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Section 1: 10-Q (10-Q)

Document


United States
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
 
x
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
For the quarterly period ended June 30, 2018
OR
 
o
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
For the transition period from _________ to _________

Commission file number 1-11986 (Tanger Factory Outlet Centers, Inc.)
Commission file number 333-3526-01 (Tanger Properties Limited Partnership)

TANGER FACTORY OUTLET CENTERS, INC.
TANGER PROPERTIES LIMITED PARTNERSHIP
(Exact name of Registrant as specified in its charter)
North Carolina (Tanger Factory Outlet Centers, Inc.)
56-1815473
North Carolina (Tanger Properties Limited Partnership)
56-1822494
(State or other jurisdiction of incorporation or organization)
(I.R.S. Employer Identification No.)
 
 
3200 Northline Avenue, Suite 360, Greensboro, NC 27408
(Address of principal executive offices)
 
 
(336) 292-3010
(Registrant's telephone number, including area code)
Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Tanger Factory Outlet Centers, Inc.
Yes x   No o
Tanger Properties Limited Partnership
Yes  x   No  o
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
Tanger Factory Outlet Centers, Inc.
Yes x   No o
Tanger Properties Limited Partnership
Yes x   No  o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer”, “accelerated filer", “smaller reporting company” and "emerging growth company" in Rule 12b-2 of the Exchange Act.
Tanger Factory Outlet Centers, Inc.
Large accelerated filer x 
 
Accelerated filer o 
Non-accelerated filer o 
 
Smaller reporting company o 
(Do not check if a smaller reporting company)
 
Emerging growth company o
Tanger Properties Limited Partnership
Large accelerated filer o 
 
Accelerated filer o 
Non-accelerated filer x
 
Smaller reporting company o 
(Do not check if a smaller reporting company)
 
Emerging growth company o



If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Tanger Factory Outlet Centers, Inc.
o
Tanger Properties Limited Partnership
o
 
Indicate by check mark whether the registrant is a shell company (as defined by Rule 12b-2 of the Act).
Tanger Factory Outlet Centers, Inc.
Yes o   No x
Tanger Properties Limited Partnership
Yes o   No x

As of July 31, 2018, there were 93,907,034 common shares of Tanger Factory Outlet Centers, Inc. outstanding, $.01 par value.




EXPLANATORY NOTE
This report combines the unaudited quarterly reports on Form 10-Q for the quarter ended June 30, 2018 of Tanger Factory Outlet Centers, Inc. and Tanger Properties Limited Partnership. Unless the context indicates otherwise, the term "Company" refers to Tanger Factory Outlet Centers, Inc. and subsidiaries and the term "Operating Partnership" refers to Tanger Properties Limited Partnership and subsidiaries. The terms “we”, “our” and “us” refer to the Company or the Company and the Operating Partnership together, as the text requires.

Tanger Factory Outlet Centers, Inc. and subsidiaries is one of the largest owners and operators of outlet centers in the United States and Canada. The Company is a fully-integrated, self-administered and self-managed real estate investment trust ("REIT") which, through its controlling interest in the Operating Partnership, focuses exclusively on developing, acquiring, owning, operating and managing outlet shopping centers. The outlet centers and other assets are held by, and all of the operations are conducted by, the Operating Partnership and its subsidiaries. Accordingly, the descriptions of the business, employees and properties of the Company are also descriptions of the business, employees and properties of the Operating Partnership. As the Operating Partnership is the issuer of our registered debt securities, we are required to present a separate set of financial statements for this entity.

The Company owns the majority of the units of partnership interest issued by the Operating Partnership through its two wholly-owned subsidiaries, Tanger GP Trust and Tanger LP Trust. Tanger GP Trust controls the Operating Partnership as its sole general partner. Tanger LP Trust holds a limited partnership interest. As of June 30, 2018, the Company, through its ownership of Tanger GP Trust and Tanger LP Trust, owned 93,907,034 units of the Operating Partnership and other limited partners (the "Non-Company LPs") collectively owned 4,995,433 Class A common limited partnership units. Each Class A common limited partnership unit held by the Non-Company LPs is exchangeable for one of the Company's common shares, subject to certain limitations to preserve the Company's status as a REIT. Class B common limited partnership units, which are held by Tanger LP Trust, are not exchangeable for common shares of the Company.

Management operates the Company and the Operating Partnership as one enterprise. The management of the Company consists of the same members as the management of the Operating Partnership. These individuals are officers of the Company and employees of the Operating Partnership. The individuals that comprise the Company's Board of Directors are also the same individuals that make up Tanger GP Trust's Board of Trustees.

We believe combining the quarterly reports on Form 10-Q of the Company and the Operating Partnership into this single report results in the following benefits:

enhancing investors' understanding of the Company and the Operating Partnership by enabling investors to view the business as a whole in the same manner as management views and operates the business;

eliminating duplicative disclosure and providing a more streamlined and readable presentation since a substantial portion of the disclosure applies to both the Company and the Operating Partnership; and

creating time and cost efficiencies through the preparation of one combined report instead of two separate reports.

There are only a few differences between the Company and the Operating Partnership, which are reflected in the disclosure in this report. We believe it is important, however, to understand these differences between the Company and the Operating Partnership in the context of how the Company and the Operating Partnership operate as an interrelated consolidated company.

As stated above, the Company is a REIT, whose only material asset is its ownership of partnership interests of the Operating Partnership through its wholly-owned subsidiaries, the Tanger GP Trust and Tanger LP Trust. As a result, the Company does not conduct business itself, other than issuing public equity from time to time and incurring expenses required to operate as a public company. However, all operating expenses incurred by the Company are reimbursed by the Operating Partnership, thus the only material item on the Company's income statement is its equity in the earnings of the Operating Partnership. Therefore, the assets and liabilities and the revenues and expenses of the Company and the Operating Partnership are the same on their respective financial statements, except for immaterial differences related to cash, other assets and accrued liabilities that arise from public company expenses paid by the Company. The Company itself does not hold any indebtedness but does guarantee certain debt of the Operating Partnership, as disclosed in this report.

