SKT 8KA Proforma FS Jeffersonville Cordish


UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

___________

FORM 8-K/A
(Amendment No. 1)


Current Report Pursuant to Section 13 or 15(d) of
The Securities Exchange Act of 1934


(Date of earliest event reported):  June 29, 2011


Tanger Factory Outlet Centers, Inc.
Tanger Properties Limited Partnership
(Exact Name of Registrant as Specified in Charter)

North Carolina
North Carolina
(State or Other Jurisdiction
of Incorporation)
1-11986
333-03526-01
(Commission
File Number)
56-1815473
56-1822494
(IRS Employer
Identification No.)


3200 Northline Avenue, Suite 360  Greensboro, NC 27408
(Address of Principal Executive Offices, including Zip Code)
3200 Northline Avenue, Suite 360  Greensboro, NC 27408
(Address of Principal Executive Offices, including Zip Code)
 
Registrant's telephone number, including area code: (336) 292-3010
 
Not Applicable
(Former Name or Former Address, if Changed Since Last Report)
 
 
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

[ ]
Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
 
 
[ ]
Soliciting material pursuant to Rule 14a-12 under the Exchange
 
 
[ ]
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
 
 
[ ]
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))


1





Explanatory Note

On June 29, 2011, Tanger Factory Outlet Centers, Inc. (the "Company") in combination with its operating partnership, Tanger Properties Limited Partnership (the "Operating Partnership") filed a Current Report on Form 8-K (the "Original Form 8-K") related to the closing of an acquisition of an outlet center in Jeffersonville, Ohio (the "Jeffersonville Property") from the Simon Property Group, L.P., and the entrance into agreements with OCF Holdings LLC, Cordish AC-1 Associates LLC, Cordish AC-2 Associates LLC and Atlantic City Associates Number Three Manager LLC for the probable acquisition of substantially all of the economic interests in two outlet centers located in Atlantic City, New Jersey and Ocean City, Maryland.

On July 15, 2011, the Operating Partnership closed on its admission as a member into three existing entities that resulted in it acquiring substantially all of the economic interests from Cordish AC-1 Associates, LLC, Cordish AC-2 Associates, LLC and OCF Holdings LLC in Phase I & II of Atlantic City Outlets The Walk and Ocean City Factory Outlets. The Company is also under contract to purchase substantially all of the economic interests in Phase III of Atlantic City Outlets The Walk, which it currently expects to close by the end of 2011 or early 2012 (collectively with Phase I & II of Atlantic City Outlets The Walk and Ocean City Factory Outlets, the "Cordish Properties"). The Company can offer no assurances that this acquisition will close on the terms described herein, or at all.

This Form 8-K/A updates the interim period financial statements relating to the Cordish Properties from March 31, 2011 to June 30, 2011 which were included in the original Form 8-K to comply with Rule 3-14 of Regulation S-X and to update the proforma financial statements as of and for the six months ended June 30, 2011 for the financial results of the Jeffersonville Property and Cordish Properties.


2




Section 9.  Financial Statements and Exhibits

Item 9.01 Financial Statements and Exhibits
 
(a) Financial Statements of Acquisition Properties
 
 
Page Number
Cordish Properties
 
 
Combined Statement of Revenues and Certain Expenses for the six months ended June 30, 2011 (Unaudited)
 
4
 
 
 
Notes to the Combined Statement of Revenues and Certain Expenses
 
5
 
(b)  Pro Forma Financial Information for Tanger Factory Outlet Centers, Inc. and Tanger Properties Limited Partnership (Unaudited)                                                               
Tanger Factory Outlet Centers, Inc.
 
 
Unaudited Proforma Consolidating Statements of Operations:
 
 
For the six months ended June 30, 2011
 
8
For the year ended December 31, 2010
 
10
 
 
 
Unaudited Pro Forma Consolidating Balance Sheet:
 
 
As of June 30, 2011
 
12
 
 
 
Tanger Properties Limited Partnership
 
 
Unaudited Proforma Consolidating Statements of Operations:
 
 
For the six months ended June 30, 2011
 
14
For the year ended December 31, 2010
 
16
 
 
 
Unaudited Pro Forma Consolidating Balance Sheet:
 
 
As of June 30, 2011
 
18
 
 
 
Combined Tanger Factory Outlet Centers, Inc and Tanger Properties Limited Partnership
 
 
Unaudited Pro Forma Funds from Operations
 
20
For the six months ended June 30, 2011
 
 
For the year ended December 31, 2010
 
 

(c) Not applicable

(d) Exhibits

None







3




OCF Holdings LLC, Cordish AC-1 Associates LLC, Cordish AC-2 Associates LLC and Atlantic City Associates Number Three Manager LLC

Combined Statement of Revenue and Certain Expenses
For the six months ended June 30, 2011 (Unaudited)
(in thousands)

 
 
 
 
 
Six Months Ended
 
 
June 30, 2011
 
 
(Unaudited)
Revenue
 
 
Base rent
 
$
6,812

Percentage rentals
 
730

Expense reimbursements
 
2,855

Other income
 
50

Total revenue
 
10,447

 
 
 
Certain Expenses
 
 
Property operating expenses
 
2,833

General and administrative expenses
 
609

Total certain expenses
 
3,442

 
 
 
Revenue in excess of certain expenses
 
$
7,005

 
 
 

























See accompanying notes to combined statements of revenue and certain expenses.

4



OCF Holdings LLC, Cordish AC-1 Associates LLC, Cordish AC-2 Associates LLC and Atlantic City Associates Number Three Manager LLC

Notes to Combined Statement of Revenue and Certain Expenses
For the six months ended June 30, 2011 (Unaudited)
(in thousands)


1.    Business

The accompanying combined statement of revenue and certain expenses (the "Statement") relate to the operations of the OCF Holdings LLC, Cordish AC-1 Associates LLC, Cordish AC-2 Associates LLC and Atlantic City Associates Number Three Manager LLC (the "Cordish Properties") consisting of two outlet centers totaling approximately 694,000 square feet in Atlantic City, New Jersey and Ocean City, Maryland, respectively. All references to square feet in this Statement are unaudited.

