858 | 7,606 | 13,252 | |||||||||||||||||
Other capital expenditures (2) | 18,329 | 23,531 | (5,202) | |||||||||||||||||
| 63,601 | 130,136 | (66,535) | ||||||||||||||||||
| Conversion from accrual to cash basis | 9,829 | (10,066) | 19,895 | |||||||||||||||||
| Additions to rental property-cash basis | $ | 73,430 | $ | 120,070 | $ | (46,640) | ||||||||||||||
(1)The decrease in new center developments and expansions is primarily due to development costs at our site in Nashville, TN and other projects in the prior year.
(2)Other capital expenditures in 2024 decreased over the 2023 period due to a lower number of major capital expenditure projects within our existing portfolio.
51
Potential Future Developments and Acquisitions
We intend to continue to grow our portfolio by developing, expanding or acquiring additional outlet and retail real estate assets. Future real estate assets may be wholly-owned by us, owned through joint ventures or partnership arrangements, or managed through management agreements. However, you should note that any developments or expansions that we, or a joint venture that we have an ownership interest in, have planned or anticipated may not be started or completed as scheduled, or may not result in accretive net income or funds from operations ("FFO"). See the section "Non-GAAP Supplemental Earnings Measures" - "Funds From Operations" below for further discussion of FFO. In addition, we regularly evaluate acquisition or disposition proposals and engage from time to time in negotiations for acquisitions or dispositions of properties. We may also enter into letters of intent for the purchase or sale of properties. Any prospective acquisition or disposition that is being evaluated or which is subject to a letter of intent may not be consummated.
As of the date of this filing, we are not in the pre-development period for any other new developments. We may use joint venture arrangements to develop potential sites.
In the case of projects to be wholly-owned by us, we expect to fund these projects with cash on hand, borrowings under our unsecured lines of credit and cash flows from operations, but may also fund them with capital from additional public debt and equity offerings. For projects to be developed through joint venture arrangements, we may use collateralized construction loans to fund a portion of the project, with our share of the equity requirements funded from sources described above.
Unconsolidated Real Estate Joint Ventures
From time to time, we form joint venture arrangements to develop centers. As of September 30, 2024 we have partial ownership interests in six unconsolidated centers totaling approximately 2.1 million square feet, including two centers in Canada. See Note 3 to the consolidated financial statements for details of our individual joint ventures, including, but not limited to, carrying values of our investments, fees we receive for services provided to the joint ventures, recent development and financing transactions and condensed combined summary financial information.
We may elect to fund cash needs of a joint venture through equity contributions (generally on a basis proportionate to our ownership interests), advances or partner loans, although such funding is not typically required contractually or otherwise. 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 and intend to provide further financial support to these joint ventures. We believe our joint ventures will be able to fund their operating and capital needs for the next twelve months based on their sources of working capital, specifically cash flow from operations, access to contributions from partners, and ability to refinance debt obligations, including the ability to exercise upcoming extensions of near term maturities.
Our joint ventures are typically encumbered by a mortgage on the joint venture property. 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. A default by a joint venture under its debt obligations may expose us to liability under the guaranty. For secured term loans, we may include a guaranty of completion as well as principal. Our joint ventures may contain make whole provisions in the event that demands are made on any existing guarantees.
Our joint ventures are generally subject to buy-sell provisions that are customary for joint venture agreements in the real estate industry. Either partner may initiate these provisions (subject to any applicable lock up period), which could result in either the sale of our interest or the use of available cash or additional borrowings to acquire the other party's interest. Under these provisions, one partner sets a price for the property, then the other partner has the option to either (1) purchase their partner's interest based on that price or (2) sell its interest to the other partner based on that price. Since the partner other than the partner who triggers the provision has the option to be the buyer or seller, we do not consider this arrangement to be a mandatory redeemable obligation.
52
Contractual Obligations
There were no material changes in our contractual commitments during the nine months ended September 30, 2024 from those disclosed in our Annual Report on Form 10-K for the year ended December 31, 2023, other than the following updates to our contractual obligations for future debt and interest payments over the next five years and thereafter as of September 30, 2024.
Future Debt Obligations
As described further in Note 5 of the notes to the consolidated financial statements, as of September 30, 2024, scheduled maturities of our existing long-term debt for the remainder 2024 and for 2025, 2026, 2027 and 2028 are $1.3 million, $1.5 million, $407.4 million, $625.0 million and $0.0 million, respectively. As of September 30, 2024, scheduled maturities after 2028 aggregate to $400.0 million.
Future Interest Payments
We are obligated to make periodic interest payments at fixed and variable rates, depending on the terms of the applicable debt agreements. Based on applicable interest rates and scheduled debt maturities as of September 30, 2024, these interest obligations total approximately $55.4 million over the next twelve months.
Cash Flows
The following table sets forth our changes in cash flows from September 30, 2024 and 2023 (in thousands):
| Nine months ended September 30, | ||||||||||||||||||||
| 2024 | 2023 | Change | ||||||||||||||||||
| Net cash provided by operating activities | $ | 169,017 | $ | 151,870 | $ | 17,147 | ||||||||||||||
| Net cash used in investing activities | (67,352) | (87,139) | 19,787 | |||||||||||||||||
| Net cash used in financing activities | (103,483) | (88,324) | (15,159) | |||||||||||||||||
| Effect of foreign currency rate changes on cash and equivalents | 76 | (315) | 391 | |||||||||||||||||
| Net decrease in cash and cash equivalents | $ | (1,742) | $ | (23,908) | $ | 22,166 | ||||||||||||||
Operating Activities
Net cash provided by operating activities increased period over period primarily due to our new development in Nashville, TN that opened in October of 2023 and our acquired properties in Asheville, NC and Huntsville, AL that were acquired in November of 2023.
Investing Activities
The decrease in net cash used in investing activities was primarily due to lower additions to rental property as the 2023 period included additions related to our Nashville, TN center that opened in October 2023.
Financing Activities
Net cash used in financing activities increased period over period primarily due to an increase in cash dividends paid, higher amount of net share settlements related to the vesting of equity awards and finance origination costs related to the amendment and extension of our unsecured lines of credit, offset by proceeds from our common share offering under our ATM Offering program.
Financing Arrangements
As of September 30, 2024, unsecured borrowings represented 96% of our outstanding debt and 93% of the gross book value of our real estate portfolio was unencumbered. The Company guarantees the Operating Partnership’s obligations under our unsecured lines of credit and our term loan.
