<PAGE>
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 1996
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 NO. 33-99736-01
TANGER PROPERTIES LIMITED PARTNERSHIP
(Exact name of Registrant as specified in its Charter)
NORTH CAROLINA 56-1822494
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
1400 WEST NORTHWOOD STREET, GREENSBORO, NORTH CAROLINA 27408
(Address of principal executive offices)
(Zip code)
(910) 274-1666
(Registrant's telephone number, including area code)
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
<PAGE>
TANGER PROPERTIES LIMITED PARTNERSHIP
INDEX
PART I. FINANCIAL INFORMATION
<TABLE>
<CAPTION>
Page Number
Item 1. Financial Statements (Unaudited)
Statements of Operations
<S> <C>
For the three and nine months ended September 30, 1996 and 1995 3
Balance Sheets
As of September 30, 1996 and December 31, 1995 4
Statements of Cash Flows
For the nine months ended September 30, 1996 and 1995 5
Notes to Financial Statements 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 7
PART II. OTHER INFORMATION
Item 1. Legal proceedings 14
Item 6. Exhibits and Reports on Form 8-K 14
Signatures 15
</TABLE>
2
<PAGE>
TANGER PROPERTIES LIMITED PARTNERSHIP
STATEMENTS OF OPERATIONS
(Unaudited)
(In thousands, except per unit data)
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
1996 1995 1996 1995
------------- -------------- ----- ------------- -------------
<S> <C> <C> <C> <C>
REVENUES
Base rentals $12,779 $11,575 $37,497 $33,875
Percentage rentals 566 569 1,164 1,298
Expense reimbursements 5,901 5,377 16,446 15,034
Other income 207 247 658 556
Total revenues 19,453 17,768 55,765 50,763
------------- -------------- ----- ------------- -------------
EXPENSES
Operating and maintenance 6,372 6,138 17,737 16,898
General and administrative 1,365 1,216 4,036 3,709
Mortgage interest 3,614 2,925 10,282 8,375
Depreciation and amortization 4,178 3,642 12,285 10,665
Total expenses 15,529 13,921 44,340 39,647
------------- -------------- ----- ------------- -------------
INCOME BEFORE GAIN ON SALE OF LAND AND
EXTRAORDINARY ITEM 3,924 3,847 11,425 11,116
Gain on sale of land 159 --- 159 ---
------------- -------------- ----- ------------- -------------
INCOME BEFORE EXTRAORDINARY ITEM 4,083 3,847 11,584 11,116
Extraordinary item - Loss on early extinguishment of
debt --- --- (831) ---
NET INCOME $4,083 $3,847 $10,753 $11,116
============= ============== ===== ============= =============
PER UNIT OUTSTANDING:
Income before extraordinary item $.37 $.34 $1.03 $.98
Net income $.37 $.34 $.94 $.98
============= ============== ===== ============= =============
DISTRIBUTIONS PER UNIT $.52 $.50 $1.54 $1.46
============= ============== ===== ============= =============
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
3
<PAGE>
TANGER PROPERTIES LIMITED PARTNERSHIP
BALANCE SHEETS
(Unaudited)
(In thousands)
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1996 1995
------------------- -----------------
<S> <C> <C>
ASSETS
Rental property, net $304,918 $294,423
Cash and cash equivalents 2,860 5,113
Tenant receivables, net 4,245 5,228
Deferred charges, net 8,208 5,728
Other assets 5,284 4,455
TOTAL ASSETS $325,515 $314,947
=================== =================
LIABILITIES AND PARTNERS' EQUITY
LIABILITIES
Long-term debt $174,101 $156,749
Construction trade payables 6,424 11,305
Accounts payable and accrued expenses 7,902 4,496
TOTAL LIABILITIES 188,427 172,550
------------------- -----------------
Commitments
PARTNERS' EQUITY
General partner 111,227 114,813
Limited partner 25,861 27,584
TOTAL PARTNERS' EQUITY 137,088 142,397
------------------- -----------------
TOTAL LIABILITIES AND PARTNERS' EQUITY $325,515 $314,947
=================== =================
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
4
<PAGE>
TANGER PROPERTIES LIMITED PARTNERSHIP
STATEMENTS OF CASH FLOWS
(Unaudited)
(In thousands)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
1996 1995
------------- --------------------
<S> <C> <C>
OPERATING ACTIVITIES