On July 15, 2011, substantially all of the economic interests of OCF Holdings LLC, Cordish AC-1 Associates LLC, Cordish AC-2 Associates LLC, consisting of approximately 649,000 square feet, were acquired by Tanger Properties Limited Partnership, a majority owned subsidiary of Tanger Factory Outlet Centers, Inc.. It is anticipated that substantially all of the economic interests of Atlantic City Associates Number Three Manager LLC, consisting of 45,000 square feet, will be acquired by Tanger Properties Limited Partnership through the acquisition of interests or investment in equity interests of the existing LLC under the agreement dated May 6, 2011.

2.    Summary of Significant Accounting Policies

Basis of Presentation
The accompanying Statement is prepared for the purposes of complying with the rules and regulations of the Securities and Exchange Commission, including Rule 3-14 of Regulation S-X, in contemplation of Tanger Properties Limited Partnership (the "Operating Partnership") acquiring the Cordish Properties. 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 Cordish Properties in the future operation by the Operating Partnership, have been excluded as discussed below. This Statement does not represent the complete financial statements of the Cordish Properties in accordance with accounting principles generally accepted in the United States of America ("GAAP").

Certain operating expenses include advertising and promotional expenses, common area maintenance, real estate taxes, and certain other operating expenses related to the operations of the Cordish Properties. In accordance with the regulations of the Securities and Exchange Commission, mortgage interest, depreciation and amortization, management fees and corporate overhead have been excluded from certain operating expenses, as they are not comparable to the proposed future operations of the Cordish Properties.

Revenue and Expense Recognition
The Cordish Properties are leased to various tenants under operating leases. Revenue is recognized on a straight-line basis over the terms of the related leases. Rental revenue includes fees for early terminated leases. Substantially all of the retail tenants are also required to pay overage rents based on sales over a stated base amount during the lease year. Tenant expense reimbursement revenue includes payments from tenants as reimbursement for property operating expenses as stipulated in the leases. This expense reimbursement revenue is recognized in the same period as the related operating expense. Expenses are recognized in the period in which they are incurred.


5



Use of Estimates
The preparation of this Statement is in conformity with GAAP, which requires management to make estimates and assumptions that affect the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates.

Interim Unaudited Financial Information
The Statement for the six months ended June 30, 2011 is unaudited, however, in the opinion of management, all adjustments (consisting solely of normal, recurring adjustments) necessary for the fair presentation of the Statement for the interim period have been included. The results of the interim period are not necessarily indicative of the results to be obtained for a full fiscal year.

3.    Rental Revenue

The Cordish Properties have entered into non-cancelable tenant leases. The leases provide that tenants will share operating expenses and real estate taxes on a pro rata basis, as defined in the leases. Future minimum rentals, excluding such expenses, as of June 30, 2011, to be received under these tenant leases are as follows:
 
Minimum rental
 
 
 
 
payments
 
 
 
 
(unaudited)
 
 
 
2011
$
6,516

 
 
 
2012
11,984

 
 
 
2013
9,190

 
 
 
2014
6,785

 
 
 
2015
4,913

 
 
 
Thereafter
9,833

 
 
 
Total
$
49,221

 
 
 

4.    Risks and Uncertainties

The Cordish Properties' results of operations are significantly dependent on the overall health of the retail industry. The Cordish Properties' tenants are comprised almost exclusively of merchants in the retail industry. The retail industry is subject to external factors such as inflation, consumer confidence, unemployment rates and consumer tastes and preferences. A decline in the retail industry could reduce merchant sales, which could adversely affect the operating results of the Cordish Properties. A number of merchants occupy space in the Cordish Properties; however, no single merchant accounts for more than 10% of the Cordish Properties' base rents and no one tenant occupies more than 10% of the Cordish Properties' total gross leasable area for the six months ended June 30, 2011 (unaudited).

5.    Commitments and Contingencies

The Cordish Properties are not subject to any material litigation nor to management's knowledge is any material litigation currently threatened against the Cordish Properties other than routine litigation, claims and administrative proceedings arising in the ordinary course of business. Management believes that such routine litigation, claims and administrative proceedings will not have a material adverse impact on the Cordish Properties' Statement.

6.    Subsequent Events

We have evaluated subsequent events for recognition or disclosure through October 13, 2011, which is the date the Statement was issued.



6



TANGER FACTORY OUTLET CENTERS, INC. AND SUBSIDIARIES
TANGER PROPERTIES LIMITED PARTNERSHIP
PRO FORMA FINANCIAL INFORMATION INTRODUCTION
(unaudited)

The accompanying unaudited pro forma condensed consolidated statements of operations for the six months ended June 30, 2011 and the year ended December 31, 2010, have been prepared to reflect the effect of (i) the acquisition of the Jeffersonville outlet center held by Ohio Factory Shops Partnership from Simon which occurred on June 28, 2011, (ii) the public issuance by the Company of 4.6 million common shares on July 6, 2011, and (iii) the acquisitions of substantially all of the economic interests in OCF Holdings LLC, Cordish AC-1 Associates LLC, Cordish AC-2 Associates LLC which occurred on July 15, 2011, and the assumed acquisition of substantially all of the economic interests of Atlantic City Associates Number Three Manager LLC (collectively with OCF Holdings LLC, Cordish AC-1 Associates LLC, and Cordish AC-2 Associates LLC, the "Cordish Acquisition Properties"), as if such transactions had occurred on January 1, 2010.
The accompanying unaudited pro forma consolidated balance sheet as of June 30, 2011 has been prepared to reflect the public issuance by the Company of 4.6 million common shares on July 6, 2011 and the effect of the Cordish Acquisition Properties acquired by the Company and the Operating Partnership, as if such transactions had occurred on June 30, 2011.
These unaudited pro forma condensed consolidated statements should be read in connection with the historical consolidated financial statements and notes thereto included in the Company’s and Operating Partnership's Annual Report on Form 10-K for the year ended December 31, 2010. In the opinion of management, the pro forma condensed consolidated financial information provides for all adjustments necessary to reflect the effects of the above transactions.
The pro forma condensed consolidated statements of operations are unaudited and are not necessarily indicative of the consolidated results that would have occurred if the transactions and adjustments reflected therein had been consummated on the date presented, nor does it purport to represent the financial position, results of operations or cash flows for future periods. In addition, the pro forma balance sheet includes pro forma preliminary estimates of the fair value of the assets and liabilities acquired in connection with the acquisitions. These preliminary estimates may be adjusted in the future upon finalization of the purchase accounting.



