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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 September 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 every Interactive Data File required to be submitted 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 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 
 
 
Emerging growth company o
Tanger Properties Limited Partnership
Large accelerated filer o 
 
Accelerated filer o 
Non-accelerated filer x
 
Smaller reporting company o 
 
 
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 November 1, 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 September 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 September 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 September 30, 2018 and December 31, 2017
Consolidated Statements of Operations - for the three and nine months ended September 30, 2018 and 2017
Consolidated Statements of Comprehensive Income - for the three and nine months ended September 30, 2018 and 2017
Consolidated Statements of Shareholders' Equity - for the nine months ended September 30, 2018 and 2017
Consolidated Statements of Cash Flows - for the nine months ended September 30, 2018 and 2017
 
 
FINANCIAL STATEMENTS OF TANGER PROPERTIES LIMITED PARTNERSHIP (Unaudited)
 
Consolidated Balance Sheets - as of September 30, 2018 and December 31, 2017
Consolidated Statements of Operations - for the three and nine months ended September 30, 2018 and 2017
Consolidated Statements of Comprehensive Income - for the three and nine months ended September 30, 2018 and 2017
Consolidated Statements of Equity - for the nine months ended September 30, 2018 and 2017
Consolidated Statements of Cash Flows - for the nine months ended September 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)
 
 
September 30, 2018
 
December 31, 2017
Assets
 
 

 
 

Rental property:
 
 

 
 

Land
 
$
278,632

 
$
279,978

Buildings, improvements and fixtures
 
2,755,698

 
2,793,638

Construction in progress
 
762

 
14,854

 
 
3,035,092

 
3,088,470

Accumulated depreciation
 
(953,158
)
 
(901,967
)
Total rental property, net
 
2,081,934

 
2,186,503

Cash and cash equivalents
 
4,404

 
6,101

Investments in unconsolidated joint ventures
 
111,305

 
119,436

Deferred lease costs and other intangibles, net
 
120,064

 
132,061

Prepaids and other assets
 
103,910

 
96,004

Total assets
 
$
2,421,617

 
$
2,540,105

Liabilities and Equity
 
 
 
 
Liabilities
 
 

 
 

Debt:
 
 

 
 

Senior, unsecured notes, net
 
$
1,136,184

 
$
1,134,755

Unsecured term loan, net
 
323,416

 
322,975

Mortgages payable, net
 
88,359

 
99,761

Unsecured lines of credit, net
 
199,701

 
206,160

Total debt
 
1,747,660

 
1,763,651

Accounts payable and accrued expenses
 
70,132

 
90,416

Other liabilities
 
79,342

 
73,736

Total liabilities
 
1,897,134

 
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 September 30, 2018 and December 31, 2017, respectively
 
939

 
946

Paid in capital
 
774,724

 
784,782

Accumulated distributions in excess of net income 
 
(259,258
)
 
(184,865
)
Accumulated other comprehensive loss
 
(18,413
)
 
(19,285
)
Equity attributable to Tanger Factory Outlet Centers, Inc.
 
497,992

 
581,578

Equity attributable to noncontrolling interests:
 
 
 
 
Noncontrolling interests in Operating Partnership
 
26,491

 
30,724

Noncontrolling interests in other consolidated partnerships
 

 

Total equity
 
524,483

 
612,302

Total liabilities and equity
 
$
2,421,617

 
$
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 September 30,
 
Nine months ended September 30,
 
 
2018
 
2017
 
2018
 
2017
Revenues:
 
 
 
 
 
 

 
 
Base rentals
 
$
82,323

 
$
80,349

 
$
244,781

 
$
241,467

Percentage rentals
 
3,210

 
3,138

 
6,666

 
6,798

Expense reimbursements
 
35,468

 
34,180

 
107,876

 
104,801

Management, leasing and other services
 
583

 
588

 
1,826

 
1,776

Other income
 
2,652

 
2,510

 
6,333

 
6,905

Total revenues
 
124,236

 
120,765

 
367,482

 
361,747

Expenses:
 
 
 


 
 
 
 

Property operating
 
39,653

 
37,571

 
119,817

 
115,074

General and administrative
 
10,752

 
10,934

 
32,861

 
33,846

Abandoned pre-development costs
 

 
(99
)
 