2




The Operating Partnership holds all of the outlet centers and other assets, including the ownership interests in consolidated and unconsolidated joint ventures. The Operating Partnership conducts the operations of the business and is structured as a partnership with no publicly traded equity. Except for net proceeds from public equity issuances by the Company, which are contributed to the Operating Partnership in exchange for partnership units, the Operating Partnership generates the capital required through its operations, its incurrence of indebtedness or through the issuance of partnership units.

Noncontrolling interests, shareholder's equity and partner's capital are the main areas of difference between the consolidated financial statements of the Company and those of the Operating Partnership. The limited partnership interests in the Operating Partnership held by the Non-Company LPs are accounted for as partner's capital in the Operating Partnership's financial statements and as noncontrolling interests in the Company's financial statements.

To help investors understand the significant differences between the Company and the Operating Partnership, this report presents the following separate sections, as applicable, for each of the Company and the Operating Partnership:

Consolidated financial statements;

The following notes to the consolidated financial statements:

Debt of the Company and the Operating Partnership;

Shareholders' Equity, if applicable, and Partners' Equity;

Earnings Per Share and Earnings Per Unit;

Accumulated Other Comprehensive Income of the Company and the Operating Partnership;

Liquidity and Capital Resources in the Management's Discussion and Analysis of Financial Condition and Results of Operations.

This report also includes separate Item 4. Controls and Procedures sections and separate Exhibit 31 and 32 certifications for each of the Company and the Operating Partnership in order to establish that the Chief Executive Officer and the Chief Financial Officer of each entity have made the requisite certifications and that the Company and Operating Partnership are compliant with Rule 13a-15 or Rule 15d-15 of the Securities Exchange Act of 1934 and 18 U.S.C. §1350.

The separate sections in this report for the Company and the Operating Partnership specifically refer to the Company and the Operating Partnership. In the sections that combine disclosure of the Company and the Operating Partnership, this report refers to actions or holdings as being actions or holdings of the Company. Although the Operating Partnership is generally the entity that enters into contracts and joint ventures and holds assets and debt, reference to the Company is appropriate because the business is one enterprise and the Company operates the business through the Operating Partnership.

The Company currently consolidates the Operating Partnership because it has (1) the power to direct the activities of the Operating Partnership that most significantly impact the Operating Partnership’s economic performance and (2) the obligation to absorb losses and the right to receive the residual returns of the Operating Partnership that could be potentially significant. The separate discussions of the Company and the Operating Partnership in this report should be read in conjunction with each other to understand the results of the Company on a consolidated basis and how management operates the Company.

3



TANGER FACTORY OUTLET CENTERS, INC. AND TANGER PROPERTIES LIMITED PARTNERSHIP
Index
 
Page Number
Part I. Financial Information
Item 1.
 
FINANCIAL STATEMENTS OF TANGER FACTORY OUTLET CENTERS, INC. (Unaudited)
 
Consolidated Balance Sheets - as of June 30, 2018 and December 31, 2017
Consolidated Statements of Operations - for the three and six months ended June 30, 2018 and 2017
Consolidated Statements of Comprehensive Income - for the three and six months ended June 30, 2018 and 2017
Consolidated Statements of Shareholders' Equity - for the six months ended June 30, 2018 and 2017
Consolidated Statements of Cash Flows - for the six months ended June 30, 2018 and 2017
 
 
FINANCIAL STATEMENTS OF TANGER PROPERTIES LIMITED PARTNERSHIP (Unaudited)
 
Consolidated Balance Sheets - as of June 30, 2018 and December 31, 2017
Consolidated Statements of Operations - for the three and six months ended June 30, 2018 and 2017
Consolidated Statements of Comprehensive Income - for the three and six months ended June 30, 2018 and 2017
Consolidated Statements of Equity - for the six months ended June 30, 2018 and 2017
Consolidated Statements of Cash Flows - for the six months ended June 30, 2018 and 2017
 
 
Condensed Notes to Consolidated Financial Statements of Tanger Factory Outlet Centers, Inc. and Tanger Properties Limited Partnership
 
 
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
 
 
Item 3. Quantitative and Qualitative Disclosures about Market Risk
 
 
Item 4. Controls and Procedures (Tanger Factory Outlet Centers, Inc. and Tanger Properties Limited Partnership)
 
Part II. Other Information
 
 
Item 1. Legal Proceedings
 
 
Item 1A. Risk Factors
 
 
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
 
 
Item 4. Mine Safety Disclosure
 
 
Item 6. Exhibits
 
 
Signatures

4



PART I. - FINANCIAL INFORMATION

Item 1 - Financial Statements of Tanger Factory Outlet Centers, Inc.

TANGER FACTORY OUTLET CENTERS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands, except share data, unaudited)
 
 
June 30, 2018
 
December 31, 2017
Assets
 
 

 
 

Rental property:
 
 

 
 

Land
 
$
279,978

 
$
279,978

Buildings, improvements and fixtures
 
2,825,729

 
2,793,638

Construction in progress
 
1,329

 
14,854

 
 
3,107,036

 
3,088,470

Accumulated depreciation
 
(956,418
)
 
(901,967
)
Total rental property, net
 
2,150,618

 
2,186,503

Cash and cash equivalents
 
4,261

 
6,101

Investments in unconsolidated joint ventures
 
110,502

 
119,436

Deferred lease costs and other intangibles, net
 
124,234

 
132,061

Prepaids and other assets
 
98,982

 
96,004

Total assets
 
$
2,488,597

 
$
2,540,105

Liabilities and Equity
 
 
 
 
Liabilities
 
 

 
 

Debt:
 
 

 
 

Senior, unsecured notes, net
 
$
1,135,705

 
$
1,134,755

Unsecured term loan, net
 
323,249

 
322,975

Mortgages payable, net
 
89,235

 
99,761

Unsecured lines of credit, net
 
220,018

 
206,160

Total debt
 
1,768,207

 
1,763,651

Accounts payable and accrued expenses
 
65,445

 
90,416

Other liabilities
 
79,281

 
73,736

Total liabilities
 
1,912,933

 
1,927,803

Commitments and contingencies
 


 


Equity
 
 

 
 

Tanger Factory Outlet Centers, Inc.:
 
 

 
 

Common shares, $.01 par value, 300,000,000 shares authorized, 93,907,034 and 94,560,536 shares issued and outstanding at June 30, 2018 and December 31, 2017, respectively
 
939

 
946

Paid in capital
 
770,877

 
784,782

Accumulated distributions in excess of net income 
 
(204,506
)
 
(184,865
)
Accumulated other comprehensive loss
 
(20,722
)
 
(19,285
)
Equity attributable to Tanger Factory Outlet Centers, Inc.
 