7




TANGER FACTORY OUTLET CENTERS, INC. AND SUBSIDIARIES
PRO FORMA CONSOLIDATING STATEMENT OF OPERATIONS
For the Six Months Ended June 30, 2011
(Unaudited)
(In thousands, except per share data)

 
The
 
Pro forma
 
Pro forma
 
Company
Acquisitions
Adjustments
 
Consolidated
 
(a)
(b)
 
 
 
REVENUES
 
 
 
 
 
Base rentals
$
94,612

$
11,477

$
(233
)
 (c)
$
105,856

Percentage rentals
2,528

796

 
 
3,324

Expense reimbursements
41,821

4,282

 
 
46,103

Other income
3,879

76

 
 
3,955

Total revenues
142,840

16,631

(233
)
 
159,238

EXPENSES
 
 
 
 
 
Property operating
47,873

4,025

 
 
51,898

General and administrative
13,952

609

 
 
14,561

Acquisition costs
1,541

 
 
 
1,541

Abandoned development costs
158

 
 
 
158

Depreciation and amortization
35,823

 
11,144

(d)
46,967

Total expenses
99,347

4,634

11,144

 
115,125

Operating income
43,493

11,997

(11,377
)
 
44,113

Interest expense
(21,038
)
 
(3,027
)
(e)
(24,065
)
Income before equity in losses of unconsolidated joint ventures, discontinued operations and noncontrolling interest
22,455

11,997

(14,404
)
 
20,048

Equity in losses of unconsolidated joint ventures
(796
)
 
 
 
(796
)
Income from continuing operations
$
21,659

$
11,997

$
(14,404
)
 
$
19,252

 
 
 
 
 
 
Basic earnings per common share:
 
 
 
 
 
Income from continuing operations (f)
$
0.23

 
 
 
$
0.19

Weighted average shares
80,418

 
4,600

(g)
85,018

 
 
 
 
 
 
Diluted earnings per common share:
 
 
 
 
 
Income from continuing operations (f)
$
0.23

 
 
 
$
0.19

Weighted average shares
81,039

 
4,600

(g)
85,639

 
The accompanying notes are an integral part of these unaudited pro forma consolidating financial statements.


8



NOTES TO PRO FORMA CONSOLIDATING STATEMENT OF OPERATIONS

a)      As reported in the unaudited consolidated statement of operations of Tanger Factory Outlet Centers, Inc. and Subsidiaries for the six months ended June 30, 2011. 
 
b)      Represents the combined revenues and certain expenses (unaudited) of Ohio Factory Shops Partnership (through the acquisition date of June 28, 2011) and the Cordish Properties. There were no operations associated with Atlantic City Associates Number Three Manager LLC.

c)      Reflects the amortization of purchase price preliminarily assigned to above and below market leases and straight-line base rental adjustments.
 
d)      Reflects depreciation and amortization of the purchase price preliminarily allocated to the acquired buildings, improvements and fixtures and the amortization of purchase price preliminarily allocated to lease related intangibles. Estimated lives used are 33 years for buildings, 10 to 18 years for site improvements, remaining lease terms for tenant improvements and other lease related intangibles and remaining lease term plus 5 years for tenant relationship intangibles.

e)      Reflects interest expense from (i) the assumption of six mortgages with a face value of approximately $73.5 million with stated interest rates ranging from 5.14% to 7.65% ($79.0 million fair value, with imputed interest rates ranging from 4.68% to 5.05%), (ii) additional borrowings of $150.0 million under an unsecured bridge loan at an interest rate of 1.79% based on one month LIBOR plus 1.60%, and (iii) the net decrease in the lines of credit of $7.4 million from borrowings and repayments related to the acquisition and financing activities described herein at an interest rate of 2.09% based on one month LIBOR plus 1.90%.   A one-eighth percent (0.125%) increase or decrease in the LIBOR rate would result in a change in interest expense of $158,000 per year on our assumed LIBOR based borrowings. The pro forma adjustment to interest expense has been reduced for the estimated capitalization of interest related to ongoing development of Atlantic City Associates Number Three Manager LLC.
 
f)      Pro forma income per share is computed as follows: Income from continuing operations less the noncontrolling interest in Cordish AC-1 Associates LLC, Cordish AC-2 Associates LLC, and Atlantic City Associates Number Three Manager LLC, the noncontrolling interest in the Operating Partnership and the allocation of earnings to participating securities divided by pro forma weighted average shares outstanding.

g) Reflects the public issuance of 4.6 million additional common shares at a share price of $25.662 on the New York Stock Exchange, for net proceeds of $117.3 million, as if the shares had been issued as of the beginning of the six month period.



9



TANGER FACTORY OUTLET CENTERS, INC. AND SUBSIDIARIES
PRO FORMA CONSOLIDATING STATEMENT OF OPERATIONS
For the Year Ended December 31, 2010
 (Unaudited)
(In thousands, except per share data)

 
The Company
 
Pro forma Adjustments
 
Pro forma Consolidated
 
Acquisitions
 
 
(a)
(b)
 
 
 
REVENUES
 
 
 
 
 
Base rentals
$
178,976

$
23,454

$
(239
)
 (c)
$
202,191

Percentage rentals
7,914

1,824

 
 
9,738

Expense reimbursements
80,627

8,707

 
 
89,334

Other income
8,786

592

 
 
9,378

Total revenues
276,303

34,577

(239
)
 
310,641

EXPENSES
 
 
 
 
 
Property operating
93,345

9,307

 
 
102,652

General and administrative
24,553

997

 
 
25,550

Impairment charge
735

 
 
 
735

Depreciation and amortization
78,039

 
22,288

(d)
100,327

Total expenses
196,672

10,304

22,288

 
229,264

Operating income
79,631

24,273

(22,527
)
 
81,377

Interest expense
(34,120
)
 
(6,107
)
(e)
(40,227
)
Loss on early extinguishment of debt
(563
)
 
 
 
(563
)
Loss on termination of derivatives
(6,142
)
 