As of September 30, 2024, we maintained unsecured lines of credit that provided for borrowings of up to $620.0 million. The unsecured lines of credit as of September 30, 2024 included a $20.0 million liquidity line and a $600.0 million syndicated line. The syndicated line may be increased up to $1.2 billion through an accordion feature in certain circumstances.
53
In April 2024, the Operating Partnership entered into amendments to its unsecured lines of credit, which, among other things, increased the borrowing capacity from $520.0 million to $620.0 million, with an accordion feature to increase total borrowing capacity to $1.2 billion, extended the maturity date from July 14, 2025 to April 12, 2028 (which may be extended by one additional year by exercising extension options), and reduced the applicable pricing margin from Adjusted SOFR plus 100 basis points to Adjusted SOFR plus 85 basis points based on the Company's current credit rating.
We intend to retain the ability to raise additional capital, including public debt or equity, to pursue attractive investment opportunities that may arise and to otherwise act in a manner that we believe to be in the best interests of our shareholders and unitholders. The Company and Operating Partnership are well-known seasoned issuers with a joint shelf registration statement on Form S-3, expiring in December 2026, that allows us to offer and sell unspecified amounts of different classes of securities. To generate capital to reinvest into other attractive investment opportunities, we may also consider the use of additional operational and developmental joint ventures, property management opportunities, the sale or lease of outparcels on our existing properties and the sale of certain properties that do not meet our long-term investment criteria. Based on cash provided by operations, existing lines of credit, ongoing relationships with certain financial institutions and our ability to sell debt or issue equity subject to market conditions, we believe that we have access to the necessary financing to fund the planned capital expenditures for at least the next twelve months.
We anticipate that adequate cash will be available to fund our operating and administrative expenses, regular debt service obligations, and the payment of dividends in accordance with REIT requirements in both the short- and long-term. Although we receive most of our rental payments on a monthly basis, dividends and distributions to shareholders and unitholders, respectively, are typically made quarterly and interest payments on the senior, unsecured notes are made semi-annually. Amounts accumulated for such payments will be used in the interim to reduce the outstanding borrowings under our existing unsecured lines of credit or invested in short-term money market or other suitable instruments.
We believe our current balance sheet position is financially sound; however, due to the economic uncertainty caused by the current macroeconomic environment, including rising interest rates and inflation, and the inherent uncertainty and unpredictability of the capital and credit markets, we can give no assurance that affordable access to capital will exist between now and when our next significant debt matures, which is our $350.0 million senior notes due September 2026.
Equity Offerings under the ATM Offering Program
As of September 30, 2024, we have a remaining authorization of $195.1 million of common shares under the ATM Offering program.
The following table sets forth information regarding issuances under our ATM Offering program:
| Three months ended September 30, | Nine months ended September 30, | |||||||||||||||||||||||||
| 2024 | 2023 | 2024 | 2023 | |||||||||||||||||||||||
| Number of common shares settled during the period | 818,943 | 106,615 | 818,943 | 106,615 | ||||||||||||||||||||||
| Average price per share | $ | 30.53 | $ | 24.89 | $ | 30.53 | $ | 24.89 | ||||||||||||||||||
| Aggregate gross proceeds (in thousands) | $ | 25,000 | $ | 2,654 | $ | 25,000 | $ | 2,654 | ||||||||||||||||||
| Aggregate net proceeds after commissions and fees (in thousands) | $ | 24,687 | $ | 2,621 | $ | 24,687 | $ | 2,621 | ||||||||||||||||||
In October 2024, we issued an additional 484,741 common shares under our ATM Offering program, at an average price of $33.38 per share, yielding approximately $16.2 million of gross proceeds.
Our ATM Offering program also provides that we may sell common shares through forward sale contracts. Actual sales under the ATM Offering program will depend on a variety of factors including market conditions, the trading price of our common shares, our capital needs, and our determination of the appropriate sources of funding to meet such needs.
54
Derivatives
Throughout 2023, we entered into $325.0 million of forward-starting Daily SOFR interest rate swaps at average fixed pay rate of 3.90%. The swaps were effective February 1, 2024, and end at various dates from February 1, 2026 to January 1, 2027. These swaps replaced $300.0 million of existing swaps that expired on February 1, 2024, which had an average fixed pay rate of 0.4%, as part of our interest rate risk management strategy.
Debt Covenants
The Operating Partnership’s debt agreements require the maintenance of certain ratios, including debt service coverage and leverage, and limit the payment of dividends such that dividends and distributions will not exceed funds from operations, as defined in the agreements, for the prior fiscal year on an annual basis or 95% on a cumulative basis.
We have historically been, and at September 30, 2024 are, in compliance with all of our debt covenants. Our continued compliance with these covenants depends on many factors and could be impacted by current or future economic conditions. Failure to comply with these covenants would result in a default, which, if we were unable to cure or obtain a waiver from the lenders, could accelerate the repayment obligations. Further, in the event of default, the Company may be restricted from paying dividends to its shareholders in excess of dividends required to maintain its REIT qualification. Accordingly, an event of default could have a material and adverse impact on us. As a result, we have considered our short-term (one-year or less from the date of filing these financial statements) liquidity needs and the adequacy of our estimated cash flows from operating activities and other financing sources to meet these needs. These other sources include but are not limited to: existing cash, ongoing relationships with certain financial institutions, our ability to sell debt or issue equity subject to market conditions and proceeds from the potential sale of non-core assets. We believe that we have access to the necessary financing to fund our short-term liquidity needs.
As of September 30, 2024, we were in compliance with all financial and non-financial covenants related to our debt obligations.