Net income $10,753 $11,116
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization 12,285 10,665
Amortization of deferred financing costs 694 702
Loss on early extinguishment of debt 831 ---
Gain on sale of land (159) ---
Straight-line base rent adjustment (946) (1,002)
Compensation under Unit Option Plan 254 253
Increase (decrease) due to changes in:
Tenant receivables 1,929 2,395
Other assets (980) 67
Accounts payable and accrued expenses 3,406 1,538
------------- --------------------
NET CASH PROVIDED BY OPERATING ACTIVITIES 28,067 25,734
------------- --------------------
INVESTING ACTIVITIES
Additions to rental properties (26,815) (32,753)
Additions to deferred lease costs (1,275) (911)
Proceeds on sale of land 174 ---
------------- --------------------
NET CASH USED IN INVESTING ACTIVITIES (27,916) (33,664)
------------- --------------------
FINANCING ACTIVITIES
Distributions to partners (16,316) (15,467)
Proceeds from notes payable 75,000 16,250
Repayments on notes payable (747) (699)
Proceeds from revolving lines of credit 51,026 86,569
Repayments on revolving lines of credit (107,927) (76,745)
Additions to deferred financing costs (3,440) (781)
Proceeds from exercise of unit options --- 14
------------- --------------------
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES (2,404) 9,141
------------- --------------------
Net increase (decrease) in cash and cash equivalents (2,253) 1,211
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 5,113 3,644
------------- --------------------
CASH AND CASH EQUIVALENTS, END OF PERIOD $2,860 $4,855
============= ====================
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED FINANCIAL
STATEMENTS.
5
<PAGE>
TANGER PROPERTIES LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
September 30, 1996
(Unaudited)
1. INTERIM FINANCIAL STATEMENTS
The unaudited financial statements of Tanger Properties Limited
Partnership, (the "Operating Partnership"), have been prepared pursuant
to the Securities and Exchange Commissions' ("SEC") rules and
regulations and should be read in conjunction with the financial
statements and notes thereto of the Operating Partnership's Annual
Report on Form 10-K for the year ended December 31, 1995. Certain
information and note disclosures normally included in financial
statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted pursuant to such rules and
regulations, although management believes that the disclosures are
adequate to make the information presented not misleading.
The accompanying financial statements reflect, in the opinion of
management, all adjustments necessary for a fair presentation of the
interim financial statements. All such adjustments are of a normal and
recurring nature.
2. DEVELOPMENT OF REAL ESTATE
During the first nine months of 1996, the Operating Partnership
substantially completed expansions totalling approximately 181,142
square feet in Gonzales, Louisiana - 29,890 square feet; Williamsburg,
Iowa - 26,187 square feet; Branson, Missouri - 25,000 square feet; San
Marcos, Texas - 29,875 square feet; Locust Grove, Georgia - 34,190
square feet and Commerce, Georgia - 36,000 square feet. In addition,
construction has commenced on the initial phase of one new center in
Riverhead, New York totalling 241,344 square feet.
Construction in progress amounted to $6.3 million and commitments to
complete construction of new developments and additions to existing
properties amounted to approximately $27.3 million at September 30,
1996. Commitments for construction represent only those costs
contractually required to be paid by the Operating Partnership.
Interest costs capitalized during the three months ended September 30,
1996 and 1995 amounted to $278,000 and $126,000, respectively, and
during the nine months ended September 30, 1996 and 1995 amounted to
$734,000 and $287,000, respectively.
3. ACCUMULATED DEPRECIATION
Accumulated depreciation at September 30, 1996 and December 31, 1995 was
$42,935,000 and $31,458,000, respectively.