 
528

Impairment charge
 
49,739

 

 
49,739

 

Depreciation and amortization
 
32,850

 
30,976

 
98,667

 
95,175

Total expenses
 
132,994

 
79,382

 
301,084

 
244,623

Operating income (loss)
 
(8,758
)
 
41,383


66,398


117,124

Other income (expense):
 
 
 
 
 
 
 
 
Interest expense
 
(16,367
)
 
(16,489
)
 
(48,348
)
 
(49,496
)
Loss on early extinguishment of debt
 

 
(35,626
)
 

 
(35,626
)
Gain on sale of assets
 

 

 

 
6,943

Other non-operating income (expense)
 
261

 
591

 
661

 
683

Income (loss) before equity in earnings (losses) of unconsolidated joint ventures
 
(24,864
)
 
(10,141
)
 
18,711

 
39,628

Equity in earnings (losses) of unconsolidated joint ventures
 
1,833

 
(5,893
)
 
6,233

 
(1,201
)
Net income (loss)
 
(23,031
)
 
(16,034
)

24,944


38,427

Noncontrolling interests in Operating Partnership
 
1,172

 
815

 
(1,274
)
 
(1,920
)
Noncontrolling interests in other consolidated partnerships
 

 

 
278

 

Net income (loss) attributable to Tanger Factory Outlet Centers, Inc.
 
$
(21,859
)
 
$
(15,219
)

$
23,948


$
36,507

 
 
 
 
 
 
 
 
 
Basic earnings per common share:
 
 
 
 
 
 
 
 
Net income (loss)
 
$
(0.24
)
 
$
(0.17
)
 
$
0.25

 
$
0.38

Diluted earnings per common share:
 
 
 
 
 
 
 
 
Net income (loss)
 
$
(0.24
)
 
$
(0.17
)
 
$
0.25

 
$
0.38

 
 
 
 
 
 
 
 
 
Dividends declared per common share
 
$
0.3500

 
$
0.3425

 
$
1.0425

 
$
1.0100

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 September 30,
 
Nine months ended September 30,
 
 
2018
 
2017
 
2018
 
2017
Net income (loss)
 
$
(23,031
)
 
$
(16,034
)
 
$
24,944

 
$
38,427

Other comprehensive income (loss):
 
 
 
 
 
 
 
 
Foreign currency translation adjustments
 
1,921

 
4,737

 
(3,176
)
 
8,821

Change in fair value of cash flow hedges
 
512

 
39

 
4,095

 
217

Other comprehensive income
 
2,433

 
4,776

 
919

 
9,038

Comprehensive income (loss)
 
(20,598
)
 
(11,258
)
 
25,863

 
47,465

Comprehensive (income) loss attributable to noncontrolling interests
 
1,048

 
573

 
(1,043
)
 
(2,376
)
Comprehensive income (loss) attributable to Tanger Factory Outlet Centers, Inc.
 
$
(19,550
)
 
$
(10,685
)
 
$
24,820

 
$
45,089

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
 


36,507


36,507

1,920


38,427

Other comprehensive income
 



8,582

8,582

456


9,038

Compensation under Incentive Award Plan
 

10,891



10,891



10,891

Issuance of 1,800 common shares upon exercise of options
 

54



54



54

Grant of 411,968 restricted common share awards, net of forfeitures
 
4

(4
)






Repurchase of 1,911,585 common shares, including transaction costs
 
(19
)
(49,343
)


(49,362
)


(49,362
)
Withholding of 69,886 common shares for employee income taxes
 
(1
)
(2,435
)


(2,436
)


(2,436
)
Adjustment for noncontrolling interests in Operating Partnership
 

1,606



1,606

(1,606
)


Acquisition of noncontrolling interest in other consolidated partnership
 






(159
)
(159
)
Common dividends
($1.01 per share)
 


(97,781
)

(97,781
)


(97,781
)
Distributions to noncontrolling interests
 





(5,078
)

(5,078
)
Balance, September 30, 2017
 
$
945

$
781,020

$
(183,975
)
$
(19,713
)
$
578,277

$
30,758

$

$
609,035

 
 
 
 
 
 