546,588

 
581,578

Equity attributable to noncontrolling interests:
 
 
 
 
Noncontrolling interests in Operating Partnership
 
29,076

 
30,724

Noncontrolling interests in other consolidated partnerships
 

 

Total equity
 
575,664

 
612,302

Total liabilities and equity
 
$
2,488,597

 
$
2,540,105


The accompanying notes are an integral part of these consolidated financial statements.

5



TANGER FACTORY OUTLET CENTERS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except share data, unaudited)
 
 
Three months ended June 30,
 
Six months ended June 30,
 
 
2018
 
2017
 
2018
 
2017
Revenues:
 
 
 
 
 
 

 
 
Base rentals
 
$
80,925

 
$
80,788

 
$
162,458

 
$
161,118

Percentage rentals
 
2,027

 
1,805

 
3,456

 
3,660

Expense reimbursements
 
34,128

 
34,023

 
72,408

 
70,621

Management, leasing and other services
 
630

 
609

 
1,243

 
1,188

Other income
 
2,001

 
2,389

 
3,681

 
4,395

Total revenues
 
119,711

 
119,614

 
243,246

 
240,982

Expenses:
 
 
 


 
 
 
 

Property operating
 
37,946

 
37,116

 
80,164

 
77,503

General and administrative
 
10,997

 
11,500

 
22,109

 
22,912

Abandoned pre-development costs
 

 

 

 
627

Depreciation and amortization
 
32,694

 
32,905

 
65,817

 
64,199

Total expenses
 
81,637

 
81,521

 
168,090

 
165,241

Operating income
 
38,074

 
38,093


75,156


75,741

Other income (expense):
 
 
 
 
 
 
 
 
Interest expense
 
(16,181
)
 
(16,520
)
 
(31,981
)
 
(33,007
)
Gain on sale of assets
 

 
6,943

 

 
6,943

Other non-operating income (expense)
 
191

 
57

 
400

 
92

Income before equity in earnings of unconsolidated joint ventures
 
22,084

 
28,573

 
43,575

 
49,769

Equity in earnings of unconsolidated joint ventures
 
2,206

 
2,374

 
4,400

 
4,692

Net income
 
24,290

 
30,947


47,975


54,461

Noncontrolling interests in Operating Partnership
 
(1,229
)
 
(1,557
)
 
(2,446
)
 
(2,735
)
Noncontrolling interests in other consolidated partnerships
 
(92
)
 

 
278

 

Net income attributable to Tanger Factory Outlet Centers, Inc.
 
$
22,969

 
$
29,390


$
45,807


$
51,726

 
 
 
 
 
 
 
 
 
Basic earnings per common share:
 
 
 
 
 
 
 
 
Net income
 
$
0.24

 
$
0.31

 
$
0.48

 
$
0.54

Diluted earnings per common share:
 
 
 
 
 
 
 
 
Net income
 
$
0.24

 
$
0.31

 
$
0.48

 
$
0.54

 
 
 
 
 
 
 
 
 
Dividends declared per common share
 
$
0.3500

 
$
0.3425

 
$
0.6925

 
$
0.6675

The accompanying notes are an integral part of these consolidated financial statements.

6



TANGER FACTORY OUTLET CENTERS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(In thousands, unaudited)
 
 
Three months ended June 30,
 
Six months ended June 30,
 
 
2018
 
2017
 
2018
 
2017
Net income
 
$
24,290

 
$
30,947

 
$
47,975

 
$
54,461

Other comprehensive income (loss):
 
 
 
 
 
 
 
 
Foreign currency translation adjustments
 
(2,002
)
 
3,074

 
(5,097
)
 
4,084

Change in fair value of cash flow hedges
 
844

 
(544
)
 
3,583

 
178

Other comprehensive income (loss)
 
(1,158
)
 
2,530

 
(1,514
)
 
4,262

Comprehensive income
 
23,132

 
33,477

 
46,461

 
58,723

Comprehensive income attributable to noncontrolling interests
 
(1,262
)
 
(1,702
)
 
(2,091
)
 
(2,949
)
Comprehensive income attributable to Tanger Factory Outlet Centers, Inc.
 
$
21,870

 
$
31,775

 
$
44,370

 
$
55,774

The accompanying notes are an integral part of these consolidated financial statements.


7



TANGER FACTORY OUTLET CENTERS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
(In thousands, except share and per share data, unaudited)

 
 
Common shares
Paid in capital
Accumulated distributions in excess of earnings
Accumulated other comprehensive loss
Equity attributable to Tanger Factory Outlet Centers, Inc.
Noncontrolling interests in Operating Partnership
Noncontrolling
interests in
other consolidated partnerships
Total
 equity
Balance,
December 31, 2016
 
$
961

$
820,251

$
(122,701
)
$
(28,295
)
$
670,216

$
35,066

$
159

$
705,441

Net income
 


51,726


51,726

2,735


54,461

Other comprehensive income
 



4,048

4,048

214


4,262

Compensation under Incentive Award Plan
 

7,306



7,306



7,306

Issuance of 1,800 common shares upon exercise of options
 

54



54



54

Grant of 428,312 restricted common share awards, net of forfeitures
 
4

(4
)






Repurchase of 1,497,981 common shares, including transaction costs
 
(15
)
(39,339
)


(39,354
)


(39,354
)
Withholding of 69,886 common shares for employee income taxes
 

(2,435
)


(2,435
)


(2,435
)
Adjustment for noncontrolling interests in Operating Partnership
 

1,422



1,422

(1,422
)


Common dividends
($.6675 per share)
 


(65,250
)

(65,250
)


(65,250
)
Distributions to noncontrolling interests
 





(3,356
)

(3,356
)
Balance,
June 30, 2017
 
$
950

$
787,255

$
(136,225
)
$
(24,247
)
$
627,733

$
33,237

$
159

$
661,129

 
 
 
 
 
 
 
 
 
 
The accompanying notes are an integral part of these consolidated financial statements.
 
