_______________________________________________________________________________
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 JUNE 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
<S> <C>
Item 1. Financial Statements (Unaudited)
Statements of Operations
For the three and six months ended June 30, 1996 and 1995 3
Balance Sheets
As of June 30, 1996 and December 31, 1995 4
Statements of Cash Flows
For the six months ended June 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
</TABLE>
Part II. Other Information
<TABLE>
<CAPTION>
<S> <C>
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>
<S> <C> <C> <C> <C>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
1996 1995 1996 1995
------------- -------------- ----- ------------- -------------
REVENUES
Base rentals $12,423 $11,357 $24,718 $22,300
Percentage rentals 331 327 598 729
Expense reimbursements 5,210 5,374 10,545 9,657
Other income 225 177 451 309
------------- -------------- ----- ------------- -------------
Total revenues 18,189 17,235 36,312 32,995
------------- -------------- ----- ------------- -------------
EXPENSES
Operating and maintenance 5,561 5,906 11,365 10,760
General and administrative 1,268 1,349 2,671 2,493
Mortgage interest 3,605 2,882 6,668 5,450
Depreciation and amortization 4,164 3,573 8,107 7,023
------------- -------------- ----- ------------- -------------
Total expenses 14,598 13,710 28,811 25,726
------------- -------------- ----- ------------- -------------
INCOME BEFORE EXTRAORDINARY ITEM 3,591 3,525 7,501 7,269
Extraordinary item - Loss on early extinguishment of
debt --- --- (831) ---
------------- -------------- ----- ------------- -------------
NET INCOME $3,591 $3,525 $6,670 $7,269
============= ============== ===== ============= =============
PER UNIT OUTSTANDING:
Income before extraordinary item $.32 $.31 $.67 $.63
Net income $.32 $.31 $.58 $.63
============= ============== ===== ============= =============
DISTRIBUTIONS PER UNIT $.52 $.50 $1.02 $.96
============= ============== ===== ============= =============
</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>
<S> <C> <C>
JUNE 30, DECEMBER 31,
1996 1995
-------------- -----------------
ASSETS
Rental property, net $298,734 $294,423
Cash and cash equivalents 2,764 5,113
Tenant receivables, net 3,103 5,228
Deferred charges, net 8,108 5,728
Other assets 5,079 4,455
-------------- -----------------
TOTAL ASSETS $317,788 $314,947
============== =================
LIABILITIES AND PARTNERS' EQUITY
Liabilities
Long-term debt $165,743 $156,749
Construction trade payables 7,363 11,305
Accounts payable and accrued expenses 6,253 4,496
-------------- -----------------
TOTAL LIABILITIES 179,359 172,550
-------------- -----------------
Commitments
Partners' equity
General partner 112,137 114,813
Limited partner 26,292 27,584
-------------- -----------------
Total partners' equity 138,429 142,397
-------------- -----------------
TOTAL LIABILITIES AND PARTNERS' EQUITY $317,788 $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>
Six Months Ended
June 30,
1996 1995
------------ --------------------
<S> <C> <C>
OPERATING ACTIVITIES
Net income $6,670 $7,269
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization 8,107 7,023
Amortization of deferred financing costs 474 426
Loss on early extinguishment of debt 831 ---
Straight-line base rent adjustment (707) (708)
Compensation under Unit Option Plan 169 168
Increase (decrease) due to changes in:
Tenant receivables 2,832 2,114
Other assets (716) 284
Accounts payable and accrued expenses 1,757 122
------------ --------------------
NET CASH PROVIDED BY OPERATING ACTIVITIES 19,417 16,698
------------ --------------------
INVESTING ACTIVITIES
Additions to rental properties (15,845) (23,755)
Additions to deferred lease costs (903) (622)
------------ --------------------
NET CASH USED IN INVESTING ACTIVITIES (16,748) (24,377)
------------ --------------------
FINANCING ACTIVITIES
Distributions to partners (10,807) (10,171)
Proceeds from notes payable 75,000 16,250
Repayments on notes payable (480) (455)
Proceeds from revolving lines of credit 32,201 65,044
Repayments on revolving lines of credit (97,727) (60,550)
Additions to deferred financing costs (3,205) (684)
------------ --------------------
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES (5,018) 9,434
------------ --------------------
Net increase (decrease) in cash and cash equivalents (2,349) 1,755
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 5,113 3,644
------------ --------------------
CASH AND CASH EQUIVALENTS, END OF PERIOD $2,764 $5,399
============ ====================
</TABLE>
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 June 30,
1996 and 1995 amounted to $7,363 and $10,022, respectively.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED FINANCIAL
STATEMENTS.