4. LONG-TERM DEBT
In January 1996, the Operating Partnership established a new $50 million
line of credit maturing in January 1999 with interest payable at LIBOR
plus 1.5%. In March 1996, the Operating Partnership used a portion of
its borrowing capacity under a shelf registration statement by issuing
$75 million of senior, unsecured notes, maturing March 11, 2001, priced
at 99.302% with a coupon rate of 8.75% to yield 8.9626%. The proceeds of
this offering were used to extinguish all revolving lines of credit
which were established prior to January 1996. In April 1996, the
Operating Partnership together with its general partner and majority
owner, Tanger
6
<PAGE>
Factory Outlet Centers, Inc., filed a new registration statement with
the SEC to reestablish the total amount of funds available under the
shelf registration at $200 million. In June 1996, the Operating
Partnership amended an unsecured line of credit, previously established
in April 1996, to total $10 million maturing in January 1998 with
interest payable at prime or LIBOR plus 1.85%. Total borrowings
outstanding under the lines of credit at September 30, 1996 amounted to
$23.6 million.
On October 14, 1996, the Operating Partnership established an additional
unsecured line of credit totalling $15 million maturing in October 1998
with interest payable at LIBOR plus 1.75%.
5. INCOME PER UNIT
Income per unit is computed by dividing income, less applicable
preferred distributions, by the weighted average number of general and
limited partnership units outstanding. Options outstanding are not
included since their inclusion would not be materially dilutive. The
assumed conversion of preferred units to general units as of the
beginning of the year would have been anti-dilutive.
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
1996 1995 1996 1995
------------------ ---------------- ----------------- ----------------
<S> <C> <C> <C> <C>
Applicable preferred distributions $602,000 $692,000 $1,885,000 $2,259,000
Weighted average units 9,436,303 9,208,778 9,404,709 9,065,967
================== ================ ================= ================
</TABLE>
At September 30, 1996 and 1995, the ownership interests of the Operating
Partnership consisted of the following:
<TABLE>
<CAPTION>
September 30, December 31,
1996 1995
------------------ --------------------
<S> <C> <C>
General partnership units 6,522,863 6,286,581
Limited partnership units 3,033,305 3,033,305
Preferred partnership units, held by the general partner 115,259 141,484
================== ====================
</TABLE>
6. SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING ACTIVITIES
The Operating Partnership purchases capital equipment and incurs costs
relating to construction of new facilities, including tenant finishing
allowances. Expenditures included in construction trade payables as of
September 30, 1996 and 1995 amounted to $6,424,000 and $10,188,000,
respectively.
7. RECLASSIFICATIONS
Certain prior year amounts have been reclassified to conform with the
current year presentation.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
OVERVIEW
The following discussion and analysis of the financial condition and results of
operations should be read in conjunction with the Financial Statements and Notes
thereto. Historical results and percentage relationships set
7
<PAGE>
forth in the Statements of Operations, including trends which might appear, are
not necessarily indicative of future operations.
The discussion of the Operating Partnership's results of operations reported in
the Statements of Operations compares the three and nine months ended September
30, 1996 with the three and nine months ended September 30, 1995. Certain
comparisons between the periods are also made on a percentage basis as well as
on a weighted average gross leasable area ("GLA") basis, a technique which
adjusts for certain increases or decreases in the number of centers and
corresponding square feet related to the development and expansion or
disposition of rental properties.
The Operating Partnership continues to grow principally through the development
of new factory outlet centers and the expansion of existing centers. During the
first nine months of 1996, the Operating Partnership substantially completed
expansions totalling approximately 181,142 square feet in Gonzales, Louisiana -
29,890 square feet; Williamsburg, Iowa - 26,187 square feet; Branson, Missouri -
25,000 square feet; San Marcos, Texas - 29,875 square feet; Locust Grove,
Georgia - 34,190 square feet and Commerce, Georgia - 36,000 square feet. In
addition, construction has commenced on the initial phase of one new center in
Riverhead, New York totalling 241,344 square feet.