 
 
(6,142
)
Income before equity in losses of unconsolidated joint
 
 
 
 
 
ventures, discontinued operations and noncontrolling interest
38,806

24,273

(28,634
)
 
34,445

Equity in losses of unconsolidated joint ventures
(464
)
 
 
 
(464
)
Income from continuing operations
$
38,342

$
24,273

$
(28,634
)
 
$
33,981

 
 
 
 
 
 
Basic earnings per common share:
 
 
 
 
 
Income from continuing operations (f)
$
0.32

 
 
 
$
0.26

Weighted average shares
80,187

 
4,600

 (g)
84,787

 
 
 
 
 
 
Diluted earnings per common share:
 
 
 
 
 
Income from continuing operations (f)
$
0.32

 
 
 
$
0.26

Weighted average shares
80,390

 
4,600

 (g)
84,990


The accompanying notes are an integral part of these unaudited pro forma consolidating financial statements.


10



NOTES TO PRO FORMA CONSOLIDATING STATEMENT OF OPERATIONS

a)      Reflects the consolidated operations of Tanger Factory Outlet Centers, Inc. and Subsidiaries related to continuing operations for the year ended December 31, 2010. Revenues and expenses related to discontinued operations are not included. See the historical consolidated financial statements and notes thereto included in Tanger Factory Outlet Centers, Inc. and Subsidiaries' Annual Report on Form 10-K for the year ended December 31, 2010. 
 
b)      Represents the combined revenues and certain expenses of Ohio Factory Shops Partnership and the Cordish Properties. There were no operations associated with Atlantic City Associates Number Three Manager LLC.

c)      Reflects the amortization of purchase price preliminarily assigned to above and below market leases and straight-line base rental adjustments.
 
d)      Reflects depreciation and amortization of the purchase price preliminarily allocated to the acquired buildings, improvements and fixtures and the amortization of purchase price preliminarily allocated to lease related intangibles. Estimated lives used are 33 years for buildings, 10 to 18 years for site improvements, remaining lease terms for tenant improvements and other lease related intangibles and remaining lease term plus 5 years for tenant relationship intangibles.

e)      Reflects interest expense from (i) the assumption of six mortgages with a face value of approximately $73.5 million with stated interest rates ranging from 5.14% to 7.65% ($79.0 million fair value, with imputed interest rates ranging from 4.68% to 5.05%), (ii) additional borrowings of $150.0 million under an unsecured bridge loan at an interest rate of 1.79% based on one month LIBOR plus 1.60%, and (iii) the net decrease in the lines of credit of $7.4 million from borrowings and repayments related to the acquisition and financing activities described herein at an interest rate of 2.09% based on one month LIBOR plus 1.90%.   A one-eighth percent (0.125%) increase or decrease in the LIBOR rate would result in a change in interest expense of $158,000 per year on our assumed LIBOR based borrowings. The pro forma adjustment to interest expense has been reduced for the estimated capitalization of interest related to ongoing development of Atlantic City Associates Number Three Manager LLC.
 
f)      Pro forma income per share is computed as follows:  Income from continuing operations less preferred share dividends, the write off of original preferred share issuance costs totaling approximately $7.8 million, the noncontrolling interest in Cordish AC-1 Associates LLC, Cordish AC-2 Associates LLC, and Atlantic City Associates Number Three Manager LLC, the noncontrolling interest in the Operating Partnership and the allocation of earnings to participating securities divided by pro forma weighted average shares outstanding.  
 
g)       Reflects the public issuance of 4.6 million additional common shares at a share price of $25.662 on the New York Stock Exchange, for net proceeds of $117.3 million, as if the shares had been issued as of the beginning of the year.


11



TANGER FACTORY OUTLET CENTERS, INC. AND SUBSIDIARIES
PRO FORMA CONSOLIDATING BALANCE SHEET
As of June 30, 2011
(Unaudited, in thousands)
 
The Company
Acquisitions and Pro forma Adjustments
 
Pro forma Consolidated
 
 
ASSETS
(a)
 
 
 
Rental Property
 
 
 
 
Land
$
144,329

 
 
$
144,329

Buildings, improvements and fixtures
1,560,920

$
130,077

(b)
1,690,997

Construction in progress
3,367

10,851

(b)
14,218

 
1,708,616

140,928

 
1,849,544

Accumulated depreciation
(477,687
)
 
 
(477,687
)
Rental property, net
1,230,929

140,928

 
1,371,857

Cash and cash equivalents
18,438

 
 
18,438

Investments in unconsolidated joint ventures
4,592

 
 
4,592

Deferred lease costs and other intangibles, net
51,573

65,172

(b)
116,745

Deferred debt origination costs, net
6,783

 
 
6,783

Prepaids and other assets
55,274

(11,800
)
(c)
43,474

Total assets
$
1,367,589

$
194,300

 
$
1,561,889

 
 
 
 
 
LIABILITIES, NONCONTROLLING INTERESTS AND EQUITY
 
 
 
 
Liabilities
 
 
 
 
Debt
 
 
 
 
Senior, unsecured notes
$
554,644

 
 
$
554,644

Mortgages payable

$
78,954

(d)
78,954

Unsecured bridge loan
150,000

 
 
150,000

Unsecured lines of credit
182,000

(3,235
)
(e)
178,765

Total debt
886,644

75,719

 
962,363

Construction trade payables
27,333

 
 
27,333

Accounts payable and accrued expenses
27,129

 
 
27,129

Other liabilities
16,170

 
 
16,170

Total liabilities
957,276

75,719

 
1,032,995

Commitments
 
 
 
 
Noncontrolling interests

1,286

(f)
1,286

 
 
 
 
 
Equity
 
 
 
 
Tanger Factory Outlet Centers, Inc.
 
 
 
 
Common Shares
813

46

(g)
859

Paid in capital
607,756

105,891

(g)
713,647

Distributions in excess of net income
(253,213
)
 
 
(253,213
)
Accumulated other comprehensive income
1,683

 
 
1,683

Equity attributable to Tanger Factory Outlet Centers, Inc.
357,039

105,937

 
462,976

Equity attributable to noncontrolling interest in Operating Partnership
53,274

11,358

(g)
64,632

Total equity
410,313

117,295

 
527,608

Total liabilities, noncontrolling interests and equity
$
1,367,589

$
194,300

 
$
1,561,889


The accompanying notes are an integral part of these unaudited pro forma consolidating financial statements.
 

