SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1999
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from _________ to _________
Commission file numbers: 33-99736-01
333-3526-01
333-39365-01
TANGER PROPERTIES LIMITED PARTNERSHIP
(Exact name of Registrant as specified in its charter)
North Carolina 56-1822494
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
3200 Northline Avenue
Suite 360
Greensboro, NC 27408 (336) 292-3010
(Address of principal executive offices) (Registrant's telephone number)
Securities registered pursuant to Section 12(b) of the Act:
None
Securities registered pursuant to Section 12(g) of the Act:
None
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K.[ ]
Documents Incorporated By Reference
Part III incorporates certain information by reference from the Registrant's
definitive proxy statement of Tanger Factory Outlet Centers, Inc. to be filed
with respect to the Annual Meeting of Shareholders to be held May 16, 2000.
<PAGE>
PART I
Item 1. Business
The Operating Partnership
Tanger Properties Limited Partnership, a North Carolina limited partnership (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. According to Value Retail News, an industry
publication, the Operating Partnership is one of the largest owners and
operators of factory outlet centers in the United States. As of December 31,
1999, the Operating Partnership owned and operated 31 centers (the "Centers")
with a total gross leasable area ("GLA") of approximately 5.1 million square
feet. These centers were approximately 97% leased, contained over 1,300 stores
and represented over 280 brand name companies as of such date.
The Operating Partnership is controlled by Tanger Factory Outlet Centers, Inc.
(the "Company"), a fully-integrated, self-administered, self-managed real estate
investment trust ("REIT") as the sole shareholder of the Operating Partnership's
general partner, Tanger GP Trust. Prior to 1999, the Company directly owned the
majority of the units of partnership interest issued by the Operating
Partnership (the "Units") and served as its sole general partner. During 1999,
the Company transferred its ownership of Units into two wholly-owned
subsidiaries, the Tanger GP Trust and the Tanger LP Trust, with Tanger GP Trust
as the sole general partner and Tanger LP Trust as a limited partner. The Tanger
Family Limited Partnership ("TFLP"), holds the remaining Units as a limited
partner. Stanley K. Tanger, the Company's Chairman of the Board and Chief
Executive Officer, is the sole general partner of TFLP.
As of December 31, 1999, the Tanger GP Trust owned 150,000 Units, the Tanger LP
Trust owned 7,726,835 Units and 85,270 Preferred Units (which are convertible
into approximately 795,309 limited partnership Units) and TFLP owned 3,033,305
Units. TFLP's Units are exchangeable, subject to certain limitations to preserve
the Company's status as a REIT, on a one-for-one basis for common shares of the
Company. Preferred Units are automatically converted into limited partnership
Units to the extent of any conversion of preferred shares of the Company into
common shares of the Company. Management of the Company beneficially owns
approximately 27% of all outstanding common shares (assuming the Series A
Preferred Shares and the limited partner's Units are exchanged for common shares
but without giving effect to the exercise of any outstanding stock and
partnership Unit options).
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 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 limited partnership Units to the extent that the Series A
Preferred Shares are converted into Common Shares and will be redeemed by the
Operating Partnership to the extent that the Series A Preferred Shares are
redeemed by the Company.
Ownership of the Company's common and preferred shares is restricted to preserve
the Company's status as a REIT for federal income tax purposes. Subject to
certain exceptions, a person may not actually or constructively own more than 4%
of the Company's common shares (including common shares which may be issued as a
result of conversion of Series A Preferred Shares) or more than 29,400 Series A
Preferred Shares (or a lesser number in certain cases). The Company also
operates in a manner intended to enable it to preserve its status as a REIT,
including, among other things, making distributions with respect to its
outstanding common and preferred shares equal to at least 95% of its taxable
income each year.
The Operating Partnership is a North Carolina limited partnership that was
formed in May 1993. The executive offices are currently located at 3200
Northline Avenue, Suite 360, Greensboro, North Carolina, 27408 and the telephone
number is (336) 292-3010.
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Recent Developments
At December 31, 1999, the Operating Partnership owned 31 centers in 22 states
totaling 5,149,000 square feet of operating GLA compared to 31 centers in 23
states totaling 5,011,000 square feet of operating GLA as of December 31, 1998.
The 138,000 net increase in GLA is comprised primarily of an increase of 176,000
square feet due to expansions in five existing centers during the year, an
increase of 165,000 square feet due the acquisition of Bass Pro Outdoor World in
Fort Lauderdale, Florida and a decrease of 198,000 square feet due to the
tornado destruction of the center in Stroud, Oklahoma. In addition, the
Operating Partnership has approximately 114,000 square feet of expansion space
under construction in three centers, which are scheduled to open during the
first six months of 2000.
The center in Stroud, Oklahoma was destroyed by a tornado in May 1999. At
December 31, 1999, the Operating Partnership had recorded a receivable of $4.2
million from the Operating Partnership's property insurance carrier. This
amount, which was collected in January 2000, represents the unpaid portion of an
insurance settlement of $13.4 million related to the loss of the Stroud center.
Approximately $1.9 million of the settlement proceeds represented business
interruption insurance. The business interruption proceeds are being amortized
to other income over a period of fourteen months. The unrecognized portion of
the business interruption proceeds at December 31, 1999 totaled $985,200. The
remaining portion of the settlement, net of related expenses, was considered
replacement proceeds for the portion of the center that was totally destroyed.
As a result, the Operating Partnership recognized a gain on disposal of $4.1
million during 1999. The remaining carrying value for this property consists of
land and related site work totaling $1.7 million.
The Operating Partnership also is in the process of developing plans for
additional expansions and new centers for completion in 2000 and beyond.
Currently, the Operating Partnership is in the preleasing stage of a second
phase of the Fort Lauderdale development that will include 130,000 square feet
of GLA to be developed on the 12-acre parcel adjacent to the Bass Pro Outdoor
World store. If the Operating Partnership decides to develop this project, it
anticipates stores in this phase to begin opening in early 2001. Based on tenant
demand, the Operating Partnership also has an option to purchase the retail
portion of a site at the Bourne Bridge Rotary in Cape Cod, MA where it plans to
develop a new 300,000 square foot outlet center. The entire site will contain
more than 950,000 square feet of mixed-use entertainment, retail, office and
residential community built in the style of a Cape Cod Village. The local and
state planning authorities are currently reviewing the project and the Operating
Partnership anticipates final approvals by early 2001.
These anticipated or planned developments or expansions may not be started or
completed as scheduled, or may not result in accretive funds from operations. In
addition, the Operating Partnership regularly evaluates acquisition or
disposition proposals, engages from time to time in negotiations for
acquisitions or dispositions and may from time to time enter into letters of
intent for the purchase or sale of properties. Any prospective acquisition or
disposition that is being evaluated or which is subject to a letter of intent
also may not be consummated, or if consummated, may not result in accretive
funds from operations.
During March 1999, the Operating Partnership refinanced its 8.92% notes that had
a carrying amount of $47.3 million. The refinancing reduced the interest rate to
7.875%, increased the loan amount to $66.5 million and extended the maturity
date to April 2009. The additional proceeds were used to reduce amounts
outstanding under the Operating Partnership's revolving lines of credit. In
addition, the Operating Partnership extended the maturity of all of its
revolving lines of credit by one year. The lines of credit now have maturity
dates in the years 2001 and 2002.
In January 2000, the Operating Partnership entered into a $20.0 million two year
unsecured term loan with interest payable at LIBOR plus 2.25%. The proceeds were
used to reduce amounts outstanding under the existing lines of credit. Also in
January 2000, the Operating Partnership entered into interest rate swap
agreements on notional amounts totaling $20.0 million at a cost of $162,000. The
agreements mature in January 2002. The swap agreements have the effect of fixing
the interest rate on the new $20.0 million loan at 8.75%.
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 by eliminating the third party retailer,
and because factory outlet centers 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
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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 factory outlet centers range in size from 11,000 to
716,529 square feet of GLA and are typically located at least 10 miles from
densely populated 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 factory outlet 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 that 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 re-merchandising plans and expansions of existing
centers. 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 companies, including prospective new
entrants into 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 companies do not have a
significant presence or where there are few factory outlet centers. Thus, the
Operating Partnership believes that its commitment to developing,
re-merchandising and expanding factory outlet centers is justified by the
potential financial returns on such centers.
With the decline in the real estate debt and equity markets, the Operating
Partnership or the Company may not, in the short term, be able to access these
markets on favorable terms in order to maintain its historical rate of external
growth. In the interim, the Operating Partnership may consider the use of
operational and developmental joint ventures and other related strategies to
generate additional cash funding. See "Business-Capital Strategy" below.
The Operating Partnership's Factory Outlet Centers
Each of the Operating Partnership's factory outlet centers carry the Tanger
brand name. The Operating Partnership believes that both national manufacturers
and consumers recognize the Tanger name as a company that provides outlet
shopping centers where consumers can trust the brand, quality and price of the
merchandise they purchase directly from the manufacturers.
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.
As of December 31, 1999, the Operating Partnership had a diverse tenant base
comprised of over 280 different well-known, upscale, national designer or brand
name companies, such as Liz Claiborne, Reebok International, Ltd., Tommy
Hilfiger, Polo Ralph Lauren, The Gap, Nautica and Nike. A majority of the
factory outlet stores leased by the Operating Partnership are directly operated
by the respective manufacturer.
No single tenant (including affiliates) accounted for 10% or more of combined
base and percentage rental revenues during 1999, 1998 and 1997. As of March 1,
2000, the Operating Partnership's largest tenant, including all of its store
concepts, accounted for approximately 6.6% of its GLA. 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.
Revenues from fixed rents and operating expense reimbursements accounted for
approximately 90% of the Operating Partnership's total revenues in 1999.
Revenues from contingent sources, such as percentage rents, which fluctuate
depending on tenant's sales performance, accounted for approximately 6% of 1999
revenues. As a result, only a small portion of the Operating Partnership's
revenues are dependent on contingent revenue sources.
Business History
Stanley K. Tanger, the Company's founder, Chairman and Chief Executive Officer,
entered the factory outlet center business in 1981. Prior to founding 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"), which business included the operation of five factory
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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.
From 1981 to 1986, Stanley K. Tanger solely developed the first successful
factory outlet centers. Steven Tanger joined the Operating Partnership in 1986
and by June 1993, together, the Tangers had developed 17 Centers with a total
GLA of approximately 1.5 million square feet. In June of 1993, the Company
completed its initial public offering ("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 Centers and acquired
seven Centers and, together with expansions of existing Centers net of centers
disposed of, added approximately 3.6 million square feet of GLA to its
portfolio, bringing its portfolio of properties as of December 31, 1999 to 31
Centers totaling approximately 5.1 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, acquire, develop, and
expand factory outlet centers. The Operating Partnership's strategy is to
increase revenues through new development, selective acquisitions and expansions
of factory outlet 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.
While factory outlet stores continue to be a profitable and fundamental
distribution channel for brand name manufacturers, some retail formats are more
successful than others. As typical in the retail industry, certain tenants have
closed, or will close, certain stores by terminating their lease prior to its
original expiration or as a result of filing for protection under bankruptcy
laws.
As part of its strategy of aggressively managing its assets, the Operating
Partnership is strengthening the tenant base in several of its centers by adding
strong new anchor tenants, such as Nike, GAP, Polo, Tommy Hilfiger and Nautica.
To accomplish this goal, stores may remain vacant for a longer period of time in
order to recapture enough space to meet the size requirement of these upscale,
high volume tenants. Consequently, the Operating Partnership anticipates that
its average occupancy level will remain strong, but may be more in line with the
industry average going forward.
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 per year and access
to frontage on a major or interstate 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 support centers with
approximately 75 stores totaling at least 300,000 square feet of GLA. Generally,
the Operating Partnership will build such centers in phases, with the first
phase containing 150,000 to 200,000 square feet of GLA. Subsequent phases are
considered based on the success of the center and tenant demand. Future phases
have historically been less expensive to build than the first phase because the
Operating Partnership generally consummates land acquisition and finishes most
of the site work, including parking lots, utilities, zoning and other
developmental work, in the first phase.
The Operating Partnership generally preleases at least 50% of the space in each
center prior to acquiring the site and beginning construction. Construction of a
new factory outlet center has normally 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: (i) maintaining a low level of leverage, (ii)
extending and sequencing debt maturity dates, (iii) managing its floating
interest 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" - See "Management's Discussion and Analysis of Financial Condition and
Results of Operations--Funds From Operations") for such year.
The Operating Partnership has successfully increased its distribution each of
its first six years in existence. At the same time, the Operating Partnership
continues to have one of the lowest payout ratios in the REIT industry. The
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distribution payout ratio for the year ended December 31, 1999 was 68%. As a
result, the Operating Partnership retained approximately $13.3 million of its
1999 FFO.
A low 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 and reduce debt. In addition, the Operating
Partnership has provided the funding for the Company to repurchase some of its
outstanding common shares and may continue to do so when the Company's stock
price declines to further reduce the distribution payout ratio and improve
earnings and FFO per share. Proceeds required to repurchase these common shares
are funded by the Operating Partnership in exchange for an equivalent number of
units in the Operating Partnership held by the Company. The Company's Board of
Directors has authorized the repurchase of up to $6.0 million of the Company's
common shares, of which $4.8 million was available for future repurchases at
December 31, 1999.
The Operating Partnership intends to retain the ability to raise additional
capital, including additional debt, to pursue attractive investment
opportunities that may arise and to otherwise act in a manner that it believes
to be in the best interest of the Operating Partnership and its unitholders. The
Operating Partnership maintains revolving lines of credit that provide for
unsecured borrowings up to $100 million, of which $11.0 million was available
for additional borrowings at December 31, 1999. In January 2000, the Operating
Partnership entered into a $20.0 million two year unsecured term loan. The
proceeds were used to reduce amounts outstanding under the existing lines of
credit, the effect of which was to take the amounts available under the lines to
$31.0 million.
As a general matter, the Operating Partnership anticipates utilizing its lines
of credit as an interim source of funds to acquire, develop and expand factory
outlet centers and repaying the credit lines with longer-term debt or equity
when management determines that market conditions are favorable. Under joint
shelf registration, the Company and the Operating Partnership could issue up to
$100 million in additional equity securities and $100 million in additional debt
securities. With the decline in the real estate debt and equity markets, the
Company and the Operating Partnership may not, in the short term, be able to
access these markets on favorable terms. Management believes the decline is
temporary and may utilize these funds as the markets improve to continue its
external growth. In the interim, the Operating Partnership may consider the use
of operational and developmental joint ventures and other related strategies to
generate additional cash funding. The Operating Partnership may also consider
selling certain properties that do not meet the Operating Partnership's
long-term investment criteria as well as outparcels on existing properties to
generate capital to reinvest into other attractive investment opportunities.
Based on cash provided by operations, existing credit facilities, ongoing
negotiations with certain financial institutions and funds available under the
shelf registration, management believes that the Operating Partnership has
access to the necessary financing to fund the planned capital expenditures
during 2000.
Competition
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 for customers primarily
with factory outlet centers built and operated by different developers,
traditional shopping malls and full- and off-price retailers. However,
management believes that the majority of the Operating Partnership's customers
visit factory outlet centers because they are intent on buying name-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 10 miles from the nearest major
department store or the tenants' own specialty stores. For this reason, the
Operating Partnership's centers compete only to a very limited extent with
traditional malls in or near metropolitan areas.
Management believes that the Operating Partnership competes favorably with as
many as three large national developers of factory outlet centers and numerous
small developers. Competition with other factory outlet centers for new tenants
is generally based on cost, location, quality and mix of the centers' existing
tenants, and the degree and quality of the support and marketing services
provided. As a result of these factors and due to the strong tenant
relationships that presently exist with the current major outlet developers, the
Operating Partnership believes there are significant barriers to entry into the
outlet center industry by new developers. The Operating Partnership believes
that its centers have an attractive tenant mix, as a result of the Operating
Partnership's decision to lease substantially all 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.