 
 
 
 
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
 


23,948


23,948

1,274

(278
)
24,944

Other comprehensive income
 



872

872

47


919

Compensation under Incentive Award Plan
 

11,654



11,654



11,654

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
 

347



347

(347
)


Common dividends
($1.0425 per share)
 


(98,341
)

(98,341
)


(98,341
)
Distributions to noncontrolling interests
 





(5,207
)
(167
)
(5,374
)
Balance, September 30, 2018
 
$
939

$
774,724

$
(259,258
)
$
(18,413
)
$
497,992

$
26,491

$

$
524,483


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)
 
 
Nine months ended September 30,
 
 
2018
 
2017
OPERATING ACTIVITIES
 
 
 
 

Net income
 
$
24,944

 
$
38,427

Adjustments to reconcile net income to net cash provided by operating activities:
 
 
 
 
Depreciation and amortization
 
98,667

 
95,175

Impairment charge
 
49,739

 

Amortization of deferred financing costs
 
2,280

 
2,640

Gain on sale of assets
 

 
(6,943
)
Loss on early extinguishment of debt
 

 
35,626

Equity in (earnings) losses of unconsolidated joint ventures
 
(6,233
)
 
1,201

Equity-based compensation expense
 
10,814

 
10,114

Amortization of debt (premiums) and discounts, net
 
309

 
363

Amortization (accretion) of market rent rate adjustments, net
 
1,980

 
2,107

Straight-line rent adjustments
 
(4,744
)
 
(4,749
)
Distributions of cumulative earnings from unconsolidated joint ventures
 
6,081

 
8,128

Changes in other assets and liabilities:
 
 
 
 
Other assets
 
(406
)
 
(1,131
)
Accounts payable and accrued expenses
 
(3,471
)
 
653

Net cash provided by operating activities
 
179,960

 
181,611

INVESTING ACTIVITIES
 
 
 
 
Additions to rental property
 
(53,349
)
 
(132,612
)
Additions to investments in unconsolidated joint ventures
 
(1,764
)
 
(4,033
)
Net proceeds from sale of assets
 

 
39,213

Additions to non-real estate assets
 
(1,203
)
 
(8,384
)
Distributions in excess of cumulative earnings from unconsolidated joint ventures
 
16,656

 
16,019

Additions to deferred lease costs
 
(5,220
)
 
(4,218
)
Other investing activities
 
8,065

 
4,963

Net cash used in investing activities
 
(36,815
)
 
(89,052
)
FINANCING ACTIVITIES
 
 
 
 
Cash dividends paid
 
(98,341
)
 
(97,781
)
Distributions to noncontrolling interests in Operating Partnership
 
(5,207
)
 
(5,078
)
Proceeds from revolving credit facility
 
391,900

 
543,866

Repayments of revolving credit facility
 
(396,900
)
 
(456,666
)
Proceeds from notes, mortgages and loans
 

 
299,460

Repayments of notes, mortgages and loans
 
(10,971
)
 
(302,240
)
Payment of make-whole premium related to early extinguishment of debt
 

 
(34,143
)
Repurchase of common shares, including transaction costs
 
(19,998
)
 
(49,362
)
Employee income taxes paid related to shares withheld upon vesting of equity awards
 
(2,068
)
 
(2,436
)
Additions to deferred financing costs
 
(2,615
)
 
(2,900
)
Proceeds from exercise of options
 

 
54

Proceeds from other financing activities
 
445

 
12,054

Payment for other financing activities
 
(1,027
)
 
(782
)
Net cash used in financing activities
 
(144,782
)
 
(95,954
)
Effect of foreign currency rate changes on cash and cash equivalents
 
(60
)
 
(54
)
Net decrease in cash and cash equivalents
 
(1,697
)
 
(3,449
)
Cash and cash equivalents, beginning of period
 
6,101

 
12,222

Cash and cash equivalents, end of period
 
$
4,404

 
$
8,773

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)
 
 
September 30, 2018
 
December 31, 2017
Assets
 
 

 
 

Rental property:
 
 

 
 

Land
 
$
278,632

 
$
279,978

Buildings, improvements and fixtures
 
2,755,698

 
2,793,638

Construction in progress
 
762

 
14,854

 
 