| Senior unsecured notes financial covenants | Required | Actual | ||||||
| Total Consolidated Debt to Adjusted Total Assets | < 60% | 37 | % | |||||
| Total Secured Debt to Adjusted Total Assets | < 40% | 2 | % | |||||
| Total Unencumbered Assets to Unsecured Debt | > 150% | 257 | % | |||||
| Consolidated Income Available for Debt Service to Annual Debt Service Charge | > 1.5 x | 5.6 | x | |||||
| Lines of credit and term loan | Required | Actual | ||||||
| Total Liabilities to Total Adjusted Asset Value | < 60% | 35 | % | |||||
| Secured Indebtedness to Total Adjusted Asset Value | < 35% | 4 | % | |||||
| EBITDA to Fixed Charges | > 1.5 x | 4.4 | x | |||||
| Total Unsecured Indebtedness to Adjusted Unencumbered Asset Value | < 60% | 31 | % | |||||
| Unencumbered Interest Coverage Ratio | > 1.5 x | 5.7 | x | |||||
55
Debt of unconsolidated joint ventures
The following table details information regarding the outstanding debt of the unconsolidated joint ventures and guarantees of such debt provided by us as of September 30, 2024 (dollars in millions):
| Joint Venture | Ownership % | Total Joint Venture Debt | Maturity Date | Maturity Date with Option | Interest Rate | Percent Guaranteed by the Operating Partnership | Maximum Guaranteed Amount by the Company | |||||||||||||||||||||||||||||||||||||
| Charlotte | 50% | $ | 98.2 | July 2028 | 4.27% | — | % | $ | — | |||||||||||||||||||||||||||||||||||
| Columbus | 50% | 71.0 | October 2032 | 6.25% | — | % | — | |||||||||||||||||||||||||||||||||||||
| Galveston/Houston | 50% | 58.0 | June 2026 | June 2028 | SOFR + 3.00% | 17.2 | % | 10.0 | ||||||||||||||||||||||||||||||||||||
| National Harbor | 50% | 92.5 | January 2030 | 4.63 | % | — | % | — | ||||||||||||||||||||||||||||||||||||
| Debt origination costs | (1.8) | |||||||||||||||||||||||||||||||||||||||||||
| 50% | $ | 317.9 | $ | 10.0 | ||||||||||||||||||||||||||||||||||||||||
Critical Accounting Estimates
The preparation of financial statements and related disclosures in conformity with U.S. GAAP and the Company’s discussion and analysis of its financial condition and operating results require the Company’s management to make judgments, assumptions and estimates that affect the amounts reported. Our Annual Report on Form 10-K for the year ended December 31, 2023 contains a discussion of our critical accounting estimates in the Management's Discussion and Analysis of Financial Condition and Results of Operations section. There have been no material changes to these estimates during the nine months ended September 30, 2024.
Recent Accounting Pronouncements
See Note 17 to the consolidated financial statements for information on recently adopted accounting standards and new accounting pronouncements issued.
56
NON-GAAP SUPPLEMENTAL MEASURES
Funds From Operations
Funds From Operations (“FFO”) is a widely used measure of the operating performance for real estate companies that supplements net income (loss) determined in accordance with GAAP. We determine FFO based on the definition set forth by the National Association of Real Estate Investment Trusts (“Nareit”), of which we are a member. In December 2018, Nareit issued “Nareit Funds From Operations White Paper - 2018 Restatement,” which clarifies, where necessary, existing guidance and consolidates alerts and policy bulletins into a single document for ease of use. Nareit defines FFO as net income (loss) available to the Company’s common shareholders computed in accordance with GAAP, excluding (i) depreciation and amortization related to real estate, (ii) gains or losses from sales of certain real estate assets, (iii) gains and losses from change in control, (iv) impairment write-downs of certain real estate assets and investments in entities when the impairment is directly attributable to decreases in the value of depreciable real estate held by the entity and (v) after adjustments for unconsolidated partnerships and joint ventures calculated to reflect FFO on the same basis.
FFO is intended to exclude historical cost depreciation of real estate as required by GAAP, which assumes that the value of real estate assets diminishes ratably over time. Historically, however, real estate values have risen or fallen with market conditions. Because FFO excludes depreciation and amortization of real estate assets, gains and losses from property dispositions and extraordinary items, it provides a performance measure that, when compared year over year, reflects the impact to operations from trends in occupancy rates, rental rates, operating costs, development activities and interest costs, providing perspective not immediately apparent from net income (loss).
We present FFO because we consider it an important supplemental measure of our operating performance. In addition, a portion of cash bonus compensation to certain members of management is based on our FFO or Core FFO, which is described in the section below. We believe it is useful for investors to have enhanced transparency into how we evaluate our performance and that of our management. In addition, FFO is frequently used by securities analysts, investors and other interested parties in the evaluation of REITs, many of which present FFO when reporting their results. FFO is also widely used by us and others in our industry to evaluate and price potential acquisition candidates. We believe that FFO payout ratio, which represents regular distributions to common shareholders and unitholders of the Operating Partnership expressed as a percentage of FFO, is useful to investors because it facilitates the comparison of dividend coverage between REITs. Nareit has encouraged its member companies to report their FFO as a supplemental, industry-wide standard measure of REIT operating performance.
FFO has significant limitations as an analytical tool, and you should not consider it in isolation, or as a substitute for analysis of our results as reported under GAAP. Some of these limitations are:
•FFO does not reflect our cash expenditures, or future requirements, for capital expenditures or contractual commitments;
•FFO does not reflect changes in, or cash requirements for, our working capital needs;
•Although depreciation and amortization are non-cash charges, the assets being depreciated and amortized will often have to be replaced in the future, and FFO does not reflect any cash requirements for such replacements; and
•Other companies in our industry may calculate FFO differently than we do, limiting its usefulness as a comparative measure.
Because of these limitations, FFO should not be considered as a measure of discretionary cash available to us to invest in the growth of our business or our dividend paying capacity. We compensate for these limitations by relying primarily on our GAAP results and using FFO only as a supplemental measure.
57
Core FFO
We present Core Funds From Operations (“Core FFO”) as a supplemental measure of our performance. We define Core FFO as FFO further adjusted to eliminate the impact of certain items that we do not consider indicative of our ongoing operating performance. These further adjustments are itemized in the table below. You are encouraged to evaluate these adjustments and the reasons we consider them appropriate for supplemental analysis. In evaluating Core FFO you should be aware that in the future we may incur expenses that are the same as or similar to some of the adjustments in this presentation. Our presentation of Core FFO should not be construed as an inference that our future results will be unaffected by unusual or non-recurring items.
We present Core FFO because we believe it assists investors and analysts in comparing our performance across reporting periods on a consistent basis by excluding items that we do not believe are indicative of our core operating performance. In addition, we believe it is useful for investors to have enhanced transparency into how we evaluate management’s performance and the effectiveness of our business strategies. We use Core FFO when certain material, unplanned transactions occur as a factor in evaluating management’s performance and to evaluate the effectiveness of our business strategies, and may use Core FFO when determining incentive compensation.
Core FFO has limitations as an analytical tool. Some of these limitations are:
•Core FFO does not reflect our cash expenditures, or future requirements, for capital expenditures or contractual commitments;
•Core FFO does not reflect changes in, or cash requirements for, our working capital needs;
•Although depreciation and amortization are non-cash charges, the assets being depreciated and amortized will often have to be replaced in the future, and Core FFO does not reflect any cash requirements for such replacements;
•Core FFO does not reflect the impact of certain cash charges resulting from matters we consider not to be indicative of our ongoing operations; and
•Other companies in our industry may calculate Core FFO differently than we do, limiting its usefulness as a comparative measure.
