<PAGE>
Filed pursuant to Rule 424(b)(5)
Reg. No. 33-99736-01
Reg. No. 333-3526-01
PROSPECTUS SUPPLEMENT
(TO PROSPECTUS DATED SEPTEMBER 12, 1997)
$75,000,000
TANGER PROPERTIES LIMITED PARTNERSHIP
7 7/8% NOTES DUE 2004
UNCONDITIONALLY GUARANTEED BY TANGER FACTORY OUTLET CENTERS, INC.
---------------------
The 7 7/8% Notes due 2004 (the "Notes") offered hereby (the "Offering") will
be issued by Tanger Properties Limited Partnership, a North Carolina limited
partnership (the "Operating Partnership"), in an aggregate principal amount of
$75,000,000. The Notes will mature on October 24, 2004 and may not be redeemed
by the Operating Partnership prior to maturity. The Notes will not be subject to
any sinking fund. Interest on the Notes will be payable semi-annually in arrears
on each April 24 and October 24, commencing April 24, 1998. See "Description of
the Notes."
Tanger Factory Outlet Centers, Inc. (the "Company") will fully,
unconditionally and irrevocably guarantee the due and punctual payment of
principal of, and interest on, the Notes, when and as the same shall become due
and payable, whether at maturity, by declaration of acceleration or otherwise.
The Notes will be represented by a single fully registered global note in
book-entry form without coupons (the "Global Note") and will be registered in
the name of the nominee of The Depository Trust Company ("DTC"). Beneficial
interests in the Global Note will be shown on, and transfers thereof will be
effected only through, records maintained by DTC (with respect to beneficial
interests of participants) or by participants or persons that hold interests
through participants (with respect to beneficial interests of beneficial
owners). Owners of beneficial interests in the Global Note will be entitled to
physical delivery of Notes in certificated form equal in principal amount to
their respective beneficial interests only under the limited circumstances
described under "Description of the Notes - Book-Entry System." Settlement for
the Notes will be made in immediately available funds, and secondary market
trading activity in the Notes will also settle in immediately available funds.
All payments of principal and interest in respect of the Notes will be made by
the Operating Partnership in immediately available funds. See "Description of
the Notes - Same-Day Settlement and Payment."
SEE "RISK FACTORS" ON PAGE 4 IN THE ACCOMPANYING PROSPECTUS FOR CERTAIN
FACTORS RELEVANT TO AN INVESTMENT IN THE NOTES.
---------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS SUPPLEMENT OR
THE ACCOMPANYING PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
PROCEEDS TO
PRICE TO UNDERWRITING THE OPERATING
PUBLIC(1) DISCOUNT(2) PARTNERSHIP(3)
<S> <C> <C> <C>
Per Note.................................. 99.799% 1.375% 98.424%
Total..................................... $74,849,250 $1,031,250 $73,818,000
</TABLE>
(1) Plus accrued interest, if any, from October 24, 1997.
(2) The Operating Partnership and the Company have agreed to indemnify the
several Underwriters against certain liabilities, including liabilities
under the Securities Act of 1933, as amended. See "Underwriting."
(3) Before deducting expenses payable by the Operating Partnership estimated at
$450,000.
--------------------------
The Notes are offered by the several Underwriters, subject to prior sale,
when, as and if issued to and accepted by the Underwriters, to approval of
certain legal matters by counsel for the Underwriters and to certain other
conditions. The Underwriters reserve the right to withdraw, cancel or modify
such offer and reject orders in whole or in part. It is expected that delivery
of the Notes will be made in book-entry-only form through the facilities of DTC
in New York, New York, on or about October 24, 1997.
--------------------------
MERRILL LYNCH & CO. NATIONSBANC MONTGOMERY
------------------
The date of this Prospectus Supplement is October 21, 1997.
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[LOGO]
[MAP]
Certain persons participating in the Offering may engage in transactions
that stabilize, maintain or otherwise affect the market price of the Notes
offered hereby. Such transactions may include stabilizing and the purchase of
Notes to cover short positions. For a description of these activities, see
"Underwriting."
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PROSPECTUS SUPPLEMENT SUMMARY
THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY THE DETAILED
INFORMATION AND FINANCIAL INFORMATION APPEARING ELSEWHERE IN, OR INCORPORATED BY
REFERENCE IN, THIS PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS.
CERTAIN STATEMENTS CONTAINED OR INCORPORATED BY REFERENCE IN THIS PROSPECTUS
SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS, INCLUDING, WITHOUT LIMITATION,
STATEMENTS CONTAINING THE WORDS "BELIEVES," "ANTICIPATES," "EXPECTS," AND WORDS
OF SIMILAR IMPORT, CONSTITUTE "FORWARD-LOOKING STATEMENTS" WITHIN THE MEANING OF
THE PRIVATE SECURITIES REFORM ACT OF 1995. SUCH FORWARD-LOOKING STATEMENTS
INVOLVE KNOWN AND UNKNOWN RISKS, UNCERTAINTIES AND OTHER FACTORS THAT MAY CAUSE
THE ACTUAL RESULTS, PERFORMANCE OR ACHIEVEMENTS OF THE OPERATING PARTNERSHIP, OR
INDUSTRY RESULTS, TO BE MATERIALLY DIFFERENT FROM ANY FUTURE RESULTS,
PERFORMANCE OR ACHIEVEMENTS EXPRESSED OR IMPLIED BY SUCH FORWARD-LOOKING
STATEMENTS.
THE OPERATING PARTNERSHIP
Tanger Properties Limited Partnership, a North Carolina limited partnership
(the "Operating Partnership"), was, as of September 30, 1997, 73.9% (assuming
conversion of all preferred partnership units) owned and managed by its sole
general partner, Tanger Factory Outlet Centers, Inc. (the "Company"), a
fully-integrated, self-administered and self-managed real estate investment
trust ("REIT"). The Operating Partnership focuses exclusively on developing,
acquiring, owning and operating factory outlet centers (the "Centers") and
provides all development, leasing and management services for its Centers. The
Operating Partnership believes that it is one of the largest owners and
operators of factory outlet centers in the United States. Based on a recent
Value Retail News survey of outlet tenants, the Operating Partnership owns
Centers in five of the top 18 outlet markets, ranked by sales per square foot,
in the United States. As of September 30, 1997, the Company owned and operated
30 Centers with a total gross leasable area ("GLA") of approximately 4.3 million
square feet. These Centers were approximately 98% leased, contained over 1,025
stores and represented over 240 brand name companies as of such date.
Stanley K. Tanger, the Company's Chairman and Chief Operating Officer,
entered the factory outlet center business in 1981. From 1981 to June of 1993,
the Tangers developed 17 Centers with a total GLA of approximately 1.5 million
square feet. Since the Company completed its initial public offering ("IPO") in
June 1993, the Operating Partnership has developed nine and acquired four
Centers and, together with expansions of existing Centers, added approximately
2.8 million square feet of GLA to its portfolio.
Management believes that factory outlet centers continue to present
attractive opportunities for capital investment by the Operating Partnership,
particularly with respect to strategic expansions of existing Centers. Because
of the moderate land and construction costs relative to other retailing formats,
factory outlet centers can often be developed or expanded relatively
inexpensively. Management believes that under present conditions such
development or expansion costs, coupled with current market lease rates, permit
attractive investment returns. Management further believes, based upon its
contacts with present and prospective tenants, that many tenants, including
prospective tenants new to the factory outlet business, desire to open a number
of new factory outlet stores in the next several years, particularly where there
are successful factory outlet centers in which such tenants do not have a
significant presence or where there are few factory outlet centers. Thus, the
Operating Partnership believes that its commitment to developing, acquiring and
expanding factory outlet centers is justified by the potential financial returns
on such centers.
The Operating Partnership's strategy is to increase revenues and cash flows
through new developments, selective acquisitions and expansions of existing
factory outlet centers while minimizing its operating expenses by designing low
maintenance properties and achieving economies of scale. The Operating
Partnership will seek to maintain high occupancy rates and increasing rental
revenues with a tenant base of nationally recognized, name-brand tenants.
The Operating Partnership's capital strategy is to maintain a strong and
flexible financial position by (1) maintaining a low level of leverage, (ii)
extending and sequencing debt maturity dates, (iii) managing its floating rate
exposure, (iv) maintaining its liquidity and (v) reinvesting a significant
portion of its cash flow by maintaining a low distribution payout ratio (defined
as annual distributions as a percent of funds from operations ("FFO") for such
year).
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OWNERSHIP STRUCTURE OF THE COMPANY AND THE OPERATING PARTNERSHIP
(AS OF SEPTEMBER 30, 1997)
[CHART]
THE OFFERING
All capitalized terms used but not defined herein have the meanings provided
in "Description of the Notes." For a more complete description of the terms of
the Notes, see "Description of the Notes" herein and "Description of Debt
Securities" in the accompanying Prospectus.
<TABLE>
<S> <C>
Securities Offered................ $75,000,000 aggregate principal amount of 7 7/8% Notes
due 2004.
Maturity.......................... The Notes will mature on October 24, 2004.
Redemption........................ The Notes will not be redeemable prior to maturity.
Interest Payment Dates............ Interest on the Notes will be payable semi-annually in
arrears on each April 24 and October 24, commencing
April 24, 1998.
Ranking........................... The Notes will rank pari passu with each other and with
all other unsecured and unsubordinated indebtedness of
the Operating Partnership. However, the Notes will be
effectively subordinated to the prior claims of
creditors under its mortgage notes and the secured
Credit Facility (as defined). See "The Operating Part-
nership--Capital Strategy" and "Capitalization."
Use of Proceeds................... The Operating Partnership intends to use the net
proceeds from the Offering to repay indebtedness
presently outstanding under the Credit Facilities, which
indebtedness was incurred principally to fund the cost
of the Operating Partnership's development, expansion
and acquisition activities, and for general corporate
purposes. See "Recent Developments."
</TABLE>
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<TABLE>
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Certain Covenants................. The Notes will contain certain covenants, including the
following:
LIMITATIONS ON INCURRENCE OF DEBT
(1) The Operating Partnership will not incur any Debt,
if, after giving effect thereto, the aggregate principal
amount of all outstanding Debt of the Operating
Partnership is greater than 60% of the sum of (i)
the Operating Partnership's Total Assets as of the
end of the most recent calendar quarter and (ii)
any increase in the Operating Partnership's Total
Assets from the end of such calendar quarter (such
increase together with the Operating Partnership's
Total Assets is referred to as "Adjusted Total
Assets").
(2) The Operating Partnership will not incur any
Secured Debt if, after giving effect thereto, the
aggregate amount of all outstanding Secured Debt of
the Operating Partnership is greater than 40% of
the Operating Partnership's Adjusted Total Assets.
(3) The Operating Partnership will not incur any Debt
if the ratio of Consolidated Income Available for Debt
Service for the four consecutive fiscal quarters
most recently ended prior to the date of the
incurrence of such Debt, on a pro forma basis,
shall be less than 2.0 times the Annual Service
Charge on all Debt outstanding immediately after
the incurrence of such additional Debt.
(4) The Operating Partnership will not allow any
Restricted Subsidiary to incur any Debt other than
intercompany Debt.
LIMITATIONS ON DISTRIBUTIONS
The Operating Partnership will not make any distribution
unless, immediately after giving pro forma effect to
such distribution, (a) no default under the Indenture
(as defined), or event of default under any mortgage,
indenture or instrument under which there may be issued,
or by which there may be secured or evidenced, any Debt
of the Operating Partnership, the Company or any
Subsidiary, shall have occurred and be continuing, (b)
the Operating Partnership could incur at least $1.00 of
Debt under the Indenture covenants limiting the
incurrence of Debt and (c) the aggregate sum of all
distributions shall not exceed the sum of (i) 95% of the
aggregate cumulative Funds From Operations of the
Operating Partnership accrued on a cumulative basis from
the date of the Indenture until the end of the last
fiscal quarter prior to the contemplated payment, and
(ii) the aggregate Net Cash Proceeds received from the
issuance and sale of Capital Stock after the date of the
Indenture; provided, however, that the foregoing
limitation shall not apply to any distribution which is
necessary to maintain the Company's status as a REIT if
the aggregate principal amount of all
</TABLE>
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<TABLE>
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outstanding Debt of the Company and the Operating
Partnership on a consolidated basis at such time is less
than 60% of Adjusted Total Assets.
For certain additional covenants, see "Description of
the Notes--Certain Covenants" herein and "Description of
Debt Securities--Certain Covenants" in the accompanying
Prospectus.