12



NOTES TO PRO FORMA CONSOLIDATING BALANCE SHEET

a)      As reported in the unaudited consolidated balance sheet of Tanger Factory Outlet Centers, Inc. and Subsidiaries as of June 30, 2011. 
 
b)      Reflects the preliminary allocation of the purchase price to assets acquired. The pro forma balance sheet includes pro forma preliminary estimates of the fair value of the assets and liabilities acquired in connection with the acquisitions. These preliminary estimates may be adjusted in the future upon finalization of the purchase accounting.

c) Reflects the reclassification of the $11.8 million cash acquisition deposit paid for the acquisition of the Cordish Properties during the second quarter of 2011.
 
d)      Reflects the assumption of mortgages payable with a face value of $73.5 million and a fair value of $79.0 million.

e) Reflects a reduction in unsecured lines of credit utilizing net funds available after giving effect to the following: (i) net proceeds from the assumed public issuance of 4.6 million common shares totaling $117.3 million (net of estimated offering expenses of approximately $750,000 but excluding any underwriting discount) offset by (ii) the borrowing of $114.1 million to fund the acquisitions of Cordish AC-1 Associates LLC, Cordish AC-2 Associates LLC and Atlantic City Associates Number Three Manager LLC ($125.9 million purchase price less cash acquisition deposit paid of $11.8 million).

g)      Reflects the noncontrolling interest in Cordish AC-1 Associates LLC, Cordish AC-2 Associates LLC and Atlantic City Associates Number Three Manager LLC.
 
h)       Reflects the public issuance of 4.6 million additional common shares at a share price of $25.662 on the New York Stock Exchange, for net proceeds of $117.3 million.

13




TANGER PROPERTIES LIMITED PARTNERSHIP AND SUBSIDIARIES
PRO FORMA CONSOLIDATING STATEMENT OF OPERATIONS
For the Six Months Ended June 30, 2011
(Unaudited)
(In thousands, except per unit amounts)

 
Operating
 
Pro forma
 
Pro forma
 
Partnership
Acquisitions
Adjustments
 
Consolidated
 
(a)
(b)
 
 
 
REVENUES
 
 
 
 
 
  Base rentals
$
94,612

$
11,477

$
(233
)
 (c)
$
105,856

  Percentage rentals
2,528

796

 
 
3,324

  Expense reimbursements
41,821

4,282

 
 
46,103

  Other income
3,879

76

 
 
3,955

       Total revenues
142,840

16,631

(233
)
 
159,238

EXPENSES
 
 
 
 
 
  Property operating
47,873

4,025

 
 
51,898

  General and administrative
13,952

609

 
 
14,561

  Acquisition costs
1,541

 
 
 
1,541

  Abandoned development costs
158

 
 
 
158

  Depreciation and amortization
35,823

 
11,144

(d)
46,967

       Total expenses
99,347

4,634

11,144

 
115,125

Operating income
43,493

11,997

(11,377
)
 
44,113

Interest expense
(21,038
)
 
(3,027
)
(e)
(24,065
)
Income before equity in earnings of unconsolidated joint ventures and discontinued operations
22,455

11,997

(14,404
)
 
20,048

Equity in losses of unconsolidated joint ventures
(796
)
 
 
 
(796
)
Income from continuing operations
$
21,659

$
11,997

$
(14,404
)
 
$
19,252

Basic earnings per unit:
 
 
 
 
 
Income from continuing operations (f)
$
0.92

 
 
 
$
0.78

Weighted average units
23,138

 
1,150

(g)
24,288

 
 
 
 
 
 
Diluted earnings per unit:
 
 
 
 
 
Income from continuing operations (f)
$
0.91

 
 
 
$
0.77

Weighted average units
23,138

 
1,150

(g)
24,288

 
The accompanying notes are an integral part of these unaudited pro forma consolidating financial statements.


14



NOTES TO PRO FORMA CONSOLIDATING STATEMENTS OF OPERATIONS

a)      As reported in the unaudited consolidated statement of operations of Tanger Properties Limited Partnership and Subsidiaries for the six months ended June 30, 2011. 
 
b)      Represents the combined revenues and certain expenses (unaudited) of Ohio Factory Shops Partnership (through the acquisition date of June 28, 2011) and the Cordish Properties. There were no operations associated with Atlantic City Associates Number Three Manager LLC.

c)      Reflects the amortization of purchase price preliminarily assigned to above and below market leases and straight-line base rental adjustments.
 
d)      Reflects depreciation and amortization of the purchase price preliminarily allocated to the acquired buildings, improvements and fixtures and the amortization of purchase price preliminarily allocated to lease related intangibles. Estimated lives used are 33 years for buildings, 10 to 18 years for site improvements, remaining lease terms for tenant improvements and other lease related intangibles and remaining lease term plus 5 years for tenant relationship intangibles.

e)      Reflects interest expense from (i) the assumption of six mortgages with a face value of approximately $73.5 million with stated interest rates ranging from 5.14% to 7.65% ($79.0 million fair value, with imputed interest rates ranging from 4.68% to 5.05%), (ii) additional borrowings of $150.0 million under an unsecured bridge loan at an interest rate of 1.79% based on one month LIBOR plus 1.60%, and (iii) the net decrease in the lines of credit of $7.4 million from borrowings and repayments related to the acquisition and financing activities described herein at an interest rate of 2.09% based on one month LIBOR plus 1.90%.   A one-eighth percent (0.125%) increase or decrease in the LIBOR rate would result in a change in interest expense of $158,000 per year on our assumed LIBOR based borrowings. The pro forma adjustment to interest expense has been reduced for the estimated capitalization of interest related to ongoing development of Atlantic City Associates Number Three Manager LLC.
 
f)       Pro forma income per unit is computed as follows: Income from continuing operations less the noncontrolling interest in Cordish AC-1 Associates LLC, Cordish AC-2 Associates LLC, and Atlantic City Associates Number Three Manager LLC and the allocation of earnings to participating securities divided by pro forma weighted average units outstanding.

g). Reflects the issuance of 1.2 million additional common limited partnership units, as if the units had been issued as of the beginning of the six month period.