5
<PAGE>
TANGER PROPERTIES LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
June 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 six months of 1996, the Operating Partnership
substantially completed expansions totalling approximately 110,952
square feet in Gonzales, Louisiana - 29,890 square feet; Williamsburg,
Iowa - 26,187 square feet; Branson, Missouri - 25,000 square feet; and
San Marcos, Texas - 29,875 square feet. In addition, construction has
commenced on the initial phase of one new center in Riverhead, New York
totalling 241,344 square feet, as well as expansions in Locust Grove,
Georgia totalling approximately 34,190 square feet and Commerce, Georgia
totalling approximately 36,000 square feet.
Construction in progress amounted to $8.8 million and commitments to
complete construction of new developments and additions to existing
properties amounted to approximately $9.7 million at June 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 June 30, 1996
and 1995 amounted to $166,000 and $64,000, respectively, and during the
six months ended June 30, 1996 and 1995 amounted to $456,000 and
$161,000, respectively.
3. ACCUMULATED DEPRECIATION
Accumulated depreciation at June 30, 1996 and December 31, 1995 was
$39,083,000 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
6
<PAGE>
to January 1996. In April 1996, the Operating Partnership together with
its general partner and majority owner, Tanger 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
June 30, 1996 amounted to $15 million.
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 as of the beginning of the year
would have been anti-dilutive.
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
1996 1995 1996 1995
------------------ ---------------- ----------------- ----------------
<S> <C> <C> <C> <C>
Applicable preferred distributions $636,000 $729,000 $1,283,000 $1,567,000
Weighted average units 9,368,416 9,136,765 9,346,502 8,993,377
================== ================ ================= ================
</TABLE>
At June 30, 1996 and 1995, the ownership interests of the Operating
Partnership consisted of the following:
<TABLE>
<CAPTION>
June 30, December 31,
1996 1995
------------------ --------------------
<S> <C> <C>
General partnership units 6,336,537 6,286,581
Limited partnership units 3,033,305 3,033,305
Preferred partnership units, held by the general partner 135,939 141,484
================== ====================
</TABLE>
6. 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 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 Consolidated Statements of Operations compares the three and six months
ended June 30, 1996 with the three and six months ended June 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
7
<PAGE>
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 six months of 1996, the Operating Partnership substantially completed
expansions totalling approximately 110,952 square feet in Gonzales, Louisiana -
29,890 square feet; Williamsburg, Iowa - 26,187 square feet; Branson, Missouri -
25,000 square feet; and San Marcos, Texas - 29,875 square feet. In addition,
construction has commenced on the initial phase of a new center in Riverhead,
New York totalling approximately 241,344 square feet, as well as expansions in
Locust Grove, Georgia totalling approximately 34,190 square feet and Commerce,
Georgia totalling approximately 36,000 square feet.
A summary of the operating results for three and six months ended June 30, 1996
and 1995, calculated on a weighted average GLA basis, is presented in the
following table.
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
1996 1995 1996 1995
----------------- -------------- ------ --------------- ----------------
<S> <C> <C> <C> <C>
GLA at end of period 3,652,583 3,286,613 3,652,583 3,286,613
Weighted Average GLA(a) 3,612,134 3,264,190 3,577,401 3,215,123
Outlet centers in operation 27 26 27 26
New centers opened --- --- --- 1
Centers expanded 3 1 4 1
States operated in at end of period 22 22 22 22
Per square foot
Revenues
Base rent $3.44 $3.48 $6.91 $6.94
Percentage rentals .09 .10 .17 .23
Expense reimbursements 1.44 1.65 2.95 3.00
Other income .06 .05 .13 .10
----------------- -------------- ------ --------------- ----------------
Total revenues 5.03 5.28 10.16 10.27
----------------- -------------- ------ --------------- ----------------
Expenses
Operating and maintenance 1.54 1.81 3.18 3.35
General and administrative .35 .41 .75 .78
Mortgage interest 1.00 .88 1.86 1.70
Depreciation and amortization 1.15 1.09 2.27 2.18
----------------- -------------- ------ --------------- ----------------
Total expenses 4.04 4.19 8.06 8.01
----------------- -------------- ------ --------------- ----------------
Income before extraordinary item $0.99 $1.09 $2.10 $2.26
================= ============== ====== =============== ================
</TABLE>
(A) GLA WEIGHTED BY MONTHS OF OPERATIONS
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 share/unit had the Operating
8
<PAGE>
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
generally are not required in interim reports on Form 10-Q.