Because of these limitations, Core FFO should not be considered in isolation or as a substitute for performance measures calculated in accordance with GAAP. We compensate for these limitations by relying primarily on our GAAP results and using Core FFO only as a supplemental measure.
58
Below is a reconciliation of net income to FFO and Core FFO available to common shareholders (in thousands, except per share amounts):
Three months ended | Nine months ended | |||||||||||||||||||||||||||||||||||||
| September 30, | September 30, | |||||||||||||||||||||||||||||||||||||
| 2024 | 2023 | 2024 | 2023 | |||||||||||||||||||||||||||||||||||
| Net income | $ | 25,930 | $ | 28,877 | $ | 75,151 | $ | 79,037 | ||||||||||||||||||||||||||||||
| Adjusted for: | ||||||||||||||||||||||||||||||||||||||
| Depreciation and amortization of real estate assets - consolidated | 34,357 | 24,953 | 100,764 | 75,077 | ||||||||||||||||||||||||||||||||||
| Depreciation and amortization of real estate assets - unconsolidated joint ventures | 2,850 | 2,608 | 7,450 | 7,893 | ||||||||||||||||||||||||||||||||||
| FFO | 63,137 | 56,438 | 183,365 | 162,007 | ||||||||||||||||||||||||||||||||||
| FFO attributable to noncontrolling interests in other consolidated partnerships | — | — | 80 | (248) | ||||||||||||||||||||||||||||||||||
| Allocation of earnings to participating securities | (418) | (651) | (1,248) | (1,560) | ||||||||||||||||||||||||||||||||||
FFO available to common shareholders (1) | $ | 62,719 | $ | 55,787 | $ | 182,197 | $ | 160,199 | ||||||||||||||||||||||||||||||
| As further adjusted for: | ||||||||||||||||||||||||||||||||||||||
Executive departure-related adjustments (2) | — | — | 1,554 | (806) | ||||||||||||||||||||||||||||||||||
| Impact of above adjustment to the allocation of earnings to participating securities | — | — | (10) | 6 | ||||||||||||||||||||||||||||||||||
Core FFO available to common shareholders (1) | $ | 62,719 | $ | 55,787 | $ | 183,741 | $ | 159,399 | ||||||||||||||||||||||||||||||
FFO available to common shareholders per share - diluted (1) | $ | 0.54 | $ | 0.50 | $ | 1.58 | $ | 1.45 | ||||||||||||||||||||||||||||||
Core FFO available to common shareholders per share - diluted (1) | $ | 0.54 | $ | 0.50 | $ | 1.60 | $ | 1.44 | ||||||||||||||||||||||||||||||
| Weighted Average Shares: | ||||||||||||||||||||||||||||||||||||||
| Basic weighted average common shares | 108,972 | 104,461 | 108,675 | 104,308 | ||||||||||||||||||||||||||||||||||
| Effect of notional units | 799 | 1,026 | 746 | 898 | ||||||||||||||||||||||||||||||||||
Effect of outstanding options | 933 | 832 | 925 | 783 | ||||||||||||||||||||||||||||||||||
| Diluted weighted average common shares (for earnings per share computations) | 110,704 | 106,319 | 110,346 | 105,989 | ||||||||||||||||||||||||||||||||||
| Exchangeable operating partnership units | 4,708 | 4,738 | 4,708 | 4,738 | ||||||||||||||||||||||||||||||||||
Diluted weighted average common shares (for FFO and Core FFO per share computations) (1) | 115,412 | 111,057 | 115,054 | 110,727 | ||||||||||||||||||||||||||||||||||
(1)Assumes the Class A common limited partnership units of the Operating Partnership held by the noncontrolling interests are exchanged for common shares of the Company. Each Class A common limited partnership unit is exchangeable for one of the Company’s common shares, subject to certain limitations to preserve the Company’s REIT status.
(2)For the 2024 period, represents executive severance costs and for the 2023 period, represents the reversal of previously expensed compensation related to a voluntary executive departure.
59
Portfolio Net Operating Income and Same Center Net Operating Income
We present portfolio net operating income (“Portfolio NOI”) and same center net operating income (“Same Center NOI”) as supplemental measures of our operating performance. Portfolio NOI represents our property level net operating income which is defined as total operating revenues less property operating expenses and excludes termination fees and non-cash adjustments including straight-line rent, net above and below market rent amortization, impairment charges, loss on early extinguishment of debt and gains or losses on the sale of assets recognized during the periods presented. We define Same Center NOI as Portfolio NOI for the properties that were operational for the entire portion of both comparable reporting periods and which were not acquired, or subject to a material expansion or non-recurring event, such as a natural disaster, during the comparable reporting periods. We present Portfolio NOI and Same Center NOI on a consolidated basis.
We believe Portfolio NOI and Same Center NOI are non-GAAP metrics used by industry analysts, investors and management to measure the operating performance of our properties because they provide performance measures directly related to the revenues and expenses involved in owning and operating real estate assets and provide a perspective not immediately apparent from net income (loss), FFO or Core FFO. Because Same Center NOI excludes properties developed, redeveloped, acquired and sold; as well as non-cash adjustments, gains or losses on the sale of outparcels and termination rents; it highlights operating trends such as occupancy levels, rental rates and operating costs on properties that were operational for both comparable periods. Portfolio NOI and Same Center NOI should not be considered alternatives to net income (loss) as an indication of our performance or to cash flows as a measure of our liquidity or our ability to make distributions. Other REITs may use different methodologies for calculating Portfolio NOI and Same Center NOI, and accordingly, our Portfolio NOI and Same Center NOI may not be comparable to other REITs.
Portfolio NOI and Same Center NOI should not be considered alternatives to net income (loss) or as an indicator of our financial performance since they do not reflect the entire operations of our portfolio, nor do they reflect the impact of general and administrative expenses, acquisition-related expenses, interest expense, depreciation and amortization costs, other non-property income and losses, the level of capital expenditures and leasing costs necessary to maintain the operating performance of our properties, or trends in development and construction activities which are significant economic costs and activities that could materially impact our results from operations. Because of these limitations, Portfolio NOI and Same Center NOI should not be viewed in isolation or as a substitute for performance measures calculated in accordance with GAAP. We compensate for these limitations by relying primarily on our GAAP results and using Portfolio NOI and Same Center NOI only as supplemental measures.