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Corporate and Regional Headquarters
The Operating Partnership rents space in an 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, New York under a
lease agreement and sublease agreement, respectively, to better service its
principal fashion-related tenants, many of who are based in and around that
area.
The Operating Partnership maintains offices and employee on-site managers at 25
Centers. The managers closely monitor the operation, marketing and local
relationships at each of their centers.
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 March 1, 2000, the Operating Partnership had 150 full-time employees,
located at the Operating Partnership's corporate headquarters in North Carolina,
its regional office in New York and its 25 business offices.
Item 2. Business and Properties
As of March 1, 2000, the Operating Partnership's portfolio consisted of 31
Centers located in 22 states. The Operating Partnership's Centers range in size
from 11,000 to 716,529 square feet of GLA. These Centers are typically strip
shopping centers that enable customers to view all of the shops from the parking
lot, minimizing the time needed to shop. The Centers are generally located near
tourist destinations or along major interstate highways to provide 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 represents more than 10% of the
Operating Partnership's total assets or gross revenues as of and for the year
ended December 31, 1999 is the property in Riverhead, NY. See "Business and
Properties - Significant Property". No other Center represented more than 10% of
the Operating Partnership's total assets or gross revenues as of December 31,
1999.
Management has an ongoing strategy of 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"
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. Of the 31 Centers, the Operating Partnership owns the land
underlying 28 and has ground leases on three. The land on which the Pigeon Forge
and 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, approximately 47 acres, 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, containing
approximately 43 acres, is owned by the Operating Partnership.
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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 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.
<TABLE>
<CAPTION>
Location of Centers (as of March 1, 2000)
Number of GLA %
State Centers (sq. ft.) of GLA
- ---------------------------------------------------------- ------------- -------------- ---------------
<S> <C> <C> <C>
Georgia 4 950,590 18
New York 1 716,529 14
Tennessee 2 434,350 8
Texas 2 414,830 8
Florida 2 363,956 7
Missouri 1 277,494 5
Iowa 1 277,237 5
Louisiana 1 245,325 5
Pennsylvania 1 230,063 4
Arizona 1 186,018 4
North Carolina 2 187,910 4
Indiana 1 141,051 3
Minnesota 1 134,480 3
Michigan 1 112,120 2
California 1 105,950 2
Oregon 1 97,749 2
Kansas 1 88,200 2
Maine 2 84,397 2
Alabama 1 80,730 1
New Hampshire 2 61,915 1
West Virginia 1 49,252 ---
Massachusetts 1 23,417 ---
- ---------------------------------------------------------- ------------- -------------- ---------------
Total 31 5,263,563 100
========================================================== ============= ============== ===============
</TABLE>
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The table set forth below summarizes certain information with respect to the
Operating Partnership's existing centers as of March 1, 2000.
<TABLE>
<CAPTION>
Mortgage
Debt
GLA % Outstanding Fee or
Date Opened Location (sq. ft.) Occupied (000's) (5) Ground Lease
- ------------------- ------------------------------------------ ----------- ---- ----------- --------------- ---------------------
<S> <C> <C> <C> <C> <C>
Jun. 1986 Kittery I, ME 59,694 100 $6,634 Fee
Mar. 1987 Clover, North Conway, NH 11,000 100 --- Fee
Nov. 1987 Martinsburg, WV 49,252 86 --- Fee
Apr. 1988 LL Bean, North Conway, NH 50,915 92 --- Fee
Jul. 1988 Pigeon Forge, TN 94,750 95 --- Ground Lease
Aug. 1988 Boaz, AL 80,730 100 --- Fee
Jun. 1988 Kittery II, ME 24,703 100 --- Fee
Jul. 1989 Commerce, GA 185,750 98 9,460 Fee
Oct. 1989 Bourne, MA 23,417 100 --- Fee
Feb. 1991 West Branch, MI 112,120 97 7,401 Fee
May 1991 Williamsburg, IA 277,237 (1) 98 20,346 Fee
Feb. 1992 Casa Grande, AZ 186,018 89 --- Fee
Dec. 1992 North Branch, MN 134,480 92 --- Fee
Feb. 1993 Gonzales, LA 245,325 99 --- Fee
May 1993 San Marcos, TX 237,395 (2) 97 19,802 Fee
Dec. 1993 Lawrence, KS 88,200 68 --- Fee
Dec. 1993 McMinnville, OR 97,749 (3) 69 --- Fee
Aug. 1994 Riverhead, NY 716,529 (7) 98 --- Ground Lease (4)
Aug. 1994 Terrell, TX 177,435 88 --- Fee
Sep. 1994 Seymour, IN 141,051 77 --- Fee
Oct. 1994 (6) Lancaster, PA 230,063 100 15,351 Fee
Nov. 1994 Branson, MO 277,494 99 --- Fee
Nov. 1994 Locust Grove, GA 248,854 95 --- Fee
Jan. 1995 Barstow, CA 105,950 80 --- Fee
Dec. 1995 Commerce II, GA 342,556 (7) 98 --- Fee
Feb. 1997 (6) Sevierville, TN 339,600 (7) 100 --- Ground Lease
Sept. 1997 (6) Blowing Rock, NC 105,448 98 --- Fee
Sep. 1997 (6) Nags Head, NC 82,462 100 --- Fee
Mar. 1998 (6) Dalton, GA 173,430 95 11,658 Fee
Jul. 1998 (6) Fort Meyers, FL 198,956 98 --- Fee
Nov. 1999 (6) Fort Lauderdale, FL 165,000 100 Fee
- ------------------- ----------------------------------------- ------------ ---- -------- --------------- ------------------------
Total 5,263,563 (7) 95 $ 90,652
=================== ========================================= ============ ==== ======== =============== ========================
</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) GLA excludes 26,030 square foot land lease to a theatre.
(4) 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.
(5) As of December 31, 1999. The weighted average interest rate for debt
outstanding at December 31, 1999 was 8.2% and the weighted average maturity
date was December 2003.
(6) Represents date acquired by the Operating Partnership.
(7) GLA includes square feet of new space not yet open as of December 31, 1999,
which totaled 114,041 square feet (Riverhead - 44,929; Commerce II -
19,300; Sevierville - 49,812)
- --------------------------------
9
<PAGE>
Lease Expirations
The following table sets forth, as of March 1, 2000, 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
Average Base Rent
No. of Approx. Annualized Annualized Represented
Leases GLA Base Rent Base Rent by Expiring
Year Expiring(1) (sq. ft.) (1) per sq. ft. (000's) (2) Leases
- ------------------------ ----------------- ----------------- ------------- --------------- --------------
<S> <C> <C> <C> <C> <C> <C> <C>
2000 116 453,000 (3) $ 12.69 $5,748 9
2001 174 629,000 13.38 8,418 13
2002 242 884,000 15.05 13,301 20
2003 200 871,000 14.04 12,225 17
2004 210 914,000 14.82 13,547 21
2005 64 294,000 15.00 4,411 7
2006 14 105,000 14.35 1,507 2
2007 11 70,000 14.67 1,027 2
2008 9 60,000 13.93 836 1
2009 8 51,000 10.92 557 3
2010 & thereafter 25 395,000 8.92 3,522 5
- ------------------------ ----------- ----------------------- ---------- -------------- ------------------
Total 1,073 4,726,000 $ 13.77 $ 65,099 100
======================== =========== ======================= ========== ============== ==================
</TABLE>
(1) Excludes leases that have been entered into but which tenant has not yet
taken possession, vacant suites and month-to-month leases totaling in the
aggregate approximately 491,000 square feet.
(2) Base rent is defined as the minimum payments due, excluding periodic
contractual fixed increases.
(3) Excludes 221,000 square feet scheduled to expire in 2000 that had already
renewed as of March 1, 2000.
Rental and Occupancy Rates
The following table sets forth information regarding the expiring leases during
each of the last five calendar years.
<TABLE>
<CAPTION>
Renewed by Existing Re-leased to
Total Expiring Tenants New Tenants
----------------------------------- ---------------------------- ----------------------------
% of % of % of
GLA Total Center GLA Expiring GLA Expiring
Year (sq. ft.) GLA (sq. ft.) GLA (sq. ft.) GLA
- ---------------- --------------- ---------------- ------------- ----------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C>
1999 715,197 14 606,450 85 22,882 3
1998 548,504 11 407,837 74 38,526 7
1997 238,250 5 195,380 82 18,600 8
1996 149,689 4 134,639 90 15,050 10
1995 93,650 3 91,250 97 2,400 3
</TABLE>
10
<PAGE>
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 five calendar years.
<TABLE>
<CAPTION>
Renewals of Existing Leases Stores Re-leased to New Tenants (1)
---------------------------------------------------- ------------------------------------------------------
Average Annualized Base Rents Average Annualized Base Rents
($ per sq. ft.) ($ per sq. ft.)
-------------------------------------- ----------------------------------------
GLA % GLA
Year (sq. ft.) Expiring New Increase (sq. ft.) Expiring New % Change
- --------- ---------- ----------- --------- ---------- ---------- ----------- --------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
1999 606,450 $ 14.36 $ 14.36 -- 240,851 $ 15.51 $ 16.57 7
1998 407,387 13.83 14.07 2 220,890 15.33 13.87 (9)
1997 195,380 14.21 14.41 1 171,421 14.59 13.42 (8)
1996 134,639 12.44 14.02 13 78,268 14.40 14.99 4
1995 91,250 11.54 13.03 13 59,455 13.64 14.80 9
- ---------------------
</TABLE>
(1) The square footage released to new tenants for 1999, 1998, 1997, 1996 and
1995 contains 22,882, 38,526, 18,600, 15,050 and 2,400 square feet,
respectively, that was released to new tenants upon expiration of an
existing lease during the current year.
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 GLA Open at Aggregate
% Annualized Base End of Each Number of Percentage
Year Leased(1) Rent per sq. ft. (2) Year Centers Rents (000's)
- ------------ ----------- ------------------------ ------------------ ----------------- ----------------
<S> <C> <C> <C> <C> <C>
1999 97 $ 13.85 5,149,000 31 $ 3,141
1998 97 13.88 5,011,000 31 3,087
1997 98 14.04 4,458,000 30 2,637
1996 99 13.89 3,739,000 27 2,017
1995 99 13.92 3,507,000 27 2,068
- ---------------------
</TABLE>
(1) As of December 31st of each year shown.
(2) 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.
Occupancy Costs
The Operating Partnership believes that its ratio of average tenant occupancy
cost (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
Year % of Tenant Sales
------------------------------ --------------------------
<S> <C> <C>
1999 7.8
1998 7.9
1997 8.2
1996 8.7
1995 8.5
</TABLE>
11
<PAGE>
Tenants
The following table sets forth certain information with respect to the Operating
Partnership's ten largest tenants and their store concepts as of March 1, 2000.
<TABLE>
<CAPTION>
Number GLA % of Total
Tenant of Stores (sq. ft.) GLA open
- -------------------------------------------------------------------- ------------- ------------- ---------------------
Liz Claiborne, Inc.:
<S> <C> <C> <C>
Liz Claiborne 28 291,368 5.7
Elizabeth 8 29,284 0.5
DKNY Jeans 4 8,820 0.2
Dana Buchman 3 6,600 0.1
Claiborne Mens 2 3,100 0.1
-------- ---------------- -----------------------
45 339,172 6.6
Phillips-Van Heusen Corporation:
Bass 21 139,553 2.7
Van Heusen 20 85,156 1.7
Geoffrey Beene Co. Store 11 45,680 0.9
Izod 14 31,217 0.6
-------- ---------------- -----------------------
66 301,606 5.9
Reebok International, Ltd. 24 172,161 3.3
Bass Pro Outdoor World 1 165,000 3.2
The Gap, Inc.
GAP 12 101,387 2.0
Banana Republic 4 31,323 0.6
Old Navy 2 30,000 0.5
-------- ---------------- -----------------------
18 162,710 3.1
Sara Lee Corporation:
L'eggs, Hanes, Bali 25 108,809 2.1
Coach 11 26,561 0.5
Socks Galore 7 8,680 0.2
-------- ---------------- -----------------------
43 144,050 2.8
Dress Barn Inc. 16 112,328 2.2
American Commercial, Inc.:
Mikasa Factory Store 12 98,000 1.9
Corning Revere 21 97,931 1.9
Brown Group Retail, Inc.:
Factory Brand Shores 15 76,880 1.5
Naturalizer 8 20,475 0.4
-------- ---------------- -----------------------
23 97,355 1.9
- -------------------------------------------------------------------- -------- ---------------- -----------------------
Total of all tenants listed in table 269 1,690,313 32.8
==================================================================== ======== ================ =======================
</TABLE>
12
<PAGE>
Significant Property
The Center in Riverhead, New York is the Operating Partnership's only Center
that comprises more than 10% of total assets or total revenues. The Riverhead
Center was originally constructed in 1994. Upon completion of expansions
currently underway totaling approximately 44,929 square feet, the Riverhead
Center will total 716,529 square feet.
Tenants at the Riverhead Center principally conduct retail sales operations. The
occupancy rate as of the end of 1999, 1998 and 1997, excluding expansions under
construction, was 99%, 97% and 99%. Average annualized base rental rates during
1999, 1998, and 1997 were $19.15, $18.89, and $18.65 per weighted average 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,
1999, the net federal tax basis of this Center was approximately $83.3 million.
Real estate taxes assessed on this Center during 1999 amounted to $2.4 million.
Real estate taxes for 2000 are estimated to be approximately $2.5 million.
The following table sets forth, as of March 1, 2000, scheduled lease expirations
at the Riverhead Center assuming that none of the tenants exercise renewal
options:
<TABLE>
<CAPTION>
% of Gross
Annualized
Base Rent
No. of Annualized Annualized Represented
Leases GLA Base Rent Base Rent by Expiring
Year Expiring (1) (sq. ft.) (1) per sq. ft. (000) (2) Leases
- --------------------------- ----------------- ----------------- ------------------ ---------------- ----------------
<S> <C> <C> <C> <C> <C>
2000 4 28,985 $ 18.18 $ 527 4
2001 7 36,000 18.64 671 5
2002 62 206,724 21.43 4,431 35
2003 21 86,170 18.86 1,625 13
2004 41 175,015 19.22 3,363 27
2005 6 21,410 24.71 529 4
2006 1 1,600 35.00 56 1
2007 4 22,060 17.23 380 3
2008 1 7,500 18.00 135 1
2009 1 3,000 25.00 75 1
2010 and thereafter 5 73,000 9.95 726 6
- ---------------------------- --------- --------------------- ------------------ --------------- --------------------
Total 153 661,464 $ 18.92 $ 12,518 100
============================ ========= ===================== ================== =============== ====================
</TABLE>
(1) Excludes leases that have been entered into but which tenant has not taken
possession, vacant suites and month-to-month leases.
(2) Base rent is defined as the minimum payments due, excluding periodic
contractual fixed increases.
Item 3. Legal Proceedings
The Operating Partnership is subject to legal proceedings and claims that have
arisen in the ordinary course of its business and have not been finally
adjudicated. In managements' opinion, the ultimate resolution of these matters
will have no material effect on the Operating Partnership's results of
operations or financial condition.
Item 4. Submission of Matters to a Vote of Security Holders
There were no matters submitted to a vote of security holders, through
solicitation of proxies or otherwise, during the fourth quarter of the fiscal
year ended December 31, 1999.