</TABLE>
S-6
<PAGE>
SPECIAL NOTE REGARDING FORWARD LOOKING STATEMENTS
CERTAIN STATEMENTS CONTAINED OR INCORPORATED BY REFERENCE IN THIS PROSPECTUS
SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS, INCLUDING, WITHOUT LIMITATION,
STATEMENTS CONTAINING THE WORDS "BELIEVES," "ANTICIPATES," "EXPECTS," AND WORDS
OF SIMILAR IMPORT, CONSTITUTE "FORWARD-LOOKING STATEMENTS" WITHIN THE MEANING OF
THE PRIVATE SECURITIES REFORM ACT OF 1995. SUCH FORWARD-LOOKING STATEMENTS
INVOLVE KNOWN AND UNKNOWN RISKS, UNCERTAINTIES AND OTHER FACTORS THAT MAY CAUSE
THE ACTUAL RESULTS, PERFORMANCE OR ACHIEVEMENTS OF THE OPERATING PARTNERSHIP, OR
INDUSTRY RESULTS, TO BE MATERIALLY DIFFERENT FROM ANY FUTURE RESULTS,
PERFORMANCE OR ACHIEVEMENTS EXPRESSED OR IMPLIED BY SUCH FORWARD-LOOKING
STATEMENTS. SUCH FACTORS INCLUDE, AMONG OTHERS, THE FOLLOWING: NATIONAL AND
LOCAL GENERAL ECONOMIC AND MARKET CONDITIONS; DEMOGRAPHIC CHANGES; THE ABILITY
OF THE OPERATING PARTNERSHIP TO SUSTAIN, MANAGE OR FORECAST ITS GROWTH; EXISTING
GOVERNMENT REGULATIONS AND CHANGES IN, OR THE FAILURE TO COMPLY WITH, GOVERNMENT
REGULATIONS; ADVERSE PUBLICITY; LIABILITY AND OTHER CLAIMS ASSERTED AGAINST THE
OPERATING PARTNERSHIP; COMPETITION; THE RISK THAT THE OPERATING PARTNERSHIP MAY
NOT BE ABLE TO FINANCE ITS PLANNED DEVELOPMENT ACTIVITIES; RISKS RELATED TO THE
RETAIL INDUSTRY IN WHICH THE OPERATING PARTNERSHIP'S OUTLET CENTERS COMPETE,
INCLUDING THE POTENTIAL ADVERSE IMPACT OF EXTERNAL FACTORS SUCH AS INFLATION,
TENANT DEMAND FOR SPACE, CONSUMER CONFIDENCE, UNEMPLOYMENT RATES AND CONSUMER
TASTES AND PREFERENCES; RISKS ASSOCIATED WITH THE OPERATING PARTNERSHIP'S
DEVELOPMENT ACTIVITIES, SUCH AS THE POTENTIAL FOR COST OVERRUNS, DELAYS AND LACK
OF PREDICTABILITY WITH RESPECT TO THE FINANCIAL RETURNS ASSOCIATED WITH THESE
DEVELOPMENT ACTIVITIES; RISKS ASSOCIATED WITH REAL ESTATE OWNERSHIP, SUCH AS THE
POTENTIAL ADVERSE IMPACT OF CHANGES IN THE LOCAL ECONOMIC CLIMATE ON THE
REVENUES AND THE VALUE OF THE OPERATING PARTNERSHIP'S PROPERTIES; RISKS THAT A
SIGNIFICANT NUMBER OF TENANTS MAY BECOME UNABLE TO MEET THEIR LEASE OBLIGATIONS
OR THAT THE OPERATING PARTNERSHIP MAY BE UNABLE TO RENEW OR RE-LEASE A
SIGNIFICANT AMOUNT OF AVAILABLE SPACE ON ECONOMICALLY FAVORABLE TERMS;
FLUCTUATIONS AND DIFFICULTY IN FORECASTING OPERATING RESULTS; CHANGES IN
BUSINESS STRATEGY OR DEVELOPMENT PLANS; BUSINESS DISRUPTIONS; THE ABILITY TO
ATTRACT AND RETAIN QUALIFIED PERSONNEL; THE ABILITY TO REALIZE PLANNED COSTS
SAVINGS IN ITS ACQUISITIONS; RETENTION OF EARNINGS; AND OTHER FACTORS REFERENCED
IN THIS PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS. CERTAIN OF THESE
FACTORS ARE DISCUSSED IN MORE DETAIL ELSEWHERE IN, OR INCORPORATED BY REFERENCE
IN, THIS PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS, INCLUDING,
WITHOUT LIMITATION, UNDER THE CAPTIONS "THE OPERATING PARTNERSHIP," "SELECTED
CONSOLIDATED FINANCIAL DATA," AND "BUSINESS AND PROPERTIES" IN THIS PROSPECTUS
SUPPLEMENT AND UNDER THE CAPTION "RISK FACTORS" IN THE ACCOMPANYING PROSPECTUS.
GIVEN THESE UNCERTAINTIES, PROSPECTIVE INVESTORS ARE CAUTIONED NOT TO PLACE
UNDUE RELIANCE ON SUCH FORWARD-LOOKING STATEMENTS. THE OPERATING PARTNERSHIP
DISCLAIMS ANY OBLIGATION TO UPDATE ANY SUCH FACTORS OR TO PUBLICLY ANNOUNCE THE
RESULT OF ANY REVISIONS TO ANY OF THE FORWARD-LOOKING STATEMENTS CONTAINED OR
INCORPORATED BY REFERENCE IN THIS PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING
PROSPECTUS TO REFLECT FUTURE EVENTS OR DEVELOPMENTS.
THE OPERATING PARTNERSHIP
The Operating Partnership was, as of September 30, 1997, 73.9% (assuming
conversion of all preferred partnership units) owned and managed by its sole
general partner, the Company, a fully-integrated, self-administered and
self-managed real estate investment trust. The Operating Partnership focuses
exclusively on developing, acquiring, owning and operating factory outlet
centers and provides all development, leasing and management services for its
Centers. The Operating Partnership believes that it is one of the largest owners
and operators of factory outlet centers in the United States. Based on a recent
Value Retail News survey of outlet tenants, the Operating Partnership owns
Centers in five of the top 18 outlet markets, ranked by sales per square foot,
in the United States. As of September 30, 1997, the Operating Partnership owned
and operated 30 Centers with a total GLA of approximately 4.3 million square
feet. These Centers were approximately 98% leased, contained over 1,025 stores
and represented over 240 brand name companies as of such date.
As of September 30, 1997, the ownership interests in the Operating
Partnership consisted of 7,763,985 general partnership units and 90,789
preferred partnership units (which are convertible into approximately 818,009
general partnership units) held by the Company and 3,033,305 limited partnership
units (the
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general partnership units, preferred partnership units and limited partnership
units are collectively referred to as "Units") held by the Tanger Family Limited
Partnership ("TFLP"). Each limited partnership unit is exchangeable, subject to
certain limitations to preserve the Company's status as a REIT, into a common
share of the Company.
Each preferred partnership unit entitles the Company to receive
distributions from the Operating Partnership in an amount equal to the
distribution payable with respect to a share of the Company's Series A
Cumulative Convertible Redeemable Preferred Shares (the "Series A Preferred
Shares"), prior to the payment by the Operating Partnership of distributions
with respect to the general partnership units. Preferred partnership units will
be automatically converted by holders into general partnership units to the
extent that the Series A Preferred Shares are converted into common shares of
the Company and will be redeemed by the Operating Partnership to the extent that
the Series A Preferred Shares are redeemed by the Company. See "Description of
Preferred Shares" in the accompanying Prospectus.
The Operating Partnership's executive offices are located at 1400 West
Northwood Street, Greensboro, North Carolina, 27408 and its telephone number is
(910) 274-1666. The Operating Partnership is a North Carolina limited
partnership that was formed in May 1993.
THE FACTORY OUTLET CONCEPT
Factory outlets are manufacturer-operated retail stores that sell primarily
first quality, branded products at significant discounts from regular retail
prices charged by department stores and specialty stores. Factory outlet centers
offer numerous advantages to both consumers and manufacturers. Manufacturers
selling in factory outlet stores are often able to charge customers lower prices
for brand name and designer products because they can eliminate the third party
retailer and because factory outlet stores typically have lower operating costs
than other retailing formats. Factory outlet centers enable manufacturers to
optimize the size of production runs while continuing to maintain control of
their distribution channels. In addition, factory outlet centers benefit
manufacturers by permitting them to sell out-of-season, overstocked or
discontinued merchandise without alienating department stores or hampering the
manufacturer's brand name, as is often the case when merchandise is distributed
via discount chains.
The Operating Partnership's Centers range in size from 8,000 to 528,015
square feet of GLA, with an average GLA of approximately 143,000 square feet,
and are typically located at least 15 to 20 miles from downtown areas, where
major department stores and manufacturer-owned full price retail stores are
usually located. Manufacturers prefer these locations so that they do not
compete directly with their major customers and their own stores. Many of the
Operating Partnership's Centers are located near tourist destinations to attract
tourists who consider shopping to be a recreational activity and are typically
situated in close proximity to interstate highways to provide accessibility and
visibility to potential customers.
Management believes that factory outlet centers continue to present
attractive opportunities for capital investment by the Operating Partnership,
particularly with respect to strategic expansions of existing Centers. Because
of the moderate land and construction costs relative to other retailing formats,
factory outlet centers can often be developed or expanded relatively
inexpensively. Management believes that under present conditions such
development or expansion costs, coupled with current market lease rates, permit
attractive investment returns. Management further believes, based upon its
contacts with present and prospective tenants, that many tenants, including
prospective tenants new to the factory outlet business, desire to open a number
of new factory outlet stores in the next several years, particularly where there
are successful factory outlet centers in which such tenants do not have a
significant presence or where there are few factory outlet centers. Thus, the
Operating Partnership believes that its commitment to developing, acquiring and
expanding factory outlet centers is justified by the potential financial returns
on such centers.
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THE OPERATING PARTNERSHIP'S FACTORY OUTLET CENTERS
The Operating Partnership's Centers are designed to attract national brand
name tenants. As one of the original participants in this industry, the
Operating Partnership has developed long-standing relationships with many
national and regional manufacturers. Because of its established relationships
with many manufacturers, the Operating Partnership believes it is well
positioned to capitalize on industry growth.
The Operating Partnership has a diverse tenant base comprised of over 240
different well-known, upscale, national designer or other brand name companies,
such as Liz Claiborne, Reebok International, Ltd., Tommy Hilfiger, Polo Ralph
Lauren and Off 5th--SAKS Fifth Avenue Outlet Store. A majority of the factory
outlet stores leased by the Operating Partnership are directly operated by the
respective manufacturer. Unlike some other outlet center developers, the
Operating Partnership has for the most part excluded off-price retailers
(retailers that sell merchandise from a number of sources, often second quality,
limited stock or non-name brand items) from its Centers. The Operating
Partnership believes that this policy helps it attract and maintain a high
quality tenant base.
The Operating Partnership believes that the Centers are well diversified
geographically and by tenant and that it is not dependent upon any single
property or tenant. The only Center that represented more than 10% of the
Operating Partnership's consolidated total assets or consolidated gross revenues
as of and for the year ended December 31, 1996 is the property in Riverhead, New
York. See "Business and Properties--Significant Property." No other Center
represented more than 10% of the Operating Partnership's consolidated total
assets or consolidated gross revenues as of and for the year ended December 31,
1996.
In addition, no single tenant (including affiliates) accounted for 10% or
more of combined base and percentage rental revenues during 1996. During 1995
and 1994, one tenant (including affiliates) accounted for approximately 10% and
11%, respectively, of combined base and percentage rental revenues. Because the
typical tenant of the Operating Partnership is a large, national manufacturer,
the Operating Partnership has not experienced any material problems with respect
to rent collections or lease defaults.
BUSINESS HISTORY
Stanley K. Tanger, the Company's Chairman and Chief Executive Officer,
entered the factory outlet center business in 1981. Prior to founding the
Company and the Operating Partnership, Stanley K. Tanger and his son, Steven B.
Tanger, the Company's President and Chief Operating Officer, built and managed a
successful family owned apparel manufacturing business, Tanger/Creighton Inc.
("Tanger/Creighton"), whose business included the operation of five factory
outlet stores. Based on their knowledge of the apparel and retail industries, as
well as their experience operating Tanger/Creighton's factory outlet stores, the
Tangers recognized that there would be a demand for factory outlet centers where
a number of manufacturers could operate in a single location and attract a large
number of shoppers. Since a single manufacturer was generally not in a position
to build a factory outlet center tenanted by other manufacturers and retailers,
the Tangers and the Company found a natural market for their experience.
From 1981 to June of 1993, the Tangers developed 17 Centers with a total GLA
of approximately 1.5 million square feet. In June of 1993, the Company completed
its IPO, making Tanger Factory Outlet Centers, Inc. the first publicly traded
outlet center company. Since the Company's IPO, the Operating Partnership has
developed nine and acquired four Centers and, together with expansions of
existing Centers, added approximately 2.8 million square feet of GLA to its
portfolio, bringing its portfolio of properties as of September 30, 1997 to 30
Centers totalling approximately 4.3 million square feet of GLA.
BUSINESS AND OPERATING STRATEGY
The Operating Partnership intends to increase its cash flow and the value of
its portfolio over the long-term by continuing to own, manage, develop, acquire
and expand factory outlet centers. The
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Operating Partnership's strategy is to increase revenues through new
developments, selective acquisitions and expansions of its existing Centers
while minimizing its operating expenses by designing low maintenance properties
and achieving economies of scale. In connection with the ownership and
management of its properties, the Operating Partnership places an emphasis on
regular maintenance and intends to make periodic renovations as necessary. In
addition, the Operating Partnership will seek to maintain high occupancy rates
and increasing rental revenues with a tenant base of nationally recognized brand
name tenants.
The Operating Partnership typically seeks locations for its new centers that
have at least 3.5 million people residing within an hour's drive, an average
household income within a 50 mile radius of at least $35,000 to $40,000 per year
and access to a highway with a traffic count of at least 35,000 cars per day.
The Operating Partnership will vary its minimum conditions based on the
particular characteristics of a site, especially if the site is located near or
at a tourist destination. The Operating Partnership's current goal is to target
sites that are large enough to construct centers with approximately 75 stores
totalling at least 300,000 square feet of GLA. Generally, the Operating
Partnership will build such centers in phases, with the first phase containing
at least 150,000 to 200,000 square feet of GLA. Future phases have historically
been less expensive than the first phase because the Operating Partnership
generally finishes most of the site work and consummates land acquisition in the
first phase.
The Operating Partnership preleases a large part of the space in each center
prior to acquiring the site and beginning construction. Historically, the
Operating Partnership has not begun construction until it has obtained a
significant amount of signed leases. Typically, construction of a new factory
outlet center has taken the Operating Partnership four to six months from
groundbreaking to the opening of the first tenant store. Construction of
expansions to existing properties typically takes less time, usually between
three to four months.
CAPITAL STRATEGY
The Operating Partnership's capital strategy is to maintain a strong and
flexible financial position by: (1) maintaining a low level of leverage, (ii)
extending and sequencing debt maturity dates, (iii) managing its floating rate
exposure, (iv) maintaining its liquidity and (v) reinvesting a significant
portion of its cash flow by maintaining a low distribution payout ratio (defined
as annual distributions as a percent of FFO (generally defined as net income
(loss), computed in accordance with generally accepted accounting principles,
before extraordinary items and gains (losses) on sale of properties, plus
depreciation and amortization uniquely significant to real estate)).