15



TANGER PROPERTIES LIMITED PARTNERSHIP AND SUBSIDIARIES
PRO FORMA CONSOLIDATING STATEMENT OF OPERATIONS
For the Year Ended December 31, 2010
(Unaudited)
(In thousands, except per unit amounts)
 
 
Operating
 
Pro forma
 
Pro forma
 
Partnership
Acquisitions
Adjustments
 
Consolidated
 
(a)
(b)
 
 
 
REVENUES
 
 
 
 
 
  Base rentals
$
178,976

$
23,454

$
(239
)
(c)
$
202,191

  Percentage rentals
7,914

1,824

 
 
9,738

  Expense reimbursements
80,627

8,707

 
 
89,334

  Other income
8,786

592

 
 
9,378

       Total revenues
276,303

$
34,577

$
(239
)
 
310,641

EXPENSES
 
 
 
 
 
  Property operating
93,345

9,307

 
 
102,652

  General and administrative
24,553

997

 
 
25,550

  Impairment charge
735

 
 
 
735

  Depreciation and amortization
78,039

 
22,288

(d)
100,327

       Total expenses
196,672

10,304

22,288

 
229,264

Operating income
79,631

24,273

(22,527
)
 
81,377

  Interest expense
(34,120
)
 
(6,107
)
(e)
(40,227
)
  Loss on early extinguishment of debt
(563
)
 
 
 
(563
)
  Loss on termination of derivatives
(6,142
)
 
 
 
(6,142
)
Income before equity in losses of unconsolidated
 
 
 
 
 
joint ventures and discontinued operations
38,806

24,273

(28,634
)
 
34,445

Equity in losses of unconsolidated joint ventures
(464
)
 
 
 
(464
)
Income from continuing operations
$
38,342

$
24,273

$
(28,634
)
 
$
33,981

 
 
 
 
 
 
Basic earnings per unit:
 
 
 
 
 
Income from continuing operations (f)
$
1.29

 
 
 
$
1.05

Weighted average units
23,080

 
1,150

(g)
24,230

 
 
 
 
 
 
Diluted earnings per unit:
 
 
 
 
 
Income from continuing operations (f)
$
1.29

 
 
 
$
1.05

Weighted average units
23,131

 
1,150

(g)
24,281


The accompanying notes are an integral part of these unaudited pro forma consolidating financial statements.


16



NOTES TO PRO FORMA CONSOLIDATING STATEMENT OF OPERATIONS


a)      Reflects the consolidated operations of Tanger Properties Limited Partnership and Subsidiaries related to continuing operations for the year ended December 31, 2010. Revenues and expenses related to discontinued operations are not included. See the historical consolidated financial statements and notes thereto included in Tanger Properties Limited Partnership and Subsidiaries' Annual Report on Form 10-K for the year ended December 31, 2010. 
 
b)      Represents the combined revenues and certain expenses (unaudited) of Ohio Factory Shops Partnership and the Cordish Properties. There were no operations associated with Atlantic City Associates Number Three Manager LLC.

c)      Reflects the amortization of purchase price preliminarily assigned to above and below market leases and straight-line base rental adjustments.
 
d)      Reflects depreciation and amortization of the purchase price preliminarily allocated to the acquired buildings, improvements and fixtures and the amortization of purchase price preliminarily allocated to lease related intangibles. Estimated lives used are 33 years for buildings, 10 to 18 years for site improvements, remaining lease terms for tenant improvements and other lease related intangibles and remaining lease term plus 5 years for tenant relationship intangibles.

e)     Reflects interest expense from (i) the assumption of six mortgages with a face value of approximately $73.5 million with stated interest rates ranging from 5.14% to 7.65% ($79.0 million fair value, with imputed interest rates ranging from 4.68% to 5.05%), (ii) additional borrowings of $150.0 million under an unsecured bridge loan at an interest rate of 1.79% based on one month LIBOR plus 1.60%, and (iii) the net decrease in the lines of credit of $7.4 million from borrowings and repayments related to the acquisition and financing activities described herein at an interest rate of 2.09% based on one month LIBOR plus 1.90%.   A one-eighth percent (0.125%) increase or decrease in the LIBOR rate would result in a change in interest expense of $158,000 per year on our assumed LIBOR based borrowings. The pro forma adjustment to interest expense has been reduced for the estimated capitalization of interest related to ongoing development of Atlantic City Associates Number Three Manager LLC.
 
f)      Pro forma income per unit is computed as follows:  Income from continuing operations less preferred unit distributions, the write off of original preferred unit issuance costs of totaling approximately $7.8 million, the noncontrolling interest in Cordish AC-1 Associates LLC, Cordish AC-2 Associates LLC, and Atlantic City Associates Number Three Manager LLC and the allocation of earnings to participating securities divided by pro forma weighted average units outstanding.  

g)      Reflects the issuance of 1.2 million additional common limited partnership units, as if the units had been issued as of the beginning of the year.







17



TANGER PROPERTIES LIMITED PARTNERSHIP AND SUBSIDIARIES
PRO FORMA CONSOLIDATING BALANCE SHEET
As of June 30, 2011
(Unaudited in thousands)

 
 
Acquisitions and
 
 
 
Operating Partnership
Pro forma Adjustments
 
Pro forma Consolidated
ASSETS
(a)
 
 
 
Rental Property
 
 
 
 
Land
$
144,329

 
 
$
144,329

Buildings, improvements and fixtures
1,560,920

$
130,077

(b)
1,690,997

Construction in progress
3,367

10,851

(b)
14,218

 
1,708,616

140,928

 
1,849,544

Accumulated depreciation
(477,687
)
 
 
(477,687
)
Rental property, net
1,230,929

140,928

 
1,371,857

Cash and cash equivalents
18,366

 
 
18,366

Investments in unconsolidated joint ventures
4,592

 
 
4,592

Deferred lease costs and other intangibles, net
51,573

65,172

(b)
116,745

Deferred debt origination costs, net
6,783

 
 