13
<PAGE>
EXECUTIVE OFFICERS OF THE COMPANY
The Operating Partnership does not have any officers. The following table sets
forth certain information concerning the executive officers of the Company which
controls the Operating Partnership through its ownership of the general partner,
Tanger GP Trust.:
NAME AGE POSITION
- -------------------------- --- -------------------------------
Stanley K. Tanger...........76 Founder, Chairman of the Board of Directors and
Chief Executive Officer
Steven B. Tanger............51 Director, President and Chief Operating Officer
Rochelle G. Simpson ........61 Secretary and Executive Vice President -
Administration and Finance
Willard A. Chafin, Jr.......62 Executive Vice President - Leasing,
Site Selection, Operations and Marketing
Frank C. Marchisello, Jr....41 Senior Vice President - Chief Financial Officer
Joseph H. Nehmen............51 Senior Vice President - Operations
Virginia R. Summerell.......41 Treasurer and Assistant Secretary
C. Randy Warren, Jr.........35 Senior Vice President - Leasing
Carrie A. Warren............37 Vice President - Marketing
Kevin M. Dillon.............41 Vice President - Construction
The following is a biographical summary of the experience of the executive
officers of the Company:
Stanley K. Tanger. Mr. Tanger is the founder, 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 Executive Vice President -
Administration and Finance in January 1999. She previously held the position of
Senior Vice President - Administration and Finance since 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 the Predecessor
Company. 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 Executive Vice President -
Leasing, Site Selection, Operations and Marketing of the Company in January
1999. Mr. Chafin previously held the position of Senior Vice President -
Leasing, Site Selection, Operations and Marketing since 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 Senior Vice President
and Chief Financial Officer in January 1999. He was named Vice President and
Chief Financial Officer in November 1994. Previously, he served as Chief
Accounting Officer since joining the Company in January 1993 and Assistant
Treasurer since February 1994. He was employed by Gilliam, Coble & Moser,
14
<PAGE>
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. 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 was named Senior Vice President of Operations
in January 1999. He joined the Company in September 1995 and was named Vice
President of 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 and brother-in-law of Steven B. 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 with NationsBank. Her major responsibilities include maintaining
banking relationships, oversight of all project and corporate finance
transactions and development of treasury management systems. 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 was named Senior Vice President of Leasing
in January 1999. He joined the Company in November 1995 as Vice President of
Leasing. He was previously director of anchor leasing at Prime Retail, L.P.,
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. Mr. Warren is the husband of
Ms. Carrie A. Warren.
Carrie A. Warren. Ms. Warren 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. Warren was with Prime Retail, L.P. 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, L.P., Ms.
Warren 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.
Warren is a graduate of East Carolina University and is the wife of Mr. C. Randy
Warren, Jr.
Kevin M. Dillon. Mr. Dillon was named Vice President - Construction in
October 1997. Previously, he held the position of Director of Construction from
September 1996 to October 1997 and Construction Manager from November 1993, the
month he joined the Company, to September 1996. Prior to joining the Company,
Mr. Dillon was employed by New Market Development Company for six years where he
served as Senior Project Manager. Prior to joining New Market, Mr. Dillon was
the Development Director of Western Development Company where he spent 6 years.
PART II
Item 5. Market For Registrant's Common Equity and Related Shareholder Matters
There is no established public trading market for the Operating Partnership's
units. As of December 31, 1999, the Company's wholly-owned subsidiaries owned
7,876,835 Units, and 85,270 Preferred Units (which are convertible into
approximately 795,309 limited partnership Units) and TFLP owned 3,033,305 Units
as a limited partner.
The Operating Partnership made distributions per partnership unit during 1999
and 1998 as follows:
<TABLE>
<CAPTION>
1999 1999 1998
----------------------------------- --------------- --------------------
<S> <C> <C>
First Quarter $ .600 $ .55
Second Quarter .605 .60
Third Quarter .605 .60
Fourth Quarter .605 .60
----------------------------------- ------------------ -----------------
Year 1999 $ 2.415 $ 2.35
----------------------------------- ------------------ -----------------
</TABLE>
Certain of the Operating Partnership's debt agreements limit the payment of
distributions such that distributions shall not exceed FFO, as defined in the
agreements, for the prior fiscal year on an annual basis or 95% of FFO on a
cumulative basis. Based on continuing favorable operations and available funds
from operations, the Operating Partnership intends to continue to pay regular
quarterly distributions.
15
<PAGE>
<TABLE>
<CAPTION>
Item 6. Selected Financial Data
1999 1998 1997 1996 1995
- ------------------------------------------ ------------- ------------- ------------ ------------- -------------
(In thousands, except per unit and center data)
OPERATING DATA
<S> <C> <C> <C> <C> <C>
Total revenues $ 104,016 $ 97,766 $ 85,271 $ 75,500 $ 68,604
Income before extraordinary item 21,211 16,103 17,583 16,177 15,352
Net income 20,866 15,643 17,583 15,346 15,352
- ------------------------------------------ ------------- ------------- ------------ ------------- -------------
UNIT DATA
Basic:
Income before extraordinary item $ 1.77 $ 1.30 $ 1.57 $ 1.46 $ 1.36
Net income $ 1.74 $ 1.26 $ 1.57 $ 1.37 $ 1.36
Weighted average units 10,894 10,919 10,061 9,435 9,128
Diluted:
Income before extraordinary item $ 1.74 $ 1.28 $ 1.55 $ 1.46 $ 1.36
Net income $ 1.74 $ 1.24 $ 1.55 $ 1.37 $ 1.36
Weighted average units 10,904 11,040 10,171 9,441 9,129
Distributions paid $ 2.42 $ 2.35 $ 2.17 $ 2.06 $ 1.96
- ------------------------------------------ ------------- ------------- ------------ ------------- -------------
BALANCE SHEET DATA
Real estate assets, before depreciation $ 566,216 $ 529,247 $ 454,708 $ 358,361 $ 325,881
Total assets 489,851 471,568 415,578 331,954 314,947
Long term debt 329,647 302,485 229,050 178,004 156,749
Partners' equity 141,054 149,363 160,525 136,256 142,397
- ------------------------------------------ ------------- ------------- ------------ ------------- -------------
OTHER DATA
EBITDA (1) $ 70,274 $ 60,285 $ 52,857 $ 46,633 $ 41,058
Funds from operations (1) $ 41,673 $ 39,748 $ 35,840 $ 32,313 $ 29,597
Cash flows provided by (used in):
Operating activities $ 43,169 $ 35,791 $ 39,232 $ 38,031 $ 32,455
Investing activities $ (45,959) $ (79,236) $ (93,636) $ (36,401) $ (44,788)
Financing activities $ (3,043) $ 46,172 $ 55,444 $ (4,176) $ 13,802
Gross leasable area open at year end 5,149 5,011 4,458 3,739 3,507
Number of centers 31 31 30 27 27
- -----------------------
</TABLE>
(1) EBITDA and Funds from Operations ("FFO") are widely accepted financial
indicators used by certain investors and analysts to analyze and compare
companies on the basis of operating performance. EBITDA represents earnings
before interest expense, income taxes, depreciation and amortization. Funds
from operations is defined as net income (loss), computed in accordance
with generally accepted accounting principles, before extraordinary items
and gains (losses) on sale of depreciable operating properties, plus
depreciation and amortization uniquely significant to real estate. The
Operating Partnership cautions that the calculations of EBITDA and FFO may
vary from entity to entity and as such the presentation of EBITDA and FFO
by the Operating Partnership may not be comparable to other similarly
titled measures of other reporting companies. EBITDA and FFO are not
intended to represent cash flows for the period. EBITDA and FFO have not
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.
16
<PAGE>
Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations
The following discussion should be read in conjunction with the financial
statements appearing elsewhere in this report. Historical results and percentage
relationships set forth in the statements of operations, including trends which
might appear, are not necessarily indicative of future operations.
The discussion of the Operating Partnership's results of operations reported in
the statements of operations compares the years ended December 31, 1999 and
1998, as well as December 31, 1998 and 1997. Certain comparisons between the
periods are made on a percentage basis as well as on a weighted average gross
leasable area ("GLA") basis, a technique which adjusts for certain increases or
decreases in the number of centers and corresponding square feet related to the
development, acquisition, expansion or disposition of rental properties. The
computation of weighted average GLA, however, does not adjust for fluctuations
in occupancy that may occur subsequent to the original opening date.
Cautionary Statements
Certain statements made below are forward-looking statements within the meaning
of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the
Securities Exchange Act of 1934, as amended. The Operating Partnership intends
such forward-looking statements to be covered by the safe harbor provisions for
forward-looking statements contained in the Private Securities Reform Act of
1995 and included this statement for purposes of complying with these safe
harbor provisions. Forward-looking statements, which are based on certain
assumptions and describe our future plans, strategies and expectations, are
generally identifiable by use of the words `believe', `expect', `intend',
`anticipate', `estimate', `project', or similar expressions. You should not rely
on forward-looking statements since they involve known and unknown risks,
uncertainties and other factors which are, in some cases, beyond our control and
which could materially affect our actual results, performance or achievements.
Factors which may cause actual results to differ materially from current
expectations include, but are not limited to, the following:
o general economic and local real estate conditions could change (for
example, our tenant's business may change if the economy changes, which
might effect (1) the amount of rent they pay us or their ability to pay
rent to us, (2) their demand for new space, or (3) our ability to renew
or re-lease a significant amount of available space on favorable terms;
o the laws and regulations that apply to us could change (for instance, a
change in the tax laws that apply to REITs could result in unfavorable
tax treatment for us);
o availability and cost of capital (for instance, financing opportunities
may not be available to us, or may not be available to us on favorable
terms);
o our operating costs may increase or our costs to construct or acquire
new properties or expand our existing properties may increase or exceed
our original expectations.
General Overview
At December 31, 1999, the Operating Partnership owned 31 centers in 22 states
totaling 5,149,000 square feet of operating GLA compared to 31 centers in 23
states totaling 5,011,000 square feet of operating GLA as of December 31, 1998.
The 138,000 net increase in GLA is comprised primarily of an increase of 176,000
square feet due to expansions in five existing centers during the year, an
increase of 165,000 square feet due the acquisition of Bass Pro Outdoor World in
Fort Lauderdale, Florida and a decrease of 198,000 square feet due to the
tornado destruction of the center in Stroud, Oklahoma. In addition, the
Operating Partnership has approximately 114,000 square feet of expansion space
under construction in three centers, which are scheduled to open during the
first six months of 2000.
During 1998, the Operating Partnership added a total of 569,000 square feet to
its portfolio including: Dalton Factory Stores, a 173,000 square foot factory
outlet center located in Dalton, GA, acquired in March 1998; Sanibel Factory
Stores, a 186,000 square foot factory outlet center located in Fort Myers, FL,
acquired in July 1998; and 210,000 square feet of expansions in 5 existing
centers. Also during 1998, the Operating Partnership completed the sale of its
8,000 square foot, single tenant property in Manchester, VT for $1.85 million.
The center in Stroud, Oklahoma was destroyed by a tornado in May 1999. At
December 31, 1999, the Operating Partnership had recorded a receivable of $4.2
million from the Operating Partnership's property insurance carrier. This
amount, which was collected in January 2000, represents the unpaid portion of an
insurance settlement of $13.4 million related to the loss of the Stroud center.
17
<PAGE>
Approximately $1.9 million of the settlement proceeds represented business
interruption insurance. The business interruption proceeds are being amortized
to other income over a period of fourteen months. The unrecognized portion of
the business interruption proceeds at December 31, 1999 totaled $985,200. The
remaining portion of the settlement, net of related expenses, was considered
replacement proceeds for the portion of the center that was totally destroyed.
As a result, the Operating Partnership recognized a gain on disposal of $4.1
million during 1999. The remaining carrying value for this property consists of
land and related site work totaling $1.7 million.
A summary of the operating results for the years ended December 31, 1999, 1998
and 1997 is presented in the following table, expressed in amounts calculated on
a weighted average GLA basis.
<TABLE>
<CAPTION>
1999 1998 1997
- ----------------------------------------------------------------------- -------------- --------------- ---------------
<S> <C> <C> <C> <C>
GLA open at end of period (000's) 5,149 5,011 4,458
Weighted average GLA (000's) (1) 4,996 4,768 4,046
Outlet centers in operation 31 31 30
New centers acquired 1 2 3
Centers disposed of or sold 1 1 ---
Centers expanded 5 1 5
States operated in at end of period 22 23 23
Occupancy percentage at end of period 97 97 98
Per square foot
Revenues
Base rentals $13.85 $13.88 $14.04
Percentage rentals .63 .65 .65
Expense reimbursements 5.59 5.63 6.10
Other income .76 .34 .29
- ----------------------------------------------------------------------- -------------- --------------- ---------------
Total revenues 20.83 20.50 21.08
- ----------------------------------------------------------------------- -------------- --------------- ---------------
Expenses
Property operating 6.12 6.10 6.49
General and administrative 1.46 1.40 1.52
Interest 4.85 4.62 4.16
Depreciation and amortization 4.97 4.65 4.56
- ----------------------------------------------------------------------- -------------- --------------- ---------------
Total expenses 17.40 16.77 16.73
- ----------------------------------------------------------------------- -------------- --------------- ---------------
Income before gain on disposal or sale of real estate
and extraordinary item $ 3.43 $ 3.73 $ 4.35
- ----------------------------------------------------------------------- -------------- --------------- ---------------
</TABLE>
(1) GLA weighted by months of operations. GLA is not adjusted for fluctuations
in occupancy that may occur subsequent to the original opening date.
Results of Operations
1999 Compared to 1998
Base rentals increased $3.0 million, or 5%, in the 1999 period when compared to
the same period in 1998. The increase is primarily due to the effect of a full
year of rent in 1999 from the centers acquired on March 31, 1998 and July 31,
1998 as well as the expansions mentioned in the Overview above, offset by the
loss of rent from the center in Stroud, Oklahoma. Base rent per weighted average
GLA decreased $.03 per foot due to the portfolio of properties having a lower
overall average occupancy rate during 1999 compared to 1998. Base rent per
square foot, however, was favorably impacted during the year due to the loss of
the Stroud center that had a lower average base rent per square foot than the
portfolio average.
Percentage rentals, which represent revenues based on a percentage of tenants'
sales volume above predetermined levels (the "breakpoint"), increased by $54,000
and on a weighted average GLA basis, decreased $.02 per square foot in 1999
compared to 1998. For the year ended December 31, 1999, reported same-store
sales, defined as the weighted average sales per square foot reported by tenants
for stores open since January 1, 1998, were down approximately 1% with that of
the previous year. However, same-space sales for the year ended December 31,
1999 actually increased 5% to $261 per square foot due to the Operating
Partnership's efforts to re-merchandise selected centers by replacing low volume
tenants with high volume tenants.
18
<PAGE>
Expense reimbursements, which represent the contractual recovery from tenants of
certain common area maintenance, insurance, property tax, promotional,
advertising and management expenses generally fluctuates consistently with the
reimbursable property operating expenses to which it relates. Expense
reimbursements, expressed as a percentage of property operating expenses,
decreased to 91% in 1999 from 92% in 1998 primarily as a result of a lower
average occupancy rate in the 1999 period compared to the 1998 period.
Other income increased $2.1 million in 1999 as compared to 1998. The increase is
primarily due to gains on sale of out parcels of land totaling $687,000 during
1999 as well as to the recognition of $880,000 of business interruption
insurance proceeds relating to the Stroud center.
Property operating expenses increased by $1.5 million, or 5%, in 1999 as
compared to 1998. On a weighted average GLA basis, property operating expenses
increased slightly from $6.10 to $6.12 per square foot. Higher real estate taxes
per square foot were offset by decreases in advertising and promotion expenses
per square foot and lower common area maintenance expenses per square foot.
General and administrative expenses increased $629,000, or 9%, in 1999 as
compared to 1998. As a percentage of revenues, general and administrative
expenses were approximately 7.0% of revenues in 1999 and 6.8% in 1998. On a
weighted average GLA basis, general and administrative expenses increased $.06
per square foot from $1.40 in 1998 to $1.46 in 1999. The increase in general and
administrative expenses per square foot reflects the rental and related expenses
for the new corporate office space to which the Operating Partnership relocated
its corporate headquarters in April 1999.