3,035,092

 
3,088,470

Accumulated depreciation
 
(953,158
)
 
(901,967
)
Total rental property, net
 
2,081,934

 
2,186,503

Cash and cash equivalents
 
4,361

 
6,050

Investments in unconsolidated joint ventures
 
111,305

 
119,436

Deferred lease costs and other intangibles, net
 
120,064

 
132,061

Prepaids and other assets
 
103,313

 
95,384

Total assets
 
$
2,420,977

 
$
2,539,434

Liabilities and Equity
 

 
 
Liabilities
 
 
 
 
Debt:
 
 
 
 
Senior, unsecured notes, net
 
$
1,136,184

 
$
1,134,755

Unsecured term loan, net
 
323,416

 
322,975

Mortgages payable, net
 
88,359

 
99,761

Unsecured lines of credit, net
 
199,701

 
206,160

Total debt
 
1,747,660

 
1,763,651

Accounts payable and accrued expenses
 
69,492

 
89,745

Other liabilities
 
79,342

 
73,736

Total liabilities
 
1,896,494

 
1,927,132

Commitments and contingencies
 


 


Equity
 
 
 
 
Partners' Equity:
 
 
 
 
General partner, 1,000,000 units outstanding at September 30, 2018 and December 31, 2017
 
5,054

 
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 September 30, 2018 and December 31, 2017, respectively
 
538,855

 
626,803

Accumulated other comprehensive loss
 
(19,426
)
 
(20,345
)
Total partners' equity
 
524,483

 
612,302

Noncontrolling interests in consolidated partnerships
 

 

Total equity
 
524,483

 
612,302

Total liabilities and equity
 
$
2,420,977

 
$
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 September 30,
 
Nine months ended September 30,
 
 
2018
 
2017
 
2018
 
2017
Revenues:
 
 
 
 
 
 

 
 
Base rentals
 
$
82,323

 
$
80,349

 
$
244,781

 
$
241,467

Percentage rentals
 
3,210

 
3,138

 
6,666

 
6,798

Expense reimbursements
 
35,468

 
34,180

 
107,876

 
104,801

Management, leasing and other services
 
583

 
588

 
1,826

 
1,776

Other income
 
2,652

 
2,510

 
6,333

 
6,905

Total revenues
 
124,236

 
120,765


367,482


361,747

Expenses:
 
 
 
 
 
 
 
 
Property operating
 
39,653

 
37,571

 
119,817

 
115,074

General and administrative
 
10,752

 
10,934

 
32,861

 
33,846

Abandoned pre-development costs
 

 
(99
)
 

 
528

Impairment charge
 
49,739

 

 
49,739

 

Depreciation and amortization
 
32,850

 
30,976

 
98,667

 
95,175

Total expenses
 
132,994

 
79,382


301,084


244,623

Operating income (loss)
 
(8,758
)
 
41,383


66,398


117,124

Other income (expense):
 
 
 
 
 
 
 
 
Interest expense
 
(16,367
)
 
(16,489
)
 
(48,348
)
 
(49,496
)
Loss on early extinguishment of debt
 

 
(35,626
)
 

 
(35,626
)
Gain on sale of assets
 

 

 

 
6,943

Other non-operating income (expense)
 
261

 
591

 
661

 
683

Income (loss) before equity in earnings (losses) of unconsolidated joint ventures
 
(24,864
)
 
(10,141
)

18,711


39,628

Equity in earnings (losses) of unconsolidated joint ventures
 
1,833

 
(5,893
)
 
6,233

 
(1,201
)
Net income (loss)
 
(23,031
)
 
(16,034
)

24,944


38,427

Noncontrolling interests in consolidated partnerships
 

 

 
278

 

Net income (loss) available to partners
 
(23,031
)
 
(16,034
)

25,222


38,427

Net income (loss) available to limited partners
 
(22,798
)
 
(15,874
)
 
24,970

 
38,048

Net income (loss) available to general partner
 
$
(233
)
 
$
(160
)

$
252


$
379

 
 
 
 
 
 
 
 
 
Basic earnings per common unit:
 
 
 
 
 
 
 
 

Net income (loss)
 
$
(0.24
)
 