The Operating Partnership's distribution payout ratio for the year ended
December 31, 1996 was 69%, which the Operating Partnership believes to be one of
the lowest payout ratios in the REIT industry. As a result, the Operating
Partnership retained approximately $10 million of its 1996 FFO. The distribution
payout ratio policy allows the Operating Partnership to retain capital to
maintain the quality of its portfolio, as well as to develop, acquire and expand
properties.
The Company and the Operating Partnership filed a shelf registration
statement in November 1995 with the Securities and Exchange Commission (the
"Commission") to issue from time to time $100 million in equity securities and
$100 million in debt securities. During March 1996, the Operating Partnership
issued $75 million of senior, unsecured notes, maturing March 11, 2001, with a
coupon rate of 8.75%. The proceeds of such debt offering were used to extinguish
the Operating Partnership's floating rate, secured lines of credit existing
prior to January 1996. In April 1996, the Company and the Operating Partnership
filed a new registration statement with the Commission to reestablish the
issuance capacity under the shelf registration at $200 million. The Commission
declared the registration statement effective on June 6, 1996. In September and
October of 1997, the Company issued a total of 1,080,000 common shares for
approximately $29 million in net proceeds (the "Common Share Offering"). The net
proceeds of the Common Share Offering are being used to acquire, expand and
develop factory outlet centers and for
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general corporate purposes. See "Recent Developments--Property Development,
Expansion and Acquisition" and "--Issuance of Additional Common Shares."
The Operating Partnership currently has a $50 million secured line of credit
with interest payable at LIBOR plus 1.5% and other unsecured lines of credit
totalling $50 million with interest rates ranging from the prime rate less .25%
to the prime rate or from LIBOR plus 1.75% to LIBOR plus 1.80%. Amounts
available under these lines of credit (the "Credit Facilities"), based on debt
outstanding at June 30, 1997, totalled $34.7 million. Following completion of
the Offering and the application of the net proceeds to repay its existing
Credit Facilities, the Operating Partnership would have had approximately $100
million available under its Credit Facilities at June 30, 1997 on a pro forma
basis, and would have had no exposure to variable rate interest risk.
The Operating Partnership's ratio of EBITDA (defined as earnings before
interest expense, income taxes, depreciation and amortization) to Annual Service
Charge (defined as the amount which is expensed or capitalized for interest on
debt, excluding amortization of deferred finance charges) for the year ended
December 31, 1996 was 3.3 times. After giving effect to the Offering and the
Common Share Offering, the Operating Partnership's ratio of debt to total market
capitalization (defined as the value of outstanding Units plus total debt) at
June 30, 1997 on a pro forma basis would be approximately 38.4% (assuming that
each type of Unit has the same value as the equivalent common shares of the
Company, which at October 21, 1997 had a market value of $30.8125 per common
share). See "Capitalization".
THE COMPANY
The Company is a fully integrated real estate company, focusing exclusively
on factory outlet centers. Management of the Company beneficially owns common
shares and partnership interests in the Operating Partnership exchangeable for
common shares that represent approximately 27% of all outstanding common shares
and partnership interests exchangeable for common shares (without giving effect
to the exercise of any outstanding stock options). The Company owned, as of
September 30, 1997, 73.9% (assuming conversion of all preferred partnership
units), and is the sole general partner, of the Operating Partnership. All of
the Company's operations are conducted through the Operating Partnership.
The Company expects to continue to qualify as a REIT under the Internal
Revenue Code of 1986, as amended (the "Code"). In order to maintain its
qualification as a REIT for federal income tax purposes, the Company is required
to distribute at least 95% of its taxable income each year. Dividends on
preferred shares are included as distributions for this purpose. Historically,
the Company's distributions have exceeded, and the Company expects that its
distributions will continue to exceed, taxable income in each year. As a result,
and because a portion of the distributions may constitute a return of capital,
the consolidated net worth of the Company may decline. However, the Company does
not believe that consolidated net worth is a meaningful reflection of net real
estate values.
The Company's executive offices are located at 1400 West Northwood Street,
Greensboro, North Carolina, 27408 and its telephone number is (910) 274-1666.
The Company is a North Carolina corporation that was formed on March 3, 1993.
COMPETITION
The Operating Partnership's Centers compete for customers primarily with
other factory outlet centers, traditional shopping malls and full- and off-price
retailers. The Operating Partnership carefully considers the degree of existing
and planned competition in a proposed area before deciding to develop, acquire
or expand a new center.
The Operating Partnership's Centers compete, to a limited extent, with
various full- and off-price retailers in the highly fragmented retailing
industry. However, management believes that the majority of the Operating
Partnership's customers visit factory outlet centers because they are intent on
buying name-
S-11
<PAGE>
brand products at discounted prices. Traditional full- and off-price retailers
are often unable to provide such a variety of name-brand products at attractive
prices.
Tenants of factory outlet centers typically avoid direct competition with
major retailers and their own specialty stores, and therefore generally insist
that the outlet centers be located not less than 15 to 20 miles from the nearest
major department store or their own stores. For this reason, the Operating
Partnership's Centers compete only to a limited extent with traditional shopping
malls in or near metropolitan areas.
Management believes that the Operating Partnership competes with as many as
four large national developers of factory outlet centers and numerous small
developers. Competition with other factory outlet centers for new tenants is
generally based on location, quality and mix of the center's existing tenants,
degree and quality of the support services (including marketing) provided by the
property manager and rental and other charges. The Operating Partnership
believes that its Centers have an attractive tenant mix, as a result of the
Operating Partnership's decision to lease the majority of its space to
manufacturer operated stores rather than to off-price retailers, and also as a
result of the strong brand identity of the Operating Partnership's major
tenants.
CORPORATE AND REGIONAL HEADQUARTERS
The Operating Partnership owns a small office building in Greensboro, North
Carolina in which its corporate headquarters is located. In addition, the
Operating Partnership rents a regional office in New York City under a lease
agreement and sublease agreement, respectively, to better service its principal
fashion-related tenants, many of whom are based in and around New York City.
The Operating Partnership maintains on-site managers and offices at 24
Centers to closely monitor the development of those Centers from construction
through opening and operation and to provide effective and efficient management
and marketing services. In addition, the Operating Partnership maintains an
off-site business office in Portland, Maine to service its Centers in the New
England area.
INSURANCE
Management believes that the Centers are covered by adequate fire, flood and
property insurance provided by reputable companies and with commercially
reasonable deductibles and limits.
EMPLOYEES
As of September 30, 1997, the Operating Partnership had 104 full-time
employees, located at the Operating Partnership's corporate headquarters in
North Carolina, its regional office in New York City and its 25 business
offices.
S-12
<PAGE>
RECENT DEVELOPMENTS
ISSUANCE OF ADDITIONAL COMMON SHARES
On September 24, 1997, the Company completed a 1,000,000 common share
offering at a price of $29.0625 per share. On October 15, 1997, the Company sold
an additional 80,000 common shares pursuant to an over-allotment option granted
to the underwriters. The net proceeds of the Common Share Offering, which were
contributed to the Operating Partnership by the Company in exchange for
1,080,000 general partnership units, are being used to acquire, expand and
develop factory outlet centers and for general corporate purposes. See
"--Property Development, Expansion and Acquisition."
PROPERTY DEVELOPMENT, EXPANSION AND ACQUISITION
On September 30, 1997, the Operating Partnership completed the acquisition
of two outlet centers located in popular resort areas of North Carolina for
$19.5 million: Shoppes on the Parkway in Blowing Rock and Soundings Factory
Stores in Nags Head. The acquisition of Shoppes on the Parkway consists of
approximately 97,800 square feet of GLA and features 34 upscale outlet stores,
including Polo Ralph Lauren, Coach, Jones New York, London Fog and Royal
Doulton. The acquisition of Soundings Factory Stores consists of approximately
82,500 square feet of GLA and features 23 upscale outlet stores, including Polo
Ralph Lauren, Jones New York, London Fog and Nine West.
On February 28, 1997, the Operating Partnership completed the purchase of
Five Oaks Factory Stores located in Sevierville, Tennessee, containing
approximately 123,000 square feet of GLA, for an aggregate purchase price of
$18.0 million. The Five Oaks Stores Center features 29 upscale outlet stores,
including Polo Ralph Lauren, Tommy Hilfiger, Nautica, Brooks Brothers and
Reebok. Following the purchase, the Operating Partnership began construction of
a 50,400 square foot expansion to the Five Oaks Factory Stores Center, which is
expected to begin opening by late fall of 1997.
In addition, construction is substantially complete on a 241,800 square foot
initial phase of an expansion to the Operating Partnership's Center in
Riverhead, New York, of which 100% of this additional GLA is leased or committed
to be leased. This expansion is anchored by Off 5th-SAKS Fifth Avenue Outlet
Store, which opened on May 17, 1997. A further expansion of 59,700 square feet
of GLA to the Riverhead Center is currently under construction and is scheduled
to be completed by December 1997, at which time the Riverhead Center will total
over 587,000 square feet of GLA.
Other developments currently underway include expansions in Lancaster, PA
(26,000 square feet), Commerce, GA (60,900 square feet), and San Marcos, TX
(23,000 square feet), all of which are expected to be completed by late fall of
1997.
The Operating Partnership also is in the process of developing plans for
additional expansions in 1997 and beyond and for completion of new centers in
1998 and beyond and will consider other acquisitions that are suitable for its
portfolio. For example, the Operating Partnership is in the preleasing stages
for future factory outlet centers at two potential sites located in Concord, NC
(Charlotte) and Romulus, MI (Detroit). These two centers combined have the
potential to add over 1.1 million square feet of GLA to the Operating
Partnership's portfolio. The Operating Partnership is also in the process of
finalizing the leasing of another 46,000 square foot expansion to the Riverhead
Center and an additional 33,400 square foot expansion in Commerce, GA. 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 other
acquisitions will be made or that any development, expansion or acquisition will
result in an advantageous return on investment for the Operating Partnership.
S-13
<PAGE>
USE OF PROCEEDS
The Operating Partnership estimates the net proceeds of the Offering to be
approximately $73.4 million after deducting estimated expenses and underwriting
discount. The Operating Partnership intends to use the net proceeds from the
Offering to repay indebtedness presently outstanding under the Credit Facilities
and for general corporate purposes. The indebtedness under the Credit Facilities
was incurred principally to fund the cost of developing, expanding and acquiring
factory outlet centers. See "Recent Developments". On September 30, 1997, the
interest rate on the Credit Facilities averaged 7.5% per annum, with the Credit
Facilities scheduled to mature between January 15, 1999 and June 30, 1999.
CAPITALIZATION
The following table sets forth the capitalization of the Operating
Partnership as of June 30, 1997, and as adjusted to give effect to the Offering,
the Common Share Offering and the anticipated use of proceeds from the Offering
as described under "Use of Proceeds."
<TABLE>
<CAPTION>
JUNE 30, 1997
-----------------------
<S> <C> <C>
UNAUDITED
<CAPTION>
HISTORICAL AS ADJUSTED
---------- -----------
(IN THOUSANDS)
<S> <C> <C>
Debt:
Mortgages payable...................................................................... $ 74,640 $ 74,640
Secured Credit Facility................................................................ 35,100 --
Unsecured Credit Facilities............................................................ 30,150 --
8 3/4% Notes due 2001.................................................................. 75,000 75,000
7 7/8% Notes due 2004.................................................................. -- 75,000
---------- -----------
Total debt........................................................................... 214,890 224,640
---------- -----------
Partners' equity:
General partner, 6,742,885 and 90,839 general partnership units and preferred
partnership units outstanding, 7,822,885 and 90,839 as adjusted(1)................... 108,355 137,596
Limited partner, 3,033,305 limited partnership units outstanding....................... 24,556 24,556
---------- -----------
Total partners' equity............................................................... 132,911 162,152
---------- -----------
Total capitalization............................................................... $ 347,801 $ 386,792
---------- -----------
---------- -----------
</TABLE>
- ------------------------
(1) The general partner's equity, as adjusted, has been increased by the net
proceeds of the Company's Common Share Offering, which were contributed by
the Company to the Operating Partnership in exchange for 1,080,000
additional general partnership units.
S-14
<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA
The following table sets forth selected financial and other operating data
of the Operating Partnership on a historical basis. The information should be
read in conjunction with all of the financial statements and notes thereto and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" incorporated herein by reference from the Operating Partnership's
Annual Report on Form 10-K for the year ended December 31, 1996 and Quarterly
Report on Form 10-Q for the six months ended June 30, 1997.
The historical data as of and for the years ended December 31, 1996, 1995,
1994, 1993 and 1992 have been derived from historical financial statements
audited by Coopers & Lybrand L.L.P., independent auditors. The historical data
for the six months ended June 30, 1997 and June 30, 1996 have been derived from
the unaudited historical financial statements of the Operating Partnership. In
the opinion of management, this historical data includes all adjustments
(consisting only of normal recurring adjustments) necessary to present fairly
the information set forth. However, operating results for the six months ended
June 30, 1997 are not necessarily indicative of results that may be expected for
the year ended December 31, 1997.
The selected financial data includes the financial and operating information
of the Operating Partnership for periods subsequent to June 1993 and combined
financial and operating information of Tanger Properties, the predecessor
business, for periods prior to June 1993.