Interest expense increased $2.2 million during 1999 as compared to 1998 due to
financing the 1998 acquisitions and the 1998 and 1999 expansions. However,
interest expense was favorably impacted by the insurance proceeds received from
the loss of the Stroud center that were used to immediately reduce outstanding
amounts under the Operating Partnership's lines of credit. Depreciation and
amortization per weighted average GLA increased from $4.65 per square foot in
1998 to $4.97 per square foot in the 1999 period due to a higher mix of tenant
finishing allowances included in buildings and improvements which are
depreciated over shorter lives (i.e., over lives generally ranging from 3 to 10
years as opposed to other construction costs which are depreciated over lives
ranging from 15 to 33 years.)
The gain on disposal of real estate during 1999 represents the amount of
insurance proceeds from the loss of the Stroud center in excess of the carrying
amount for the portion of the related assets destroyed by the tornado. The gain
on sale of real estate during 1998 is due primarily to the sale of an 8,000
square foot, single tenant property in Manchester, VT.
The extraordinary losses recognized in each year represent the write-off of
unamortized deferred financing costs related to debt that was extinguished
during each period prior to its scheduled maturity.
1998 Compared to 1997
Base rentals increased $9.4 million, or 17%, in 1998 when compared to the same
period in 1997 primarily as a result of the 18% increase in weighted average
GLA. The increase in weighted average GLA is due primarily to the acquisitions
in October 1997 (180,000 square feet), March 1998 (173,000 square feet), and
July 1998 (186,000 square feet), as well as expansions completed in the fourth
quarter of 1997 and first quarter 1998. The decrease in base rentals per
weighted average GLA of $.16 in 1998 compared to 1997 reflects (1) the impact of
these acquisitions which collectively have a lower average base rental rate per
square foot and (2) lower average occupancy rates in 1998 compared to 1997. Base
rentals per weighted average GLA, excluding these acquisitions, during the 1998
period decreased $.08 per square foot to $13.96.
Percentage rentals increased $450,000, or 17%, in 1998 compared to 1997 due to
the acquisitions and expansions completed in 1997. Same store sales, defined as
the weighted average sales per square foot reported for tenant stores open all
of 1998 and 1997, decreased 2.7% to approximately $242 per square foot.
Expense reimbursements, which represent the contractual recovery from tenants of
certain common area maintenance, insurance, property tax, promotional and
advertising and management expenses generally fluctuates consistently with the
reimbursable property operating expenses to which it relates. Expense
reimbursements, expressed as a percentage of property operating expenses,
decreased from 94% in 1997 to 92% in 1998 primarily as a result of the decrease
in occupancy.
19
<PAGE>
Property operating expenses increased by $2.8 million, or 11%, in 1998 as
compared to 1997. On a weighted average GLA basis, property operating expenses
decreased from $6.49 to $6.10 per square foot. Higher expenses for real estate
taxes per square foot were offset by decreases in advertising and promotion and
common area maintenance expenses per square foot. The decrease in property
operating expenses per square foot is also attributable to the acquisitions that
collectively have a lower average operating cost per square foot. Excluding the
acquisitions, property operating expenses during 1998 were $6.19 per square
foot.
General and administrative expenses increased $524,000 in 1998 compared to 1997.
As a percentage of revenues, general and administrative expenses decreased from
7.2% in 1997 to 6.8% in 1998. On a weighted average GLA basis, general and
administrative expenses decreased $.12 per square foot to $1.40 in 1998,
reflecting the absorption of the acquisitions in 1997 and 1998 without relative
increases in general and administrative expenses.
Interest expense increased $5.2 million during 1998 as compared to 1997 due to
higher average borrowings outstanding during the period and due to less interest
capitalized during 1998 as a result of a decrease in ongoing construction
activity during 1998 compared to 1997. Average borrowings have increased
principally to finance the acquisitions and expansions to existing centers (see
"General Overview" above). Depreciation and amortization per weighted average
GLA increased from $4.56 per square foot to $4.65 per square foot.
The asset write-down of $2.7 million in 1998 represents the write-off of
pre-development costs capitalized for certain projects, primarily the Romulus,
MI project, which were discontinued and terminated during the year.
The gain on sale of real estate for 1998 represents the sale of an 8,000 square
foot, single tenant property in Manchester, VT for $1.85 million and the sale of
three outparcels at other centers for sales prices aggregating $940,000. The
extraordinary item in 1998 represents a write-off of unamortized deferred
financing costs due to the termination of a $50 million secured line of credit.
Liquidity and Capital Resources
Net cash provided by operating activities was $43.2, $35.8 and $39.2 million for
the years ended December 31, 1999, 1998 and 1997, respectively. The increase in
cash provided by operating activities in 1999 compared to 1998 is primarily due
to increases in operating income from the 1998 and 1999 acquisitions and
expansions and increases in accounts payable. Net cash provided by operating
activities decreased $3.4 million in 1998 compared to 1997 as decreases in
accounts payable offset the increases in operating income associated with
acquired or expanded centers. Net cash used in investing activities amounted to
$46.0, $79.2, and $93.6 million during 1999, 1998 and 1997, respectively, and
reflects the fluctuation in construction and acquisition activity during each
year. Net cash used in investing activities also decreased in 1999 compared to
1998 due to approximately $6.5 million in net insurance proceeds received from
the loss of the Stroud center. Cash provided by (used in) financing activities
of $(3.0), $46.2, and $55.4 in 1999, 1998 and 1997, respectively, has fluctuated
consistently with the capital needed to fund the current development and
acquisition activity and reflects increases in distributions paid during both
1999 and 1998. In 1999, net cash provided by financing activities was further
reduced by $958,000 paid to the Company to purchase and retire some of the
Company's common shares and $1.0 million paid in deferred financing costs to
refinance its 8.92% notes during 1999.
During 1999, the Operating Partnership added approximately 176,000 square feet
of expansions in five existing centers and acquired the 165,000 square foot Bass
Pro Outdoor World in Fort Lauderdale, Florida. In addition, the Operating
Partnership has approximately 114,000 square feet of expansion space under
construction in three centers, which are scheduled to open during the first six
months of 2000. Commitments for construction of these projects (which represent
only those costs contractually required to be paid by the Operating Partnership)
amounted to $3.0 million at December 31, 1999.
The Operating Partnership also is in the process of developing plans for
additional expansions and new centers for completion in 2000 and beyond.
Currently, the Operating Partnership is in the preleasing stage of a second
phase of the Fort Lauderdale development that will include 130,000 square feet
of GLA to be developed on the 12-acre parcel adjacent to the Bass Pro Outdoor
World. If the Operating Partnership decides to develop this project, it
anticipates stores in this phase to begin opening in early 2001. Based on tenant
demand, the Operating Partnership also has an option to purchase the retail
portion of a site at the Bourne Bridge Rotary in Cape Cod, MA where it plans to
develop a new 300,000 square foot outlet center. The entire site will contain
more than 950,000 square feet of mixed-use entertainment, retail, office and
residential community built in the style of a Cape Cod Village. The local and
20
<PAGE>
state planning authorities are currently reviewing the project and the Operating
Partnership anticipates final approvals by early 2001.
These anticipated or planned developments or expansions may not be started or
completed as scheduled, or may not result in accretive funds from operations. In
addition, the Operating Partnership regularly evaluates acquisition or
disposition proposals, engages from time to time in negotiations for
acquisitions or dispositions and may from time to time enter into letters of
intent for the purchase or sale of properties. Any prospective acquisition or
disposition that is being evaluated or which is subject to a letter of intent
also may not be consummated, or if consummated, may not result in accretive
funds from operations.
Other assets include a receivable totaling $2.8 million from Stanley K. Tanger,
the Chairman of the Board and Chief Executive Officer of the Company. Mr. Tanger
and the Operating Partnership have entered into demand note agreements whereby
he may borrow up to $3.5 million through various advances from the Operating
Partnership for an investment in a separate E-commerce business venture. The
notes bear interest at a rate of 8% per annum and are collateralized by Mr.
Tanger's limited partnership interest in Tanger Investments Limited Partnership.
Mr. Tanger intends to fully repay the loans.
The Operating Partnership maintains revolving lines of credit which provide for
unsecured borrowings up to $100 million, of which $11.0 million was available
for additional borrowings at December 31, 1999. As a general matter, the
Operating Partnership anticipates utilizing its lines of credit as an interim
source of funds to acquire, develop and expand factory outlet centers and
repaying the credit lines with longer-term debt or equity when management
determines that market conditions are favorable. Under joint shelf registration,
the Company and the Operating Partnership could issue up to $100 million in
additional equity securities and $100 million in additional debt securities.
With the decline in the real estate debt and equity markets, the Company and the
Operating Partnership may not, in the short term, be able to access these
markets on favorable terms. Management believes the decline is temporary and may
utilize these funds as the markets improve to continue its external growth. In
the interim, the Operating Partnership may consider the use of operational and
developmental joint ventures and other related strategies to generate additional
capital. The Operating Partnership may also consider selling certain properties
that do not meet the Operating Partnership's long-term investment criteria as
well as outparcels on existing properties to generate capital to reinvest into
other attractive opportunities. Based on cash provided by operations, existing
credit facilities, ongoing negotiations with certain financial institutions and
funds available under the shelf registration, management believes that the
Operating Partnership has access to the necessary financing to fund the planned
capital expenditures during 2000.
During March 1999, the Operating Partnership refinanced its 8.92% notes that had
a carrying amount of $47.3 million. The refinancing reduced the interest rate to
7.875%, increased the loan amount to $66.5 million and extended the maturity
date to April 2009. The additional proceeds were used to reduce amounts
outstanding under the revolving lines of credit. In addition, the Operating
Partnership extended the maturity of all of its revolving lines of credit by one
year. The lines of credit now have maturity dates in the years 2001 and 2002.
In January 2000, the Operating Partnership entered into a $20.0 million two year
unsecured term loan with interest payable at LIBOR plus 2.25%. The proceeds were
used to reduce amounts outstanding under the existing lines of credit. Also in
January 2000, the Operating Partnership entered into interest rate swap
agreements on notional amounts totaling $20.0 million at a cost of $162,000. The
agreements mature in January 2002. The swap agreements have the effect of fixing
the interest rate on the new $20.0 million loan at 8.75%.
At December 31, 1999, approximately 73% of the outstanding long-term debt
represented unsecured borrowings and approximately 81% of the Operating
Partnership's real estate portfolio was unencumbered. The weighted average
interest rate on debt outstanding on December 31, 1999 was 8.2%.
The Operating Partnership anticipates that adequate cash will be available to
fund its operating and administrative expenses, regular debt service
obligations, and the payment of distributions in accordance with REIT
requirements in both the short and long term. Although the Operating Partnership
receives most of its rental payments on a monthly basis, distributions to
unitholders are made quarterly and interest payments on the senior, unsecured
notes are made semi-annually. Amounts accumulated for such payments will be used
in the interim to reduce the outstanding borrowings under the existing lines of
credit or invested in short-term money market or other suitable instruments.
Certain of the Operating Partnership's debt agreements limit the payment of
distributions such that distributions will not exceed funds from operations
("FFO"), as defined in the agreements, for the prior fiscal year on an annual
basis or 95% of FFO on a cumulative basis from the date of the agreement.
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<PAGE>
Market Risk
The Operating Partnership is exposed to various market risks, including changes
in interest rates. Market risk is the potential loss arising from adverse
changes in market rates and prices, such as interest rates. The Operating
Partnership does not enter into derivatives or other financial instruments for
trading or speculative purposes.
The Operating Partnership negotiates long-term fixed rate debt instruments and
enters into interest rate swap agreements to manage its exposure to interest
rate changes on its floating rate debt. The swaps involve the exchange of fixed
and variable interest rate payments based on a contractual principal amount and
time period. Payments or receipts on the agreements are recorded as adjustments
to interest expense. In June 1999, the Operating Partnership terminated its only
interest rate swap agreement effective through October 2001 with a notional
amount of $20 million. Under this agreement, the Operating Partnership received
a floating interest rate based on the 30 day LIBOR index and paid a fixed
interest rate of 5.47%. Upon termination of the agreement, the Operating
Partnership received $146,000 in cash proceeds. The proceeds have been recorded
as deferred income and are being amortized as a reduction to interest expense
over the remaining life of the original contract term. In January 2000, the
Operating Partnership entered into new interest rate swap agreements on notional
amounts totaling $20.0 million at a cost of $162,000.
The fair market value of long-term fixed interest rate debt is subject to
interest rate risk. Generally, the fair market value of fixed interest rate debt
will increase as interest rates fall and decrease as interest rates rise. The
estimated fair value of the Operating Partnership's total long-term debt at
December 31, 1999 was $324.4 million. A 1% increase from prevailing interest
rates at December 31, 1999 would result in a decrease in fair value of total
long-term debt by approximately $5.0 million. Fair values were determined from
quoted market prices, where available, using current interest rates considering
credit ratings and the remaining terms to maturity.
Funds from Operations
Management believes that for a clear understanding of the historical operating
results of the Operating Partnership, FFO should be considered along with net
income as presented in the audited financial statements included elsewhere in
this report. FFO is presented because it is a widely accepted financial
indicator used by certain investors and analysts to analyze and compare one
equity real estate investment trust ("REIT") with another on the basis of
operating performance. FFO is generally defined as net income (loss), computed
in accordance with generally accepted accounting principles, before
extraordinary items and gains (losses) on sale of depreciable operating
properties, plus depreciation and amortization uniquely significant to real
estate. The Operating Partnership cautions that the calculation of FFO may vary
from entity to entity and as such the presentation of FFO by the Operating
Partnership may not be comparable to other similarly titled measures of other
reporting companies. FFO does not represent net income or cash flow from
operations as defined by generally accepted accounting principles and should not
be considered an alternative to net income as an indication of operating
performance or to cash from operations as a measure of liquidity. FFO is not
necessarily indicative of cash flows available to fund distributions to
unitholders and other cash needs.
22
<PAGE>
<TABLE>
<CAPTION>
Below is a calculation of funds from operations for the years ended December 31,
1999, 1998 and 1997 as well as actual cash flow and other data for those
respective years (in thousands):
1999 1998 1997
- --------------------------------------------------------------- ---------------- ------------- ---------------
Funds from Operations:
<S> <C> <C> <C>
Net income $ 20,866 $ 15,643 $ 17,583
Adjusted for:
Extraordinary item-loss on early extinguishment of debt 345 460 ---
Depreciation and amortization uniquely significant
to real estate 24,603 21,939 18,257
Gain on disposal or sale of real estate (4,141) (994) ---
Asset write-down --- 2,700 ---
- --------------------------------------------------------------- ---------------- ------------- ---------------
Funds from operations (1) $ 41,673 $ 39,748 $ 35,840
- --------------------------------------------------------------- ---------------- ------------- ---------------
Cash flow provided by (used in):
Operating activities $ 43,169 $ 35,791 $ 39,232
Investing activities $ (45,959) $ (79,236) $ (93,636)
Financing activities $ (3,043) $ 46,172 $ 55,444
Weighted average units outstanding (2) 11,697 11,844 11,000
- --------------------------------------------------------------- ---------------- ------------- ---------------
</TABLE>
(1) For the year ended December 31, 1999, includes $687,000 in gains on sales
of outparcels of land.
(2) Assumes the preferred units of the Operating Partnership and unit options
are all converted to limited partnership units.
In October 1999, the National Association of Real Estate Investment Trusts
("NAREIT") issued interpretive guidance regarding the calculation of FFO.
NAREIT's leadership determined that FFO should include both recurring and
non-recurring operating results, except those results defined as extraordinary
items under generally accepted accounting principles and gains and losses from
sales of depreciable operating property. All REITS are encouraged to implement
the recommendations of this guidance effective for fiscal periods beginning in
2000 for all periods presented in financial statements or tables. The Operating
Partnership intends to adopt the new NAREIT clarification beginning January 1,
2000. Below is a calculation of FFO under the new proposed method as if the
Operating Partnership had adopted the method as of January 1, 1997.
