SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 8-K
Current Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
JULY 31, 1998
Date of Report (Date of earliest event reported)
TANGER FACTORY OUTLET CENTERS, INC.
(Exact name of registrant as specified in its charter)
NORTH CAROLINA
(STATE OR OTHER JURISDICTION OF INCORPORATION OR ORGANIZATION)
1-11986 56-1815473
(COMMISSION FILE NO.) (I.R.S. EMPLOYER IDENTIFICATION NO.)
1400 WEST NORTHWOOD STREET, GREENSBORO, NC 27408
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES, INCLUDING ZIP CODE)
(336) 274-1666
(REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)
NOT APPLICABLE
(FORMER NAME OR FORMER ADDRESS, IF CHANGED SINCE LAST REPORT)
<PAGE>
TANGER FACTORY OUTLET CENTERS, INC.
CURRENT REPORT
ON
FORM 8-K
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
On July 31, 1998, Tanger Properties Limited Partnership, of which
Tanger Factory Outlet Centers, Inc. (the "Company") is the sole general
partner, completed the acquisition of Sanibel Factory Stores, a factory
outlet center containing approximately 186,000 square feet, for an
aggregate purchase price of $27.65 million. Sanibel Factory Stores is
located on the Gulf coast of Florida between Fort Myers and Sanibel
Island.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS
The financial statements, unaudited pro forma financial information and
exhibits filed herewith are as set forth below
(a) Financial Statements Page
(1) Sanibel Factory Stores
Report of Independent Accountants 3
Statement of Revenues and Certain Operating Expenses
for the Year Ended December 31, 1997 4
Notes to Statement of Revenues and
Certain Operating Expenses 5
(b) Pro Forma Financial Information
(1) Unaudited Pro Forma Consolidated Balance Sheet
as of March 31, 1998 8
(2) Unaudited Pro Forma Consolidated Statements of
Operations
for the three months ended March 31, 1998 9
for the year ended December 31, 1997 10
(3) Adjustments to Unaudited Pro Forma Consolidated
Statements of Operations 11
(c) Exhibits
23.1 Consent of PricewaterhouseCoopers LLP*
- ---------------------------
* Filed herewith
2
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REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors of
Tanger Factory Outlet Centers, Inc:
We have audited the statement of revenues and certain operating
expenses of Sanibel Factory Stores (the "Property") as described in Note 1, for
the year ended December 31, 1997. This financial statement is the responsibility
of the Property's management. Our responsibility is to express an opinion on
this financial statement based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the statement of revenues and certain
operating expenses is free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statement. An audit also includes assessing the accounting
principles used and the significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audit provides a reasonable basis for our opinion.
The accompanying statement of revenues and certain operating expenses
was prepared for the purpose of complying with the rules and regulations of the
Securities and Exchange Commission for inclusion in the current report on Form
8-K of Tanger Factory Outlet Centers, Inc. as described in Note 1 and is not
intended to be a complete presentation of the Property's revenues and expenses.
In our opinion, the financial statement referred to above presents
fairly, in all material respects, the revenues and certain operating expenses of
the Property for the year ended December 31, 1997 in conformity with generally
accepted accounting principles.
PricewaterhouseCoopers LLP
Greensboro, North Carolina
June 30, 1998
3
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SANIBEL FACTORY STORES
STATEMENT OF REVENUES AND CERTAIN OPERATING EXPENSES
For The Year Ended December 31, 1997
(In thousands)
Revenues
Base rentals $2,815
Percentage rentals 148
Expense reimbursements 1,071
Other income 10
--------
4,044
--------
Certain operating expenses
Advertising and promotion 374
Common area maintenance 363
Real estate taxes 296
Insurance 49
General and administrative 60
--------
1,142
--------
Excess of revenues over certain operating
expenses $2,902
========
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THIS FINANCIAL STATEMENT.