60
Below is a reconciliation of net income to Portfolio NOI and Same Center NOI for the consolidated portfolio (in thousands):
Three months ended | Nine months ended | |||||||||||||||||||||||||||||||||||||
| September 30, | September 30, | |||||||||||||||||||||||||||||||||||||
| 2024 | 2023 | 2024 | 2023 | |||||||||||||||||||||||||||||||||||
| Net income | $ | 25,930 | $ | 28,877 | $ | 75,151 | $ | 79,037 | ||||||||||||||||||||||||||||||
| Adjusted to exclude: | ||||||||||||||||||||||||||||||||||||||
| Equity in earnings of unconsolidated joint ventures | (2,312) | (2,389) | (7,803) | (6,030) | ||||||||||||||||||||||||||||||||||
| Interest expense | 15,493 | 11,688 | 45,546 | 35,997 | ||||||||||||||||||||||||||||||||||
| Other (income) expense | 52 | (1,899) | (755) | (7,023) | ||||||||||||||||||||||||||||||||||
| Depreciation and amortization | 35,376 | 25,374 | 103,410 | 76,656 | ||||||||||||||||||||||||||||||||||
Other non-property income | (199) | (306) | (1,000) | (1,327) | ||||||||||||||||||||||||||||||||||
| Corporate general and administrative expenses | 18,231 | 18,950 | 56,556 | 54,674 | ||||||||||||||||||||||||||||||||||
Non-cash adjustments (1) | (214) | 670 | 28 | 1,971 | ||||||||||||||||||||||||||||||||||
| Lease termination fees | (335) | (392) | (875) | (400) | ||||||||||||||||||||||||||||||||||
| Portfolio NOI - Consolidated | 92,022 | 80,573 | 270,258 | 233,555 | ||||||||||||||||||||||||||||||||||
Non-same center NOI - Consolidated | (7,702) | (90) | (22,978) | (50) | ||||||||||||||||||||||||||||||||||
Same Center NOI - Consolidated (2) | $ | 84,320 | $ | 80,483 | $ | 247,280 | $ | 233,505 | ||||||||||||||||||||||||||||||
(1)Non-cash items include straight-line rent, above and below market rent amortization, straight-line rent expense on land leases and gains or losses on outparcel sales, as applicable.
(2)Centers excluded from Same Center NOI Cash Basis:
| Center | Date | Event | |||||||||
| Nashville, TN | October 2023 | New Development | |||||||||
| Asheville, NC | November 2023 | Acquired | |||||||||
| Huntsville, AL | November 2023 | Acquired | |||||||||
61
Adjusted EBITDA, EBITDAre and Adjusted EBITDAre
We present Earnings Before Interest, Taxes, Depreciation and Amortization (“EBITDA”) as adjusted for items described below (“Adjusted EBITDA”), EBITDA for Real Estate (“EBITDAre”) and Adjusted EBITDAre, all non-GAAP measures, as supplemental measures of our operating performance. Each of these measures is defined as follows:
We define Adjusted EBITDA as net income (loss) available to the Company’s common shareholders computed in accordance with GAAP before net interest expense, income taxes (if applicable), depreciation and amortization, gains and losses on sale of operating properties, joint venture properties, outparcels and other assets, impairment write-downs of depreciated property and of investment in unconsolidated joint ventures caused by a decrease in value of depreciated property in the affiliate, compensation related to voluntary retirement plan and other executive officer severance, certain executive departure-related adjustments, gain on sale of non-real estate asset, casualty gains and losses, gains and losses on early extinguishment of debt, net and other items that we do not consider indicative of the Company's ongoing operating performance.
We determine EBITDAre based on the definition set forth by Nareit, which is defined as net income (loss) available to the Company’s common shareholders computed in accordance with GAAP before net interest expense, income taxes (if applicable), depreciation and amortization, gains and losses on sale of operating properties, gains and losses on change of control and impairment write-downs of depreciated property and of investment in unconsolidated joint ventures caused by a decrease in value of depreciated property in the affiliate and after adjustments to reflect our share of the EBITDAre of unconsolidated joint ventures.
Adjusted EBITDAre is defined as EBITDAre excluding gains and losses on early extinguishment of debt, net, casualty gains and losses, compensation related to voluntary retirement plan and other executive officer severance, gain on sale of non-real estate asset, gains and losses on sale of outparcels, and other items that that we do not consider indicative of the Company's ongoing operating performance.
We present Adjusted EBITDA, EBITDAre and Adjusted EBITDAre as we believe they are useful for investors, creditors and rating agencies as they provide additional performance measures that are independent of a Company’s existing capital structure to facilitate the evaluation and comparison of the Company’s operating performance to other REITs and provide a more consistent metric for comparing the operating performance of the Company’s real estate between periods.
Adjusted EBITDA, EBITDAre and Adjusted EBITDAre have significant limitations as analytical tools, including:
•They do not reflect our net interest expense;
•They do not reflect gains or losses on sales of operating properties or impairment write-downs of depreciated property and of investment in unconsolidated joint ventures caused by a decrease in value of depreciated property in the affiliate;
•Adjusted EBITDA and Adjusted EBITDAre do not reflect gains and losses on extinguishment of debt and other items that may affect operations; and
•Other companies in our industry may calculate these measures differently than we do, limiting its usefulness as a comparative measure.
Because of these limitations, Adjusted EBITDA, EBITDAre and Adjusted EBITDAre should not be considered in isolation or as a substitute for performance measures calculated in accordance with GAAP. We compensate for these limitations by relying primarily on our GAAP results and using Adjusted EBITDA, EBITDAre and Adjusted EBITDAre only as supplemental measures.