6,783

Prepaids and other assets
54,942

(11,800
)
(c)
43,142

Total assets
$
1,367,185

$
194,300

 
$
1,561,485

 
 
 
 
 
LIABILITIES, NONCONTROLLING INTERESTS AND PARTNERS' EQUITY
 
 
 
 
Liabilities
 
 
 
 
Debt
 
 
 
 
Senior, unsecured notes
$
554,644

 
 
$
554,644

Mortgages payable

$
78,954

(d)
78,954

Unsecured bridge loan
150,000

 
 
150,000

Unsecured lines of credit
182,000

(3,235
)
(e)
178,765

 
886,644

75,719

 
962,363

Construction trade payables
27,333

 
 
27,333

Accounts payable and accrued expenses
26,725

 
 
26,725

Other liabilities
16,170

 
 
16,170

Total liabilities
956,872

75,719

 
1,032,591

Commitments
 
 
 
 
Noncontrolling interests

1,286

(f)
1,286

 
 
 
 
 
Partners' equity
 
 
 
 
General partner
5,070

 
 
5,070

Limited partner
403,612

117,295

(g)
520,907

Accumulated other comprehensive income
1,631

 
 
1,631

Total partners' equity
410,313

117,295

 
527,608

Total liabilities, noncontrolling interests and partners' equity
$
1,367,185

$
194,300

 
$
1,561,485


The accompanying notes are an integral part of these unaudited pro forma consolidating financial statements.


18



NOTES TO PRO FORMA CONSOLIDATING BALANCE SHEET

a)      As reported in the unaudited consolidated balance sheet of Tanger Properties Limited Partnership and Subsidiaries as of June 30, 2011. 
 
b)      Reflects the preliminary allocation of the purchase price to assets acquired. The pro forma balance sheet includes pro forma preliminary estimates of the fair value of the assets and liabilities acquired in connection with the acquisitions. These preliminary estimates may be adjusted in the future upon finalization of the purchase accounting.

c) Reflects the reclassification of the $11.8 million cash acquisition deposit paid for the acquisition of the Cordish Properties during the second quarter of 2011.
 
d)      Reflects the assumption of mortgages payable with a face value of $73.5 million and a fair value of $79.0 million.

e) Reflects a reduction in unsecured lines of credit utilizing net funds available after giving effect to the following: (i) net proceeds from the assumed public issuance of 4.6 million common shares of the Company totaling $117.3 million, which would be contributed to the Operating Partnership in exchange for 1.2 million common limited partnership units, offset by (ii) the borrowing of $114.1 million to fund the acquisitions of Cordish AC-1 Associates LLC, Cordish AC-2 Associates LLC and Atlantic City Associates Number Three Manager LLC ($125.9 million purchase price less cash acquisition deposit paid of $11.8 million).

g)      Reflects the noncontrolling interest in Cordish AC-1 Associates LLC, Cordish AC-2 Associates LLC and Atlantic City Associates Number Three Manager LLC.
 
h)       Reflects the issuance of 1.2 million additional common limited partnership units.

19



SUPPLEMENTAL EARNINGS MEASURE
Pro Forma Funds From Operations
Funds from Operations ("FFO") represents income before extraordinary items and gains (losses) on sale or disposal of depreciable operating properties, plus depreciation and amortization uniquely significant to real estate and after adjustments for unconsolidated partnerships and joint ventures.
FFO is intended to exclude historical cost depreciation of real estate as required by Generally Accepted Accounting Principles ("GAAP") which assumes that the value of real estate assets diminishes ratably over time. Historically, however, real estate values have risen or fallen with market conditions. Because FFO excludes depreciation and amortization unique to real estate, gains and losses from property dispositions and extraordinary items, it provides a performance measure that, when compared year over year, reflects the impact to operations from trends in occupancy rates, rental rates, operating costs, development activities and interest costs, providing perspective not immediately apparent from net income.
We present FFO because we consider it an important supplemental measure of our operating performance and believe it is frequently used by securities analysts, investors and other interested parties in the evaluation of REITs, many of which present FFO when reporting their results. FFO is widely used by us and others in our industry to evaluate and price potential acquisition candidates. The National Association of Real Estate Investment Trusts, Inc., of which we are a member, has encouraged its member companies to report their FFO as a supplemental, industry-wide standard measure of REIT operating performance. In addition, a percentage of bonus compensation to certain members of management is based on our FFO performance.
FFO has significant limitations as an analytical tool, and you should not consider it in isolation, or as a substitute for analysis of our results as reported under GAAP. Some of these limitations are:
FFO does not reflect our cash expenditures, or future requirements, for capital expenditures or contractual commitments;
FFO does not reflect changes in, or cash requirements for, our working capital needs;
Although depreciation and amortization are non-cash charges, the assets being depreciated and amortized will often have to be replaced in the future, and FFO does not reflect any cash requirements for such replacements;
FFO, which includes discontinued operations, may not be indicative of our ongoing operations; and
Other companies in our industry may calculate FFO differently than we do, limiting its usefulness as a comparative measure.
Because of these limitations, FFO should not be considered as a measure of discretionary cash available to us to invest in the growth of our business or our dividend paying capacity. We compensate for these limitations by relying primarily on our GAAP results and using FFO only supplementally.


20



Below is a reconciliation of income from continuing operations to FFO for the six months ended June 30, 2011 as well as other data for those respective periods (in thousands):
 
 
 
Pro forma
 
Pro forma
 
Historical
Acquisitions
Adjustments
 
Consolidated
 
(a)
(b)
 
 
 
For the six months ended June 30, 2011
 
 
 
 
 
Funds from Operations:
 
 
 
 
 
Income from continuing operations
$
21,659

$
11,997

$
(14,404
)
(c)
$
19,252

Depreciation and amortization uniquely significant to
 
 
 
 
 
real estate - consolidated
35,493

 
11,144

(d)
46,637

Depreciation and amortization uniquely significant to
 
 
 
 
 
real estate - unconsolidated joint ventures
2,642

 
 
 
2,642

Funds from operations
59,794

11,997

(3,260
)
 
68,531

Noncontrolling interests

 
(56
)
(e)
(56
)
Allocation of FFO to participating securities
(572
)
 
(67
)
(f)
(639
)
Funds from operations available to common
 
 
 
 
 
shareholders and noncontrolling interests in Operating Partnership
$
59,222

$
11,997

$
(3,383
)
 
$
67,836

 
 
 
 
 
 
TANGER FACTORY OUTLET CENTERS, INC.
 