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<PAGE>
NOTES TO STATEMENT OF REVENUES AND
CERTAIN OPERATING EXPENSES
(IN THOUSANDS)
1. BASIS OF PRESENTATION
The Statement of Revenues and Certain Operating Expenses relates to the
operations of Sanibel Factory Stores, a factory outlet center located in
Florida between Ft. Myers and Sanibel Island (the "Property"). The
Property was acquired by Tanger Properties Limited Partnership which has
as its sole general partner, Tanger Factory Outlet Centers, Inc.
(the "Company").
The accompanying Statement of Revenues and Certain Operating Expenses was
prepared for the purpose of complying with the rules and regulations of
the Securities and Exchange Commission. This statement is not
representative of the actual operations for the period presented, as
certain expenses, which may not be comparable to the expenses expected to
be incurred by the Company in the future operation of the Property, have
been excluded as discussed below.
Certain Operating Expenses include advertising and promotional expenses,
common area maintenance, real estate taxes, and certain other operating
expenses relating to the operations of the Property. In accordance with
the regulations of the Securities and Exchange Commission, mortgage
interest, depreciation and amortization and certain other costs have been
excluded from certain operating expenses, as they are dependent upon a
particular owner, purchase price or other financial arrangement. Certain
other costs excluded include:
Management fees, net of
tenant reimbursements $38
Leasing commissions 21
---
$59
===
No Federal income taxes have been provided because the Company is taxed as
a Real Estate Investment Trust under the provision of the Internal Revenue
Code. Accordingly, the Company does not pay Federal income tax whenever
income distributed to its shareholders is equal to at least 95% of real
estate investment trust's taxable income and certain other conditions are
met.
2. ACQUISITION CONSIDERATIONS (UNAUDITED)
In assessing the Property, the Company's management considered the
existing tenant base, which is the primary revenue source, occupancy rate,
the competitive nature of the market and comparative rental rates.
Furthermore, current and anticipated maintenance and repair costs, real
estate taxes and capital improvement requirements were evaluated.
Management is not aware of any material factors that would cause the
reported financial information in the accompanying Statement of Revenues
and Certain Operating Expenses to be misleading or not necessarily
indicative of future operating results.
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3. SIGNIFICANT ACCOUNTING POLICIES AND OPERATING LEASES
Base and percentage rental revenues are reported as income over the lease
term as earned.
The preparation of the Statement of Revenues and Certain Operating
Expenses in conformity with generally accepted accounting principles
requires management to make estimates and assumptions that affect the
reported amounts of revenues and expenses during the period reported.
Actual results may differ from those estimates.
The Property is leased to tenants under operating leases with expiration
dates extending to the year 2005. Future minimum rentals (assuming lease
renewal options, where applicable, are not exercised) under noncancellable
operating leases, exclusive of additional rents from reimbursement of
operating expenses are approximately as follows:
1998 $2,656
1999 2,280
2000 1,828
2001 1,602
2002 1,426
Thereafter 1,222
--------
$11,014
========
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<PAGE>
TANGER FACTORY OUTLET CENTERS, INC.
PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS
The accompanying Pro Forma Consolidated Financial Statements are based on
the historical statements of the Company after giving effect to the acquisition
of Sanibel Factory Stores, which was acquired on July 31, 1998, and Dalton
Factory Stores, which was acquired on March 31, 1998 (collectively, the
"Acquisitions"). The unaudited Pro Forma Consolidated Statements of Operations
for the three months ended March 31, 1998 and the year ended December 31, 1997
assume the Acquisitions had occurred as of the beginning of each respective
period.