A summary of the operating results for three and nine months ended September 30,
1996 and 1995, calculated on a weighted average GLA basis, is presented in the
following table.
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
1996 1995 1996 1995
----------------- -------------- ------ --------------- ----------------
<S> <C> <C> <C> <C>
GLA at end of period 3,718,198 3,320,773 3,718,198 3,320,773
Weighted Average GLA(a) 3,686,000 3,306,844 3,613,931 3,245,675
Outlet centers in operation 27 26 27 26
New centers opened --- --- --- 1
Centers expanded 2 --- 6 1
States operated in at end of period 22 22 22 22
Per square foot
Revenues
Base rent $3.47 $3.50 $10.38 $10.44
Percentage rentals 0.15 0.17 0.32 0.40
Expense reimbursements 1.60 1.63 4.55 4.63
Other income 0.06 0.07 0.18 0.17
Total revenues 5.28 5.37 15.43 15.64
----------------- -------------- ------ --------------- ----------------
Expenses
Operating and maintenance 1.73 1.86 4.91 5.21
General and administrative 0.37 0.37 1.12 1.14
Mortgage interest 0.98 0.88 2.85 2.58
Depreciation and amortization 1.13 1.10 3.40 3.28
Total expenses 4.21 4.21 12.28 12.21
----------------- -------------- ------ --------------- ----------------
Income before gain on sale of land and
extraordinary item $1.07 $1.16 $3.15 $3.43
================= ============== ====== =============== ================
</TABLE>
(a) GLA weighted by months of operations
8
<PAGE>
In October 1995, the Financial Accounting Standards Board issued SFAS #123,
ACCOUNTING FOR STOCK-BASED COMPENSATION, effective for fiscal years beginning
after December 15, 1995, which encourages companies to account for employee
stock options and other stock compensation awards based on their estimated fair
value at the date they are granted. The resulting cost would be recorded as an
expense on the income statement. Alternatively, companies may disclose in the
footnotes the effect on net income and earnings per unit had the Operating
Partnership recognized expense for stock compensation awards based on Statement
123. The Operating Partnership intends to adopt the latter method in the fiscal
year ending December 31, 1996. The disclosure requirements of Statement 123 are
not required in interim reports on Form 10-Q.
RESULTS OF OPERATIONS
COMPARISON OF THE THREE MONTHS ENDED SEPTEMBER 30, 1996 TO THE THREE MONTHS
ENDED SEPTEMBER 30, 1995
Base rentals increased $1.2 million, or 10%, in the 1996 period when compared to
the same period in 1995 primarily as a result of the 12% increase in weighted
average GLA. The increase is related to the effect of a full year's operation of
new centers and expansions opened in 1995. Base rentals per weighted average
GLA, however, decreased 1% from $3.50 per square foot to $3.47 per square foot
primarily as a result of a slightly lower average occupancy rate in the 1996
period when compared to the 1995 period.
Reported tenant sales for centers that were open the three months ended
September 30, 1996 and 1995 increased approximately 1%. Percentage rentals, in
terms of dollars, remained flat when compared to the same period in the prior
year; however, percentage rental per weighted average per GLA decreased $.02 per
square foot from $.17 per square foot to $.15 per square foot. This is primarily
the result of the dilutive effect of the increase in additional square footage
associated with the expansions, since tenant sales at centers in their first
year of operation often do not reach the level of sales on which percentage
rentals are required (the "Breakpoint"), and as a result of escalating
Breakpoints in certain leases renewing at existing centers without comparable
increases in sales.
Expense reimbursements, which represent the contractual recovery from tenants of
certain common area maintenance, operating, property tax, promotional and
management expenses, increased $524,000, or 10%, in the 1996 period as compared
to the same period in 1995 due principally to the related increase in
reimbursable operating and maintenance expenses. Expense reimbursements
expressed as a percentage of operating and maintenance expenses increased from
88% in the 1995 period to 93% in the 1996 period due to contractual increases
and reductions in nonrecoverable operating and maintenance expenses.