<TABLE>
<CAPTION>
New Proposed Method 1999 1998 1997
- ------------------------------------------------------------- -------------- ---------------- ---------------
Funds from Operations:
<S> <C> <C> <C>
Net income $20,866 $15,643 $17,583
Adjusted for:
Extraordinary item-loss on early extinguishment of debt 345 460 ---
Depreciation and amortization uniquely significant
to real estate 24,603 21,939 18,257
Gain on disposal or sale of real estate (4,141) (994) ---
- ------------------------------------------------------------- -------------- ---------------- ---------------
Funds from operations $41,673 $37,048 $35,840
- ------------------------------------------------------------- -------------- ---------------- ---------------
</TABLE>
New Accounting Pronouncements
During 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities." SFAS No. 133 requires entities to recognize
all derivatives as either assets or liabilities in the statement of financial
position and measure those instruments at their fair value. In June 1999, the
FASB issued SFAS No. 137 "Accounting for Derivative Instruments and Hedging
Activities-Deferral of the Effective Date of FASB Statement No. 133-an amendment
of the FASB Statement No. 133" that revises SFAS No. 133 to become effective in
the first quarter of 2001. Management of the Operating Partnership anticipates
that, due to its limited use of derivative instruments, the adoption of SFAS No.
133 will not have a significant effect on the Operating Partnership's results of
operations or its financial position.
23
<PAGE>
Economic Conditions and Outlook
The majority of the Operating Partnership's leases contain provisions designed
to mitigate the impact of inflation. Such provisions include clauses for the
escalation of base rent and clauses enabling the Operating Partnership to
receive percentage rentals based on tenants' gross sales (above predetermined
levels, which the Operating Partnership believes often are lower than
traditional retail industry standards) which generally increase as prices rise.
Most of the leases require the tenant to pay their share of property operating
expenses, including common area maintenance, real estate taxes, insurance and
advertising and promotion, thereby reducing exposure to increases in costs and
operating expenses resulting from inflation.
While factory outlet stores continue to be a profitable and fundamental
distribution channel for brand name manufacturers, some retail formats are more
successful than others. As typical in the retail industry, certain tenants have
closed, or will close, certain stores by terminating their lease prior to its
natural expiration or as a result of filing for protection under bankruptcy
laws.
As part of its strategy of aggressively managing its assets, the Operating
Partnership is strengthening the tenant base in several of its centers by adding
strong new anchor tenants, such as Nike, GAP, Polo, Tommy Hilfiger and Nautica.
To accomplish this goal, stores may remain vacant for a longer period of time in
order to recapture enough space to meet the size requirement of these upscale,
high volume tenants. Consequently, the Operating Partnership anticipates that
its average occupancy level will remain strong, but may be more in line with the
industry average.
Approximately 26% of the Operating Partnership's lease portfolio is scheduled to
expire during the next two years. Approximately 721,000 square feet of space is
up for renewal during 2000 and approximately 629,000 square feet will come up
for renewal in 2001. If the Operating Partnership were unable to successfully
renew or release a significant amount of this space on favorable economic terms,
the loss in rent could have a material adverse effect on its results of
operations.
Existing tenants' sales have remained stable and renewals by existing tenants
have remained strong. Approximately 221,000, or 31%, of the square feet
scheduled to expire in 2000 have already been renewed by the existing tenants.
In addition, the Operating Partnership continues to attract and retain
additional tenants. The Operating Partnership's factory outlet centers typically
include well known, national, brand name companies. By maintaining a broad base
of creditworthy tenants and a geographically diverse portfolio of properties
located across the United States, the Operating Partnership reduces its
operating and leasing risks. No one tenant (including affiliates) accounts for
more than 7% of the Operating Partnership's combined base and percentage rental
revenues. Accordingly, management currently does not expect any material adverse
impact on the Operating Partnership's results of operation and financial
condition as a result of leases to be renewed or stores to be released.
Year 2000 Compliance
The Operating Partnership did not experience any systems or other Year 2000
("Y2K") problems during January 2000. In 1999, the Operating Partnership spent
approximately $220,000 to upgrade or replace equipment or systems specifically
to bring them in compliance with Y2K. The Operating Partnership is not aware of
any other significant costs to be incurred to address future Y2K problems.
There are a number of Y2K related items that may affect the Operating
Partnership's results of operations. For example, the Operating Partnership's
spending patterns or cost relationships may have been affected by large Y2K
remediation expenditures or the postponement of certain expenses. The Operating
Partnership's revenue patterns may have been affected by unusual tenant
behavior, such as delayed openings or delayed payments of rents until after Y2K.
In addition, some companies may have postponed Information Technology projects
or other capital spending in preparing for Y2K which could impact the company's
liquidity requirements. The Operating Partnership has not experienced any of
these situations and does not believe that any exist which might materially
impact the Operating Partnership's results of operations or liquidity.
The Operating Partnership has third-party relationships with approximately 280
tenants and over 8,000 suppliers and contractors. Many of these third party
tenants are publicly-traded corporations and subject to disclosure requirements.
The principal risks to the Operating Partnership in its relationships with third
parties are the failure of third-party systems used to conduct business such as
tenants being unable to stock stores with merchandise, use cash registers and
pay invoices; banks being unable to process receipts and disbursements; vendors
being unable to supply needed materials and services to the centers; and
processing of outsourced employee payroll.
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<PAGE>
The Operating Partnership's assessment of major third parties' Y2K readiness
included sending surveys to tenants and key suppliers of outsourced services
including stock transfer, debt servicing, banking collection and disbursement,
payroll and benefits. The majority of the Operating Partnership's vendors are
small suppliers that the Operating Partnership believes can manually execute
their business and are readily replaceable. Management also believes there is no
material risk of being unable to procure necessary supplies and services from
third parties who have not already indicated that they are currently Y2K
compliant. The Operating Partnership received responses to approximately 73% of
the surveys sent to tenants, banks and key suppliers. Of the companies who
responded, 99% indicated they were presently, or would be by December 31, 1999,
Y2K compliant. The Operating Partnership is not aware of any significant third
parties who are not currently Y2K compliant. However, there can be no assurance
that all third parties are currently Y2K compliant and that all will be able to
continue to conduct transactions with the Operating Partnership successfully.
There also can be no assurance that Y2K problems of third parties or of the
Operating Partnership's own systems which did not surface in January 2000 will
not be a problem sometime in the near future.
Item 8. Financial Statements and Supplementary Data
The information required by this Item is set forth at the pages indicated in
Item 14(a) below.
Item 9. Changes in and Disagreements With Accountants on Accounting and
Financial Disclosure
Not applicable.
PART III
Certain information required by Part III is omitted from this Report in that the
registrant's majority owner, the Company, will file a definitive proxy statement
pursuant to Regulation 14A (the "Proxy Statement") not later than 120 days after
the end of the fiscal year covered by this Report, and certain information
included therein is incorporated herein by reference. Only those sections of the
Proxy Statement which specifically address the items set forth herein are
incorporated by reference.
Item 10. Directors and Executive Officers of the Registrant
The Operating Partnership does not have any directors or officers. The
information concerning the Company' directors required by this Item is
incorporated by reference to the Company's Proxy Statement.
The information concerning the Company's executive officers required by this
Item is incorporated by reference herein to the section in Part I, Item 4,
entitled "Executive Officers of the Company".
The information regarding compliance with Section 16 of the Securities and
Exchange Act of 1934 is to be set forth in the Company's Proxy Statement and is
hereby incorporated by reference.
Item 11. Executive Compensation
The information required by this Item is incorporated by reference to the
Company's Proxy Statement.
Item 12. Security Ownership of Certain Beneficial Owners and Management
The information required by this Item is incorporated by reference to the
Company's Proxy Statement.
Item 13. Certain Relationships and Related Transactions
The information required by this Item is incorporated by reference to the
Company's Proxy Statement.
25
<PAGE>
PART IV
Item 14. Exhibits, Financial Statements Schedules, and Reports on Form 8-K
(a) Documents filed as a part of this report:
1. Financial Statements
Report of Independent Accountants F-1
Balance Sheets-December 31, 1999 and 1998 F-2
Statements of Operations-
Years Ended December 31, 1999, 1998 and 1997 F-3
Statements of Partners' Equity-
For the Years Ended December 31, 1999, 1998 and 1997 F-4
Statements of Cash Flows-
Years Ended December 31, 1999, 1998 and 1997 F-5
Notes to Financial Statements F-6 to F-14
2. Financial Statement Schedule
Schedule III
Report of Independent Accountants F-15
Real Estate and Accumulated Depreciation F-16 to F-17
All other schedules have been omitted because of the absence of
conditions under which they are required or because the required
information is given in the above-listed financial statements or notes
thereto.
3. Exhibits
Exhibit No. Description
3.3 Amended and Restated Agreement of Limited Partnership for the
Operating Partnership. (Note 8)
10.1 Amended and Restated Unit Option Plan. (Note 6)
10.4 Form of Unit Option Agreement between the Operating Partnership
and certain employees. (Note 2)
10.5 Amended and Restated Employment Agreement for Stanley K. Tanger,
as of January 1, 1998. (Note 6)
10.6 Amended and Restated Employment Agreement for Steven B. Tanger,
as of January 1, 1998. (Note 6)
10.7 Amended and Restated Employment Agreement for Willard Albea
Chafin, Jr., as of January 1, 1999. (Note 6)
10.8 Amended and Restated Employment Agreement for Rochelle Simpson,
as of January 1, 1999. (Note 6)
10.9 Amended and Restated Employment Agreement for Joseph Nehmen, as
of January 1, 1999. (Note 6)
10.10 Amended and Restated Employment Agreement for Frank C.
Marchisello, Jr., as of January 1, 1999. (Note 8)
10.11 Registration Rights Agreement among the Company, the Tanger
Family Limited Partnership and Stanley K. Tanger. (Note 1)
10.11A Amendment to Registration Rights Agreement among the Company, the
Tanger Family Limited Partnership and Stanley K. Tanger. (Note 3)
10.12 Agreement Pursuant to Item 601(b)(4)(iii)(A) of Regulation S-K.
(Note 1)
26
<PAGE>
10.13 Assignment and Assumption Agreement among Stanley K. Tanger,
Stanley K. Tanger & Company, the Tanger Family Limited
Partnership, the Operating Partnership and the Company. (Note 1)
10.14 Promissory Notes by and between the Operating Partnership and John
Hancock Mutual Life Insurance Company aggregating $66,500,000.
(Note 7)
10.15 Form of Senior Indenture. (Note 4)
10.16 Form of First Supplemental Indenture (to Senior Indenture). (Note
4)
10.16A Form of Second Supplemental Indenture (to Senior Indenture) dated
October 24, 1997 among Tanger Properties Limited Partnership,
Tanger Factory Outlet Centers, Inc. and State Street Bank & Trust
Company. (Note 5)
10.17 Promissory Notes by and between Stanley K. Tanger and Tanger
Properties Limited Partnewship dated
June 25, 1999 and August 27, 1999. (Note 8)
21.1 List of Subsidiaries. (Note 1)
23.1 Consent of PricewaterhouseCoopers LLP.
Notes to Exhibits:
1. Incorporated by reference to the exhibits to the Tanger Factory Outlet
Centers, Inc.'s Registration Statement on Form S-11 filed May 27,
1993, as amended.
2. Incorporated by reference to the exhibits to the Tanger Factory Outlet
Centers, Inc.'s Annual Report on Form 10-K for the year ended December
31, 1993.
3. Incorporated by reference to the exhibits to the Tanger Factory Outlet
Centers, Inc.'s Annual Report on Form 10-K for the year ended December
31, 1995.
4. Incorporated by reference to the exhibits to the Tanger Factory Outlet
Centers, Inc.'s Current Report on Form 8-K dated March 6, 1996.
5. Incorporated by reference to the exhibits to the Tanger Factory Outlet
Centers, Inc.'s Current Report on Form 8-K dated October 24, 1997.
6. Incorporated by reference to the exhibits to the Tanger Factory Outlet
Centers, Inc.'s Annual Report on Form 10-K for the year ended December
31, 1998.
7. Incorporated by reference to the exhibit to the Tanger Factory Outlet
Centers, Inc.'s Quarterly Report on 10-Q for the quarter ended March
31, 1999.
8. Incorporated by reference to the exhibits to the Tanger Factory Outlet
Centers, Inc.'s Annual Report on Form 10-K for the year ended December
31, 1999.
(b) Reports on Form 8-K - none.
27
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
TANGER PROPERTIES LIMITED PARTNERSHIP
By: Tanger GP Trust, its sole general partner
By: /s/ Stanley K. Tanger
Stanley K. Tanger
Chairman of the Board and
Chief Executive Officer
March 28, 2000
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities as officers or directors of the general partner
and on the dates indicated:
Signature Title Date
/s/ Stanley K. Tanger Chairman of the Board and Chief March 28, 2000
- ----------------------------- Executive Officer (Principal
Stanley K. Tanger Executive Officer)
/s/ Steven B. Tanger Trustee and President March 28, 2000
- -----------------------------
Steven B. Tanger
/s/ Frank C. Marchisello, Jr. Trustee and Treasurer March 28, 2000
- -----------------------------
Frank C. Marchisello, Jr. (Principal Financial and
Accounting Officer)
28
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Partners of TANGER PROPERTIES LIMITED PARTNERSHIP:
In our opinion, the accompanying balance sheets and the related statements of
operations, partners' equity and cash flows present fairly, in all material
respects, the financial position of Tanger Properties Limited Partnership at
December 31, 1999 and 1998, and the results of its operations and its cash flows
for each of the three years in the period ended December 31, 1999, in conformity
with accounting principles generally accepted in the United States. These
financial statements are the responsibility of the Operating Partnership's
management; our responsibility is to express an opinion on these financial
statements based on our audits. We conducted our audits of these statements in
accordance with auditing standards generally accepted in the United States,
which require that we plan and perform the audit to obtain reasonable assurance
about whether the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for the opinion expressed above.