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30, YEAR ENDED DECEMBER 31,
------------------------ ------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
1997 1996 1996 1995 1994 1993
----------- ----------- --------- --------- --------- ---------
<CAPTION>
(IN THOUSANDS, EXCEPT PER UNIT DATA, RATIOS AND NUMBER OF CENTERS)
<S> <C> <C> <C> <C> <C> <C>
OPERATING DATA
Total revenues.................................... $ 39,681 $ 36,312 $ 75,500 $ 68,604 $ 45,988 $ 29,204
Income before extraordinary item.................. 7,822 7,501 16,177 15,352 15,147 8,555
Net income (1).................................... 7,822 6,670 15,346 15,352 15,147 5,879
UNIT DATA (2)
Income before extraordinary item (3).............. $ 0.71 $ 0.67 $ 1.46 $ 1.36 $ 1.32 $ .90
Net income (1)(3)................................. $ 0.71 $ 0.58 $ 1.37 $ 1.36 $ 1.32 $ .35
Distributions paid(4)............................. $ 1.07 $ 1.02 $ 2.06 $ 1.96 $ 1.80 $ .535
Weighted average number of general and limited
units........................................... 9,758 9,436 9,435 9,128 8,211 7,891
BALANCE SHEET DATA
Real estate assets, before depreciation........... $ 403,781 $ 337,817 $ 358,361 $ 325,881 $ 292,406 $ 137,666
Total assets...................................... 370,251 317,788 331,954 314,947 294,643 182,322
Long-term debt.................................... 214,890 165,743 178,004 156,749 121,323 20,316
Total partners' equity (deficit).................. 132,911 138,429 136,256 142,397 147,462 150,707
RATIOS
Earnings to fixed charges (5)..................... 1.75 1.98 1.99 2.23 4.19 2.27
EBITDA to Annual Service Charge (6)(10)........... 2.9 3.3 3.3 3.7 7.3 3.6
Debt to Adjusted Total Assets (7)(8).............. 52.9% 48.7% 49.3% 47.4% 41.0% 11.1%
Secured Debt to Adjusted Total Assets (9)......... 27.0% 25.2% 25.1% 47.4% 41.0% 11.1%
Consolidated income available for debt service to
annual service charge (10)...................... 2.9 3.3 3.2 3.7 7.1 3.5
Distribution Payout Ratio (11).................... 70% 71% 69% 71% 84% 91%
OTHER DATA
EBITDA (6)........................................ $ 24,505 $ 22,276 $ 46,474 $ 41,058 $ 26,089 $ 17,519
Funds from operations (12)........................ $ 16,633 $ 15,540 $ 32,313 $ 29,597 $ 23,189 $ 12,008
Cash flows from:
Operating activities............................ $ 16,557 $ 19,417 $ 38,031 $ 32,455 $ 21,274 $ 11,571
Investing activities............................ $ (42,025) $ (16,748) $ (36,401) $ (44,788) $(143,683) $ (49,277)
Financing activities............................ $ 25,504 $ (5,018) $ (4,176) $ 13,802 $ 80,661 $ 81,324
Gross leasable area open.......................... 3,993 3,652 3,739 3,507 3,115 1,980
Number of Centers................................. 28 27 27 27 25 19
<CAPTION>
<S> <C>
1992
---------
<S> <C>
OPERATING DATA
Total revenues.................................... $ 17,931
Income before extraordinary item.................. 1,991
Net income (1).................................... 1,605
UNIT DATA (2)
Income before extraordinary item (3)..............
Net income (1)(3).................................
Distributions paid(4).............................
Weighted average number of general and limited
units...........................................
BALANCE SHEET DATA
Real estate assets, before depreciation........... $ 85,460
Total assets...................................... 88,192
Long-term debt.................................... 90,188
Total partners' equity (deficit).................. (9,419)
RATIOS
Earnings to fixed charges (5)..................... 1.22
EBITDA to Annual Service Charge (6)(10)........... 1.7
Debt to Adjusted Total Assets (7)(8).............. 103.4%
Secured Debt to Adjusted Total Assets (9)......... 103.4%
Consolidated income available for debt service to
annual service charge (10)...................... 1.7
Distribution Payout Ratio (11)....................
OTHER DATA
EBITDA (6)........................................ $ 10,926
Funds from operations (12)........................ $ 4,471
Cash flows from:
Operating activities............................ $ 4,263
Investing activities............................ $ (29,374)
Financing activities............................ $ 25,528
Gross leasable area open.......................... 1,284
Number of Centers................................. 15
</TABLE>
S-15
<PAGE>
(1) Pro forma net income and net income per unit, which reflect adjustments to
historical information to present income information as if the formation of
the Operating Partnership had taken place on January 1, 1992, were $10,519
and $1.31 per unit during 1993 and $5,632 and $.71 per unit during 1992.
(2) Not applicable in 1992 since the formation of the Operating Partnership took
place in June 1993.
(3) Income in the per unit computations are net of applicable preferred
distributions of $908 and $1,283 for the six months ended June 30, 1997 and
1996 and $2,399, $2,903, $4,351 and $191 for the years ended December 31,
1996, 1995, 1994 and 1993.
(4) Excludes distributions paid per unit to holders of preferred partnership
units of $9.64 and $9.19 for the six months ended June 30, 1997 and 1996,
and $18.56, $17.66 and $15.06 for the years ended December 31, 1996, 1995
and 1994. No distributions to holders of preferred partnership units were
paid during 1993.
(5) For purposes of this calculation, earnings consists of income (loss) before
gain on sale of land and extraordinary items plus fixed charges (excluding
capitalized interest). Fixed charges consist of interest costs (whether
expensed or capitalized) and amortization of debt expense and discount or
premium relating to any indebtedness (whether expensed or capitalized).
(6) EBITDA represents earnings before interest expense, income taxes,
depreciation and amortization. EBITDA is presented because it is a widely
accepted financial indicator used by certain investors and analysts to
analyze and compare companies on the basis of operating performance. EBITDA
is not intended to represent cash flows for the period, nor has it been
presented as an alternative to operating income as an indicator of operating
performance, and should not be considered in isolation or as a substitute
for measures of performance prepared in accordance with generally accepted
accounting principles.
(7) As specified in the Indenture, Debt generally consists of indebtedness in
respect of borrowed money, secured indebtedness, reimbursement obligations
in connection with letters of credit and capitalized leases.
(8) As specified in the Indenture, Adjusted Total Assets consists of the
Undepreciated Real Estate Assets and all other assets (excluding intangibles
and accounts receivable) of the Operating Partnership and its Subsidiaries
on a consolidated basis. Undepreciated Real Estate Assets means the cost
(including capital improvements) of real estate assets of the Operating
Partnership and its Subsidiaries, before depreciation and amortization,
determined on a consolidated basis.
(9) As specified in the Indenture, Secured Debt consists of Debt secured by any
mortgage, lien, charge, pledge, encumbrance or security interest of any kind
upon any property of the Operating Partnership or any Subsidiary.
(10) As specified in the Indenture, Consolidated Income Available for Debt
Service consists of consolidated income of the Operating Partnership and its
Subsidiaries, plus amounts deducted for interest, provision for income
taxes, amortization of debt discount, provision for realized losses on
properties, depreciation and amortization, non-cash charges and amortization
of deferred charges, minus gains on properties. As specified in the
Indenture, Annual Service Charge as of any date means the amount which is
expensed or capitalized in such period for interest on Debt, excluding
amortization of deferred financing charges.
(11) Distributions paid in respect of the general partnership units and
preferred partnership units for such year as a percentage of FFO. The 1993
ratio is based on pro forma FFO which reflect adjustments to present FFO as
if the IPO had taken place on January 1, 1993, and distributions as if the
Operating Partnership had made distributions with respect to each quarter
during that year.
(12) FFO for all years presented have been restated in accordance with the
current definition provided by the National Association of Real Estate
Investment Trusts. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations--Funds from Operations," which is
incorporated herein by reference, from the Operating Partnership's Annual
Report on Form 10-K for the year ended December 31, 1996.
S-16
<PAGE>
BUSINESS AND PROPERTIES
As of September 30, 1997, the Operating Partnership's portfolio consisted of
30 Centers located in 23 states. The Operating Partnership's Centers range in
size from 8,000 to 528,015 square feet of GLA. The Centers are typically strip
shopping centers which enable customers to view all of the shops from the
parking lot, and therefore minimizing the time needed to shop. The Centers are
generally located near tourist destinations or along major interstate highways
in order to increase visibility and accessibility to potential customers.
The Operating Partnership believes that the Centers are well diversified
geographically and by tenant and that it is not dependent upon any single
property or tenant. The only Center that represented more than 10% of the
Operating Partnership's consolidated total assets or consolidated gross revenues
as of and for the year ended December 31, 1996 is the property in Riverhead, New
York. See "Business and Properties--Significant Property." No other Center
represented more than 10% of the Operating Partnership's consolidated total
assets or consolidated gross revenues as of and for the year ended December 31,
1996.
LOCATION OF CENTERS (AS OF SEPTEMBER 30, 1997)
<TABLE>
<CAPTION>
NUMBER OF GLA %
STATE CENTERS (SQ. FT.) OF GLA
- -------------------------------------------------------------------------------- --------------- ---------- -----------
<S> <C> <C> <C>
Georgia......................................................................... 3 619,124 15%
New York........................................................................ 1 528,015 12
Texas........................................................................... 2 396,650 9
Iowa............................................................................ 1 275,706 7
Missouri........................................................................ 1 255,073 6
Louisiana....................................................................... 1 245,325 6
Tennessee....................................................................... 2 217,434 5
Pennsylvania.................................................................... 1 203,952 5
Oklahoma........................................................................ 1 197,878 5
Arizona......................................................................... 1 186,018 4
North Carolina.................................................................. 2 180,270 4
Indiana......................................................................... 1 141,051 3
Minnesota....................................................................... 1 134,480 3
Michigan........................................................................ 1 112,120 3
California...................................................................... 1 108,950 3
Oregon.......................................................................... 1 97,749 2
Kansas.......................................................................... 1 88,200 2
Maine........................................................................... 2 84,897 2
Alabama......................................................................... 1 80,730 2
New Hampshire................................................................... 2 61,915 1
West Virginia................................................................... 1 49,252 1
Massachusetts................................................................... 1 23,417 --
Vermont......................................................................... 1 8,000 --
--
---------- ---
Total..................................................................... 30 4,296,206 100%
--
--
---------- ---
---------- ---
</TABLE>
S-17
<PAGE>
The table set forth below summarizes certain information with respect to the
Operating Partnership's existing centers as of September 30, 1997.
PROPERTY PORTFOLIO
<TABLE>
<CAPTION>
SECURED
DEBT FEE OR
GLA % OUTSTANDING GROUND
DATE OPENED LOCATION (SQ. FT.) LEASED (000'S) (4) LEASE
- --------------- --------------------------------------------- ---------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
JUN. 1986 KITTERY I, ME 56,312 100% $ 6,012 Fee
Aug. 1993 Expansion 3,882
----------
60,194
MAR. 1987 CLOVER, NORTH CONWAY, NH 11,000 100 -- Fee
NOV. 1987 MARTINSBURG, WV 42,346 93 -- Fee
Sep. 1994 Expansion 6,906
----------
49,252
APR. 1988 LL BEAN, NORTH CONWAY, NH 50,915 100 -- Fee
JUL. 1988 PIGEON FORGE, TN 94,480 100 -- Ground
Jul. 1994 Expansion 270 Lease
94,750 (2086)
AUG. 1988 BOAZ, AL 78,550 100 3,510 Fee
May 1993 Expansion 2,180
<CAPTION>
----------
<S> <C> <C> <C> <C> <C>
80,730
OCT. 1988 MANCHESTER, VT 8,000 100 -- Fee
JUN. 1989 KITTERY II, ME 23,119 100 -- Fee
Nov. 1993 Expansion 1,584
<CAPTION>
----------
<S> <C> <C> <C> <C> <C>
24,703
JUL. 1989 COMMERCE, GA 100,100 100 10,270 Fee
Mar. 1990 Expansion 58,650
May 1992 Expansion 4,500
May 1993 Expansion 12,500
Sep. 1994 Expansion 10,000
<CAPTION>
----------
<S> <C> <C> <C> <C> <C>
185,750
OCT. 1989 BOURNE, MA 23,417 100 -- Fee
FEB. 1991 WEST BRANCH, MI 75,120 98 6,885 Fee
Oct. 1992 Expansion 25,000
May 1994 Expansion 12,000
<CAPTION>
----------
<S> <C> <C> <C> <C> <C>
112,120
</TABLE>
S-18
<PAGE>
<TABLE>
<CAPTION>
SECURED
DEBT FEE OR
GLA % OUTSTANDING GROUND
DATE OPENED LOCATION (SQ. FT.) LEASED (000'S) (4) LEASE
- --------------- --------------------------------------------- ---------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
MAY 1991 WILLIAMSBURG, IA 121,444(1) 97 17,067 Fee
Nov. 1991 Expansion 50,675
Nov. 1992 Expansion 34,000
Dec. 1993 Expansion 43,400
Apr. 1996 Expansion 26,187
<CAPTION>
----------
<S> <C> <C> <C> <C> <C>
275,706
FEB. 1992 CASA GRANDE, AZ 94,223 92 -- Fee
Dec. 1992 Expansion 91,795
<CAPTION>
----------
<S> <C> <C> <C> <C> <C>
186,018
AUG. 1992 STROUD, OK 96,378 94 8,776 Fee
Nov. 1992 Expansion 37,500
Aug. 1993 Expansion 64,000
<CAPTION>
----------
<S> <C> <C> <C> <C> <C>
197,878
DEC. 1992 NORTH BRANCH, MN 106,280 100 -- Fee
Aug. 1993 Expansion 28,200
<CAPTION>
----------
<S> <C> <C> <C> <C> <C>
134,480
FEB. 1993 GONZALES, LA 105,985 100 10,530 Fee
Aug. 1993 Expansion 109,450
Feb. 1996 Expansion 29,890
<CAPTION>
----------
<S> <C> <C> <C> <C> <C>
245,325
MAY 1993 SAN MARCOS, TX 98,820(2) 100 10,280 Fee
Oct. 1993 Expansion 40,200
Nov. 1994 Expansion 17,500
April 1995 Expansion 32,750
July 1996 Expansion 29,945
<CAPTION>
----------
<S> <C> <C> <C> <C> <C>
219,215
DEC. 1993 LAWRENCE, KS 88,200 84 -- Fee
DEC. 1993 MCMINNVILLE, OR 97,749 74 -- Fee
AUG. 1994 RIVERHEAD, NY 286,195
Aug. 1997 Expansion 241,820
<CAPTION>
----------
<S> <C> <C> <C> <C> <C>
528,015 98 -- Ground
Lease
(2004)(3)
AUG. 1994 TERRELL, TX 126,185 97 -- Fee
Oct. 1995 Expansion 51,250
<CAPTION>
----------
<S> <C> <C> <C> <C> <C>
177,435
SEP. 1994 SEYMOUR, IN 141,051 100 8,243 Fee
</TABLE>
S-19
<PAGE>
<TABLE>
<CAPTION>
SECURED
DEBT FEE OR
GLA % OUTSTANDING GROUND
DATE OPENED LOCATION (SQ. FT.) LEASED (000'S) (4) LEASE
- --------------- --------------------------------------------- ---------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
OCT. 1994(5) LANCASTER, PA 191,152 100 15,883 Fee
Nov. 1995 Expansion 12,800
<CAPTION>
----------
<S> <C> <C> <C> <C> <C>
203,952
NOV. 1994 BRANSON, MO 230,073 99 12,284 Fee
Jun. 1996 Expansion 25,000
<CAPTION>
----------
<S> <C> <C> <C> <C> <C>
255,073
NOV. 1994 LOCUST GROVE, GA 168,700 99 -- Fee
Dec. 1995 Expansion 45,964
Aug. 1996 Expansion 34,190
<CAPTION>
----------
<S> <C> <C> <C> <C> <C>
248,854
JAN. 1995 BARSTOW, CA 108,950 100 -- Fee
DEC. 1995 COMMERCE II, GA 148,520 98 -- Fee
Aug. 1996 Expansion 36,000
<CAPTION>
----------
<S> <C> <C> <C> <C> <C>
184,520
FEB. 1997 (5) SEVIERVILLE, TN 122,684 100 -- Ground
Lease
(2046)
SEP. 1997 (5) BLOWING ROCK, NC 97,808 100 -- Fee
SEP. 1997 (5) NAGS HEAD, NC 82,462 97 -- Fee
---------- --- -----------
TOTAL 4,296,206 98% $ 109,740
---------- --- -----------
---------- --- -----------
</TABLE>
- ------------------------
(1) GLA excludes 21,781 square foot land lease on outparcel occupied by Pizza
Hut.