RESULTS OF OPERATIONS
COMPARISON OF THE THREE MONTHS ENDED JUNE 30, 1996 TO THE THREE MONTHS ENDED
JUNE 30, 1995
Base rentals increased $1.1 million, or 9%, 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, however, decreased 1% from $3.48 per square foot to $3.44 per square foot
as a result of a 1% reduction in the occupancy rate from 99% in 1995 to 98% in
1996.
Reported tenant sales for centers that were open the three months ended June 30,
1996 and 1995 increased approximately 2%. Percentage rentals, both in terms of
dollars and per weighted average GLA, however, remained flat when compared to
the same period in the prior year. This is primarily the result of certain
leases being renewed with increased levels of sales on which percentage rentals
are required (the "Breakpoint") 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, decreased $164,000, or 3%, in the 1996 period as compared
to the same period in 1995 due principally to the related decrease in
reimbursable operating and maintenance expenses. Expense reimbursements
expressed as a percentage of operating and maintenance expenses increased from
91% in the 1995 period to 94% in the 1996 period due to contractual increases
and reductions in nonrecoverable operating and maintenance expenses.
Operating and maintenance expenses decreased by $345,000, or 6%, in the 1996
period as compared to the 1995 period. On a weighted average GLA basis,
operating and maintenance expenses decreased 15% from $1.81 to $1.54 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, as well as fewer grand opening ceremonies
held during the 1996 period compared to the 1995 period. 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 decreased slightly
by $81,000 and $.06 per weighted average GLA. General and administrative
expenses, as a percent of revenues, also decreased from 8% in the 1995 period to
7% in the 1996 period.
Aggregate interest expense increased $723,000 and $.12 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 6% from $1.09 per square foot to $1.15 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 recognition of depreciation on certain tenant
finishing allowances related to vacant space.
9
<PAGE>
COMPARISON OF THE SIX MONTHS ENDED JUNE 30, 1996 TO THE SIX MONTHS ENDED
JUNE 30, 1995
Base rentals increased $2.4 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 $6.94 per square foot to $6.91 per square foot
reflecting the 1% reduction in the occupancy rate from 99% to 98%.
Percentage rentals decreased $131,000, or 18%, in the 1996 period compared to
the 1995 period and percentage rentals per weighted average GLA declined from
$.23 per square foot to $.17 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 six
months ended June 30, 1996 and 1995 increased approximately 1.4%.
Expense reimbursements, increased $888,000, 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 90% 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 $605,000, or 6%, in the 1996
period as compared to the 1995 period. On a weighted average GLA basis,
operating and maintenance expenses decreased 5% from $3.35 to $3.18 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 as well as fewer grand opening ceremonies
held during the 1996 period compared to the 1995 period. 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 six months increased by
$178,000 but decreased $.03, or 4%, per weighted average GLA. General and
administrative expenses, as a percent of revenues, remained flat for the first
six months compared to the 1995 period.
Aggregate interest expense increased $1.2 million and $.16 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 4% from $2.18 per square foot to $2.27 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 recognition of depreciation on certain tenant
finishing allowances related to vacant space.
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.
10
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
Net cash provided by operating activities was $19.4 and $16.7 million for the
six months ended June 30, 1996 and 1995, respectively. The increase of $2.7
million was primarily due to the incremental operating income associated with
new and expanded centers. Net cash used in investing activities decreased $7.6
million during the first six months of 1996 compared to the first six months of
1995 due to decreased construction activity. Net cash from financing activities
decreased $14.4 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. Two expansions (scheduled to open in the
second half of 1996) totalling approximately 70,190 square feet and one new
center (expected to open in Spring 1997) totalling approximately 241,344 square
feet are currently under construction (See "General Overview"). Commitments for
construction of these projects (which represent only those costs contractually
required to be paid by the Operating Partnership) amounted to $9.7 million at
June 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 six 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%. Amounts available under the lines of credit at June 30, 1996 totalled $45
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 $5 million on debt outstanding at June 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.