 
 
 
 
 
 
 
 
 
 
 











 
 








 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

8



TANGER FACTORY OUTLET CENTERS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
(In thousands, except share and per share data, unaudited)
 
 
Common shares
Paid in capital
Accumulated distributions in excess of earnings
Accumulated other comprehensive loss
Equity attributable to Tanger Factory Outlet Centers, Inc.
Noncontrolling interests in Operating Partnership
Noncontrolling
interests in
other consolidated partnerships
Total
 equity
Balance, December 31, 2017
 
$
946

$
784,782

$
(184,865
)
$
(19,285
)
$
581,578

$
30,724

$

$
612,302

Net income
 


45,807


45,807

2,446

(278
)
47,975

Other comprehensive loss
 



(1,437
)
(1,437
)
(77
)

(1,514
)
Compensation under Incentive Award Plan
 

7,596



7,596



7,596

Grant of 355,184 restricted common share awards, net of forfeitures
 
3

(3
)






Repurchase of 919,249 common shares, including transaction costs
 
(9
)
(19,989
)


(19,998
)


(19,998
)
Withholding of
89,437 common shares for employee income taxes
 
(1
)
(2,067
)


(2,068
)


(2,068
)
Contributions from noncontrolling interests
 






445

445

Adjustment for noncontrolling interests in Operating Partnership
 

558



558

(558
)


Common dividends
($.6925 per share)
 


(65,448
)

(65,448
)


(65,448
)
Distributions to noncontrolling interests
 





(3,459
)
(167
)
(3,626
)
Balance,
June 30, 2018
 
$
939

$
770,877

$
(204,506
)
$
(20,722
)
$
546,588

$
29,076

$

$
575,664


The accompanying notes are an integral part of these consolidated financial statements.




9



TANGER FACTORY OUTLET CENTERS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands, unaudited)
 
 
Six months ended June 30,
 
 
2018
 
2017
OPERATING ACTIVITIES
 
 
 
 

Net income
 
$
47,975

 
$
54,461

Adjustments to reconcile net income to net cash provided by operating activities:
 
 
 
 
Depreciation and amortization
 
65,817

 
64,199

Amortization of deferred financing costs
 
1,532

 
1,749

Gain on sale of assets
 

 
(6,943
)
Equity in earnings of unconsolidated joint ventures
 
(4,400
)
 
(4,692
)
Equity-based compensation expense
 
7,045

 
6,796

Amortization of debt (premiums) and discounts, net
 
204

 
245

Amortization (accretion) of market rent rate adjustments, net
 
1,251

 
1,691

Straight-line rent adjustments
 
(3,294
)
 
(3,293
)
Distributions of cumulative earnings from unconsolidated joint ventures
 
4,332

 
4,952

Changes in other assets and liabilities:
 
 
 
 
Other assets
 
3,738

 
787

Accounts payable and accrued expenses
 
(8,833
)
 
(9,198
)
Net cash provided by operating activities
 
115,367

 
110,754

INVESTING ACTIVITIES
 
 
 
 
Additions to rental property
 
(41,212
)
 
(88,761
)
Additions to investments in unconsolidated joint ventures
 
(1,497
)
 
(3,617
)
Net proceeds from sale of assets
 

 
39,213

Additions to non-real estate assets
 
(1,114
)
 
(7,959
)
Distributions in excess of cumulative earnings from unconsolidated joint ventures
 
13,911

 
6,330

Additions to deferred lease costs
 
(2,821
)
 
(2,845
)
Other investing activities
 
4,032

 
2,591

Net cash used in investing activities
 
(28,701
)
 
(55,048
)
FINANCING ACTIVITIES
 
 
 
 
Cash dividends paid
 
(65,448
)
 
(65,250
)
Distributions to noncontrolling interests in Operating Partnership
 
(3,459
)
 
(3,356
)
Proceeds from revolving credit facility
 
295,600

 
326,254

Repayments of revolving credit facility
 
(280,000
)
 
(286,127
)
Proceeds from notes, mortgages and loans
 

 
454

Repayments of notes, mortgages and loans
 
(10,169
)
 
(1,483
)
Repurchase of common shares, including transaction costs
 
(19,998
)
 
(39,354
)
Employee income taxes paid related to shares withheld upon vesting of equity awards
 
(2,068
)
 
(2,435
)
Additions to deferred financing costs
 
(2,615
)
 
(50
)
Proceeds from exercise of options
 

 
54

Proceeds from other financing activities
 
445

 
11,718

Payment for other financing activities
 
(741
)
 

Net cash used in financing activities
 
(88,453
)
 
(59,575
)
Effect of foreign currency rate changes on cash and cash equivalents
 
(53
)
 
9

Net decrease in cash and cash equivalents
 
(1,840
)
 
(3,860
)
Cash and cash equivalents, beginning of period
 
6,101

 
12,222

Cash and cash equivalents, end of period
 
$
4,261

 
$
8,362

The accompanying notes are an integral part of these consolidated financial statements.

10



Item 1 - Financial Statements of Tanger Properties Limited Partnership

TANGER PROPERTIES LIMITED PARTNERSHIP AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands, except unit data, unaudited)
 
 
June 30, 2018
 
December 31, 2017
Assets
 
 

 
 

Rental property:
 
 

 
 

Land
 
$
279,978

 
$
279,978

Buildings, improvements and fixtures
 
2,825,729

 
2,793,638

Construction in progress
 
1,329

 
14,854

 
 
3,107,036

 
3,088,470

Accumulated depreciation
 
(956,418
)
 
(901,967
)
Total rental property, net
 
2,150,618

 
2,186,503

Cash and cash equivalents
 
4,135

 
6,050

Investments in unconsolidated joint ventures
 
110,502

 
119,436

Deferred lease costs and other intangibles, net
 
124,234

 
132,061

Prepaids and other assets
 
98,428

 
95,384

Total assets
 
$
2,487,917

 
$
2,539,434

Liabilities and Equity
 

 
 
Liabilities
 
 
 
 
Debt:
 
 
 