(2) GLA excludes 17,400 square foot land lease on outparcel occupied by Wendy's.
(3) The original Riverhead Center is subject to a ground lease which may be
renewed at the option of the Operating Partnership for up to seven
additional terms of five years each. The land on which the Riverhead Center
expansion is located is owned by the Operating Partnership.
(4) As of June 30, 1997. The weighted average interest rate for debt outstanding
at June 30, 1997 was 8.4% and the weighted average maturity date was
December 2000.
(5) Represents date acquired by the Operating Partnership.
S-20
<PAGE>
Management has an ongoing program for acquiring Centers, developing new
Centers and expanding existing Centers. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations--Liquidity and Capital
Resources" incorporated herein by reference from the Operating Partnership's
Annual Report on Form 10-K for the year ended December 31, 1996 for a discussion
of the cost of such programs and the sources of financing thereof.
Certain of the Operating Partnership's Centers serve as collateral for
mortgage notes payable and the secured revolving line of credit. Of the 30
Centers, the Operating Partnership owns 27 and has ground leases on three. The
land on which the Pigeon Forge and the Sevierville Centers are located are
subject to long-term ground leases expiring in 2086 and 2046, respectively. The
land on which the original Riverhead Center is located is also subject to a
ground lease with an initial term expiring in 2004, with renewal at the option
of the Operating Partnership for up to seven additional terms of five years
each. The land on which the Riverhead Center expansion is located is owned by
the Operating Partnership.
The term of the Operating Partnership's typical tenant lease ranges from
five to ten years. Generally, leases provide for the payment of fixed monthly
rent in advance. There are often contractual base rent increases during the
initial term of the lease. In addition, the rental payments are customarily
subject to upward adjustments based upon tenant sales volume. Most leases
provide for payment by the tenant of a portion of the real estate taxes,
insurance, common area maintenance, advertising and promotion expenses incurred
by the applicable Center. As a result, substantially all operating expenses for
the Centers are borne by the tenants.
LEASE EXPIRATIONS
The following table sets forth, as of September 30, 1997, scheduled lease
expirations, assuming none of the tenants exercise renewal options. Most leases
are renewable for five year terms at the tenant's option.
<TABLE>
<CAPTION>
% OF GROSS
ANNUALIZED
APPROX. AVERAGE BASE RENT
NO. OF GLA ANNUALIZED ANNUALIZED REPRESENTED
LEASES (SQ. BASE RENT BASE RENT BY EXPIRING
YEAR EXPIRING(1) FT.)(1) PER SQ. FT. (000'S) (2) LEASES
- ------------------------------------------------- --------------- ---------- ----------- ----------- ---------------
<S> <C> <C> <C> <C> <C>
1997............................................. 25 81,000 $ 13.73 $ 1,112 2%
1998............................................. 109 426,000 13.90 5,920 10
1999............................................. 185 675,000 14.51 9,792 17
2000............................................. 165 572,000 14.43 8,256 15
2001............................................. 150 554,000 13.77 7,626 14
2002............................................. 189 715,000 14.75 10,547 19
2003............................................. 62 289,000 13.78 3,982 7
2004............................................. 62 359,000 13.63 4,892 9
2005............................................. 15 100,000 11.10 1,110 2
2006............................................. 4 58,000 10.91 633 1
2007 and thereafter.............................. 30 249,000 9.97 2,482 4
--- ---------- ----------- ----------- ---
Total............................................ 996 4,078,000 $ 13.82 $ 56,352 100%
--- ---------- ----------- ----------- ---
--- ---------- ----------- ----------- ---
</TABLE>
- ------------------------
(1) Excludes leases that have been entered into but which tenant has not yet
taken possession and excludes month-to-month leases.
(2) Base rent is defined as the minimum payments due, excluding periodic
contractual fixed increases.
S-21
<PAGE>
RENTAL AND OCCUPANCY RATES
The following table sets forth information regarding the expiring leases
during each of the last four calendar years.
<TABLE>
<CAPTION>
RENEWED BY EXISTING RE-LEASED TO
TOTAL EXPIRING TENANTS NEW TENANTS
-------------------------- ---------------------------- ----------------------------
<S> <C> <C> <C> <C> <C> <C>
% OF TOTAL
GLA CENTER GLA % OF EXPIRING GLA
YEAR (SQ. FT.) GLA (SQ. FT.) GLA (SQ. FT.) % OF EXPIRING GLA
- ---------------------------------------- --------- --------------- --------- ----------------- --------- -----------------
1996.................................... 149,689 4% 134,639 90% 15,050 10%
1995.................................... 93,650 3 91,250 97 2,400 3
1994.................................... 115,697 3 105,697 91 10,000 9
1993.................................... 129,069 4 123,569 96 5,500 4
</TABLE>
The following table sets forth the average base rental rate increases per
square foot upon re-leasing stores that were turned over or renewed during each
of the last four calendar years.
<TABLE>
<CAPTION>
STORES RE-LEASED TO NEW
RENEWALS OF EXISTING LEASES TENANTS(1)
------------------------------------------------ ---------------------------------
AVERAGE ANNUALIZED BASE RENTS AVERAGE ANNUALIZED
BASE RENTS
($ PER SQ. FT.) ($ PER SQ. FT.)
GLA ------------------------------------- GLA (SQ. ----------------------
YEAR (SQ. FT.) EXPIRING NEW % INCREASE FT.) EXPIRING NEW
- ----------------------------------------- --------- ----------- --------- ------------- --------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
1996..................................... 134,639 $ 12.44 $ 14.02 13% 78,268 $ 14.40 $ 14.99
1995..................................... 91,250 11.54 13.03 13 59,445 13.64 14.80
1994..................................... 105,697 14.26 16.56 16 71,350 12.54 14.30
1993..................................... 123,569 12.83 13.94 9 29,000 10.81 14.86
<CAPTION>
YEAR % INCREASE
- ----------------------------------------- -------------
<S> <C>
1996..................................... 4%
1995..................................... 9
1994..................................... 14
1993..................................... 38
</TABLE>
- ------------------------
(1) The square footage re-leased to new tenants for 1996, 1995, 1994 and 1993
contain 15,050, 2,400, 10,000 and 5,500 square feet, respectively, that was
re-leased to new tenants upon expiration of an existing lease. The remaining
space was retenanted prior to any lease expiration.
The following table shows certain information on rents and occupancy rates
for the Centers during each of the last five calendar years.
<TABLE>
<CAPTION>
AVERAGE
ANNUALIZED AGGREGATE
BASE RENT GLA OPEN PERCENTAGE
% PER AT END OF NUMBER OF RENTS
YEAR LEASED SQ. FT. (1) EACH YEAR CENTERS (000'S)
- ------------------------------------------------------- ----------- ----------- ---------- --------------- -----------
<S> <C> <C> <C> <C> <C>
1996................................................... 99% $ 13.89 3,739,000 27 $ 2,017
1995................................................... 99 13.92 3,507,000 27 2,068
1994................................................... 99 13.43 3,115,000 25 1,658
1993................................................... 98 13.03 1,980,000 19 1,323
1992................................................... 99 12.77 1,284,000 15 1,167
</TABLE>
- ------------------------
(1) Represents total base rental revenue divided by weighted average GLA of the
portfolio, which amount does not take into consideration fluctuations in
occupancy throughout the year.
S-22
<PAGE>
OCCUPANCY COSTS
The Operating Partnership believes that its ratio of average tenant
occupancy costs (which includes base rent, common area maintenance, real estate
taxes, insurance, advertising and promotions) to average sales per square foot
is low relative to other forms of retail distribution. The following table sets
forth, for each of the last five years, tenant occupancy costs per square foot
as a percentage of reported tenant sales per square foot.
<TABLE>
<CAPTION>
OCCUPANCY COSTS AS A % OF
YEAR TENANT SALES
- ---------------------------------------------------------------------------- -------------------------
<S> <C>
1996........................................................................ 8.7%
1995........................................................................ 8.5
1994........................................................................ 7.4
1993........................................................................ 6.5
1992........................................................................ 6.5
</TABLE>
TENANTS
The following table sets forth certain information with respect to the
Operating Partnership's ten largest tenants and their store concepts as of
September 30, 1997.
<TABLE>
<CAPTION>
NUMBER GLA % OF TOTAL
TENANT OF STORES (SQ. FT.) GLA
- ------------------------------------------------------------------------------- ------------- ---------- -------------
<S> <C> <C> <C>
Phillips-Van Heusen Corporation (1):
Bass Shoes................................................................... 16 108,262 2.5%
Bass Apparel................................................................. 2 9,300 0.2
Bass Company Store........................................................... 2 13,580 0.3
Van Heusen................................................................... 19 81,556 1.9
Geoffrey Beene Co. Store..................................................... 16 66,640 1.6
Izod......................................................................... 16 37,407 0.9
Gant......................................................................... 9 25,100 0.6
--- ---------- ---
80 341,845 8.0
Liz Claiborne:
Liz Claiborne................................................................ 24 272,881 6.4
Elizabeth.................................................................... 5 20,700 0.4
--- ---------- ---
29 293,581 6.8
Reebok International, Ltd...................................................... 19 147,500 3.4
Sara Lee Corporation:
L'eggs, Hanes, Bali.......................................................... 22 103,390 2.4
Champion..................................................................... 2 6,500 0.2
Sara Lee Bakery.............................................................. 3 7,800 0.2
Coach........................................................................ 6 13,815 0.3
Socks Galore................................................................. 7 9,798 0.2
--- ---------- ---
40 141,303 3.3
</TABLE>
S-23
<PAGE>
<TABLE>
<CAPTION>
NUMBER GLA % OF TOTAL
TENANT OF STORES (SQ. FT.) GLA
- ------------------------------------------------------------------------------- ------------- ---------- -------------
<S> <C> <C> <C>
County Seat Stores, Inc. (2):
County Seat.................................................................. 3 15,000 0.4%
Levi's by County Seat........................................................ 8 91,700 2.1
--- ---------- ---
11 106,700 2.5
American Commercial, Inc.:
Mikasa Factory Store......................................................... 12 91,000 2.1
Brown Group Retail, Inc.:
Famous Footwear.............................................................. 4 21,000 0.5
Naturalizer.................................................................. 7 17,200 0.4
Brown Shoe................................................................... 2 10,500 0.2
Factory Brand Shoes.......................................................... 7 35,200 0.8
Air Step/Buster Brown........................................................ 1 3,000 0.1
--- ---------- ---
21 86,900 2.0
Oshkosh B'Gosh, Inc.:
Oshkosh...................................................................... 15 76,790 1.8
Genuine Kids................................................................. 1 3,000 0.1
--- ---------- ---
16 79,790 1.9
VF Factory Outlet, Inc......................................................... 3 78,697 1.8
Nine West Group, Inc.:
Nine West.................................................................... 16 38,235 0.8
Banister..................................................................... 3 11,831 0.3
Capezio...................................................................... 5 14,970 0.4
--- ---------- ---
24 65,036 1.5
--- ---------- ---
Total of all tenants listed in table......................................... 255 1,432,352 33.3%
--- ---------- ---
--- ---------- ---
</TABLE>
- ------------------------
(1) Phillips-Van Heusen Corporation ("PVH") has announced the closing of a
significant portion of its underperforming stores. Generally, the Operating
Partnership's leases with PVH are long-term and do not permit the tenant to
close the store during the lease term. However, the Operating Partnership has
granted PVH's request to close six additional stores by December 31, 1997.
Management believes that the rents derived from stores that are scheduled for
closing, or might be considered for closing in the future, by PVH would not have
a material effect on the Operating Partnership's results of operations or
financial condition.
(2) County Seat Stores, Inc. ("County Seat") is currently in bankruptcy
proceedings. The Operating Partnership has entered into discussions with County
Seat with respect to modifications of certain of their leases. Management
believes that this bankruptcy will not have a material effect on the Operating
Partnership's results of operations or financial condition.