62
Below is a reconciliation of Net Income to Adjusted EBITDA (in thousands):
| Three months ended | Nine months ended | |||||||||||||||||||||||||||||||||||||
| September 30, | September 30, | |||||||||||||||||||||||||||||||||||||
| 2024 | 2023 | 2024 | 2023 | |||||||||||||||||||||||||||||||||||
| Net income | $ | 25,930 | $ | 28,877 | $ | 75,151 | $ | 79,037 | ||||||||||||||||||||||||||||||
| Adjusted to exclude: | ||||||||||||||||||||||||||||||||||||||
| Interest expense, net | 15,513 | 9,283 | 45,108 | 28,584 | ||||||||||||||||||||||||||||||||||
| Income tax expense (benefit) | — | 4 | (248) | (32) | ||||||||||||||||||||||||||||||||||
| Depreciation and amortization | 35,376 | 25,374 | 103,410 | 76,656 | ||||||||||||||||||||||||||||||||||
Executive departure-related adjustments (1) | — | — | 1,554 | (806) | ||||||||||||||||||||||||||||||||||
| Adjusted EBITDA | $ | 76,819 | $ | 63,538 | $ | 224,975 | $ | 183,439 | ||||||||||||||||||||||||||||||
Below is a reconciliation of Net Income to EBITDAre and Adjusted EBITDAre (in thousands):
| Three months ended | Nine months ended | |||||||||||||||||||||||||||||||||||||
| September 30, | September 30, | |||||||||||||||||||||||||||||||||||||
| 2024 | 2023 | 2024 | 2023 | |||||||||||||||||||||||||||||||||||
| Net income | $ | 25,930 | $ | 28,877 | $ | 75,151 | $ | 79,037 | ||||||||||||||||||||||||||||||
| Adjusted to exclude: | ||||||||||||||||||||||||||||||||||||||
| Interest expense, net | 15,513 | 9,283 | 45,108 | 28,584 | ||||||||||||||||||||||||||||||||||
| Income tax expense (benefit) | — | 4 | (248) | (32) | ||||||||||||||||||||||||||||||||||
| Depreciation and amortization | 35,376 | 25,374 | 103,410 | 76,656 | ||||||||||||||||||||||||||||||||||
| Pro-rata share of interest expense, net - unconsolidated joint ventures | 2,186 | 2,224 | 6,539 | 6,550 | ||||||||||||||||||||||||||||||||||
| Pro-rata share of depreciation and amortization - unconsolidated joint ventures | 2,850 | 2,608 | 7,450 | 7,893 | ||||||||||||||||||||||||||||||||||
| EBITDAre | $ | 81,855 | $ | 68,370 | $ | 237,410 | $ | 198,688 | ||||||||||||||||||||||||||||||
Executive departure-related adjustments (1) | — | — | 1,554 | (806) | ||||||||||||||||||||||||||||||||||
| Adjusted EBITDAre | $ | 81,855 | $ | 68,370 | $ | 238,964 | $ | 197,882 | ||||||||||||||||||||||||||||||
(1)For the 2024 period, represents executive severance costs and for the 2023 period, represents the reversal of previously expensed compensation related to a voluntary executive departure.
63
ECONOMIC CONDITIONS AND OUTLOOK
We are closely monitoring the impact of the overall macroeconomic environment on all aspects of our business and geographies, including how it will impact our tenants and business partners, along with continuing to monitor retail challenges such as supply chain and labor issues, inflationary pressures and rising interest rates. While we believe many of these retailers are proactively navigating this situation, the ultimate impact of interest rates, inflation, labor and supply chain issues and overall macroeconomic environment is unknown.
A portion of our rental revenues are derived from rents that directly depend on the sales volume of certain tenants. Accordingly, declines in these tenants’ sales would reduce the income produced by our properties. If the sales or profitability of our retail tenants decline sufficiently, whether due to a change in consumer preferences, health concerns, legislative changes that increase the cost of their operations or otherwise, such tenants may be unable to pay their existing rents as such rents would represent a higher percentage of their sales.
In addition, certain of our lease agreements include co-tenancy and/or sales-based provisions that may allow a tenant to pay reduced rent and/or terminate a lease prior to its natural expiration if we fail to maintain certain occupancy levels or retain specified named tenants, or if the tenant does not achieve certain specified sales targets. If our occupancy declines, certain centers may fall below the minimum co-tenancy thresholds and could trigger many tenants' contractual ability to pay reduced rents, which in turn may negatively impact our results of operations.
Due to the relatively short-term nature of our tenants’ leases, a significant portion of the leases in our portfolio come up for renewal each year. During 2024, approximately 2.6 million square feet, or 19% of the total portfolio, including our share of unconsolidated joint ventures, will come up for renewal. For the total portfolio, including the Company’s pro rata share of unconsolidated joint ventures, as of September 30, 2024, we had lease renewals executed or in process for 72.5% of the space scheduled to expire during 2024 compared to 88.0% of the space scheduled to expire during 2023 that was executed or in process as of September 30, 2023.
The majority of our leases contain provisions designed to mitigate the impact of inflation. Such provisions include clauses for the escalation of base rent and clauses enabling us to receive percentage rentals based on tenants’ gross sales (above predetermined levels) which generally increase as prices rise. A component of most leases includes a pro-rata share or escalating fixed contributions by the tenant for property operating expenses, including common area maintenance, real estate taxes, insurance and advertising and promotion, thereby reducing exposure to increases in costs and operating expenses resulting from inflation.
Our centers typically include well-known, national, brand name companies. By maintaining a broad base of well-known tenants and a geographically diverse portfolio of properties located across the United States, we believe we reduce our operating and leasing risks. As of September 30, 2024, no one tenant (including affiliates) accounted for more than 8% of our aggregate square feet or 6% of our aggregate rental revenues.
We believe retail real estate will continue to be a profitable and fundamental distribution channel for many brands and retailers. While we continue to attract and retain additional tenants, if we were unable to successfully renew or re-lease a significant amount of this space on favorable economic terms or in a timely manner, the loss in rent and our Same Center NOI could be negatively impacted in future periods. Occupancy for our total portfolio, including our share of unconsolidated joint ventures, was 97.4% and 98% as of September 30, 2024 and 2023, respectively.
Item 3. Quantitative and Qualitative Disclosures about Market Risk
Market Risk
We are exposed to various market risks, including changes in interest rates. Market risk is the potential loss arising from adverse changes in market rates and prices, such as interest rates.
64
Interest Rate Risk
We may periodically enter into certain interest rate protection and interest rate swap agreements to effectively convert existing floating rate debt to a fixed rate basis. We do not enter into derivatives or other financial instruments for trading or speculative purposes. As of September 30, 2024 we have interest rate swap agreements in effect to fix the interest rates on outstanding debt with notional amounts totaling $325.0 million. Over the course of 2023, we entered into these interest rate swap agreements that became effective on February 1, 2024 to replace $300.0 million of expiring interest rate swaps, which had an average fixed pay rate of 0.40%, as part of our interest rate risk management strategy. The current derivatives have an average fixed pay rate of 3.90% and end at various dates from February 1, 2026 to January 1, 2027. See Note 6 to the consolidated financial statements for additional details related to our outstanding derivatives.
As of September 30, 2024, 4% of our outstanding consolidated debt, excluding the amount of variable rate debt with interest rate protection agreements in place, had variable interest rates and therefore was subject to market fluctuations. A change in the SOFR index of 100 basis points would result in an increase or decrease of approximately $517,000 in interest expense on an annual basis.