 
 
 
 
Weighted average shares
93,172

 
4,600

(g)
97,772

Funds from operations per share - diluted
$
0.64

 
 
 
$
0.69

 
 
 
 
 
 
TANGER PROPERTIES LIMITED PARTNERSHIP
 
 
 
 
 
Weighted average units
23,293

 
1,150

(h)
24,443

Funds from operations per unit - diluted
$
2.54

 
 
 
$
2.78

 
 
 
 
 
 

21



NOTES TO COMBINED PRO FORMA CONSOLIDATING FFO

a)    As reported in the Form 10-Q of Tanger Factory Outlet Centers, Inc. and Tanger Properties Limited Partnership for the six months ended June 30, 2011. 

b)    Represents the combined revenues and certain expenses (unaudited) of Ohio Factory Shops Partnership (through the acquisition date of June 28, 2011) and the Cordish Properties. There were no operations associated with Atlantic City Associates Number Three Manager LLC.

c)    Reflects the sum of the pro forma adjustments for base rent, depreciation and amortization, and interest expense presented in the unaudited pro forma consolidating statement of operations for the six months ended June 30, 2011. 
 
d)    Reflects the pro forma adjustment for depreciation and amortization presented in the unaudited pro forma consolidating statement of operations for the six months ended June 30, 2011.
 
e)    Reflects the noncontrolling interest in Cordish AC-1 Associates LLC, Cordish AC-2 Associates LLC and Atlantic City Associates Number Three Manager LLC.
 
f)    Reflects the allocation of the pro forma adjustments to participating securities.

g)    Reflects the public issuance of 4.6 million additional common shares at a share price of $25.662 on the New York Stock Exchange, for net proceeds of $117.3 million, as if the shares had been issued as of the beginning of the six month period.
 
h)    Reflects the assumed issuance of 1.2 million additional common units, as if the units had been issued as of the beginning of the six month period.


22



Below is a reconciliation of income from continuing operations to FFO for the year ended December 31, 2010 as well as other data for those respective periods (in thousands):

 
 
 
Pro forma
 
Pro forma
 
Historical
Acquisitions
Adjustments
 
Consolidated
 
(a)
(b)
 
 
 
For the year ended December 31, 2010
 
 
 
 
 
Funds from Operations:
 
 
 
 
 
Income from continuing operations
$
38,342

$
24,273

$
(28,634
)
(c)
$
33,981

Discontinued operations
(98
)
 
 
 
(98
)
Net income
38,244

24,273

(28,634
)
 
33,883

Depreciation and amortization attributable to discontinued operations
87

 
 
 
87

Depreciation and amortization uniquely significant to
 
 
 
 
 
real estate - consolidated
77,526

 
22,288

(d)
99,814

Depreciation and amortization uniquely significant to
 
 
 
 
 
real estate - unconsolidated joint ventures
5,146

 
 
 
5,146

Funds from operations
121,003

24,273

(6,346
)
 
138,930

Preferred share dividends
(5,297
)
 
 
 
(5,297
)
Original issuance costs related to redeemed preferred shares
(2,539
)
 
 
 
(2,539
)
Noncontrolling interests

 
(95
)
(e)
(95
)
Allocation of FFO to participating securities
(932
)
 
(122
)
(f)
(1,054
)
Funds from operations available to common
 
 
 
 
 
shareholders and noncontrolling interests in Operating Partnership
$
112,235

$
24,273

$
(6,563
)
 
$
129,945

 
 
 
 
 
 
TANGER FACTORY OUTLET CENTERS, INC.
 
 
 
 
 
Weighted average shares
92,523

 
4,600

(g)
97,123

Funds from operations per share - diluted
$
1.21

 
 
 
$
1.34

 
 
 
 
 
 
TANGER PROPERTIES LIMITED PARTNERSHIP
 
 
 
 
 
Weighted average units
23,131

 
1,150

(h)
24,281

Funds from operations per unit - diluted
$
4.85

 
 
 
$
5.35


23



NOTES TO COMBINED PRO FORMA CONSOLIDATING FFO

a)    As reported in the Form 10-K of Tanger Factory Outlet Centers, Inc. and Tanger Properties Limited Partnership for the year ended December 31, 2010. 

b)    Represents the combined revenues and certain expenses of Ohio Factory Shops Partnership and the Cordish Properties. There were no operations associated with Atlantic City Associates Number Three Manager LLC.

c)    Reflects the sum of the pro forma adjustments for base rent, depreciation and amortization, and interest expense presented in the unaudited pro forma consolidating statement of operations for the year ended December 31, 2010. 
 
d)    Reflects the pro forma adjustment for depreciation and amortization presented in the unaudited pro forma consolidating statement of operations for the year ended December 31, 2010 .
 
e)    Reflects the noncontrolling interest in Cordish AC-1 Associates LLC, Cordish AC-2 Associates LLC and Atlantic City Associates Number Three Manager LLC.
 
f)    Reflects the allocation of the pro forma adjustments to participating securities.

g)    Reflects the public issuance of 4.6 million additional common shares at a share price of $25.662 on the New York Stock Exchange, for net proceeds of $117.3 million, as if the shares had been issued as of the beginning of the year.
 
h)    Reflects the assumed issuance of 1.2 million additional common units, as if the units had been issued as of the beginning of the year.



SIGNATURES
 
Pursuant to the requirements of the Securities and Exchange Act of 1934, the Registrant has duly caused the report to be signed its behalf by the undersigned thereunto duly authorized.

 TANGER FACTORY OUTLET CENTERS, INC.

By:  /s/ Frank C. Marchisello Jr.                 
Frank C. Marchisello, Jr.
Executive Vice President, Chief Financial Officer and Secretary

TANGER PROPERTIES LIMITED PARTNERSHIP

By:  TANGER GP TRUST, sole general partner

By:  /s/ Frank C. Marchisello Jr.                 
Frank C. Marchisello, Jr.
Vice President, Treasurer and Assistant Secretary
 
October 13, 2011

24