SIGNIFICANT PROPERTY
The original Riverhead Center was constructed during 1994 and tenants began
to occupy space mid-year. At December 31, 1996, 100% of the available GLA at
this Center was occupied by tenants. The average annualized base rental rate of
this Center during 1996, 1995 and 1994 was approximately $17.73,
S-24
<PAGE>
$17.63 and $18.18 per weighted average GLA. The tenants at this Center
principally conduct retail sales operations. During 1997, the Operating
Partnership substantially completed construction of a 241,800 square foot
expansion to this Center, which is anchored by Off 5th-SAKS Fifth Avenue Outlet
Store. A further expansion of 59,700 square feet of GLA is currently under
construction and is scheduled to be completed by December 1997, at which time
the Riverhead Center will total over 587,000 square feet of GLA and is expected
to be 100% occupied. In addition, the Operating Partnership is also in the
process of finalizing the leasing of another 46,000 square foot expansion to the
Riverhead Center. See "Recent Developments--Property Development, Expansion and
Acquisition." No one tenant occupies more than 10% of this Center's available
GLA.
Depreciation on the Riverhead Center is recognized on a straight-line basis
over 33.33 years, resulting in a depreciation rate of 3% per year. At December
31, 1996, the net federal tax basis of this Center was approximately
$37,509,000. Real estate taxes assessed on this Center during 1996 amounted to
$749,000.
The following table sets forth, as of September 30, 1997, scheduled lease
expirations at the Riverhead Center, assuming that none of the tenants exercise
renewal options:
<TABLE>
<CAPTION>
% OF GROSS
ANNUALIZED BASE
NO. OF ANNUALIZED ANNUALIZED RENT
LEASES GLA BASE RENT BASE RENT REPRESENTED BY
YEAR EXPIRING (SQ. FT.) PER SQ. FT. (000'S) (1) EXPIRING LEASES
- -------------------------------------------------- ----------- --------- ----------- ----------- -------------------
<S> <C> <C> <C> <C> <C>
1998.............................................. 1 10,000 $ 16.00 $ 160 2%
1999.............................................. 23 85,860 18.96 1,628 18
2000.............................................. 5 17,235 19.53 332 3
2001.............................................. 9 37,150 20.54 763 8
2002.............................................. 53 177,528 20.76 3,686 40
2003.............................................. 4 16,800 19.58 329 3
2004.............................................. 17 77,650 19.92 1,547 17
2005.............................................. -- -- -- -- --
2006.............................................. -- -- -- -- --
2007.............................................. 7 77,500 11.05 856 9
--- --------- ----------- ----------- ---
Total............................................. 119 499,723 $ 18.61 $ 9,301 100%
--- --------- ----------- ----------- ---
--- --------- ----------- ----------- ---
</TABLE>
- ------------------------
(1) Base rent is defined as the minimum payments due, excluding periodic
contractual fixed increases.
S-25
<PAGE>
MANAGEMENT
The following table sets forth certain information concerning the executive
officers of the Company:
<TABLE>
<CAPTION>
NAME AGE POSITION
- ---------------------------------------------------- ----- ----------------------------------------------------
<S> <C> <C>
Stanley K. Tanger................................... 74 Chairman of the Board of Directors and Chief
Executive Officer
Steven B. Tanger.................................... 48 Director, President and Chief Operating Officer
Rochelle G. Simpson................................. 58 Secretary and Senior Vice President-- Administration
and Finance
Willard A. Chafin, Jr............................... 60 Senior Vice President--Leasing, Site Selection,
Operations and Marketing
Frank C. Marchisello, Jr............................ 39 Vice President--Chief Financial Officer
Joseph H. Nehmen.................................... 48 Vice President--Operations
Virginia R. Summerell............................... 38 Treasurer and Assistant Secretary
C. Randy Warren, Jr................................. 33 Vice President--Leasing
Richard T. Parker................................... 48 Vice President--Development
Carrie A. Johnson................................... 34 Vice President--Marketing
</TABLE>
The following is a biographical summary of the experience of the executive
officers of the Company:
STANLEY K. TANGER. Mr. Tanger is the Chief Executive Officer and Chairman of
the Board of Directors of the Company. He also served as President from
inception of the Company to December 1994. Mr. Tanger opened one of the
country's first outlet shopping centers in Burlington, North Carolina in 1981.
Before entering the factory outlet center business, Mr. Tanger was President and
Chief Executive Officer of his family's apparel manufacturing business,
Tanger/Creighton, Inc., for 30 years.
STEVEN B. TANGER. Mr. Tanger is a director of the Company and was named
President and Chief Operating Officer effective January 1, 1995. Previously, Mr.
Tanger served as Executive Vice President since joining the Company in 1986. He
has been with Tanger-related companies for most of his professional career,
having served as Executive Vice President of Tanger/Creighton for 10 years. He
is responsible for all phases of project development, including site selection,
land acquisition and development, leasing, marketing and overall management of
existing outlet centers. Mr. Tanger is a graduate of the University of North
Carolina at Chapel Hill and the Stanford University School of Business Executive
Program. Mr. Tanger is the son of Stanley K. Tanger.
ROCHELLE G. SIMPSON. Ms. Simpson was named Senior Vice
President--Administration and Finance of the Company in October 1995. She is
also the Secretary of the Company and previously served as Treasurer from May
1993 through May 1995. She entered the factory outlet center business in January
1981, in general management and as chief accountant for Stanley K. Tanger and
later became Vice President--Administration and Finance of Tanger Properties.
Ms. Simpson oversees the accounting and finance departments and has overall
management responsibility for the Company's headquarters.
WILLARD A. CHAFIN, JR. Mr. Chafin was named Senior Vice President--Leasing,
Site Selection, Operations and Marketing of the Company in October 1995. He
joined the Company in April 1990, and since has held various executive positions
where his major responsibilities included supervising the Marketing, Leasing and
Property Management Departments, and leading the Asset Management Team. Prior to
joining the Company, Mr. Chafin was the Director of Store Development for the
Sara Lee Corporation, where he spent 21 years. Before joining Sara Lee, Mr.
Chafin was employed by Sears Roebuck & Co. for nine years in advertising/sales
promotion, inventory control and merchandising.
FRANK C. MARCHISELLO, JR. Mr. Marchisello was named Vice President--Chief
Financial Officer of the Company in November 1994. Previously, he served as
Chief Accounting Officer since joining the Company
S-26
<PAGE>
in January 1993 and Assistant Treasurer since February 1994. He was employed by
Gilliam, Coble & Moser, certified public accountants, from 1981 to 1992, the
last six years of which he was a partner of the firm in charge of various real
estate clients. While at Gilliam, Coble & Moser, Mr. Marchisello worked directly
with the Tangers since 1982. Mr. Marchisello is a graduate of the University of
North Carolina at Chapel Hill and is a certified public accountant.
JOSEPH H. NEHMEN. Mr. Nehmen joined the Company in September 1995 and was
elected Vice President--Operations in October 1995. Mr. Nehmen has over 20 years
experience in private business. Prior to joining Tanger, Mr. Nehmen was owner of
Merchants Wholesaler, a privately held distribution company in St. Louis,
Missouri. He is a graduate of Washington University. Mr. Nehmen is the
son-in-law of Stanley K. Tanger.
VIRGINIA R. SUMMERELL. Ms. Summerell was named Treasurer of the Company in
May 1995 and Assistant Secretary in November 1994. Previously, she held the
position of Director of Finance since joining the Company in August 1992, after
nine years of service with NationsBank. Her major responsibilities include cash
management and oversight of all project and corporate finance transactions. Ms.
Summerell is a graduate of Davidson College and holds an MBA from the Babcock
School at Wake Forest University.
C. RANDY WARREN, JR. Mr. Warren is the Vice President--Leasing of the
Company and joined the Company in November 1995. He was previously director of
anchor leasing at Prime Retail, Inc., where he managed anchor tenant relations
and negotiation on a national basis. Prior to that, he worked as a leasing
executive for the company. Before entering the outlet industry, he was founder
of Preston Partners, a development consulting firm in Baltimore, MD. Mr. Warren
is a graduate of Towson State University and holds an MBA from Loyola College.
RICHARD T. PARKER. Mr. Parker is the Vice President--Development and joined
the Company in April 1996. Prior to joining Tanger, Mr. Parker was with The
Mills Corp for nine years where he served as Vice President of Land Development
responsible for organizing and planning the development, merchandising and sale
of peripheral land surrounding 2 million-plus square foot super regional mall
projects. Prior to joining The Mills Corp, Mr. Parker was employed by Marriott
International for 6 years where he served as Director of Franchise Development.
Mr. Parker is a graduate of Golden Gate University and a veteran of the United
States Air Force.
CARRIE A. JOHNSON. Ms. Johnson was named Vice President--Marketing in
September 1996. Previously, she held the position of Assistant Vice
President--Marketing since joining the Company in December 1995. Prior to
joining Tanger, Ms. Johnson was with Prime Retail, Inc. for 4 years where she
served as Regional Marketing Director responsible for coordinating and directing
marketing for five outlet centers in the southeast region. Prior to joining
Prime Retail, Inc., Ms. Johnson was Marketing Manager for North Hills, Inc. for
five years and also served in the same role for the Edward J. DeBartolo Corp.
for two years. Ms. Johnson is a graduate of East Carolina University.
S-27
<PAGE>
DESCRIPTION OF THE NOTES
The following description of the particular terms of the Notes offered
hereby supplements and, to the extent inconsistent therewith, replaces the
description of the general terms and provisions of Senior Debt Securities set
forth in the accompanying Prospectus, to which description reference is hereby
made. The following statements relating to the Notes and the Indenture are
summaries of provisions contained therein and do not purport to be complete.
Such statements are qualified by reference to the provisions of the Notes and
the Indenture, including the definitions therein of certain terms. (Capitalized
terms used but not defined herein shall have the meanings given to them in the
accompanying Prospectus.)
GENERAL
The Notes constitute a series of Senior Debt Securities (which are more
fully described in the accompanying Prospectus) to be issued pursuant to an
indenture, as amended, modified or supplemented (the "Indenture"), among the
Operating Partnership, the Company and State Street Bank and Trust Company, as
trustee (the "Trustee"), and will be limited to an aggregate principal amount of
$75,000,000. The terms of the Notes include those provisions contained in the
Indenture and those made part of the Indenture by reference to the Trust
Indenture Act of 1939, as amended (the "Indenture Act").
The Notes will be direct, unsecured obligations of the Operating Partnership
and will rank pari passu with each other and with all other unsecured and
unsubordinated indebtedness of the Operating Partnership from time to time
outstanding. However, the Notes will be effectively subordinated to the prior
claims of creditors under its mortgage notes and secured Credit Facilities. As
of June 30, 1997, on a pro forma basis after giving effect to the use of
proceeds from the Offering, the Operating Partnership would have had
approximately $224.6 million of indebtedness outstanding, $74.6 million of which
consists of indebtedness under its mortgage notes. See "Capitalization." Subject
to certain limitations set forth in the Indenture, and as described under "--
Certain Covenants" below, in the accompanying Prospectus, the Operating
Partnership may incur additional secured and unsecured indebtedness from time to
time.
The Notes will mature on October 24, 2004 (the "Maturity Date") and will not
be subject to redemption prior to the Maturity Date. The Notes will not be
subject to any sinking fund. The Notes will be issued only in full registered,
book-entry form without coupons, in denominations of $1,000 and integral
multiples thereof, except under the limited circumstances described below under
"-- Book-Entry System" below.
Except as described under "-- Merger, Consolidation or Sale" and "-- Certain
Covenants" below and under "Description of Debt Securities -- Merger,
Consolidation or Sale" in the accompanying Prospectus, the Indenture does not
contain any other provisions that would limit the ability of Operating
Partnership to incur indebtedness or that would afford holders of the Notes
protection in the event of (i) a highly leveraged or similar transaction
involving the Operating Partnership, the Company as general partner of the
Operating Partnership, or any Affiliate of either such party, (ii) a change of
control, or (iii) a reorganization, restructuring, merger or similar transaction
involving the Operating Partnership that may adversely affect the holders of the
Notes. In addition, subject to the limitations set forth under "-- Merger,
Consolidation or Sale" and "-- Certain Covenants" below or under "Description of
Debt Securities -- Merger, Consolidation or Sale" and "-- Certain Covenants" in
the accompanying Prospectus, the Operating Partnership may, in the future, enter
into certain transactions such as the sale of all or substantially all of its
assets or the merger or consolidation of the Operating Partnership that would
increase the amount of the Operating Partnership's indebtedness or substantially
reduce or eliminate the Operating Partnership's assets, which may have an
adverse effect on the Operating Partnership's ability to service its
indebtedness, including the Notes. The Operating Partnership and its management
have no present intention of engaging in a highly leveraged or similar
transaction involving the Operating Partnership.
S-28
<PAGE>
TANGER FACTORY OUTLET CENTERS, INC.
The Company will fully, unconditionally and irrevocably guarantee the due
and punctual payment of principal of, and interest on, the Notes, when and as
the same shall become due and payable, whether at maturity, by declaration of
acceleration or otherwise.
PRINCIPAL AND INTEREST
The Notes will bear interest at 7.875% per annum from October 24, 1997 or
from the immediately preceding Interest Payment Date (as defined below) to which
interest has been paid or duly provided for, payable semi-annually in arrears on
each April 24 and October 24, commencing April 24, 1998 (each, an "Interest
Payment Date"), to the persons (the "Holders") in whose names the applicable
Notes are registered in the security register applicable to the Notes at the
close of business 15 calendar days prior to the applicable Interest Payment
Date, regardless of whether such day is a Business Day, as defined below.
Interest on the Notes will be computed on the basis of a 360-day year of twelve
30-day months.
The principal of each Note payable on the Maturity Date will be paid against
presentation and surrender of such Note at the corporate trust office of the
Trustee, initially having an affiliate office at 61 Broadway, 15th Floor, New
York, New York 10006, in such coin or currency of the United States of America
as at the time of payment is legal tender for payment of public and private
debts.
If any Interest Payment Date or the Maturity Date falls on a day that is not
a Business Day, the required payment shall be made on the next Business Day as
if made on the date such payment was due and no interest shall accrue on the
amount so payable for the period from and after such Interest Payment Date or
the Maturity Date, as the case may be, to the date of such payment on such next
Business Day. "Business Day" means any day other than a Saturday, Sunday or
other day on which banking institutions in The City of New York are authorized
or obligated by law, regulation or executive order to be closed.