PricewaterhouseCoopers LLP
Greensboro, NC
January 26, 2000
F - 1
<PAGE>
<TABLE>
<CAPTION>
TANGER PROPERTIES LIMITED PARTNERSHIP
BALANCE SHEETS
(In thousands)
December 31,
1999 1998
- -----------------------------------------------------------------------------------
ASSETS
Rental Property
<S> <C> <C>
Land $ 63,045 $ 53,869
Buildings, improvements and fixtures 484,277 458,546
Developments under construction 18,894 16,832
- -----------------------------------------------------------------------------------
566,216 529,247
Accumulated depreciation (104,511) (84,685)
- -----------------------------------------------------------------------------------
Rental property, net 461,705 444,562
Cash and cash equivalents 501 6,334
Deferred charges, net 8,176 8,218
Other assets 19,469 12,454
- -----------------------------------------------------------------------------------
Total assets $ 489,851 $ 471,568
- -----------------------------------------------------------------------------------
LIABILITIES AND PARTNERS' EQUITY
Liabilites
Long-term debt
Senior, unsecured notes $ 150,000 $ 150,000
Mortgages payable 90,652 72,790
Lines of credit 88,995 79,695
- -----------------------------------------------------------------------------------
329,647 302,485
Construction trade payables 6,287 9,224
Accounts payable and accrued expenses 12,863 10,496
- -----------------------------------------------------------------------------------
Total liabilities 348,797 322,205
- -----------------------------------------------------------------------------------
Commitments
Partners' equity
General partner 1,927 128,746
Limited partners 139,127 20,617
- -----------------------------------------------------------------------------------
Total partners' equity 141,054 149,363
- -----------------------------------------------------------------------------------
Total liabilities and partners' equity $ 489,851 $ 471,568
- -----------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
</TABLE>
F - 2
<PAGE>
<TABLE>
<CAPTION>
TANGER PROPERTIES LIMITED PARTNERSHIP
STATEMENTS OF OPERATIONS
(In thousands, except per unit data)
Year Ended December 31,
1999 1998 1997
- ---------------------------------------------------------------------------------------------------------------------
REVENUES
<S> <C> <C> <C>
Base rentals $ 69,180 $ 66,187 $ 56,807
Percentage rentals 3,141 3,087 2,637
Expense reimbursements 27,910 26,852 24,665
Other income 3,785 1,640 1,162
- ---------------------------------------------------------------------------------------------------------------------
Total revenues 104,016 97,766 85,271
- ---------------------------------------------------------------------------------------------------------------------
EXPENSES
Property operating 30,585 29,106 26,269
General and administrative 7,298 6,669 6,145
Interest 24,239 22,028 16,835
Depreciation and amortization 24,824 22,154 18,439
Asset write-down --- 2,700 ---
- ---------------------------------------------------------------------------------------------------------------------
Total expenses 86,946 82,657 67,688
- ---------------------------------------------------------------------------------------------------------------------
Income before gain on disposal or sale of real estate,
and extraordinary item 17,070 15,109 17,583
Gain on disposal or sale of real estate 4,141 994 ---
- ---------------------------------------------------------------------------------------------------------------------
Income before extraordinary item 21,211 16,103 17,583
Extraordinary item - Loss on early extinguishment of debt, (345) (460) ---
- ---------------------------------------------------------------------------------------------------------------------
Net income 20,866 15,643 17,583
Less applicable preferred unit distributions (1,917) (1,911) (1,808)
- ---------------------------------------------------------------------------------------------------------------------
Income available to partners 18,949 13,732 15,775
Income allocated to the limited partners (5,278) (3,816) (4,756)
- ---------------------------------------------------------------------------------------------------------------------
Income allocated to the general partner $ 13,671 $ 9,916 $ 11,019
- ---------------------------------------------------------------------------------------------------------------------
Basic earnings per unit:
Income before extraordinary item $ 1.77 $ 1.30 $ 1.57
Extraordinary item (0.03) (0.04) ---
- ---------------------------------------------------------------------------------------------------------------------
Net income $ 1.74 $ 1.26 $ 1.57
- ---------------------------------------------------------------------------------------------------------------------
Diluted earnings per unit:
Income before extraordinary item $ 1.77 $ 1.28 $ 1.55
Extraordinary item (0.03) (0.04) ---
- ---------------------------------------------------------------------------------------------------------------------
Net income $ 1.74 $ 1.24 $ 1.55
- ---------------------------------------------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
</TABLE>
F - 3
<PAGE>
<TABLE>
<CAPTION>
TANGER PROPERTIES LIMITED PARTNERSHIP
STATEMENTS OF PARTNERS' EQUITY
For the Years Ended December 31, 1999, 1998, and 1997
(In thousands, except unit data)
General Limited Total Partners'
Partner Partners Equity
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Balance, December 31, 1996 $ 110,657 $ 25,599 $ 136,256
Conversion of 15,730 preferred units
into 141,726 partnership units --- --- ---
Issuance of 29,700 units upon exercise of unit options 703 --- 703
Issuance of 1,080,000 units to general partner in
exchange for proceeds from a common share offering 29,241 --- 29,241
Compensation under unit Option Plan 234 104 338
Net income 12,827 4,756 17,583
Preferred distributions ($19.55 per unit) (1,789) --- (1,789)
Distributions to partners ($2.17 per unit) (15,224) (6,583) (21,807)
- -----------------------------------------------------------------------------------------------
Balance, December 31, 1997 136,649 23,876 160,525
Conversion of 2,419 preferred units
into 21,790 partnership units --- --- ---
Issuance of 31,880 units upon exercise of
share and unit options 762 --- 762
Repurchase and retirement of 10,000
partnership units (216) --- (216)
Compensation under Unit Option Plan 142 53 195
Net income 11,827 3,816 15,643
Preferred distributions ($21.17 per unit) (1,894) --- (1,894)
Distributions to partners ($2.35 per unit) (18,524) (7,128) (25,652)
- -----------------------------------------------------------------------------------------------
Balance, December 31, 1998 128,746 20,617 149,363
Conversion of 3,000 preferred units
into 27,029 partnership units --- --- ---
Issuance of 500 units upon exercise of unit options 12 --- 12
Repurchase and retirement of 48,300
partnership units (958) --- (958)
Transfer of partnership interest (120,557) 120,557 ---
Net income 15,588 5,278 20,866
Preferred distributions ($21.76 per unit) (1,918) --- (1,918)
Distributions to partners ($2.42 per unit) (18,986) (7,325) (26,311)
- -----------------------------------------------------------------------------------------------
Balance, December 31, 1999 $ 1,927 $ 139,127 $ 141,054
- -----------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
F - 4
<PAGE>
<TABLE>
<CAPTION>
TANGER PROPERTIES LIMITED PARTNERSHIP
STATEMENTS OF CASH FLOWS
(In thousands)
Year Ended December 31,
1999 1998 1997
- ---------------------------------------------------------------------------------------------------------------------
OPERATING ACTIVITIES
<S> <C> <C> <C>
Net income $ 20,866 $ 15,643 $ 17,583
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization 24,824 22,154 18,439
Amortization of deferred financing costs 1,005 1,076 1,094
Loss on early extinguishment of debt 345 460 ---
Asset write-down --- 2,700 ---
Gain on disposal or sale of real estate (4,141) (994) ---
Gain on sale of outparcels of land (687) --- ---
Straight-line base rent adjustment (214) (688) (347)
Compensation under Unit Option Plan --- 195 338
Increase (decrease) due to changes in:
Other assets (1,196) (2,161) (1,591)
Accounts payable and accrued expenses 2,367 (2,594) 3,716
- ---------------------------------------------------------------------------------------------------------------------
Net cash provided by operating activites 43,169 35,791 39,232
- ---------------------------------------------------------------------------------------------------------------------
INVESTING ACTIVITIES
Acquisition of rental properties (15,500) (44,650) (37,500)
Additions to rental properties (34,224) (35,252) (54,795)
Additions to deferred lease costs (1,862) (1,895) (1,341)
Net proceeds from sale of real estate 1,987 2,561 ---
Net insurance proceeds from property losses 6,451 --- ---
Advances to officer (2,811) --- ---
- ---------------------------------------------------------------------------------------------------------------------
Net cash used in investing activities (45,959) (79,236) (93,636)
- ---------------------------------------------------------------------------------------------------------------------
FINANCING ACTIVITIES
Contributions from the general partner --- --- 29,241
Repurchase of partnership units (958) (216) ---
Cash distributions paid (28,229) (27,546) (23,596)
Proceeds from mortgages payable 66,500 --- 75,000
Repayments on mortgages payable (48,638) (1,260) (1,154)
Proceeds from revolving lines of credit 118,555 152,760 118,450
Repayments on revolving lines of credit (109,255) (78,065) (141,250)
Additions to deferred financing costs (1,030) (263) (1,950)
Proceeds from exercise of unit options 12 762 703
- ---------------------------------------------------------------------------------------------------------------------
Net cash provided by (used in) financing activities (3,043) 46,172 55,444
- ---------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in cash and cash equivalents (5,833) 2,727 1,040
Cash and cash equivalents, beginning of period 6,334 3,607 2,567
- ---------------------------------------------------------------------------------------------------------------------
Cash and cash equivalents, end of period $ 501 $ 6,334 $ 3,607
- ---------------------------------------------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
</TABLE>
F - 5
<PAGE>
NOTES TO FINANCIAL STATEMENTS
1. Organization of the Operating Partnership
Tanger Properties Limited Partnership, a North Carolina limited partnership (the
"Operating Partnership"), develops, owns and operates factory outlet centers.
Recognized as one of the largest owners and operators of factory outlet centers
in the United States, the Company owned and operated 31 factory outlet centers
located in 22 states with a total gross leasable area of approximately 5.1
million square feet at the end of 1999. The Company provides all development,
leasing and management services for its centers.
The Operating Partnership is controlled by Tanger Factory Outlet Centers, Inc.
(the "Company"), a fully-integrated, self-administered, self-managed real estate
investment trust ("REIT") as the sole shareholder of the Operating Partnership's
general partner, Tanger GP Trust. Prior to 1999, the Company owned the majority
of the units of partnership interest issued by the Operating Partnership (the
"Units") and served as its sole general partner. During 1999, the Company
transferred its ownership of Units into two wholly-owned subsidiaries, the
Tanger GP Trust and the Tanger LP Trust, with Tanger GP Trust as the sole
general partner and Tanger LP Trust as a limited partner. The Tanger Family
Limited Partnership ("TFLP"), holds the remaining Units as a limited partner.
Stanley K. Tanger, the Company's Chairman of the Board and Chief Executive
Officer, is the sole general partner of TFLP.
As of December 31, 1999, the Tanger GP Trust owned 150,000 Units, the Tanger LP
Trust owned 7,726,835 Units and 85,270 Preferred Units (which are convertible
into approximately 795,309 limited partnership Units) and TFLP owned 3,033,305
Units. TFLP's Units are exchangeable, subject to certain limitations to preserve
the Company's status as a REIT, on a one-for-one basis for common shares of the
Company. Preferred Units are automatically converted into limited partnership
Units to the extent of any conversion of preferred shares of the Company into
common shares of the Company.
2. Summary of Significant Accounting Policies
Basis of Presentation - Allocation of income to the partners is based on
each partner's respective ownership of Units issued by the Operating
Partnership.
Use of Estimates - The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.
Operating Segments - The Operating Partnership aggregates the financial
information of all its centers into one reportable operating segment because the
centers all have similar economic characteristics and provide similar products
and services to similar types and classes of customers.
Rental Properties - Rental properties are recorded at cost less accumulated
depreciation. Costs incurred for the acquisition, construction, and development
of properties are capitalized. Depreciation is computed on the straight-line
basis over the estimated useful lives of the assets. The Operating Partnership
generally uses estimated lives ranging from 25 to 33 years for buildings, 15
years for land improvements and seven years for equipment. Expenditures for
ordinary maintenance and repairs are charged to operations as incurred while
significant renovations and improvements, including tenant finishing allowances,
that improve and/or extend the useful life of the asset are capitalized and
depreciated over their estimated useful life.
Buildings, improvements and fixtures consist primarily of permanent
buildings and improvements made to land such as landscaping and infrastructure
and costs incurred in providing rental space to tenants. Interest costs
capitalized during 1999, 1998 and 1997 amounted to $1,242,000, $762,000, and
$1,877,000, and development costs capitalized amounted to $1,711,000,
$1,903,000, and $1,637,000, respectively. Depreciation expense for each of the
years ended December 31, 1999, 1998 and 1997 was $23,095,000, $20,873,000, and
$17,327,000, respectively.
The pre-construction stage of project development involves certain costs to
secure land control and zoning and complete other initial tasks essential to the
development of the project. These costs are transferred from other assets to
developments under construction when the pre-construction tasks are completed.
Costs of potentially unsuccessful pre-construction efforts are charged to
operations.
F - 6
<PAGE>
Cash and Cash Equivalents - All highly liquid investments with an original
maturity of three months or less at the date of purchase are considered to be
cash and cash equivalents. Cash balances at a limited number of banks may
periodically exceed insurable amounts. The Operating Partnership believes that
it mitigates its risk by investing in or through major financial institutions.
Recoverability of investments is dependent upon the performance of the issuer.
Deferred Charges - Deferred lease costs consist of fees and costs incurred
to initiate operating leases and are amortized over the average minimum lease
term. Deferred financing costs include fees and costs incurred to obtain
long-term financing and are being amortized over the terms of the respective
loans. Unamortized deferred financing costs are charged to expense when debt is
retired before the maturity date.
Impairment of Long-Lived Assets - Rental property held and used by an
entity is reviewed for impairment in the event that facts and circumstances
indicate the carrying amount of an asset may not be recoverable. In such an
event, the Operating Partnership compares the estimated future undiscounted cash
flows associated with the asset to the asset's carrying amount, and if less,
recognizes an impairment loss in an amount by which the carrying amount exceeds
its fair value. The Operating Partnership believes that no material impairment
existed at December 31, 1999.
Derivatives - The Operating Partnership selectively enters into interest
rate protection agreements to mitigate changes in interest rates on its variable
rate borrowings. The notional amounts of such agreements are used to measure the
interest to be paid or received and do not represent the amount of exposure to
loss. None of these agreements are used for speculative or trading purposes. The
cost of these agreements are included in deferred financing costs and are
amortized on a straight-line basis over the life of the agreements. As of
December 31, 1999, the Operating Partnership had no such agreements.
Revenue Recognition - Base rentals are recognized on a straight line basis
over the term of the lease. Substantially all leases contain provisions which
provide additional rents based on tenants' sales volume ("percentage rentals")
and reimbursement of the tenants' share of advertising and promotion, common
area maintenance, insurance and real estate tax expenses. Percentage rentals are
recognized when specified targets that trigger the contingent rent are met.
Expense reimbursements are recognized in the period the applicable expenses are
incurred. Payments received from the early termination of leases are recognized
when the applicable space is released, or, otherwise are amortized over the
remaining lease term. Business interruption insurance proceeds received are
recognized as other income over the estimated period of interruption.
Income Taxes - As a partnership, the allocated share of income or loss for the
year is included in the income tax returns of the partners; accordingly, no
provision has been made for Federal income taxes in the accompanying financial
statements.
Concentration of Credit Risk - The Operating Partnership's management
performs ongoing credit evaluations of its tenants. Although the tenants operate
principally in the retail industry, the properties are geographically diverse.
No single tenant accounted for 10% or more of combined base and percentage
rental income during 1999, 1998 or 1997.
Supplemental Cash Flow Information - The Operating Partnership purchases
capital equipment and incurs costs relating to construction of new facilities,
including tenant finishing allowances. Expenditures included in construction
trade payables as of December 31, 1999, 1998 and 1997 amounted to $6,287,000,
$9,224,000, and $12,913,000, respectively. Interest paid, net of interest
capitalized, in 1999, 1998 and 1997 was $23,179,000, $20,690,000, and
$12,337,000, respectively. Other assets at December 31, 1999 include a property
loss receivable of $4.2 million from the Operating Partnership's property
insurance carrier.
3. Deferred Charges
Deferred charges as of December 31, 1999 and 1998 consist of the following (in
thousands):
<TABLE>
<CAPTION>
1999 1998
------------------------------------ ----------- -------------
<S> <C> <C>
Deferred lease costs $11,110 $ 9,551
Deferred financing costs 5,866 5,691
------------------------------------ ----------- -------------
16,976 15,242
Accumulated amortization 8,800 7,024
------------------------------------ ----------- -------------
$ 8,176 $ 8,218
------------------------------------ ----------- -------------
</TABLE>
F - 7
<PAGE>
Amortization of deferred lease costs for the years ended December 31, 1999, 1998
and 1997 was $1,459,000, $1,019,000, and $873,000, respectively. Amortization of
deferred financing costs, included in interest expense in the accompanying
statements of operations, for the years ended December 31, 1999, 1998 and 1997
was $1,005,000, $1,076,000, and $1,094,000 respectively. During 1999 and 1998,
the Operating Partnership expensed the remaining unamortized financing costs
totaling $345,000 and $460,000 related to debt extinguished prior to its
respective maturity date. Such amounts are shown as extraordinary items in the
accompanying statements of operations.
4. Other Assets
Included in other assets are notes receivable totaling $2.8 million from Stanley
K. Tanger, the Chairman of the Board and Chief Executive Officer of the Company.
Mr. Tanger and the Operating Partnership have entered into demand note
agreements whereby he may borrow up to $3.5 million through various advances
from the Operating Partnership for an investment in a separate e-commerce
business venture. The notes bear interest at a rate of 8% per annum and are
collateralized by Mr. Tanger's limited partnership interest in Tanger
Investments Limited Partnership. Mr. Tanger intends to fully repay the loan.
Also included in other assets is a receivable of $4.2 million from the Operating
Partnership's property insurance carrier. This amount, which was collected in
January 2000, represents the unpaid portion of an insurance settlement of $13.4
million related to the loss of the Operating Partnership's outlet center in
Stroud, Oklahoma. The center was destroyed by a tornado in May 1999.