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 dividends in accordance with REIT requirements
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 dividends such that dividends will not
exceed funds from operations ("FFO"), as defined in the agreements, on an annual
basis or 95% of FFO on a cumulative basis.
11
<PAGE>
On July 12, 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 August 15, 1996 to each unitholder of record on July 26, 1996. The
Board of Directors of the general partner also declared a cash distribution of
$.4685 per preferred partnership unit payable on August 15, 1996 to each
preferred unitholder of record on July 26, 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 real estate investment trust
("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 six months ended June 30, 1996 and 1995 under the
new current method and under the previous method.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
(In thousands, except per unit data)
Current Method Previous Method
------------------------- --------- -----------------------------
THREE MONTHS ENDED JUNE 30, 1996 1996 1995 1996 1995
----------- ------------- --------- ------------- --------------
Income before extraordinary item $3,591 $3,525 $3,591 $3,525
Adjusted for:
Depreciation and amortization uniquely significant
to real estate 4,129 3,543 4,129 3,543
Amortization of deferred financing costs 255 234
Other depreciation and amortization 35 30
Straight-line base rent adjustment (335) (310)
Compensation under Unit Option Plan 85 85
----------- ------------- --------- ------------- --------------
Funds from operations $7,720 $7,068 $7,760 $7,107
=========== ============= ========= ============= ==============
Weighted average units outstanding(1) 10,602 10,598 10,602 10,598
Distributions paid per unit(1) $.52 $.50 $.52 $.50
=========== ============= ========= ============= ==============
</TABLE>
12
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Current Method Previous Method
------------------------- --------- -----------------------------
SIX MONTHS ENDED JUNE 30, 1996 1996 1995 1996 1995
----------- ------------- --------- ------------- --------------
Income before extraordinary item $7,501 $7,269 $7,501 $7,269
Adjusted for:
Depreciation and amortization uniquely significant
to real estate 8,039 6,963 8,039 6,963
Amortization of deferred financing costs 474 426
Other depreciation and amortization 68 60
Straight-line base rent adjustment (707) (708)
Compensation under Unit Option Plan 169 168
----------- ------------- --------- ------------- --------------
Funds from operations $15,540 $14,232 $15,544 $14,178
=========== ============= ========= ============= ==============
Weighted average units outstanding(1) 10,605 10,598 10,605 10,598
Distributions paid per unit(1) $1.02 $.96 $1.02 $.96
=========== ============= ========= ============= ==============
</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
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 Tanger Factory
Outlet Centers, Inc.'s Quarterly Report on Form 10-Q for the
period ended March 31, 1996.
** Incorporated by reference to the Operating Partnership's Current
Report on Form 8-K dated January 23, 1996.
*** Incorporated by reference to the Operating Partnership's Current
Report on Form 8-K dated March 6, 1996.
(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: August 9, 1996
15
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> JUN-30-1996
<CASH> 2,764
<SECURITIES> 0
<RECEIVABLES> 3,103
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 337,817
<DEPRECIATION> 39,083
<TOTAL-ASSETS> 317,788
<CURRENT-LIABILITIES> 0
<BONDS> 165,743
0
0
<COMMON> 0
<OTHER-SE> 138,429
<TOTAL-LIABILITY-AND-EQUITY> 317,788
<SALES> 0
<TOTAL-REVENUES> 36,312
<CGS> 0
<TOTAL-COSTS> 11,365
<OTHER-EXPENSES> 8,107<F1>
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 6,668
<INCOME-PRETAX> 7,501
<INCOME-TAX> 0
<INCOME-CONTINUING> 7,501
<DISCONTINUED> 0
<EXTRAORDINARY> (831)
<CHANGES> 0
<NET-INCOME> 6,670
<EPS-PRIMARY> .58
<EPS-DILUTED> .58
<FN>
<F1>Depreciation and amortization
</FN>
</TABLE>