$
(0.17
)
 
$
0.25

 
$
0.38

Diluted earnings per common unit:
 
 
 
 
 
 
 
 
Net income (loss)
 
$
(0.24
)
 
$
(0.17
)
 
$
0.25

 
$
0.38

 
 
 
 
 
 
 
 
 
Distribution declared per common unit
 
$
0.3500

 
$
0.3425

 
$
1.0425

 
$
1.0100

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 September 30,
 
Nine months ended September 30,
 
 
2018
 
2017
 
2018
 
2017
Net income (loss)
 
$
(23,031
)
 
$
(16,034
)
 
$
24,944

 
$
38,427

Other comprehensive income (loss):
 
 
 
 
 
 
 
 
Foreign currency translation adjustments
 
1,921

 
4,737

 
(3,176
)
 
8,821

Changes in fair value of cash flow hedges
 
512

 
39

 
4,095

 
217

Other comprehensive income
 
2,433

 
4,776

 
919

 
9,038

Comprehensive income (loss)
 
(20,598
)
 
(11,258
)
 
25,863

 
47,465

Comprehensive loss attributable to noncontrolling interests in consolidated partnerships
 

 

 
278

 

Comprehensive income (loss) attributable to the Operating Partnership
 
$
(20,598
)
 
$
(11,258
)
 
$
26,141

 
$
47,465

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
 
379

38,048


38,427


38,427

Other comprehensive income
 


9,038

9,038


9,038

Compensation under Incentive Award Plan
 

10,891


10,891


10,891

Issuance of 1,800 common units upon exercise of options
 

54


54


54

Grant of 411,968 restricted common share awards by the Company, net of forfeitures
 






Repurchase of 1,911,585 units, including transaction costs
 

(49,362
)

(49,362
)

(49,362
)
Withholding of 69,886 common units for employee income taxes
 

(2,436
)

(2,436
)

(2,436
)
Acquisition of noncontrolling interest in other consolidated partnership
 




(159
)
(159
)
Common distributions ($1.01 per common unit)
 
(1,010
)
(101,849
)

(102,859
)

(102,859
)
Balance, September 30, 2017
 
$
5,854

$
623,977

$
(20,796
)
$
609,035

$

$
609,035

 
 
 
 
 
 
 
 
 
 
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
 
252

24,970


25,222

(278
)
24,944

Other comprehensive income
 


919

919


919

Compensation under Incentive Award Plan
 

11,654


11,654


11,654

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 ($1.0425
 per common unit)
 
(1,042
)
(102,506
)

(103,548
)

(103,548
)
Distributions to noncontrolling interests
 




(167
)
(167
)
Balance, September 30, 2018
 
$
5,054

$
538,855

$
(19,426
)
$
524,483

$

$
524,483

 
 
 
 
 
 
 
 
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)
 
 
Nine months ended September 30,
 
 
2018
 
2017
OPERATING ACTIVITIES
 
 

 
 

Net income
 
$
24,944

 
$
38,427

Adjustments to reconcile net income to net cash provided by operating activities:
 
 
 
 
Depreciation and amortization
 
98,667

 
95,175

Impairment charge
 
49,739

 

Amortization of deferred financing costs
 
2,280

 
2,640

Gain on sale of assets
 

 
(6,943
)
Loss on early extinguishment of debt
 

 
35,626

Equity in (earnings) losses of unconsolidated joint ventures
 
(6,233
)
 
1,201

Equity-based compensation expense
 
10,814

 
10,114

Amortization of debt (premiums) and discounts, net
 
309

 
363

Amortization (accretion) of market rent rate adjustments, net
 
1,980

 
2,107

Straight-line rent adjustments
 
(4,744
)
 
(4,749
)
Distributions of cumulative earnings from unconsolidated joint ventures
 
6,081

 
8,128

Changes in other assets and liabilities:
 
 
 
 
Other assets
 
(429
)
 
(1,110
)
Accounts payable and accrued expenses
 
(3,440
)
 
551

Net cash provided by operating activities
 
179,968

 
181,530

INVESTING ACTIVITIES
 
 
 
 
Additions to rental property
 
(53,349
)
 