 
Senior, unsecured notes, net
 
$
1,135,705

 
$
1,134,755

Unsecured term loan, net
 
323,249

 
322,975

Mortgages payable, net
 
89,235

 
99,761

Unsecured lines of credit, net
 
220,018

 
206,160

Total debt
 
1,768,207

 
1,763,651

Accounts payable and accrued expenses
 
64,765

 
89,745

Other liabilities
 
79,281

 
73,736

Total liabilities
 
1,912,253

 
1,927,132

Commitments and contingencies
 


 


Equity
 
 
 
 
Partners' Equity:
 
 
 
 
General partner, 1,000,000 units outstanding at June 30, 2018 and December 31, 2017
 
5,637

 
5,844

Limited partners, 4,995,433 and 4,995,433 Class A common units, and 92,907,034 and 93,560,536 Class B common units outstanding at June 30, 2018 and December 31, 2017, respectively
 
591,886

 
626,803

Accumulated other comprehensive loss
 
(21,859
)
 
(20,345
)
Total partners' equity
 
575,664

 
612,302

Noncontrolling interests in consolidated partnerships
 

 

Total equity
 
575,664

 
612,302

Total liabilities and equity
 
$
2,487,917

 
$
2,539,434

The accompanying notes are an integral part of these consolidated financial statements.

11



TANGER PROPERTIES LIMITED PARTNERSHIP AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per unit data, unaudited)
 
 
Three months ended June 30,
 
Six months ended June 30,
 
 
2018
 
2017
 
2018
 
2017
Revenues:
 
 
 
 
 
 

 
 
Base rentals
 
$
80,925

 
$
80,788

 
$
162,458

 
$
161,118

Percentage rentals
 
2,027

 
1,805

 
3,456

 
3,660

Expense reimbursements
 
34,128

 
34,023

 
72,408

 
70,621

Management, leasing and other services
 
630

 
609

 
1,243

 
1,188

Other income
 
2,001

 
2,389

 
3,681

 
4,395

Total revenues
 
119,711

 
119,614


243,246


240,982

Expenses:
 
 
 
 
 
 
 
 
Property operating
 
37,946

 
37,116

 
80,164

 
77,503

General and administrative
 
10,997

 
11,500

 
22,109

 
22,912

Abandoned pre-development costs
 

 

 

 
627

Depreciation and amortization
 
32,694

 
32,905

 
65,817

 
64,199

Total expenses
 
81,637

 
81,521


168,090


165,241

Operating income
 
38,074

 
38,093


75,156


75,741

Other income (expense):
 
 
 
 
 
 
 
 
Interest expense
 
(16,181
)
 
(16,520
)
 
(31,981
)
 
(33,007
)
Gain on sale of assets
 

 
6,943

 

 
6,943

Other non-operating income (expense)
 
191

 
57

 
400

 
92

Income before equity in earnings of unconsolidated joint ventures
 
22,084

 
28,573


43,575


49,769

Equity in earnings of unconsolidated joint ventures
 
2,206

 
2,374

 
4,400

 
4,692

Net income
 
24,290

 
30,947


47,975


54,461

Noncontrolling interests in consolidated partnerships
 
(92
)
 

 
278

 

Net income available to partners
 
24,198

 
30,947


48,253


54,461

Net income available to limited partners
 
23,954

 
30,641

 
47,768

 
53,922

Net income available to general partner
 
$
244

 
$
306


$
485


$
539

 
 
 
 
 
 
 
 
 
Basic earnings per common unit:
 
 
 
 
 
 
 
 

Net income
 
$
0.24

 
$
0.31

 
$
0.48

 
$
0.54

Diluted earnings per common unit:
 
 
 
 
 
 
 
 
Net income
 
$
0.24

 
$
0.31

 
$
0.48

 
$
0.54

 
 
 
 
 
 
 
 
 
Distribution declared per common unit
 
$
0.3500

 
$
0.3425

 
$
0.6925

 
$
0.6675

The accompanying notes are an integral part of these consolidated financial statements.

12



TANGER PROPERTIES LIMITED PARTNERSHIP AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(In thousands, unaudited)

 
 
Three months ended June 30,
 
Six months ended June 30,
 
 
2018
 
2017
 
2018
 
2017
Net income
 
$
24,290

 
$
30,947

 
$
47,975

 
$
54,461

Other comprehensive income (loss):
 
 
 
 
 
 
 
 
Foreign currency translation adjustments
 
(2,002
)
 
3,074

 
(5,097
)
 
4,084

Changes in fair value of cash flow hedges
 
844

 
(544
)
 
3,583

 
178

Other comprehensive income (loss)
 
(1,158
)
 
2,530

 
(1,514
)
 
4,262

Comprehensive income
 
23,132

 
33,477

 
46,461

 
58,723

Comprehensive income attributable to noncontrolling interests in consolidated partnerships
 
(92
)
 

 
278

 

Comprehensive income attributable to the Operating Partnership
 
$
23,040

 
$
33,477

 
$
46,739

 
$
58,723

The accompanying notes are an integral part of these consolidated financial statements.


13



TANGER PROPERTIES LIMITED PARTNERSHIP AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EQUITY
(In thousands, except unit and per unit data, unaudited)
 
 
General partner
Limited partners
Accumulated other comprehensive loss
Total partners' equity
Noncontrolling interests in consolidated partnerships
Total equity
Balance, December 31, 2016
 
$
6,485

$
728,631

$
(29,834
)
$
705,282

$
159

$
705,441

Net income
 
539

53,922


54,461


54,461

Other comprehensive income
 


4,262

4,262


4,262

Compensation under Incentive Award Plan
 

7,306


7,306


7,306

Issuance of 1,800 common units upon exercise of options
 

54


54


54

Grant of 428,312 restricted common share awards by the Company, net of forfeitures
 






Repurchase of 1,497,981 units, including transaction costs
 

(39,354
)

(39,354
)

(39,354
)
Withholding of 69,886 common units for employee income taxes
 

(2,435
)

(2,435
)

(2,435
)
Common distributions ($.6675 per common unit)
 
(668
)
(67,938
)

(68,606
)

(68,606
)
Balance, June 30, 2017
 
$
6,356

$
680,186

$
(25,572
)
$
660,970

$
159

$
661,129

 
 
 
 
 
 
 
 
 
 
General partner
Limited partners
Accumulated other comprehensive loss
Total partners' equity
Noncontrolling interests in consolidated partnerships
Total equity
Balance, December 31, 2017
 