The interest rate spreads associated with our unsecured lines of credit and our unsecured term loan are based on our three investment grade credit ratings. As of September 30, 2024, there were no outstanding balances under our unsecured lines of credit. An increase in our credit rating would provide a decrease in interest expense. If downgrades to our credit ratings occur, interest expense could increase depending upon the level of downgrade.
The information presented herein is merely an estimate and has limited predictive value. As a result, the ultimate effect upon our operating results of interest rate fluctuations will depend on the interest rate exposures that arise during the period, our hedging strategies at that time and future changes in the level of interest rates.
The estimated fair value and recorded value of our debt consisting of senior unsecured notes, unsecured term loans, secured mortgages and unsecured lines of credit were as follows (in thousands):
| September 30, 2024 | December 31, 2023 | |||||||||||||
| Fair value of debt | $ | 1,363,199 | $ | 1,319,700 | ||||||||||
| Recorded value of debt | $ | 1,424,393 | $ | 1,439,203 | ||||||||||
A 100 basis point increase from prevailing interest rates at September 30, 2024 and December 31, 2023 would result in a decrease in fair value of total consolidated debt of approximately $35.2 million and $40.1 million, respectively. Refer to Note 7 to the consolidated financial statements for a description of our methodology in calculating the estimated fair value of debt. Considerable judgment is necessary to develop estimated fair values of financial instruments. Accordingly, the estimates presented herein are not necessarily indicative of the amounts we could realize on the disposition of the financial instruments.
Foreign Currency Risk
We are also exposed to foreign currency risk on investments in centers that are located in Canada. Our currency exposure is concentrated in the Canadian Dollar. To mitigate some of the risk related to changes in foreign currency, cash flows received from our Canadian joint ventures are either reinvested to fund ongoing Canadian development activities, if applicable, or converted to US dollars and utilized to repay amounts outstanding under our unsecured lines of credit, if any. Accordingly, cash held in Canadian Dollars at any point in time is insignificant. We generally do not hedge currency translation exposures.
65
Item 4. Controls and Procedures
Tanger Inc. Controls and Procedures
The President and Chief Executive Officer, Stephen J. Yalof (Principal Executive Officer), and Executive Vice President, Chief Financial Officer and Chief Investment Officer, Michael J. Bilerman (Principal Financial Officer), evaluated the effectiveness of the Company’s disclosure controls and procedures as defined in Exchange Act Rules 13a-15(e) and 15d-15(e) and concluded that, as of September 30, 2024, the Company’s disclosure controls and procedures were effective. There were no changes to the Company’s internal control over financial reporting during the quarter ended September 30, 2024, that materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.
Tanger Properties Limited Partnership Controls and Procedures
The President and Chief Executive Officer, Stephen J. Yalof (Principal Executive Officer), and Executive Vice President, Chief Financial Officer and Chief Investment Officer, Michael J. Bilerman (Principal Financial Officer), evaluated the effectiveness of the Operating Partnership's disclosure controls and procedures as defined in Rule 13a-15(e) and 15d-15(e) and concluded that, as of September 30, 2024, the Operating Partnership's disclosure controls and procedures were effective. There were no changes to the Operating Partnership’s internal control over financial reporting during the quarter ended September 30, 2024, that materially affected, or are reasonably likely to materially affect, the Operating Partnership’s internal control over financial reporting.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
The Company and the Operating Partnership are, from time to time, engaged in a variety of legal proceedings arising in the normal course of business. Although the results of these legal proceedings cannot be predicted with certainty, management believes that the final outcome of such proceedings will not have a material adverse effect on our results of operations or financial condition.
Item 1A. Risk Factors
There have been no material changes from the risk factors disclosed in the "Risk Factors" section of our Annual Report on Form 10-K for the year ended December 31, 2023.
66
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
(a) None.
(b) None.
(c) Issuer Purchases of Equity Securities
In May 2023, the Board authorized the repurchase of up to $100.0 million of the Company’s outstanding common shares through May 31, 2025, replacing the previously authorized plan to repurchase up to $80.0 million of the Company’s outstanding common shares through May 31, 2023.
Repurchases of common shares may be made from time to time through open market, privately-negotiated, structured or derivative transactions (including accelerated share repurchase transactions), or other methods of acquiring shares. The Company intends to structure open market purchases to occur within pricing and volume requirements of Rule 10b-18. The Company may, from time to time, enter into Rule 10b5-1 plans to facilitate the repurchase of its common shares under this authorization. The Company did not repurchase any common shares during the three months ended September 30, 2024. The remaining amount authorized to be repurchased under the program as of September 30, 2024 was approximately $100.0 million of common shares.
| Period | Total number of shares purchased | Average price paid per share | Total number of shares purchased as part of publicly announced plans or programs | Approximate dollar value of shares that may yet be purchased under the plans or programs (in millions) | ||||||||||||||||||||||
| July 1, 2024 to July 31, 2024 | — | $ | — | — | $ | 100.0 | ||||||||||||||||||||
| August 1, 2024 to August 31, 2024 | — | — | — | 100.0 | ||||||||||||||||||||||
| September 1, 2024 to September 30, 2024 | — | — | — | 100.0 | ||||||||||||||||||||||
| Total | — | $ | — | — | $ | 100.0 | ||||||||||||||||||||
Item 3. Defaults Upon Senior Securities
None.
Item 4. Mine Safety Disclosures
None
Item 5. Other Information
During the three months ended September 30, 2024, none of the Company's directors or officers, as defined in Section 16 of the Securities Exchange Act of 1934, adopted terminated
67
Item 6. Exhibits
| Exhibit Number | Exhibit Descriptions | |||||||
| 31.1* | ||||||||
| 31.2* | ||||||||
| 31.3* | ||||||||
| 31.4* | ||||||||
| 32.1** | ||||||||
| 32.2** | ||||||||
| 32.3** | ||||||||
| 32.4** | ||||||||
| 101.INS* | Inline XBRL Instance Document - the Instance Document does not appear in the interactive data file because its XBRL tags are embedded within the Inline XBRL document. | |||||||
| 101.SCH* | Inline XBRL Taxonomy Extension Schema Document | |||||||
| 101.CAL* | Inline XBRL Taxonomy Extension Calculation Linkbase Document | |||||||
| 101.LAB* | Inline XBRL Taxonomy Extension Label Linkbase Document | |||||||
| 101.PRE* | Inline XBRL Taxonomy Extension Presentation Linkbase Document | |||||||
| 101.DEF* | Inline XBRL Taxonomy Extension Definition Linkbase Document | |||||||
| 104* | Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101) | |||||||
| * Filed herewith. | ||||||||
| ** Furnished herewith. | ||||||||
68
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
DATE: November 7, 2024
| TANGER INC. | |||||
| By: | /s/ Michael J. Bilerman | ||||
| Michael J. Bilerman | |||||
| Executive Vice President, Chief Financial Officer and Chief Investment Officer (Principal Financial Officer) | |||||
| TANGER PROPERTIES LIMITED PARTNERSHIP | |||||
| By: Tanger Inc., its sole general partner | |||||
| By: | /s/ Michael J. Bilerman | ||||
| Michael J. Bilerman | |||||
| Executive Vice President, Chief Financial Officer and Chief Investment Officer (Principal Financial Officer) | |||||
69
Exhibit 31.1
CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER
PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Stephen J. Yalof, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Tanger Inc. for the period ended September 30, 2024;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
5. The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
Date: November 7, 2024
___/s/ Stephen J. Yalof_______________
Stephen J. Yalof
President and Chief Executive Officer
(Principal Executive Officer)
Tanger Inc.