Operating and maintenance expenses increased by $234,000, or 4%, in the 1996
period as compared to the 1995 period. On a weighted average GLA basis,
operating and maintenance expenses decreased 7% from $1.86 to $1.73 per square
foot primarily due to a reduction in advertising and promotion expenses,
reflecting the Operating Partnership's use of cost efficient means in
advertising and promoting its centers. The decrease in advertising and promotion
expenses was partially offset by increases in real estate taxes as a result of
reassessments of recently completed properties, particularly the property in
Riverhead, NY.
General and administrative expenses for the current quarter increased by
$149,000. General and administrative expenses, both per weighted average GLA and
as a percent of revenues, remained flat when compared to the same period in the
prior year.
Aggregate interest expense increased $689,000 and $.10 per weighted average GLA
during the 1996 period as compared to the 1995 period. The increase is due to
higher average borrowings outstanding during the period associated with the
growth in GLA and due to a higher average interest rate under the senior
unsecured notes issued in March 1996 when compared with the short term lines of
credit previously utilized. Depreciation and amortization per weighted average
GLA increased 3% from $1.10 per square foot to $1.13 per square foot
9
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primarily due to increases in costs associated with site preparation and
improvements in the layout and design of new centers, increased tenant finishing
allowances included in building and improvements which are depreciated over
shorter lives, as well as the accelerated depreciation of certain tenant
finishing allowances related to tenants who vacated or terminated their lease
prior to the original expiration of the lease term.
The gain on sale of land of $159,000 in the current quarter represents the sale
of an outparcel at an existing factory outlet center.
COMPARISON OF THE NINE MONTHS ENDED SEPTEMBER 30, 1996 TO THE NINE MONTHS ENDED
SEPTEMBER 30, 1995
Base rentals increased $3.6 million, or 11%, in the 1996 period when compared to
the same period in 1995 primarily as a result of the 11% increase in weighted
average GLA. The increase is related to the effect of a full year's operation of
new centers and expansions opened in 1995. Base rentals per weighted average GLA
decreased less than 1% from $10.44 per square foot to $10.38 per square foot
reflecting the slightly lower average occupancy rate during the 1996 period when
compared to the 1995 period.
Percentage rentals decreased $134,000, or 10%, in the 1996 period compared to
the 1995 period and percentage rentals per weighted average GLA declined from
$.40 per square foot to $.32 per square foot primarily as a result of the
dilutive effect of the increase in additional square footage associated with the
new centers and expansions, since tenant sales at centers in their first year of
operation often do not reach the Breakpoint, and as a result of escalating
Breakpoints in certain leases renewing at existing centers without comparable
increases in sales. Reported tenant sales for centers that were open the nine
months ended September 30, 1996 and 1995 increased approximately 1.2%.
Expense reimbursements, increased $1.4 million, or 9%, in the 1996 period as
compared to the same period in 1995 due principally to the related increase in
reimbursable operating and maintenance expenses associated with the growth in
GLA. Expense reimbursements expressed as a percentage of operating and
maintenance expenses increased from 89% in the 1995 period to 93% in the 1996
period due to contractual increases and reductions in nonrecoverable operating
and maintenance expenses.
Operating and maintenance expenses increased by $839,000, or 5%, in the 1996
period as compared to the 1995 period. On a weighted average GLA basis,
operating and maintenance expenses decreased 6% from $5.21 to $4.91 per square
foot primarily due to a reduction in advertising and promotion expenses
reflecting the Operating Partnership's use of cost efficient means in
advertising and promoting its centers. The decrease was partially offset by
increases in real estate taxes as a result of reassessments of recently
completed properties, particularly the property in Riverhead, NY, as well as
increases in maintenance costs due to the inclement weather conditions in the
first quarter of 1996.
General and administrative expenses during the first nine months increased by
$327,000 but decreased $.02, or 2%, per weighted average GLA. General and
administrative expenses, as a percent of revenues, remained flat for the first
nine months of the 1996 period compared to the 1995 period.