$
5,844

$
626,803

$
(20,345
)
$
612,302

$

$
612,302

Net income
 
485

47,768


48,253

(278
)
47,975

Other comprehensive loss
 


(1,514
)
(1,514
)

(1,514
)
Compensation under Incentive Award Plan
 

7,596


7,596


7,596

Grant of 355,184 restricted common share awards by the Company
 






Repurchase of 919,249 units, including transaction costs
 

(19,998
)

(19,998
)

(19,998
)
Withholding of 89,437 common units for employee income taxes
 

(2,068
)

(2,068
)

(2,068
)
Contributions from noncontrolling interests
 




445

445

Common distributions ($.6925
 per common unit)
 
(692
)
(68,215
)

(68,907
)

(68,907
)
Distributions to noncontrolling interests
 




(167
)
(167
)
Balance, June 30, 2018
 
$
5,637

$
591,886

$
(21,859
)
$
575,664

$

$
575,664

 
 
 
 
 
 
 
 
The accompanying notes are an integral part of these consolidated financial statements.

14



TANGER PROPERTIES LIMITED PARTNERSHIP AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands, unaudited)
 
 
Six months ended June 30,
 
 
2018
 
2017
OPERATING ACTIVITIES
 
 

 
 

Net income
 
$
47,975

 
$
54,461

Adjustments to reconcile net income to net cash provided by operating activities:
 
 
 
 
Depreciation and amortization
 
65,817

 
64,199

Amortization of deferred financing costs
 
1,532

 
1,749

Gain on sale of assets
 

 
(6,943
)
Equity in earnings of unconsolidated joint ventures
 
(4,400
)
 
(4,692
)
Equity-based compensation expense
 
7,045

 
6,796

Amortization of debt (premiums) and discounts, net
 
204

 
245

Amortization (accretion) of market rent rate adjustments, net
 
1,251

 
1,691

Straight-line rent adjustments
 
(3,294
)
 
(3,293
)
Distributions of cumulative earnings from unconsolidated joint ventures
 
4,332

 
4,952

Changes in other assets and liabilities:
 
 
 
 
Other assets
 
3,672

 
487

Accounts payable and accrued expenses
 
(8,842
)
 
(8,986
)
Net cash provided by operating activities
 
115,292

 
110,666

INVESTING ACTIVITIES
 
 
 
 
Additions to rental property
 
(41,212
)
 
(88,761
)
Additions to investments in unconsolidated joint ventures
 
(1,497
)
 
(3,617
)
Net proceeds from sale of assets
 

 
39,213

Additions to non-real estate assets
 
(1,114
)
 
(7,959
)
Distributions in excess of cumulative earnings from unconsolidated joint ventures
 
13,911

 
6,330

Additions to deferred lease costs
 
(2,821
)
 
(2,845
)
Other investing activities
 
4,032

 
2,591

Net cash used in investing activities
 
(28,701
)
 
(55,048
)
FINANCING ACTIVITIES
 
 
 
 
Cash distributions paid
 
(68,907
)
 
(68,606
)
Proceeds from revolving credit facility
 
295,600

 
326,254

Repayments of revolving credit facility
 
(280,000
)
 
(286,127
)
Proceeds from notes, mortgages and loans
 

 
454

Repayments of notes, mortgages and loans
 
(10,169
)
 
(1,483
)
Repurchase of units, including transaction costs
 
(19,998
)
 
(39,354
)
Employee income taxes paid related to shares withheld upon vesting of equity awards
 
(2,068
)
 
(2,435
)
Additions to deferred financing costs
 
(2,615
)
 
(50
)
Proceeds from exercise of options
 

 
54

Proceeds from other financing activities
 
445

 
11,718

Payment for other financing activities
 
(741
)
 

Net cash used in financing activities
 
(88,453
)
 
(59,575
)
Effect of foreign currency on cash and cash equivalents
 
(53
)
 
9

Net decrease in cash and cash equivalents
 
(1,915
)
 
(3,948
)
Cash and cash equivalents, beginning of period
 
6,050

 
12,199

Cash and cash equivalents, end of period
 
$
4,135

 
$
8,251

The accompanying notes are an integral part of these consolidated financial statements.

15



TANGER FACTORY OUTLET CENTERS, INC. AND SUBSIDIARIES
TANGER PROPERTIES LIMITED PARTNERSHIP AND SUBSIDIARIES
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. Business
Tanger Factory Outlet Centers, Inc. and subsidiaries is one of the largest owners and operators of outlet centers in the United States and Canada. We are a fully-integrated, self-administered and self-managed real estate investment trust ("REIT") which, through our controlling interest in the Operating Partnership, focuses exclusively on developing, acquiring, owning, operating and managing outlet shopping centers. As of June 30, 2018, we owned and operated 36 consolidated outlet centers, with a total gross leasable area of approximately 12.9 million square feet. We also had partial ownership interests in 8 unconsolidated outlet centers totaling approximately 2.4 million square feet, including 4 outlet centers in Canada.

Our outlet centers and other assets are held by, and all of our operations are conducted by, Tanger Properties Limited Partnership and subsidiaries. Accordingly, the descriptions of our business, employees and properties are also descriptions of the business, employees and properties of the Operating Partnership. Unless the context indicates otherwise, the term "Company" refers to Tanger Factory Outlet Centers, Inc. and subsidiaries and the term, "Operating Partnership", refers to Tanger Properties Limited Partnership and subsidiaries. The terms "we", "our" and "us" refer to the Company or the Company and the Operating Partnership together, as the text requires.

The Company owns the majority of the units of partnership interest issued by the Operating Partnership through its two wholly-owned subsidiaries, Tanger GP Trust and Tanger LP Trust. Tanger GP Trust is the sole general partner of the Operating Partnership. Tanger LP Trust holds a limited partnership interest. As of June 30, 2018, the Company, through its ownership of Tanger GP Trust and Tanger LP Trust, owned 93,907,034 units of the Operating Partnership and other limited partners (the "Non-Company LPs") collectively owned 4,995,433 Class A common limited partnership units. Each Class A common limited partnership unit held by the Non-Company LPs is exchangeable for one of the Company's common shares, subject to certain limitations to preserve the Company's REIT status. Class B common limited partnership units, which are held by Tanger LP Trust, are not exchangeable for common shares of the Company.