MERGER, CONSOLIDATION OR SALE
In addition to the restrictions on merger, consolidation or sale contained
in the accompanying Prospectus (see "Description of Debt Securities -- Merger,
Consolidation or Sale"), the Operating Partnership will not consolidate with or
merge with or into any corporation or partnership or sell, convey, transfer,
lease or otherwise dispose of all or substantially all of its assets to any
other corporation or partnership unless, after giving pro forma effect to the
consolidation, merger, sale, conveyance, transfer, lease or other disposition,
the Operating Partnership or successor entity could incur at least $1.00 of Debt
(other than intercompany Debt) in accordance with the Indenture covenants
limiting the incurrence of Debt.
CERTAIN COVENANTS
LIMITATIONS ON INCURRENCE OF DEBT. The Operating Partnership will not, and
will not permit any Subsidiary to, incur any Debt, other than intercompany debt
(representing Debt to which the only parties are the Company, the Operating
Partnership and any of their Subsidiaries (but only so long as such Debt is held
solely by any of the Company, the Operating Partnership and any Subsidiary) that
is subordinate in right of payment to the Notes) if, immediately after giving
effect to the incurrence of such additional Debt, the aggregate principal amount
of all outstanding Debt of the Operating Partnership and its Subsidiaries on a
consolidated basis determined in accordance with generally accepted accounting
principles is greater than 60% of the sum of (i) the Operating Partnership's
Total Assets as of the end of the calendar quarter covered in the Operating
Partnership's Annual Report on Form 10-K or Quarterly Report on Form 10-Q, as
the case may be, most recently filed with the Commission (or, if such filing is
not permitted under the Exchange Act, with the Trustee) prior to the incurrence
of such additional Debt and (ii) any increase in Total Assets from the end of
such quarter including, without limitation, any increase in Total Assets
S-29
<PAGE>
resulting from the incurrence of such additional Debt (such increase together
with the Operating Partnership's Total Assets shall be referred to as the
"Adjusted Total Assets").
In addition to any other limitations on the incurrence of Debt, the
Operating Partnership will not permit any Restricted Subsidiary to incur any
Debt, other than intercompany Debt.
In addition to any other limitations on the incurrence of Debt, the
Operating Partnership will not, and will not permit any Subsidiary to, incur any
Secured Debt, whether owned at the date of the Indenture or thereafter acquired,
if, immediately after giving effect to the incurrence of such additional Secured
Debt, the aggregate principal amount of all outstanding Secured Debt of the
Operating Partnership and its Subsidiaries on a consolidated basis is greater
than 40% of the Operating Partnership's Adjusted Total Assets.
In addition to any other limitations on the incurrence of Debt, the
Operating Partnership will not, and will not permit any Subsidiary to, incur any
Debt if the ratio of Consolidated Income Available for Debt Service to the
Annual Service Charge for the period consisting of the four consecutive fiscal
quarters most recently ended prior to the date on which such additional Debt is
to be incurred shall have been less than 2.0 to 1, on a pro forma basis after
giving effect to the incurrence of such Debt and to the application of the
proceeds therefrom, and calculated on the assumption that (i) such Debt and any
other Debt incurred by the Operating Partnership or its Subsidiaries since the
first day of such four-quarter period and the application of the proceeds
therefrom, including to refinance other Debt, had occurred at the beginning of
such period, (ii) the repayment or retirement of any other Debt by the Operating
Partnership or its Subsidiaries since the first day of such four-quarter period
had been incurred, repaid or retired at the beginning of such period (except
that, in making such computation, the amount of Debt under any revolving credit
facility shall be computed based upon the average daily balance of such Debt
during such period), (iii) any income earned as a result of any increase in
Adjusted Total Assets since the end of such four-quarter period had been earned,
on an annualized basis, during such period, and (iv) in the case of any
acquisition or disposition by the Operating Partnership or any Subsidiary of any
asset or group of assets since the first day of such four-quarter period,
including, without limitation, by merger, stock purchase or sale, or asset
purchase or sale, such acquisition or disposition or any related repayment of
Debt had occurred as of the first day of such period with the appropriate
adjustments with respect to such acquisition or disposition being included in
such pro forma calculation.
For purposes of the foregoing provisions regarding the limitations on the
incurrence of Debt, Debt shall be deemed to be "incurred" by the Operating
Partnership and its Subsidiaries on a consolidated basis whenever the Operating
Partnership and its Subsidiaries on a consolidated basis shall create, assume,
guarantee or otherwise become liable in respect thereof.
LIMITATIONS ON DISTRIBUTIONS. The Operating Partnership will not make any
distribution, by reduction of capital or otherwise (other than distributions
payable in securities evidencing interests in the Operating Partnership's
capital for the purpose of acquiring interests in real property or otherwise)
unless, immediately after giving pro forma effect to such distribution, (a) no
default under the Indenture or event of default under any mortgage, indenture or
instrument under which there may be issued, or by which there may be secured or
evidenced, any Debt of the Operating Partnership, the Company or any Subsidiary
shall have occurred and be continuing, (b) the Operating Partnership could incur
at least $1.00 of Debt (other than intercompany Debt) under the terms of the
Indenture and (c) the aggregate sum of all distributions made after the date of
the Indenture shall not exceed the sum of (i) 95% of the aggregate cumulative
Funds From Operations of the Operating Partnership accrued on a cumulative basis
from the date of the Indenture until the end of the last fiscal quarter prior to
the contemplated payment, and (ii) the aggregate Net Cash Proceeds received by
the Operating Partnership after the date of the Indenture from the issuance and
sale of Capital Stock of the Operating Partnership or the Company to the extent
such proceeds are contributed to the Operating Partnership; provided, however,
that the foregoing limitation shall not apply to any distribution or other
action which is necessary to maintain the Company's status as a REIT under
S-30
<PAGE>
the Code, if the aggregate principal amount of all outstanding Debt of the
Company and the Operating Partnership on a consolidated basis at such time is
less than 60% of Adjusted Total Assets.
Notwithstanding the foregoing, the Operating Partnership will not be
prohibited from making the payment of any distribution within 30 days of the
declaration thereof if at such date of declaration such payment would have
complied with the provisions of the immediately preceding paragraph.
LIMITATION ON TRANSACTIONS WITH AFFILIATES. The Operating Partnership will
not, and will not permit any Subsidiary to, directly or indirectly, enter into
any transaction or series of transactions with an Affiliate unless (i) such
transaction or series of transactions is on terms that are no less favorable
than those available in an arm's-length transaction with unrelated third
parties, (ii) with respect to any transaction, or series of transactions, with
total consideration equal to or greater than $5.0 million, the Operating
Partnership shall have delivered an officer's certificate certifying that such
transaction, or series of transactions, complies with clause (i) above and such
transaction, or series of transactions, has been approved by a majority of the
Disinterested Directors, or in the case of transactions included in this clause
(ii) for which there are no Disinterested Directors, the Operating Partnership
shall have obtained a written opinion from a nationally recognized investment
banking, appraisal or other appropriate expert firm to the effect that such
transaction, or series of transactions, is fair to the Operating Partnership or
Subsidiary from a financial point of view and (iii) with respect to any
transaction, or series of transactions, with total consideration in excess of
$15.0 million, the Operating Partnership shall obtain a written opinion from a
nationally recognized investment banking, appraisal or appropriate expert firm
as described above.
LIMITATION ON DIVIDENDS AND OTHER PAYMENT RESTRICTIONS AFFECTING RESTRICTED
SUBSIDIARIES. The Operating Partnership will not, and will not permit any
Restricted Subsidiary to, create or allow to exist any encumbrance that would
restrict the ability of a Restricted Subsidiary to (i) pay dividends on Capital
Stock, (ii) pay Debt owed to the Operating Partnership or any Subsidiary, (iii)
make loans or advances to the Operating Partnership or any Subsidiary, (iv)
transfer any property or assets to the Operating Partnership or any Subsidiary,
or (v) guarantee any Debt of the Operating Partnership or any Subsidiary.
LIMITATION ON THE SALE OF CAPITAL STOCK OF RESTRICTED SUBSIDIARIES. The
Operating Partnership will not permit any Restricted Subsidiary to issue any
Capital Stock (other than to the Operating Partnership or a Restricted
Subsidiary) and shall not permit any Person (other than the Operating
Partnership or a Subsidiary) to own any Capital Stock of any Restricted
Subsidiary; provided, however, that the foregoing shall not prohibit the
issuance or sale of all, but not less than all, of the issued and outstanding
Capital Stock of any Subsidiary owned by the Operating Partnership or any
Subsidiary in accordance with the provisions of the Indenture.
As used herein:
"AFFILIATE" of any specified Person means (i) any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such specified Person or (ii) any other Person that owns, directly
or indirectly, 10% or more of such specified Person's Voting Stock or any
executive officer, director, manager or trustee of any such specified Person or
other Person or, with respect to any natural person, any person having a
relationship with such person by blood, marriage or adoption not more remote
than first cousin. For the purposes of this definition, "control", when used
with respect to any specified Person, means the power to direct the management
and policies of such Person, directly or indirectly, whether through the
ownership of voting securities, by contract or otherwise; and the terms
"controlling" and "controlled" have meanings correlative to the foregoing.
"ANNUAL SERVICE CHARGE" as of any date means the amount which is expensed
or capitalized in the immediately preceding four fiscal quarter period for
interest on Debt, excluding amounts relating to the amortization of deferred
financing costs.
"CAPITAL STOCK" of any Person means any and all shares, interests, rights
to purchase warrants, options, participations, rights in or other equivalents
(however designated) of such Person's capital stock or
S-31
<PAGE>
other equity participations, including partnership interests, whether general or
limited, in such Person, including any preferred stock, and any rights (other
than debt securities convertible into capital stock), warrants or options
exchangeable for or convertible into such capital stock, whether now outstanding
or hereafter issued.
"CONSOLIDATED INCOME AVAILABLE FOR DEBT SERVICE" for any period means
Consolidated Net Income of the Operating Partnership and its Subsidiaries (i)
plus amounts which have been deducted for (a) interest on Debt of the Operating
Partnership and its Subsidiaries, (b) provision for taxes of the Operating
Partnership and its Subsidiaries based on income, (c) amortization of debt
discount, (d) depreciation and amortization, (e) the effect of any noncash
charge resulting from a change in accounting principles in determining
Consolidated Net Income for such period, (f) amortization of deferred charges
and (g) provisions for or realized losses on properties and (ii) less amounts
which have been included for gains on properties.
"CONSOLIDATED NET INCOME" for any period means the amount of consolidated
net income (or loss) of the Operating Partnership and its Subsidiaries for such
period determined on a consolidated basis in accordance with generally accepted
accounting principles.
"DEBT" means any indebtedness, whether or not contingent, in respect of (i)
borrowed money evidenced by bonds, notes, debentures or similar instruments,
(ii) indebtedness secured by any mortgage, pledge, lien, charge, encumbrance or
any security interest existing on property, (iii) the reimbursement obligations,
contingent or otherwise, in connection with any letters of credit actually
issued or amounts representing the balance deferred and unpaid of the purchase
price of any property except any such balance that constitutes an accrued
expense or trade payable or (iv) any lease of property which would be reflected
on a consolidated balance sheet as a capitalized lease in accordance with
generally accepted accounting principles, in the case of items of indebtedness
under (i) through (iii) above to the extent that any such items (other than
letters of credit) would appear as a liability on a consolidated balance sheet
in accordance with generally accepted accounting principles, and also includes,
to the extent not otherwise included, any obligation to be liable for, or to
pay, as obligor, guarantor or otherwise (other than for purposes of collection
in the ordinary course of business), indebtedness of another person.
"DISINTERESTED DIRECTOR" means, with respect to any transaction or series
of transactions which a majority of the Disinterested Directors of the Company
are required to approve under the terms of the Indenture, a member of the Board
of Directors who does not have any material direct or indirect financial
interest in or with respect to such transaction or series of transactions.
"FUNDS FROM OPERATIONS" ("FFO") for any period means the Consolidated Net
Income of the Operating Partnership and its Subsidiaries for such period without
giving effect to depreciation and amortization uniquely significant to real
estate, gains or losses from extraordinary items, gains or losses on sales of
real estate, gains or losses with respect to the disposition of investments in
marketable securities and any provision/benefit for income taxes for such
period, plus the allocable portion, based on the Operating Partnership's
ownership interest, of funds from operations of unconsolidated joint ventures,
all determined on a consistent basis.
"NET CASH PROCEEDS" means the proceeds of any issuance or sale of Capital
Stock or options, warrants or rights to purchase Capital Stock, in the form of
cash or cash equivalents, including payments in respect of deferred payment
obligations when received in the form of, or stock or other assets when disposed
for, cash or cash equivalents (except to the extent that such obligations are
financed or sold with recourse to the Operating Partnership or any Subsidiary),
net of attorney's fees, accountant's fees and brokerage, consultation,
underwriting and other fees and expenses actually incurred in connection with
such issuance or sale and net of taxes paid or payable as a result thereof.
"RESTRICTED SUBSIDIARY" means any Subsidiary of the Operating Partnership
unless such Subsidiary is an Unrestricted Subsidiary or is designated as an
Unrestricted Subsidiary pursuant to the terms of the Indenture.
S-32
<PAGE>
"SECURED DEBT" means any Debt secured by any mortgage, pledge, lien,
charge, encumbrance or security interest of any kind upon any property of the
Operating Partnership or any Subsidiary.
"SUBSIDIARY" means any entity of which at the time of determination the
Operating Partnership or one or more other Subsidiaries owns or controls,
directly or indirectly, more than 50% of the shares of Voting Stock.
"TOTAL ASSETS" as of any date means the sum of (i) Undepreciated Real
Estate Assets and (ii) all other assets of the Operating Partnership and its
Subsidiaries on a consolidated basis determined in accordance with generally
accepted accounting principles (but excluding intangibles and accounts
receivables).
"UNDEPRECIATED REAL ESTATE ASSETS" as of any date means the cost (original
cost plus capital improvements) of real estate assets of the Operating
Partnership and its Subsidiaries on such date, before depreciation and
amortization, determined on a consolidated basis in accordance with generally
accepted accounting principles.