Exhibit 31.2
CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER
PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Michael J. Bilerman, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Tanger Inc. for the period ended September 30, 2024;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
5. The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
Date: November 7, 2024
_/s/ Michael J. Bilerman_____
Michael J. Bilerman
Executive Vice President, Chief Financial Officer and Chief Investment Officer
Tanger Inc.
Exhibit 31.3
CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER
PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Stephen J. Yalof, certify that:
| 1 | I have reviewed this quarterly report on Form 10-Q of Tanger Properties Limited Partnership for the period ended September 30, 2024; | ||||||||||
| 2 | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; | ||||||||||
| 3 | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; | ||||||||||
| 4 | The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: | ||||||||||
| (a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; | ||||||||||
| (b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; | ||||||||||
| (c) | Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and | ||||||||||
| (d) | Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and | ||||||||||
| 5 | The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): | ||||||||||
| (a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and | ||||||||||
| (b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. | ||||||||||
| Date: | November 7, 2024 | ||||||||||
| /s/ Stephen J. Yalof | |||||||||||
| Stephen J. Yalof | |||||||||||
| President and Chief Executive Officer | |||||||||||
| Tanger Inc., sole general partner of Tanger Properties Limited Partnership | |||||||||||
Exhibit 31.4
CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER
PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Michael J. Bilerman, certify that:
| 1 | I have reviewed this quarterly report on Form 10-Q of Tanger Properties Limited Partnership for the period ended September 30, 2024; | ||||||||||
| 2 | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; | ||||||||||
| 3 | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; | ||||||||||
| 4 | The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: | ||||||||||
| (a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; | ||||||||||
| (b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; | ||||||||||
| (c) | Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and | ||||||||||
| (d) | Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and | ||||||||||
| 5 | The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): | ||||||||||
| (a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and | ||||||||||
| (b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. | ||||||||||
| Date: | November 7, 2024 | ||||||||||
| /s/ Michael J. Bilerman | |||||||||||
| Michael J. Bilerman | |||||||||||
| Executive Vice President, Chief Financial Officer and Chief Investment Officer | |||||||||||
| Tanger Inc., sole general partner of Tanger Properties Limited Partnership | |||||||||||
Exhibit 32.1
CERTIFICATION PURSUANT TO 18 U.S.C.
SECTION 1350,
AS ADOPTED PURSUANT TO SECTION 906 OF THE
SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report on Form 10-Q of Tanger Inc. (the "Company") for the period ended September 30, 2024 (the "Report"), the undersigned, principal executive officer of the Company, hereby certifies, to such officer's knowledge, that:
(i) the Report fully complies with the requirements of Section 13(a) or Section 15(d), as applicable, of the Securities Exchange Act of 1934, as amended; and
(ii) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
| Date: | November 7, 2024 | /s/ Stephen J. Yalof | ||||||
Stephen J. Yalof President and Chief Executive Officer Tanger Inc. | ||||||||
Exhibit 32.2
CERTIFICATION PURSUANT TO 18 U.S.C.
SECTION 1350,
AS ADOPTED PURSUANT TO SECTION 906 OF THE
SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report on Form 10-Q of Tanger Inc. (the "Company") for the period ended September 30, 2024 (the "Report"), the undersigned, chief financial officer of the Company, hereby certifies, to such officer's knowledge, that:
(i) the Report fully complies with the requirements of Section 13(a) or Section 15(d), as applicable, of the Securities Exchange Act of 1934, as amended; and
(ii) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
| Date: | November 7, 2024 | /s/ Michael J. Bilerman | ||||||
Michael J. Bilerman Executive Vice President, Chief Financial Officer and Chief Investment Officer Tanger Inc. | ||||||||
Exhibit 32.3
CERTIFICATION PURSUANT TO 18 U.S.C.
SECTION 1350,
AS ADOPTED PURSUANT TO SECTION 906 OF THE
SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report on Form 10-Q of Tanger Properties Limited Partnership (the "Operating Partnership") for the period ended September 30, 2024 (the "Report"), the undersigned, principal executive officer of the Operating Partnership's general partner, hereby certifies, to such officer's knowledge, that:
(i) the Report fully complies with the requirements of Section 13(a) or Section 15(d), as applicable, of the Securities Exchange Act of 1934, as amended; and
(ii) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Operating Partnership.
| Date: | November 7, 2024 | /s/ Stephen J. Yalof | ||||||
| Stephen J. Yalof | ||||||||
| President and Chief Executive Officer | ||||||||
| Tanger Inc., sole general partner of the Operating Partnership | ||||||||
Exhibit 32.4
CERTIFICATION PURSUANT TO 18 U.S.C.
SECTION 1350,
AS ADOPTED PURSUANT TO SECTION 906 OF THE
SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report on Form 10-Q of Tanger Properties Limited Partnership (the "Operating Partnership") for the period ended September 30, 2024 (the "Report"), the undersigned, chief financial officer of the Operating Partnership's general partner, hereby certifies, to such officer's knowledge, that:
(i)the Report fully complies with the requirements of Section 13(a) or Section 15(d), as applicable, of the Securities Exchange Act of 1934, as amended; and
(ii)the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Operating Partnership.
| Date: | November 7, 2024 | /s/ Michael J. Bilerman | ||||||
| Michael J. Bilerman | ||||||||
| Executive Vice President, Chief Financial Officer and Chief Investment Officer | ||||||||
| Tanger Inc., sole general partner of the Operating Partnership | ||||||||