Approximately $1.9 million of the settlement proceeds represented business
interruption insurance. The business interruption proceeds are being amortized
to other income over a period of fourteen months. The unrecognized portion of
the business interruption proceeds at December 31, 1999 totaled $985,200. The
remaining portion of the settlement, net of related expenses, was considered
replacement proceeds for the portion of the center that was totally destroyed.
As a result, the Operating Partnership recognized a gain on disposal of $4.1
million during 1999. The remaining carrying value for this property consists of
land and related site work totaling $1.7 million.
5. Asset Write-Down
During 1998, the Operating Partnership discontinued the development of its
Concord, North Carolina, Romulus, Michigan and certain other projects as the
economics of these transactions did not meet an adequate return on investment
for the Operating Partnership. As a result, the Operating Partnership recorded a
$2.7 million charge in the fourth quarter of 1998 to write-off the carrying
amount of these projects, net of proceeds received from the sale of the
Operating Partnership's interest in the Concord project to an unrelated third
party.
6. Long-term Debt
Long-term debt at December 31, 1999 and 1998 consists of the following (in
thousands):
<TABLE>
<CAPTION>
1999 1998
------------------------------------------------------------------------ --------------- ---------------
<S> <C> <C> <C> <C>
8.75% Senior, unsecured notes, maturing March 2001 $ 75,000 $ 75,000
7.875% Senior, unsecured notes, maturing October 2004 75,000 75,000
Mortgage notes with fixed interest at:
8.625%, maturing September 2000 9,460 9,805
8.92%, maturing January 2002 --- 47,405
9.77%, maturing April 2005 15,351 15,580
7.875%, maturing April 2009 65,841 ---
Revolving lines of credit with variable interest rates ranging from either
prime less .25% to prime or from LIBOR plus 1.55%
to LIBOR plus 1.60% 88,995 79,695
------------------------------------------------------------------------ --------------- ---------------
$ 329,647 $ 302,485
------------------------------------------------------------------------ --------------- ---------------
</TABLE>
The Operating Partnership maintains revolving lines of credit which provide for
borrowing up to $100 million. The agreements expire at various times through the
year 2002. Interest is payable based on alternative interest rate bases at the
Operating Partnership's option. Amounts available under these facilities at
December 31, 1999 totaled $11.0 million. Certain of the Operating Partnership's
properties, which had a net book value of approximately $88.9 million at
December 31, 1999, serve as collateral for the fixed rate mortgages.
F - 8
<PAGE>
The credit agreements require the maintenance of certain ratios, including debt
service coverage and leverage, and limit the payment of distributions such that
distributions will not exceed funds from operations, as defined in the
agreements, for the prior fiscal year on an annual basis or 95% of funds from
operations on a cumulative basis. All three existing fixed rate mortgage notes
are with insurance companies and contain prepayment penalty clauses.
During March 1999, the Operating Partnership refinanced its 8.92% notes. The
refinancing reduced the interest rate to 7.875%, increased the loan amount to
$66.5 million and extended the maturity date to April 2009. The additional
proceeds were used to reduce amounts outstanding under the revolving lines of
credit.
Maturities of the existing long-term debt are as follows (in thousands):
<TABLE>
<CAPTION>
Year Amount %
---------------------------------- ------------- ------------
<S> <C> <C>
2000 $ 10,654 3
2001 117,291 36
2002 49,381 15
2003 1,497 ---
2004 76,618 23
Thereafter 74,206 23
---------------------------------- ------------- ------------
$ 329,647 100
---------------------------------- ------------- ------------
</TABLE>
In January 2000, the Operating Partnership entered into a $20.0 million two year
unsecured term loan with interest payable at LIBOR plus 2.25%. The proceeds were
used to reduce amounts outstanding under the existing lines of credit. Also in
January 2000, the Operating Partnership entered into interest rate swap
agreements on notional amounts totaling $20.0 million at a cost of $162,000. The
agreements mature in January 2002. The swap agreements have the effect of fixing
the interest rate on the new $20.0 million loan at 8.75%.
7. Derivatives and Fair Value of Financial Instruments
In October 1998, the Operating Partnership entered into an interest rate swap
agreement effective through October 2001 with a notional amount of $20 million
that fixed the 30 day LIBOR index at 5.47%. The Operating Partnership terminated
this agreement in June 1999. The Operating Partnership had a similar agreement
with a notional amount of $10 million at a fixed 30 day LIBOR index of 5.99%
that expired during 1998. The impact of these agreements had an insignificant
effect on interest expense during 1999, 1998 and 1997.
In anticipation of offering the senior, unsecured notes due 2004, the Operating
Partnership entered into an interest rate protection agreement on October 3,
1997 which fixed the index on the 10 year US Treasury rate at 5.995% for 30 days
on a notional amount of $70 million. The transaction settled on October 21,
1997, the trade date of the $75 million offering, and, as a result of an
increase in the US Treasury rate, the Operating Partnership received proceeds of
$714,000. Such amount is being amortized as a reduction to interest expense over
the life of the notes. The overall effective interest rate on the notes, after
giving consideration to these proceeds, is 7.75%.
The carrying amount of cash equivalents approximates fair value due to the
short-term maturities of these financial instruments. The fair value of
long-term debt at December 31, 1999, which is estimated as the present value of
future cash flows, discounted at interest rates available at the reporting date
for new debt of similar type and remaining maturity, was approximately $324.4
million.
F - 9
<PAGE>
8. Partnership Equity
At December 31, 1999 and 1998, the ownership interests of the Operating
Partnership consisted of the following:
<TABLE>
<CAPTION>
1999 1998
--------------------------------- ------------- --------------
<S> <C> <C>
Preferred units 85,270 88,270
--------------------------------- ------------- --------------
Partnership Units:
General partner 150,000 7,897,606
Limited partners 10,760,140 3,033,305
--------------------------------- ------------- --------------
Total 10,910,140 10,930,911
--------------------------------- ------------- --------------
</TABLE>
During 1997, the Company completed an additional public offering of 1,080,000
common shares at a price of $29.0625 per share, receiving net proceeds of
approximately $29.2 million. The net proceeds, which were contributed to the
Operating Partnership in exchange for 1,080,000 Units, were used to acquire,
expand and develop factory outlet centers and for general corporate purposes.
The Series A Cumulative Convertible Redeemable Preferred Shares (the "Preferred
Shares") were sold to the public during 1993 in the form of Depositary Shares,
each representing 1/10 of a Preferred Share. Proceeds from this offering, net of
underwriters discount and estimated offering expenses, were contributed to the
Operating Partnership in return for preferred partnership Units. The Preferred
Shares have a liquidation preference equivalent to $25 per Depositary Share and
dividends accumulate per Depositary Share equal to the greater of (i) $1.575 per
year or (ii) the dividends on the common shares or portion thereof, into which a
depositary share is convertible. The Preferred Shares rank senior to the common
shares in respect of dividend and liquidation rights.
The Preferred Shares are convertible at the option of the holder at any time
into common shares at a rate equivalent to .901 common shares for each
Depositary Share. Preferred partnership Units are automatically converted into
limited partnership Units to the extent of any conversion of the Company's
Series A Preferred Shares into the Company's common shares. At December 31,
1999, 768,269 common shares of the Company (and 768,269 Units of the Operating
Partnership) were reserved for the conversion of Depositary Shares (and
Preferred Units). The Preferred Shares and Depositary Shares may be redeemed at
the option of the Company, in whole or in part, at a redemption price of $25 per
Depositary Share, plus accrued and unpaid dividends.
The Company's Board of Directors has authorized the repurchase of up to $6
million of the Company's common shares. Proceeds required to repurchase these
common shares are funded by the Operating Partnership in exchange for an
equivalent number of partnership units in the Operating Partnership. The timing
and amount of purchases will be at the discretion of management. During 1999 and
1998, the Company purchased and retired 48,300 and 10,000 common shares at a
price of $958,000 and $216,000, respectively. The amount authorized for future
repurchases remaining at December 31, 1999 totaled $4.8 million.
F - 10
<PAGE>
10. Earnings Per Unit
A reconciliation of the numerators and denominators in computing earnings per
share in accordance with Statement of Financial Accounting Standards No. 128,
Earnings per Share, for the years ended December 31, 1999, 1998 and 1997 is set
forth as follows (in thousands, except per unit amounts):
<TABLE>
<CAPTION>
1999 1998 1997
- -----------------------------------------------------------------------------------------------------
Numerator:
<S> <C> <C> <C>
Income before extraordinary item $ 21,211 $ 16,103 $ 17,583
Less applicable preferred unit distributions (1,917) (1,911) (1,808)
- -----------------------------------------------------------------------------------------------------
Income available to the general and limited partners-
numerator for basic and diluted earnings per unit 19,294 14,192 15,775
- -----------------------------------------------------------------------------------------------------
Denominator:
Basic weighted average partnership units 10,894 10,919 10,061
Effect of outstanding unit options 10 121 110
- -----------------------------------------------------------------------------------------------------
Diluted weighted average partnership units 10,904 11,040 10,171
- -----------------------------------------------------------------------------------------------------
Basic earnings per unit before extraordinary item $ 1.77 $ 1.30 $ 1.57
- -----------------------------------------------------------------------------------------------------
Diluted earnings per unit before extaordinary item $ 1.77 $ 1.28 $ 1.55
- -----------------------------------------------------------------------------------------------------
</TABLE>
Options to purchase units excluded from the computation of diluted earnings per
unit during 1999 and 1998 because the exercise price was greater than the
average market price of the Company's common shares totaled 651,418 and 244,775
units. During 1997, all options had exercise prices less than the average market
price. The assumed conversion of the preferred units as of the beginning of each
year would have been anti-dilutive.
11. Employee Benefit Plans
The Company has a non-qualified and incentive share option plan ("The Share
Option Plan") and the Operating Partnership has a non-qualified Unit option plan
("The Unit Option Plan"). Units received upon exercise of Unit options are
exchangeable for common shares of the Company. The Operating Partnership
accounts for these plans under APB Opinion No. 25, under which no compensation
cost has been recognized.
Had compensation cost for these plans been determined for options granted since
January 1, 1995 consistent with Statement of Financial Accounting Standards No.
123, Accounting for Stock-Based Compensation (SFAS 123), the Operating
Partnership's net income and earnings per unit would have been reduced to the
following pro forma amounts (in thousands, except per unit amounts):
<TABLE>
<CAPTION>
1999 1998 1997
------------------ ---------------- ------------ ----------------- ----------------
<S> <C> <C> <C>
Net income: As reported $ 20,866 $ 15,643 $ 17,583
Pro forma 20,599 $ 15,409 $ 17,403
Basic EPS: As reported $ 1.74 $ 1.26 $ 1.57
Pro forma $ 1.71 $ 1.24 $ 1.55
Diluted EPS: As reported $ 1.74 $ 1.24 $ 1.55
Pro forma $ 1.71 $ 1.23 $ 1.54
</TABLE>
Because the SFAS 123 method of accounting has not been applied to options
granted prior to January 1, 1995, the resulting pro forma compensation cost may
not be representative of that to be expected in future years. The fair value of
each option grant is estimated on the date of grant using the Black-Scholes
option pricing model with the following weighted-average assumptions used for
grants in 1999 and 1998, respectively: expected distribution yields of 10%;
expected lives ranging from 5 years to 7 years; expected volatility 20%; and
risk-free interest rates ranging from 4.72% to 5.50%.
F - 11
<PAGE>
The Company and the Operating Partnership may issue up to a combined 1,750,000
shares and units under The Share Option Plan and The Unit Option Plan. The
Company and the Operating Partnership have granted 1,343,070 options, net of
options forfeited, through December 31, 1999. Under both plans, the option
exercise price is determined by the Share and Unit Option Committee of the Board
of Directors. Non-qualified share and Unit options granted expire 10 years from
the date of grant and are exercisable in five equal installments commencing one
year from the date of grant.
Options outstanding at December 31, 1999 have exercise prices between $22.125
and $30.50, with a weighted average exercise price of $24.55 and a weighted
average remaining contractual life of 6.2 years.
Unamortized share compensation, which relates to options that were granted at an
exercise price below the fair market value at the time of grant, was fully
amortized in 1998. Compensation expense recognized during 1998 and 1997 was
$195,000, and $338,000, respectively.
A summary of the status of the Operating Partnership's plan at December 31,
1999, 1998 and 1997 and changes during the years then ended is presented in the
table and narrative below:
<TABLE>
<CAPTION>
1999 1998 1997
------------------------- --------------------------- -----------------------
Wtd Avg Wtd Avg Wtd Avg
Units Ex Price Units Ex Price Units Ex Price
- -------------------------------------- ------------ -------------- ------------- ------------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Outstanding at beginning of year 1,030,660 $ 25.16 847,230 $ 23.67 888,950 $ 23.69
Granted 226,800 22.13 262,600 30.15 --- ---
Exercised (500) 23.80 (28,280) 23.94 (29,700) 23.68
Forfeited (29,470) 26.94 (50,890) 26.94 (12,020) 24.41
- -------------------------------------- ------------ -------------- ------------- ------------- ----------- -----------
Outstanding at end of year 1,227,490 $ 24.55 1,030,660 $ 25.16 847,230 $ 23.67
- -------------------------------------- ------------ -------------- ------------- ------------- ----------- -----------
Exercisable at end of year 718,630 $ 23.97 592,320 $ 23.41 456,350 $ 23.37
Weighted average fair value of
options granted $ 1.05 $ 1.60 ---
</TABLE>
The Operating Partnership has a qualified retirement plan, with a salary
deferral feature designed to qualify under Section 401 of the Code (the "401(k)
Plan"), which covers substantially all officers and employees of the Operating
Partnership. The 401(k) Plan permits employees of the Operating Partnership, in
accordance with the provisions of Section 401(k) of the Code, to defer up to 20%
of their eligible compensation on a pre-tax basis subject to certain maximum
amounts. Employee contributions are fully vested and are matched by the
Operating Partnership at a rate of compensation deferred to be determined
annually at the Operating Partnership's discretion. The matching contribution is
subject to vesting under a schedule providing for 20% annual vesting starting
with the third year of employment and 100% vesting after seven years of
employment. The employer matching contribution expense for the years 1999, 1998
and 1997 was immaterial.
12. Supplementary Income Statement Information
The following amounts are included in property operating expenses for the years
ended December 31, 1999, 1998 and 1997 (in thousands):
<TABLE>
<CAPTION>
1999 1998 1997
-------------------------------- ----------- ----------- ------------
<S> <C> <C> <C>
Advertising and promotion $ 8,579 $ 9,069 $ 8,452
Common area maintenance 12,296 11,929 11,113
Real estate taxes 7,396 6,202 5,004
Other operating expenses 2,314 1,906 1,700
-------------------------------- ----------- ----------- ------------
$ 30,585 $ 29,106 $ 26,269
-------------------------------- ----------- ----------- ------------
</TABLE>
F - 12
<PAGE>
13. Lease Agreements
The Operating Partnership is the lessor of a total of 1,310 stores in 31 factory
outlet centers, under operating leases with initial terms that expire from 2000
to 2017. Most leases are renewable for five years at the lessee's option. Future
minimum lease receipts under noncancellable operating leases as of December 31,
1999 are as follows (in thousands):
<TABLE>
<CAPTION>
<S> <C>
2000 $ 63,730
2001 56,549
2002 46,886
2003 32,125
2004 20,449
Thereafter 44,106
-------------------- --------------------
$ 263,845
-------------------- --------------------
</TABLE>
14. Commitments and Contingencies
At December 31, 1999, commitments for construction of new developments and
additions to existing properties amounted to $3.0 million. Commitments for
construction represent only those costs contractually required to be paid by the
Operating Partnership.
The Operating Partnership purchased the rights to lease land on which two of the
outlet centers are situated for $1,520,000. These leasehold rights are being
amortized on a straight-line basis over 30 and 40 year periods. Accumulated
amortization was $566,000 and $517,000 at December 31, 1999 and 1998,
respectively.