Aggregate interest expense increased $1.9 million and $.27 per weighted average
GLA during the 1996 period as compared to the 1995 period. The increase is due
to higher average borrowings outstanding during the period associated with the
growth in GLA and due to a higher average interest rate under the senior
unsecured notes issued in March 1996 when compared with the short term lines of
credit previously utilized. Depreciation and amortization per weighted average
GLA increased 3% from $3.29 per square foot to $3.40 per square foot primarily
due to increases in costs associated with site preparation and improvements in
the layout and design of new centers, increased tenant finishing allowances
included in building and improvements which are depreciated over shorter lives
as well as the accelerated depreciation of certain tenant finishing allowances
related to tenants who vacated or terminated their lease prior to the original
expiration of the lease term.
10
<PAGE>
The gain on sale of land of $159,000 in the third quarter represents the sale of
an outparcel at an existing factory outlet center. The extraordinary item
represents the first quarter write-off of the unamortized deferred financing
costs related to the lines of credit which were extinguished using the proceeds
from the Operating Partnership's $75 million senior unsecured notes issued in
March 1996.
LIQUIDITY AND CAPITAL RESOURCES
Net cash provided by operating activities was $28.1 and $25.7 million for the
nine months ended September 30, 1996 and 1995, respectively. The increase of
$2.4 million was primarily due to the incremental operating income associated
with new and expanded centers. Net cash used in investing activities decreased
$5.7 million during the first nine months of 1996 compared to the first nine
months of 1995 due to decreased construction activity. Net cash from financing
activities decreased $11.5 million as less debt was required to fund the current
construction activity.
Management believes, based upon its discussions with present and prospective
tenants, that many companies, including new entrants into the factory outlet
business, desire to open a significant number of new factory outlet stores in
the next several years, particularly where there are successful factory outlet
centers in which such companies do not have a significant presence or where
there are few factory outlet centers. One new center (expected to begin opening
in Spring 1997) totalling 241,344 square feet is currently under construction
(See "General Overview"). Commitments for construction of this project (which
represent only those costs contractually required to be paid by the Operating
Partnership) amounted to $27.3 million at September 30, 1996. The Operating
Partnership also is in the process of developing plans for additional expansions
and new centers for completion in 1997 and beyond and will consider acquisitions
that are suitable for its portfolio. However, there can be no assurance that any
of these anticipated or planned developments or expansions will be started or
completed as scheduled, or that any acquisitions will be made.
Management intends to continually have access to the capital resources necessary
to expand and develop its business and, accordingly, may seek to obtain
additional funds through equity offerings or debt financing. The Operating
Partnership together with its general partner and majority owner, Tanger Factory
Outlet Centers, Inc., have a shelf registration with the SEC providing for the
issuance of up to $100 million in additional equity securities and $100 million
in additional debt securities. During March 1996, the Operating Partnership used
a portion of its borrowing capacity under the shelf registration to issue $75
million of senior, unsecured notes, maturing March 11, 2001, priced at 99.302%
with a coupon rate of 8.75% to yield 8.926%. The proceeds of this offering were
used to extinguish the Operating Partnership's revolving lines of credit
existing prior to January 1996. In April 1996, the Operating Partnership and the
general partner filed a new registration statement with the SEC to reestablish
the total amount of funds available under the shelf registration at $200
million.
Also during the first nine months, the Operating Partnership established a new
$50 million line of credit, with interest payable at LIBOR plus 1.5% and a $10
million unsecured line of credit with interest payable at prime or LIBOR plus
1.85%. In October 1996, the Operating Partnership established an additional
unsecured line of credit totalling $15 million with interest payable at LIBOR
plus 1.75%. Amounts available under these lines of credit, based on debt
outstanding at September 30, 1996, totalled $51.4 million. When considered with
the Operating Partnership's existing interest rate protection agreement covering
$10 million of variable rate debt, the Operating Partnership's exposure to
interest rate risk on variable rate borrowings was limited to $13.6 million on
debt outstanding at September 30, 1996. Based on existing credit facilities,
ongoing negotiations with certain financial institutions and funds available
under the shelf registration, management believes that the Operating Partnership
has access to the necessary financing to fund the planned capital expenditures
during 1996 and 1997.