The Pro Forma Consolidated Financial Statements have been prepared by the
Company's management. These pro forma statements may not be indicative of the
results that would have actually occurred if the Acquisitions had been in effect
on the date indicated, nor does it purport to represent the results of
operations for future periods. The Unaudited Pro Forma Consolidated Financial
Statements should be read in conjunction with the audited statement of revenues
and certain operating expenses of the Sanibel Factory Stores (contained herein)
for the year ended December 31, 1997, the Company's unaudited financial
statements and notes thereto as of March 31, 1998 and for the three months then
ended (which are contained in the Company's Form 10-Q for the period ended March
31, 1998), and the audited financial statements and notes thereto as of December
31, 1997 and for the year then ended (which are contained in the Company's
Annual Report on Form 10-K for the year ended December 31, 1997).
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TANGER FACTORY OUTLET CENTERS, INC. AND SUBSIDIARY
PRO FORMA CONSOLIDATED BALANCE SHEETS
As of March 31, 1998
(Unaudited)
(In thousands, except share data)
Tanger Adjustments Pro forma
----------------------------------
ASSETS
Rental property, net $406,673 $27,650(a) $434,323
Cash and cash equivalents 5,181 5,181
Deferred charges, net 8,288 8,288
Other assets 12,448 12,448
----------------------------------
TOTAL ASSETS $432,590 $27,650 $460,240
==================================
LIABILITIES AND SHAREHOLDERS' EQUITY
LIABILITIES
Long-term debt $253,411 $27,650(a) $281,061
Construction trade payables 8,375 8,375
Accounts payable and accrued expenses 11,521 11,521
----------------------------------
TOTAL LIABILITIES 273,307 27,650 300,957
----------------------------------
Commitments
Minority interest 38,094 38,094
----------------------------------
SHAREHOLDERS' EQUITY
Preferred shares, $.01 par value,
1,000,000 shares authorized, 89,649
shares issued and outstanding
at March 31, 1998 1 1
Common shares, $.01 par value,
50,000,000 shares authorized,
7,865,303 shares issued and
outstanding at March 31, 1998 79 79
Paid in capital 137,075 137,075
Distributions in excess of net income (15,966) (15,966)
----------------------------------
Total shareholders' equity 121,189 121,189
----------------------------------
Total liabilities and
shareholders' equity $432,590 $27,650 $460,240
==================================
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE UNAUDITED PRO FORMA
CONSOLIDATED FINANCIAL STATEMENTS.
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<PAGE>
TANGER FACTORY OUTLET CENTERS, INC. AND SUBSIDIARY
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
For The Three Months Ended March 31, 1998
(Unaudited)
(In thousands, except per share data)
Tanger Sanibel Dalton Adjustments Pro forma
---------------------------------------------------
REVENUES
Base rentals $15,655 $725 $488 $16,868
Percentage rentals 494 20 20 534
Expense reimbursements 6,360 299 140 6,799
Other income 297 6 24 327
---------------------------------------------------
Total revenues 22,806 1,050 672 24,528
---------------------------------------------------
EXPENSES
Property operating 6,652 283 140 7,075
General and
administrative 1,699 32 4 1,735
Interest 4,792 809 (b) 5,601
Depreciation and
amortization 5,134 320 (c) 5,454
---------------------------------------------------
Total expenses 18,277 315 144 1,129 19,865
---------------------------------------------------
INCOME BEFORE GAIN ON SALE
OF REAL ESTATE, MINORITY
INTEREST AND
EXTRAORDINARY ITEM 4,529 735 528 (1,129) 4,663
Gain on sale of real estate 994 994
---------------------------------------------------
Income before minority
interest and extraordinary
item 5,523 735 528 (1,129) 5,657
Minority interest (1,408) (37) (d) (1,445)
---------------------------------------------------
Income before
extraordinary item 4,115 735 528 (1,166) 4,212
Extraordinary item, net of
minority interest of $128 (332) (332)
---------------------------------------------------
Net income $3,783 $735 $528 ($1,166) $3,880
===================================================
BASIC EARNINGS PER COMMON
SHARE
Income before
extraordinary item $.46 $.48
Net income .42 .43
===================================================
DILUTED EARNINGS PER
COMMON SHARE
Income before
extraordinary item $.45 $.47
Net income .41 .42
===================================================
WEIGHTED AVERAGE NUMBER OF
SHARES
Basic 7,858 7,858
Diluted 8,038 8,038
===================================================
<PAGE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE UNAUDITED PRO FORMA
CONSOLIDATED FINANCIAL STATEMENTS.