The Operating Partnership's noncancellable operating leases, with initial terms
in excess of one year, have terms that expire from 2000 to 2085. Annual rental
payments for these leases aggregated $1,481,000, 1,090,000, and $778,000, for
the years ended December 31, 1999, 1998 and 1997, respectively. Minimum lease
payments for the next five years and thereafter are as follows (in thousands):
<TABLE>
<CAPTION>
<S> <C>
2000 $1,821
2001 1,759
2002 1,705
2003 1,550
2004 1,507
Thereafter 55,164
------------------ ---------------------
$63,506
------------------ ---------------------
</TABLE>
The Operating Partnership is also subject to legal proceedings and claims which
have arisen in the ordinary course of its business and have not been finally
adjudicated. In management's opinion, the ultimate resolution of these matters
will have no material effect on the Operating Partnership's results of
operations or financial condition.
F - 13
<PAGE>
16. Acquisitions
During 1998, the Operating Partnership completed the acquisitions of two factory
outlet centers containing approximately 359,000 square feet of gross leasable
area for purchase prices that aggregated $44.7 million. The acquisitions were
accounted for using the purchase method whereby the purchase price was allocated
to assets acquired based on their fair values. The results of operations of the
acquired properties have been included in the results of operations since the
applicable acquisition date.
The pro forma information is presented for informational purposes only and may
not be indicative of what actual results of operations would have been had the
acquisitions occurred at the beginning of each period presented, nor does it
purport to represent the results of operations for future periods. The following
unaudited summarized pro forma results of operations reflect adjustments to
present the historical information as if the all of the acquisitions had
occurred as of the January 1, 1998 (unaudited and in thousands, except per unit
data).
<TABLE>
<CAPTION>
1998
---------------------------------------- ------------
<S> <C>
Total revenues $100,840
Income before extraordinary item 16,366
Net income 15,906
Basic net income per unit:
Income before extraordinary item 1.32
Net income 1.28
Diluted net income per unit:
Income before extraordinary item 1.31
Net income 1.27
---------------------------------------- ------------
</TABLE>
F - 14
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
Our report on the financial statements of Tanger Properties Limited
Partnership is included on page F-1 of this Form 10-K. In connection with our
audits of such financial statements, we have also audited the related financial
statement schedule listed in the index on page 26 of this Form 10-K.
In our opinion, the financial statement schedule referred to above, when
considered in relation to the basic financial statements taken as a whole,
presents fairly, in all material respects, the information required to be
included therein.
PricewaterhouseCoopers LLP
Greensboro, North Carolina
January 26, 2000
F - 15
<PAGE>
<TABLE>
<CAPTION>
TANGER PROPERTIES LIMITED PARTNERSHIP
SCHEDULE III
REAL ESTATE AND ACCUMULATED DEPRECIATION
For the Year Ended December 31, 1999
(In thousands)
Costs Capitalized Gross Amount
Subsequent to Carried at
Acquisition Close of Period
Description Initial cost to Company (Improvements) 12/31/99 (1)
- ----------------- ------------------- -------------- --------- -------------- -------- -------------- --------- -------------------
Buildings, Buildings, Buildings,
Outlet Center Improvements Improvements Improvements
Name Location Encumbrances Land & Fixtures Land & Fixtures Land & Fixtures Total
- ----------------- ------------------- ------------ --------- -------------- -------- -------------- --------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Barstow Barstow, CA $ -- $3,941 $ 12,533 $ --- $1,110 $3,941 $13,643 $17,584
- ----------------- ------------------- ------------ --------- -------------- -------- -------------- --------- ----------- ---------
Blowing Rock Blowing Rock, NC --- 1,963 9,424 --- 2,032 1,963 11,456 13,419
- ----------------- ------------------- ------------ --------- -------------- -------- -------------- --------- ----------- ---------
Boaz Boaz, AL --- 616 2,195 --- 1,673 616 3,868 4,484
- ----------------- ------------------- ------------ --------- -------------- -------- -------------- --------- ----------- ---------
Bourne Bourne, MA --- 899 1,361 --- 255 899 1,616 2,515
- ----------------- ------------------- ------------ --------- -------------- -------- -------------- --------- ----------- ---------
Branch North Branch, MN --- 304 5,644 249 2,514 553 8,158 8,711
- ----------------- ------------------- ------------ --------- -------------- -------- -------------- --------- ----------- ---------
Branson Branson, MO --- 4,557 25,040 --- 6,146 4,557 31,186 35,743
- ----------------- ------------------- ------------ --------- -------------- -------- -------------- --------- ----------- ---------
Casa Grande Casa Grande, AZ --- 753 9,091 --- 1,233 753 10,324 11,077
- ----------------- ------------------- ------------ --------- -------------- -------- -------------- --------- ----------- ---------
Clover North Conway, NH --- 393 672 --- 246 393 918 1,311
- ----------------- ------------------- ------------ --------- -------------- -------- -------------- --------- ----------- ---------
Commerce I Commerce, GA 9,460 755 3,511 492 8,318 1,247 11,829 13,076
- ----------------- ------------------- ------------ --------- -------------- -------- -------------- --------- ----------- ---------
Commerce II Commerce, GA --- 1,262 14,046 541 16,986 1,803 31,032 32,835
- ----------------- ------------------- ------------ --------- -------------- -------- -------------- --------- ----------- ---------
Dalton Dalton, GA 11,658 1,641 15,596 --- 54 1,641 15,650 17,291
- ----------------- ------------------- ------------ --------- -------------- -------- -------------- --------- ----------- ---------
Ft. Lauderdale Ft. Lauderdale, FL 9,412 6,986 --- --- 9,412 6,986 16,398
- ----------------- ------------------- ------------ --------- -------------- -------- -------------- --------- ----------- ---------
Gonzales Gonzales, LA --- 947 15,895 17 3,908 964 19,803 20,767
- ----------------- ------------------- ------------ --------- -------------- -------- -------------- --------- ----------- ---------
Kittery-I Kittery, ME 6,634 1,242 2,961 229 1,288 1,471 4,249 5,720
- ----------------- ------------------- ------------ --------- -------------- -------- -------------- --------- ----------- ---------
Kittery-II Kittery, ME --- 921 1,835 529 236 1,450 2,071 3,521
- ----------------- ------------------- ------------ --------- -------------- -------- -------------- --------- ----------- ---------
Lancaster Lancaster, PA 15,351 3,691 19,907 --- 6,341 3,691 26,248 29,939
=---------------- ------------------- ------------ --------- -------------- -------- -------------- --------- ----------- ---------
Lawrence Lawrence, KS --- 1,013 5,542 429 865 1,442 6,407 7,849
- ----------------- ------------------- ------------ --------- -------------- -------- -------------- --------- ----------- ---------
LL Bean North Conway, NH --- 1,894 3,351 --- 1,026 1,894 4,377 6,271
- ----------------- ------------------- ------------ --------- -------------- -------- -------------- --------- ----------- ---------
Locust Grove Locust Grove, GA --- 2,558 11,801 --- 7,304 2,558 19,105 21,663
- ----------------- ------------------- ------------ --------- -------------- -------- -------------- --------- ----------- ---------
Martinsburg Martinsburg, WV --- 800 2,812 --- 1,256 800 4,068 4,868
- ----------------- ------------------- ------------ --------- -------------- -------- -------------- --------- ----------- ---------
McMinnville McMinnville, OR --- 1,071 8,162 6 748 1,077 8,910 9,987
- ----------------- ------------------- ------------ --------- -------------- -------- -------------- --------- ----------- ---------
Nags Head Nags Head, NC --- 1,853 6,679 --- 1,016 1,853 7,695 9,548
- ----------------- ------------------- ------------ --------- -------------- -------- -------------- --------- ----------- ---------
Pigeon Forge Pigeon Forge, TN --- 299 2,508 --- 1,639 299 4,147 4,446
- ----------------- ------------------- ------------ --------- -------------- -------- -------------- --------- ----------- ---------
Riverhead Riverhead, NY --- --- 36,374 6,152 66,736 6,152 103,110 109,262
- ----------------- ------------------- ------------ --------- -------------- -------- -------------- --------- ----------- ---------
San Marcos San Marcos, TX 19,802 1,895 9,440 17 11,006 1,912 20,446 22,358
- ----------------- ------------------- ------------ --------- -------------- -------- -------------- --------- ----------- ---------
Sanibel Sanibel, FL --- 4,916 23,196 --- 2,121 4,916 25,317 30,233
- ----------------- ------------------- ------------ --------- -------------- -------- -------------- --------- ----------- ---------
Sevierville Sevierville, TN --- --- 18,495 --- 22,242 --- 40,737 40,737
- ----------------- ------------------- ------------ --------- -------------- -------- -------------- --------- ----------- ---------
Seymour Seymour, IN --- 1,671 13,249 --- 693 1,671 13,942 15,613
- ----------------- ------------------- ------------ --------- -------------- -------- -------------- --------- ----------- ---------
Stroud Stroud, OK --- 446 2,242 --- --- 446 2,242 2,688
- ----------------- ------------------- ------------ --------- -------------- -------- -------------- --------- ----------- ---------
Terrell Terrell, TX --- 778 13,432 --- 4,387 778 17,819 18,597
- ----------------- ------------------- ------------ --------- -------------- -------- -------------- --------- ----------- ---------
West Branch West Branch, MI 7,401 350 3,428 121 4,382 471 7,810 8,281
- ----------------- ------------------- ------------ --------- -------------- -------- -------------- --------- ----------- ---------
Williamsburg Williamsburg, IA 20,346 706 6,781 716 11,221 1,422 18,002 19,424
- ----------------- ------------------- ------------ --------- -------------- -------- -------------- --------- ----------- ---------
$90,652 $ 53,547 $314,189 $9,498 $188,982 $63,045 $503,171 $566,216
- ----------------- ------------------- ------------ --------- -------------- -------- -------------- --------- ----------- ---------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
TANGER PROPERTIES LIMITED PARTNERSHIP
SCHEDULE III
REAL ESTATE AND ACCUMULATED DEPRECIATION
For the Year Ended December 31, 1999
(In thousands)
Life Used to
Compute
Depreciation
Outlet Center Accumulated Date of in Income
Name Depreciation Construction Statement
- ----------------- ------------- ------------- --------------
<S> <C> <C> <C>
Barstow $3,647 1995 (2)
- ----------------- ------------- ------------- --------------
Blowing Rock 786 1997 (3) (2)
- ----------------- ------------- ------------- --------------
Boaz 1,600 1988 (2)
- ----------------- ------------- ------------- --------------
Bourne 757 1989 (2)
- ----------------- ------------- ------------- --------------
Branch 2,966 1992 (2)
- ----------------- ------------- ------------- --------------
Branson 7,739 1994 (2)
- ----------------- ------------- ------------- --------------
Casa Grande 4,133 1992 (2)
- ----------------- ------------- ------------- --------------
Clover 419 1987 (2)
- ----------------- ------------- ------------- --------------
Commerce I 3,923 1989 (2)
- ----------------- ------------- ------------- --------------
Commerce II 4,454 1995 (2)
- ----------------- ------------- ------------- --------------
Dalton 930 1998 (3) (2)
- ----------------- ------------- ------------- --------------
Ft. Lauderdale 44 1999 (3) (2)
- ----------------- ------------- ------------- --------------
Gonzales 6,578 1992 (2)
- ----------------- ------------- ------------- --------------
Kittery-I 2,175 1986 (2)
- ----------------- ------------- ------------- --------------
Kittery-II 923 1989 (2)
- ----------------- ------------- ------------- --------------
Lancaster 5,913 1994 (3) (2)
=---------------- ------------- ------------- --------------
Lawrence 1,839 1993 (2)
- ----------------- ------------- ------------- --------------
LL Bean 1,786 1988 (2)
- ----------------- ------------- ------------- --------------
Locust Grove 4,547 1994 (2)
- ----------------- ------------- ------------- --------------
Martinsburg 1,876 1987 (2)
- ----------------- ------------- ------------- --------------
McMinnville 3,021 1993 (2)
- ----------------- ------------- ------------- --------------
Nags Head 685 1997 (3) (2)
- ----------------- ------------- ------------- --------------
Pigeon Forge 1,754 1988 (2)
- ----------------- ------------- ------------- --------------
Riverhead 14,376 1993 (2)
- ----------------- ------------- ------------- --------------
San Marcos 4,984 1993 (2)
- ----------------- ------------- ------------- --------------
Sanibel 1,112 1998 (3) (2)
- ----------------- ------------- ------------- --------------
Sevierville 2,878 1997 (3) (2)
- ----------------- ------------- ------------- --------------
Seymour 3,920 1994 (2)
- ----------------- ------------- ------------- --------------
Stroud 948 1992 (2)
- ----------------- ------------- ------------- --------------
Terrell 4,738 1994 (2)
- ----------------- ------------- ------------- --------------
West Branch 2,672 1991 (2)
- ----------------- ------------- ------------- --------------
Williamsburg 6,568 1991 (2)
- ----------------- ------------- ------------- --------------
$104,511
- ----------------- ------------- ------------- --------------
</TABLE>
(1) Aggregate cost for federal income tax purposes is approximately
$559,611,000
(2) The Operating Partnership generally uses estimated lives ranging from 25 to
33 years for buildings and 15 years for land improvements. Tenant finishing
allowances are depreciated over the initial lease term.
(3) Represents year acquired
F - 16
<PAGE>
TANGER PROPERTIES LIMITED PARTNERSHIP
SCHEDULE III - (Continued)
REAL ESTATE AND ACCUMULATED DEPRECIATION
For the Year Ended December 31, 1999
(In Thousands)
The changes in total real estate for the three years ended December 31, 1999 are
as follows:
<TABLE>
<CAPTION>
1999 1998 1997
-------------- ---------------- ----------------
<S> <C> <C> <C>
Balance, beginning of year $529,247 $ 454,708 $ 358,361
Acquisition of real estate 15,500 44,650 37,500
Improvements 31,343 31,599 59,519
Dispositions and other (9,874) (1,710) (672)
-------------- ---------------- ----------------
Balance, end of year $566,216 $ 529,247 $ 454,708
============== ================ ================
</TABLE>
The changes in accumulated depreciation for the three years ended December 31,
1999 are as follows:
<TABLE>
<CAPTION>
1999 1998 1997
-------------- ---------------- ----------------
<S> <C> <C> <C>
Balance, beginning of year $84,685 $ 64,177 $ 46,907
Depreciation for the period 23,095 20,873 17,327
Dispositions and other (3,269) (365) (57)
-------------- ---------------- ----------------
Balance, end of year $104,511 $ 84,685 $ 64,177
============== ================ ================
</TABLE>
F - 17
Exhibit 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Registration
Statements on Form S-3 (No. 33-99736-01, 333-3526-01 and 333-39365-01) of Tanger
Properties Limited Partnership of our reports dated January 26, 2000 relating to
the financial statements and financial statement schedule, which appears in this
Form 10-K.
March 28, 2000
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
The schedule contains summary financial information extracted from the financial
statements as of and for the year ended December 31, 1999 included herein and is
qualified in its entirety by reference to such statements.
</LEGEND>
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> Dec-31-1999
<PERIOD-END> Dec-31-1999
<CASH> 501
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 566,216
<DEPRECIATION> 104,511
<TOTAL-ASSETS> 489,851
<CURRENT-LIABILITIES> 0
<BONDS> 329,647
0
0
<COMMON> 0
<OTHER-SE> 141,054
<TOTAL-LIABILITY-AND-EQUITY> 489,851
<SALES> 0
<TOTAL-REVENUES> 104,016
<CGS> 0
<TOTAL-COSTS> 30,585
<OTHER-EXPENSES> 24,824 <F1>
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 24,239
<INCOME-PRETAX> 21,211
<INCOME-TAX> 0
<INCOME-CONTINUING> 21,211
<DISCONTINUED> 0
<EXTRAORDINARY> (345)
<CHANGES> 0
<NET-INCOME> 20,866
<EPS-BASIC> 1.74
<EPS-DILUTED> 1.74
<FN>
<F1> Depreciation and amortization
</FN>
</TABLE>