The Operating Partnership anticipates that adequate cash will be available to
fund its operating and administrative expenses, regular debt service
obligations, and the payment of distributions in accordance with the
requirements
11
<PAGE>
of a real estate investment trust ("REIT") in both the short and long term.
Although the Operating Partnership receives most of its rental payments on a
monthly basis, distributions are made quarterly. Amounts accumulated for
distribution are invested in short-term money market or other suitable
instruments. Certain of the Operating Partnership's debt agreements limit the
payment of distributions such that distributions will not exceed 95% of funds
from operations ("FFO"), as defined in the agreements, on a cumulative basis.
On October 11, 1996, the Board of Directors of the general partner declared a
$.52 cash distribution per unit to the general and limited partnership interests
payable on November 15, 1996 to each unitholder of record on October 25, 1996.
The Board of Directors of the general partner also declared a cash distribution
of $.4685 per preferred partnership unit payable on November 15, 1996 to each
preferred unitholder of record on October 25, 1996.
FUNDS FROM OPERATIONS
Management believes that to facilitate a clear understanding of the historical
operating results of the Operating Partnership, FFO should be considered in
conjunction with net income as presented in the unaudited financial statements
included elsewhere in this report. Management generally considers FFO to be an
appropriate measure of the performance of an equity REIT. FFO is generally
defined as net income (loss), computed in accordance with generally accepted
accounting principles, before extraordinary item and gains (losses) on sale of
properties, plus depreciation and amortization uniquely significant to real
estate. The Operating Partnership cautions that the calculation of FFO may vary
from entity to entity and as such the presentation of FFO by the Operating
Partnership may not be comparable to other similarly titled measures of other
reporting companies. FFO does not represent net income or cash flow from
operations as defined by generally accepted accounting principles and should not
be considered an alternative to net income as an indication of operating
performance or to cash from operations as a measure of liquidity. FFO is not
necessarily indicative of cash flows available to fund distributions to
unitholders and other cash needs.
In March 1995, the National Association of Real Estate Investment Trusts
("NAREIT") issued an interpretive letter providing guidance as to the use and
intent of its definition of funds from operations. Among other things, the
letter clarified that the amortization of deferred financing costs and
depreciation of assets not uniquely significant to real estate should be
excluded from total depreciation and amortization added back to net income in
calculating funds from operations. All REIT's were encouraged to implement the
recommendations of the letter no later than fiscal periods beginning in 1996.
The Operating Partnership has adopted the new NAREIT definition of funds from
operations beginning January 1, 1996. Below is a calculation of funds from
operations for the three and nine months ended September 30, 1996 and 1995 under
the new current method and under the previous method.
12
<PAGE>
<TABLE>
<CAPTION>
(In thousands, except per unit data)
Current Method Previous Method
------------------------- --------- -----------------------------
THREE MONTHS ENDED SEPTEMBER 30, 1996 1995 1996 1995
----------- ------------- --------- ------------- --------------
<S> <C> <C> <C> <C>
Income before gain on sale of land and
extraordinary item $3,924 $3,847 $3,924 $3,847
Adjusted for:
Depreciation and amortization uniquely significant
to real estate 4,132 3,611 4,132 3,611
Amortization of deferred financing costs 220 276
Other depreciation and amortization 46 31
Straight-line base rent adjustment (239) (294)
Compensation under Unit Option Plan 85 85
Funds from operations $8,056 $7,458 $8,168 $7,556
=========== ============= ========= ============= ==============
Weighted average units outstanding(1) 10,611 10,615 10,611 10,615
Distributions paid per unit(1) $.52 $.50 $.52 $.50
=========== ============= ========= ============= ==============
Current Method Previous Method
------------------------- --------- -----------------------------
NINE MONTHS ENDED SEPTEMBER 30, 1996 1995 1996 1995
----------- ------------- --------- ------------- --------------
Income before gain on sale of land and
extraordinary item $11,425 $11,116 $11,425 $11,116
Adjusted for:
Depreciation and amortization uniquely significant
to real estate 12,171 10,574 12,171 10,574
Amortization of deferred financing costs 694 702
Other depreciation and amortization 114 91
Straight-line base rent adjustment (946) (1,002)
Compensation under Unit Option Plan 254 253
Funds from operations $23,596 $21,690 $23,712 $21,734
=========== ============= ========= ============= ==============
Weighted average units outstanding(1) 10,611 10,594 10,611 10,594
Distributions paid per unit(1) $1.54 $1.46 $1.54 $1.46
=========== ============= ========= ============= ==============
</TABLE>
(1) Assumes conversion of all preferred partnership units to general partnership
units.