9
<PAGE>
TANGER FACTORY OUTLET CENTERS, INC. AND SUBSIDIARY
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
For The Year Ended December 31, 1997
(Unaudited)
(In thousands, except per share data)
<TABLE>
<CAPTION>
Pro
Tanger Sanibel Dalton Adjustments forma
----------------------------------------------------
<S> <C> <C> <C> <C>
REVENUES
Base rentals $56,807 $2,815 $1,858 $61,480
Percentage rentals 2,637 148 23 2,808
Expense reimbursements 24,665 1,071 720 26,456
Other income 1,162 10 29 1,201
----------------------------------------------------
Total revenues 85,271 4,044 2,630 91,945
----------------------------------------------------
EXPENSES
Property operating 26,269 1,082 932 28,283
General and administrative 6,145 60 8 6,213
Interest 16,835 3,237 (b) 20,072
Depreciation and
amortization 18,439 1,280 (c) 19,719
----------------------------------------------------
Total expenses 67,688 1,142 940 4,517 74,287
----------------------------------------------------
INCOME BEFORE MINORITY
INTEREST 17,583 2,902 1,690 (4,517) 17,658
Minority interest (4,756) (23) (d) (4,779)
====================================================
Net income $12,827 $2,902 $1,690 ($4,540) $12,879
====================================================
EARNINGS PER COMMON SHARE
Basic $1.57 $1.58
Diluted 1.54 1.55
====================================================
WEIGHTED AVERAGE NUMBER OF
SHARES
Basic 7,028 7,028
Diluted 7,140 7,140
====================================================
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE UNAUDITED PRO FORMA
CONSOLIDATED FINANCIAL STATEMENTS.
10
<PAGE>
TANGER FACTORY OUTLET CENTERS, INC. AND SUBSIDIARY
NOTES TO PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
(a) Represents the cost of the acquisition of the Sanibel Factory Stores which
is assumed to be financed with additional borrowings under available lines
of credit. The cost of the acquisition of Dalton Factory Stores has
already been included in the Company's historical Consolidated Balance
Sheet as of March 31, 1998.
(b) Represents interest from additional borrowings under available lines of
credit to finance the Acquisitions at an interest rate of LIBOR plus 160
basis points (assumed to be 7.25 %).
(c) Reflects increase in depreciation and amortization resulting from the
Acquisitions depreciated over lives ranging from 15 to 33 years.
(d) Reflects the adjustment to minority interest, after preferred dividends of
$468,000 and $1,808,000 for the periods ended March 31, 1998 and December
31, 1997, respectively, allocable to the Acquisitions and the pro forma
adjustments for mortgage interest and depreciation and amortization.
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
Registrant has duly caused this Report to be signed on its behalf by the
undersigned thereunto duly authorized.
TANGER FACTORY OUTLET CENTERS, INC.
By: /s/ FRANK C. MARCHISELLO, JR.
Frank C. Marchisello, Jr.
Vice President, Chief Financial Officer
DATE: July 31, 1998
11
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EXHIBIT 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in the registration statements of
Tanger Factory Outlet Centers, Inc. on Form S-8 (File No. 33-80450), Forms S-3
(File Nos. 33-99736, 333-3526 and 333-39365) of our report dated June 30, 1998,
on our audit of the Statement of Revenues and Certain Operating Expenses of
Sanibel Factory Stores for the year ended December 31, 1997, which report is
included in this Current Report on Form 8-K.
PricewaterhouseCoopers LLP
Greensboro, North Carolina
July 31, 1998