2. Basis of Presentation
The unaudited consolidated financial statements included herein have been prepared pursuant to accounting principles generally accepted in the United States of America and should be read in conjunction with the consolidated financial statements and notes thereto of the Company's and the Operating Partnership's combined Annual Report on Form 10-K for the year ended December 31, 2017. The December 31, 2017 balance sheet data in this Form 10-Q was derived from audited financial statements. Certain information and note disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted pursuant to the SEC's rules and regulations, although management believes that the disclosures are adequate to make the information presented not misleading. In the opinion of management, all adjustments (consisting only of normal recurring adjustments) necessary for a fair presentation of the financial statements for the interim periods have been made. The results of interim periods are not necessarily indicative of the results for a full year.

The Company currently consolidates the Operating Partnership because it has (1) the power to direct the activities of the Operating Partnership that most significantly impact the Operating Partnership’s economic performance and (2) the obligation to absorb losses and the right to receive the residual returns of the Operating Partnership that could be potentially significant.


16



We consolidate properties that are wholly-owned and properties where we own less than 100% but we control. Control is determined using an evaluation based on accounting standards related to the consolidation of voting interest entities and variable interest entities ("VIE"). For joint ventures that are determined to be a VIE, we consolidate the entity where we are deemed to be the primary beneficiary. Determination of the primary beneficiary is based on whether an entity has (1) the power to direct the activities of the VIE that most significantly impact the entity's economic performance, and (2) the obligation to absorb losses of the entity that could potentially be significant to the VIE or the right to receive benefits from the entity that could potentially be significant to the VIE. Our determination of the primary beneficiary considers all relationships between us and the VIE, including management agreements and other contractual arrangements.

Investments in real estate joint ventures that we do not control but may exercise significant influence on are accounted for using the equity method of accounting. These investments are recorded initially at cost and subsequently adjusted for our equity in the joint venture's net income or loss, cash contributions, distributions and other adjustments required under the equity method of accounting.

For certain investments in real estate joint ventures, we record our equity in the venture's net income or loss under the hypothetical liquidation at book value (“HLBV”) method of accounting due to the structures and the preferences we receive on the distributions from our joint ventures pursuant to the respective joint venture agreements for those joint ventures. Under this method, we recognize income and loss in each period based on the change in liquidation proceeds we would receive from a hypothetical liquidation of our investment based on depreciated book value. Therefore, income or loss may be allocated disproportionately as compared to the ownership percentages due to specified preferred return rate thresholds and may be more or less than actual cash distributions received and more or less than what we may receive in the event of an actual liquidation.

We separately report investments in joint ventures for which accumulated distributions have exceeded investments in, and our share of net income or loss of, the joint ventures within other liabilities in the consolidated balance sheets because we are committed to provide further financial support to these joint ventures. The carrying amount of our investments in the Charlotte, Galveston/Houston, and Columbus joint ventures are less than zero because of financing or operating distributions that were greater than net income, as net income includes non-cash charges for depreciation and amortization.

"Noncontrolling interests in the Operating Partnership" reflects the Non-Company LP's percentage ownership of the Operating Partnership's units. "Noncontrolling interests in other consolidated partnerships" consist of outside equity interests in partnerships or joint ventures not wholly-owned by the Company or the Operating Partnership that are consolidated with the financial results of the Company and Operating Partnership because the Operating Partnership exercises control over the entities that own the properties. Noncontrolling interests are initially recorded in the consolidated balance sheets at fair value based upon purchase price allocations. Income is allocated to the noncontrolling interests based on the allocation provisions within the partnership or joint venture agreements.



17



3. Disposition of Property

The following table sets forth certain summarized information regarding the property sold during the six months ended June 30, 2017:
Property
 
Location
 
Date Sold
 
Square Feet
(in 000's)
 
Net Sales Proceeds
(in 000's)
 
Gain on Sale(in 000's)
Westbrook
 
Westbrook, CT
 
May 2017
 
290

 
$
39,212

 
$
6,943


The rental property sold did not meet the criteria to be reported as discontinued operations, thus its results of operations have been reported as part of continuing operations.

4. Investments in Unconsolidated Real Estate Joint Ventures
The equity method of accounting is used to account for each of the individual joint ventures. We have an ownership interest in the following unconsolidated real estate joint ventures:

As of June 30, 2018
Joint Venture
 
Outlet Center Location
 
Ownership %
 
Square Feet
(in 000's)
 
Carrying Value of Investment (in millions)
 
Total Joint Venture Debt, Net
(in millions)(1)
National Harbor
 
National Harbor, MD
 
50.0
%
 
341

 
$
1.2

 
$
86.6

RioCan Canada
 
Various
 
50.0
%
 
923

 
109.3

 
10.2

Investments included in investments in unconsolidated joint ventures
 
 
 
 
 
$
110.5

 


 
 
 
 
 
 
 
 
 
 
 
Columbus(2)
 
Columbus, OH
 
50.0
%
 
355

 
$
(0.3
)
 
$
84.6

Charlotte(2)
 
Charlotte, NC
 
50.0
%
 
398

 
(9.8
)
 
99.6

Galveston/Houston (2)
 
Texas City, TX
 
50.0
%
 
353

 
(15.5
)
 
79.5

Investments included in other liabilities
 
 
 
 
 
$
(25.6
)
 



As of December 31, 2017
Joint Venture
 
Outlet Center Location
 
Ownership %
 
Square Feet
(in 000's)
 
Carrying Value of Investment (in millions)
 
Total Joint Venture Debt, Net
(in millions)
(1)
Columbus
 
Columbus, OH
 
50.0
%
 
355

 
$
1.1

 
$
84.4

National Harbor
 
National Harbor, MD
 
50.0
%
 
341

 
2.5

 
86.4

RioCan Canada
 
Various
 
50.0
%
 
923

 
115.8

 
11.1

Investments included in investments in unconsolidated joint ventures
 
 
 
 
 
$
119.4

 


 
 
 
 
 
 
 
 
 
 
 
Charlotte(2)
 
Charlotte, NC
 
50.0
%
 
398

 
$
(4.1
)
 
$
89.8

Galveston/Houston (2)
 
Texas City, TX
 
50.0
%
 
353

 
(13.0
)
 
79.4

Investments included in other liabilities
 
 
 
 
 
$
(17.1
)
 


(1)
Net of debt origination costs and including premiums of $1.4 million as of June 30, 2018 and December 31, 2017.
(2)
The negative carrying value is due to distributions exceeding contributions and increases or decreases from the equity in earnings of the joint venture.