CONTINGENCIES
There are no recorded amounts resulting from environmental liabilities as there
are no known material loss contingencies with respect thereto. Future claims for
environmental liabilities are not measurable given the uncertainties surrounding
whether there exists a basis for any such claims to be asserted and, if so,
whether any claims will, in fact, be asserted. Furthermore, no condition is
known to exist that would give rise to a material environmental liability for
site restoration, post-closure and monitoring commitments, or other costs that
may be incurred upon the sale or disposal of a property. Management has no plans
to abandon any of the properties and is unaware of any other material loss
contingencies.
13
<PAGE>
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Neither the general partner nor the Operating Partnership is presently involved
in any material litigation nor, to their knowledge, is any material litigation
threatened against the general partner or the Operating Partnership or its
properties, other than routine litigation arising in the ordinary course of
business and which is expected to be covered by the liability insurance.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
<TABLE>
<CAPTION>
<S> <C>
10.1 Credit Agreement among Tanger Properties Limited Partnership, Tanger Factory Outlet Centers, Inc
and National Westminister Bank, Plc dated January 15, 1996.**
10.1A Amendment No. 1 to Credit Agreement among Tanger Properties Limited Partnership, Tanger
Factory Outlet Centers, Inc and National Westminister Bank, Plc dated February 20, 1996.*
10.2 Form of Senior Indenture.***
10.2A Form of First Supplemental Indenture (to Senior Indenture).***
* Incorporated by reference to the exhibits to the Company's
Quarterly Report on Form 10-Q for the period ended March 31,
1996.
** Incorporated by reference to the Company's Current Report on Form 8-K dated January 23, 1996.
*** Incorporated by reference to the Company's Current Report on Form 8-K dated March 6, 1996.
</TABLE>
(b) Reports on Form 8-K - None
14
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
Registrant has duly caused this Report to be signed on its behalf by the
undersigned thereunto duly authorized.
TANGER PROPERTIES LIMITED PARTNERSHIP
By: Tanger Factory Outlet Centers, Inc.,
its general partner
By: /s/ FRANK C. MARCHISELLO, JR
Frank C. Marchisello, Jr.
Vice President, Chief Financial Officer
DATE: November 8, 1996
15
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> SEP-30-1996
<CASH> 2,860
<SECURITIES> 0
<RECEIVABLES> 4,245
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 347,853
<DEPRECIATION> 42,935
<TOTAL-ASSETS> 325,515
<CURRENT-LIABILITIES> 0
<BONDS> 174,101
0
0
<COMMON> 0
<OTHER-SE> 137,088
<TOTAL-LIABILITY-AND-EQUITY> 325,515
<SALES> 0
<TOTAL-REVENUES> 55,765
<CGS> 0
<TOTAL-COSTS> 17,737
<OTHER-EXPENSES> 12,285<F1>
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 10,282
<INCOME-PRETAX> 11,584
<INCOME-TAX> 0
<INCOME-CONTINUING> 11,584
<DISCONTINUED> 0
<EXTRAORDINARY> (831)
<CHANGES> 0
<NET-INCOME> 10,753
<EPS-PRIMARY> .94
<EPS-DILUTED> .94
<FN>
<F1>Depreciation and Amortization
</FN>
</TABLE>