"UNRESTRICTED SUBSIDIARY" means (a) any Subsidiary that at the time of
determination shall be an Unrestricted Subsidiary (as designated by the Board of
Directors, as provided below) and (b) any Subsidiary of an Unrestricted
Subsidiary. The Board of Directors may designate any Subsidiary (including any
newly acquired or newly formed Subsidiary) to be an Unrestricted Subsidiary so
long as (i) neither the Operating Partnership nor any Restricted Subsidiary is
directly or indirectly liable for any Debt of such Subsidiary, (ii) no default
with respect to any Debt of such Subsidiary would permit (upon notice, lapse of
time or otherwise) any holder of any other Debt of the Operating Partnership or
any other Subsidiary to declare a default on such other Debt or cause the
payment thereof to be accelerated or payable prior to its stated maturity, (iii)
neither the Operating Partnership nor any Restricted Subsidiary has a contract,
agreement, arrangement, understanding or obligation of any kind, whether written
or oral, with such Subsidiary other than those that might be obtained at the
time from persons who are not Affiliates of the Operating Partnership and (iv)
neither the Operating Partnership nor any Restricted Subsidiary has any
obligation (1) to subscribe for additional shares of Capital Stock or other
equity interest in such Subsidiary or (2) to maintain or preserve such
Subsidiary's financial condition or to cause such Subsidiary to achieve certain
levels of operating results. Any such designation by the Board of Directors
shall be evidenced to the Trustee by filing with the Trustee a copy of the board
resolutions giving effect to such designation. The Board of Directors may
designate any Unrestricted Subsidiary as a Restricted Subsidiary if, immediately
after giving effect to such designation, there would be no event of default
under the Indenture, or any event that after notice or passage of time would be
an event of default, and the Operating Partnership could incur $1.00 of
additional Debt (other than intercompany Debt) in accordance with the Indenture
covenants limiting the incurrence of Debt.
"VOTING STOCK" means stock having general voting power under ordinary
circumstances to elect at least a majority of the board of directors, managers
or trustees (or persons performing similar functions), provided that stock that
carries only the right to vote conditionally on the happening of an event shall
not be considered Voting Stock.
Reference is made to the section entitled "Description of Debt Securities --
Certain Covenants" in the accompanying Prospectus for a description of
additional covenants applicable to the Notes. Compliance with the covenants
described herein and such additional covenants with respect to the Notes
generally may not be waived by the Board of Directors of the Company, as general
partner of the Operating Partnership, or by the Trustee unless the Holders of at
least a majority in principal amount of all outstanding Notes consent to such
waiver; PROVIDED, HOWEVER, that the defeasance and covenant defeasance
provisions of the Indenture described under "Description of Debt Securities --
Discharge, Defeasance and Covenant Defeasance" in the accompanying Prospectus
will apply to the Notes, including with respect to the covenants described in
this Prospectus Supplement.
S-33
<PAGE>
BOOK-ENTRY SYSTEM
The following are summaries of certain rules and operating procedures of DTC
that affect the payment of principal and interest and transfers of interests in
the Global Note. Upon issuance, the Notes will only be issued in the form of a
Global Note which will be deposited with, or on behalf of, DTC and registered in
the name of Cede & Co., as nominee of DTC. Unless and until it is exchanged in
whole or in part for Notes in certificated form under the limited circumstances
described below, the Global Note may not be transferred except as a whole (i) by
DTC to a nominee of DTC, (ii) by a nominee of DTC to DTC or another nominee of
DTC or (iii) by DTC or any such nominee to a successor of DTC or a nominee of
such successor.
Ownership of beneficial interests in the Global Note will be limited to
persons that have accounts with DTC ("participants") or persons that may hold
interests through participants. Upon the issuance of the Global Note, DTC will
credit, on its book-entry registration and transfer system, the participants'
accounts with the respective principal amounts of the Notes represented by the
Global Note beneficially owned by such participants. Ownership of beneficial
interests in the Global Note will be shown on, and the transfer of such
ownership interests will be affected only through, records maintained by DTC
(with respect to interests of participants) and on the records of participants
or by persons that hold interests through participants (with respect to
beneficial interests of beneficial owners). The laws of some states may require
that certain purchasers of securities take physical delivery of such securities
in definitive form. Such laws may limit or impair the ability to own, transfer
or pledge beneficial interests in the Global Note.
So long as DTC or its nominee is the registered owner of the Global Note,
DTC or its nominee, as the case may be, will be considered the sole owner or
Holder of the Notes represented by the Global Note for all purposes under the
Indenture. Except as set forth below, owners of beneficial interests in the
Global Note will not be entitled to have Notes represented by the Global Note
registered in their names, will not receive or be entitled to receive physical
delivery of such Notes in certificated form and will not be considered the
registered owners or Holders thereof under the Indenture. Accordingly, each
person owning a beneficial interest in the Global Note must rely on the
procedures of DTC and, if such person is not a participant, on the procedures of
the participant through which such person owns its interest, to exercise any
rights of a Holder under the Indenture. The Operating Partnership understands
that under existing industry practices, if the Operating Partnership requests
any action of Holders or if an owner of a beneficial interest in the Global Note
desires to give or take any action that a Holder is entitled to give or take
under the Indenture, DTC would authorize the participants holding the relevant
beneficial interests to give or take such action, and such participants would
authorize beneficial owners owning through such participants to give or take
such action or would otherwise act upon the instructions of beneficial owners
holding through them.
Principal and interest payments in respect of the Global Note will be made
to DTC or its nominee, as the case may be, as the registered owner and Holder of
the Global Note. None of the Operating Partnership, the Company, the Trustee or
any other agent of the Operating Partnership, the Company, or the Trustee will
have any responsibility or liability for any aspect of the records relating to
or payments made on account of beneficial ownership of interests in the Global
Note or for maintaining, supervising or reviewing any records relating to such
beneficial ownership interests.
The Operating Partnership expects that DTC, upon receipt of any payment of
principal or interest in respect of the Global Note, will immediately credit
participants' accounts with payments in amounts proportionate to their
respective beneficial interests in the Global Note as shown on the records of
DTC. The Operating Partnership also expects that payments by participants to
owners of beneficial interests in the Global Note held through such participants
will be governed by standing customer instructions and customary practice, as is
now the case with securities held for the accounts of customers in bearer form
or registered in "street name," and will be the responsibility of such
participants.
If DTC is at any time unwilling or unable to continue as depository for the
Notes and the Operating Partnership fails to appoint a successor depository
registered as a clearing agency under the Exchange Act
S-34
<PAGE>
within 90 days, the Operating Partnership will issue the Notes in certificated
form in exchange for the Global Note. Any Notes issued in certificated form in
exchange for the Global Note will be registered in such name or names, and will
be issued in denominations of $1,000 and such integral multiples thereof, as DTC
shall instruct the Trustee. It is expected that such instructions will be based
upon directions received by DTC from participants with respect to ownership of
beneficial interests in the Global Note.
DTC has advised the Operating Partnership, the Company and the Underwriters
of the following information regarding DTC. DTC is a limited-purpose trust
company organized under the Banking Law of the State of New York, a member of
the Federal Reserve System, a "clearing corporation" within the meaning of the
New York Uniform Commercial Code, and a "clearing agency" registered pursuant to
the provisions of Section 17A of the Exchange Act. DTC was created to hold
securities of its participants and to facilitate the clearance and settlement of
transactions among its participants in such securities through electronic
book-entry changes in accounts of the participants, thereby eliminating the need
for physical movement of securities certificates. DTC's participants include
securities brokers and dealers, including the Underwriters, banks, trust
companies, clearing corporations and certain other organizations, some of which
(and/or their representatives) own DTC. Access to the DTC book-entry system is
also available to others, such as banks, brokers and dealers and trust companies
that clear through or maintain a custodial relationship with a participant,
either directly or indirectly.
SAME-DAY SETTLEMENT AND PAYMENT
Settlement for the Notes will be made by the Underwriters in immediately
available funds, and secondary market trading activity in the Notes will also
settle in immediately available funds. All payments of principal and interest in
respect of the Notes will be made by the Operating Partnership in immediately
available funds.
S-35
<PAGE>
UNDERWRITING
Subject to the terms and conditions contained in the terms agreement and the
related underwriting agreement (collectively, the "Underwriting Agreement"), the
Operating Partnership has agreed to sell to each of the Underwriters, and each
Underwriter has severally agreed to purchase from the Operating Partnership, the
respective principal amount of Notes set forth below opposite their names. The
Underwriting Agreement provides that the obligations of the Underwriters are
subject to certain conditions precedent, and that the Underwriters are committed
to purchase all of the Notes if any are purchased.
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT
UNDERWRITER OF NOTES
- ------------------------------------------------------------------------------- -------------
<S> <C>
Merrill Lynch, Pierce, Fenner & Smith
Incorporated......................................................... $ 37,500,000
NationsBanc Montgomery Securities, Inc......................................... 37,500,000
-------------
Total................................................................ $ 75,000,000
-------------
-------------
</TABLE>
The Underwriters have advised the Operating Partnership that they propose
initially to offer the Notes to the public at the public offering price set
forth on the cover page of this Prospectus Supplement, and to certain dealers at
such price less a concession not in excess of .825% of the principal amount
thereof. The Underwriters may allow, and such dealers may reallow, a discount
not in excess of .25% of principal amount to certain other dealers. After the
initial public offering, the public offering price, concession and discount may
be changed.
The Notes are a new issue of securities with no established trading market.
The Operating Partnership does not intend to apply for listing of the Notes on a
national securities exchange. The Operating Partnership has been advised by the
Underwriters that the Underwriters intend to make a market in the Notes as
permitted by applicable laws and regulations, but the Underwriters are not
obligated to do so and may discontinue market-making at any time without notice.
No assurance can be given as to the development of a secondary market for the
Notes or the liquidity of such market if one develops.
Until the distribution of the Notes is completed, rules of the Commission
may limit the ability of the Underwriters to bid for and purchase the Notes. As
an exception to these rules, Merrill Lynch, Pierce, Fenner & Smith Incorporated
("Merrill Lynch"), as representative, will be permitted to engage in certain
transactions that stabilize the price of the Notes. Such transactions consist of
bids or purchases for the purpose of pegging, fixing or maintaining the price of
the Notes.
If the Underwriters create a short position in the Notes in connection with
the Offering, i.e., if they sell more of the Notes than are set forth on the
cover page of this Prospectus Supplement, Merrill Lynch may reduce that short
position by purchasing Notes in the open market.
In general, purchases of a security for the purpose of stabilization or to
reduce a short position could cause the price of the security to be higher than
it might be in the absence of such purchases.
Neither the Operating Partnership nor the Underwriters make any
representation or prediction as to the direction or magnitude of any effect that
the transactions decribed above may have on the prices of the Notes. In additon,
neither the Operating Partnership nor the Underwriters make any representation
that Merrill Lynch will engage in such transactions or that such transactions,
once commenced, will be discontinued without notice.
The Operating Partnership and the Company have agreed to indemnify the
Underwriters against certain liabilities, including liabilities under the
Securities Act of 1933, as amended, or to contribute to payments the
Underwriters may be required to make in respect thereof.
S-36
<PAGE>
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NO DEALER, SALESPERSON OR OTHER INDIVIDUAL HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED OR
INCORPORATED BY REFERENCE IN THIS PROSPECTUS SUPPLEMENT AND THE PROSPECTUS IN
CONNECTION WITH THE OFFER MADE BY THIS PROSPECTUS SUPPLEMENT AND THE PROSPECTUS
AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED
UPON AS HAVING BEEN AUTHORIZED BY THE OPERATING PARTNERSHIP, THE COMPANY OR THE
UNDERWRITERS. NEITHER THE DELIVERY OF THIS PROSPECTUS SUPPLEMENT OR THE
PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCE, CREATE ANY
IMPLICATION THAT THERE HAS NOT BEEN ANY CHANGE IN THE FACTS SET FORTH IN THIS
PROSPECTUS SUPPLEMENT OR IN THE PROSPECTUS OR IN THE AFFAIRS OF THE OPERATING
PARTNERSHIP OR THE COMPANY SINCE THE DATE HEREOF. THIS PROSPECTUS SUPPLEMENT AND
THE PROSPECTUS DO NOT CONSTITUTE AN OFFER OR SOLICITATION BY ANYONE IN ANY
JURISDICTION IN WHICH THE PERSON MAKING SUCH OFFER OR SOLICITATION IS NOT
QUALIFIED TO DO SO OR TO ANYONE TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR
SOLICITATION.
------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
PROSPECTUS SUPPLEMENT
Prospectus Supplement Summary............................................. S-3
The Operating Partnership................................................. S-7
Recent Developments....................................................... S-13
Use of Proceeds........................................................... S-14
Capitalization............................................................ S-14
Selected Consolidated Financial Data...................................... S-15
Business and Properties................................................... S-17
Management................................................................ S-26
Description of the Notes.................................................. S-28
Underwriting.............................................................. S-36
PROSPECTUS
Available Information..................................................... 2
Incorporation of Certain Documents by Reference........................... 2
The Company and the Operating Partnership................................. 4
Risk Factors.............................................................. 4
Use of Proceeds........................................................... 6
Description of Debt Securities............................................ 7
Description of Common Shares.............................................. 22
Description of Common Share Warrants...................................... 24
Description of Preferred Shares........................................... 24
Description of Depositary Shares.......................................... 33
Ratios of Earnings to Fixed Charges....................................... 36
Certain Federal Income Tax Considerations................................. 37
Plan of Distribution...................................................... 44
Experts................................................................... 45
Legal Matters............................................................. 45
</TABLE>
$75,000,000
TANGER PROPERTIES
LIMITED PARTNERSHIP
7 7/8% NOTES DUE 2004
UNCONDITIONALLY GUARANTEED
BY
TANGER FACTORY
OUTLET CENTERS, INC.
------------
PROSPECTUS SUPPLEMENT
-------------------
MERRILL LYNCH & CO.
NATIONSBANC MONTGOMERY
OCTOBER 21, 1997
- --------------------------------------------------------------------------------
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