18



Fees we received for various services provided to our unconsolidated joint ventures were recognized in management, leasing and other services as follows (in thousands):
 
 
Three months ended

Six months ended
 
 
June 30,

June 30,
 
 
2018
 
2017

2018

2017
Fee:
 
 
 
 
 
 

 
 

Management and marketing
 
$
565

 
$
570

 
$
1,133

 
$
1,112

Leasing and other fees
 
65

 
39

 
110

 
76

Total Fees
 
$
630

 
$
609

 
$
1,243

 
$
1,188


Our investments in real estate joint ventures are reduced by the percentage of the profits earned for leasing and development services associated with our ownership interest in each joint venture. Our carrying value of investments in unconsolidated joint ventures differs from our share of the assets reported in the "Summary Balance Sheets - Unconsolidated Joint Ventures" shown below due to adjustments to the book basis, including intercompany profits on sales of services that are capitalized by the unconsolidated joint ventures. The differences in basis (totaling $4.1 million and $4.2 million as of June 30, 2018 and December 31, 2017, respectively) are amortized over the various useful lives of the related assets.

Charlotte

In June 2018, the Charlotte joint venture closed on a $100.0 million mortgage loan with a fixed interest rate of 4.27% and a maturity date of July 2028. The proceeds from the loan were used to pay off the $90.0 million mortgage loan with an interest rate of LIBOR + 1.45%, which had an original maturity date of November 2018. The joint venture distributed the incremental net loan proceeds of $9.3 million equally to the partners.

Condensed combined summary financial information of unconsolidated joint ventures accounted for using the equity method is as follows (in thousands):
Condensed Combined Balance Sheets - Unconsolidated Joint Ventures
 
June 30, 2018
 
December 31, 2017
Assets
 
 

 
 

Land
 
$
93,222

 
$
95,686

Buildings, improvements and fixtures
 
497,518

 
505,618

Construction in progress
 
2,994

 
3,005

 
 
593,734

 
604,309

Accumulated depreciation
 
(103,662
)
 
(93,837
)
Total rental property, net
 
490,072

 
510,472

Cash and cash equivalents
 
18,352

 
25,061

Deferred lease costs and other intangibles, net
 
10,057

 
10,985

Prepaids and other assets
 
16,944

 
15,073

Total assets
 
$
535,425

 
$
561,591

Liabilities and Owners' Equity
 
 

 
 

Mortgages payable, net
 
$
360,529

 
$
351,259

Accounts payable and other liabilities
 
12,253

 
14,680

Total liabilities
 
372,782

 
365,939

Owners' equity
 
162,643

 
195,652

Total liabilities and owners' equity
 
$
535,425

 
$
561,591




19



 
 
Three months ended
 
Six months ended
Condensed Combined Statements of Operations
 
June 30,
 
June 30,
 - Unconsolidated Joint Ventures
 
2018
 
2017
 
2018
 
2017
Revenues
 
$
23,406

 
$
23,285

 
$
47,403

 
$
47,347

Expenses:
 
 
 
 
 
 

 
 
Property operating
 
8,958

 
8,877

 
18,886

 
18,255

General and administrative
 
54

 
96

 
253

 
216

Depreciation and amortization
 
6,545

 
6,943

 
12,907

 
14,456

Total expenses
 
15,557

 
15,916

 
32,046

 
32,927

Operating income
 
7,849

 
7,369

 
15,357

 
14,420

Interest expense
 
(3,388
)
 
(2,460
)
 
(6,465
)
 
(4,720
)
Other non-operating income
 
55

 
1

 
107

 
3

Net income
 
$
4,516

 
$
4,910

 
$
8,999

 
$
9,703

 
 
 
 
 
 
 
 
 
The Company and Operating Partnership's share of:
 
 

 
 

Net income
 
$
2,206

 
$
2,374

 
$
4,400

 
$
4,692

Depreciation and amortization expense (real estate related)
 
$
3,325

 
$
3,550

 
$
6,554

 
$
7,388


20



5. Debt Guaranteed by the Company

All of the Company's debt is held by the Operating Partnership and its consolidated subsidiaries.

The Company guarantees the Operating Partnership's obligations with respect to its unsecured lines of credit which have a total borrowing capacity of $600.0 million. The Company also guarantees the Operating Partnership's unsecured term loan.

The Operating Partnership had the following principal amounts outstanding on the debt guaranteed by the Company (in thousands):
 
 
As of
 
 
June 30, 2018
 
December 31, 2017
Unsecured lines of credit
 
$
223,700

 
$
208,100

Unsecured term loan
 
$
325,000

 
$
325,000


6. Debt of the Operating Partnership

The debt of the Operating Partnership consisted of the following (in thousands):
 
 
 
 
 
 
As of
 
As of
 
 
 
 
 
 
June 30, 2018
 
December 31, 2017
 
 
Stated Interest Rate(s)
 
Maturity Date
 
Principal
 
Book Value(1)
 
Principal
 
Book Value(1)
Senior, unsecured notes:
 
 
 
 

 
 
 
 
 
 
Senior notes
 
3.875
%
 
December 2023
 
$
250,000

 
$
246,348

 
$
250,000

 
$
246,036

Senior notes
 
3.750
%
 
December 2024
 
250,000

 
247,587

 
250,000

 
247,410

Senior notes
 
3.125
%
 
September 2026
 
350,000

 
345,397

 
350,000

 
345,128

Senior notes
 
3.875
%
 
July 2027
 
300,000

 
296,373

 
300,000

 
296,182

 
 
 
 
 
 
 
 
 
 
 
 
 
Mortgages payable:
 
 
 
 
 
 
 
 
 
 
 
 
Atlantic City (2)(3)
 
5.14%-7.65%

 
November 2021- December 2026
 
35,892

 
38,111

 
37,462

 
39,879

     Southaven
 
LIBOR + 1.80%

 
April 2021