(132,612
)
Additions to investments in unconsolidated joint ventures
 
(1,764
)
 
(4,033
)
Net proceeds from sale of assets
 

 
39,213

Additions to non-real estate assets
 
(1,203
)
 
(8,384
)
Distributions in excess of cumulative earnings from unconsolidated joint ventures
 
16,656

 
16,019

Additions to deferred lease costs
 
(5,220
)
 
(4,218
)
Other investing activities
 
8,065

 
4,963

Net cash used in investing activities
 
(36,815
)
 
(89,052
)
FINANCING ACTIVITIES
 
 
 
 
Cash distributions paid
 
(103,548
)
 
(102,859
)
Proceeds from revolving credit facility
 
391,900

 
543,866

Repayments of revolving credit facility
 
(396,900
)
 
(456,666
)
Proceeds from notes, mortgages and loans
 

 
299,460

Repayments of notes, mortgages and loans
 
(10,971
)
 
(302,240
)
Payment of make-whole premium related to early extinguishment of debt
 

 
(34,143
)
Repurchase of units, including transaction costs
 
(19,998
)
 
(49,362
)
Employee income taxes paid related to shares withheld upon vesting of equity awards
 
(2,068
)
 
(2,436
)
Additions to deferred financing costs
 
(2,615
)
 
(2,900
)
Proceeds from exercise of options
 

 
54

Proceeds from other financing activities
 
445

 
12,054

Payment for other financing activities
 
(1,027
)
 
(782
)
Net cash used in financing activities
 
(144,782
)
 
(95,954
)
Effect of foreign currency on cash and cash equivalents
 
(60
)
 
(54
)
Net decrease in cash and cash equivalents
 
(1,689
)
 
(3,530
)
Cash and cash equivalents, beginning of period
 
6,050

 
12,199

Cash and cash equivalents, end of period
 
$
4,361

 
$
8,669

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 September 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 September 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 control such properties. 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. Impairment Charge and Disposition of Property

Impairment Charge

Rental property held and used by us is reviewed for impairment in the event that facts and circumstances indicate the carrying amount of an asset may not be recoverable. In such an event, we compare the estimated future undiscounted cash flows associated with the asset to the asset's carrying amount, and if less, recognize an impairment loss in an amount by which the carrying amount exceeds its fair value.

During the third quarter 2018, we determined that the estimated future undiscounted cash flows of our Jeffersonville, OH outlet center did not exceed the property's carrying value due to a decline of operating results at the center likely resulting from increased competition from the Company's center in Columbus, OH and slower than expected improvement from remerchandising activities. Therefore, we recorded a $49.7 million non-cash impairment charge in our consolidated statement of operations which equaled the excess of the property's carrying value over its estimated fair value, see Note 8, for additional information on the fair market value calculation.

Disposition of Property

The following table sets forth certain summarized information regarding the property sold during the nine months ended September 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

 
$
39,213

 
$
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.


18



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 September 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)
Investments included in investments in unconsolidated joint ventures:
 
 
 
 
National Harbor
 
National Harbor, MD
 
50.0
%
 
341

 
$
0.6

 
$
86.7

RioCan Canada
 
Various
 
50.0
%
 
923

 
110.7

 
10.2

 
 
 
 
 
 
$
111.3

 


Investments included in other liabilities:
 
 
 
 
Columbus(2)
 
Columbus, OH
 
50.0
%
 
355

 
$
(1.1
)
 
$
84.7

Charlotte(2)
 
Charlotte, NC
 
50.0
%
 
398

 
(10.3
)
 
99.5

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

 
(15.3
)
 
79.5

 
 
 
 
 
 
$
(26.7
)
 



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)
Investments included in investments in unconsolidated joint ventures:
 
 
 
 
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

 
 
 
 
 
 
$
119.4

 


 
 
 
 
 
 
 
 
 
 
 
Investments included in other liabilities:
 
 
 
 
Charlotte(2)
 
Charlotte, NC
 
50.0
%
 
398

 
$
(4.1
)
 
$
89.8

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

 
(13.0
)
 
79.4

 
 
 
 
 
 
$
(17.1
)
 


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

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

Nine months ended
 
 
September 30,

September 30,
 
 
2018
 
2017

2018

2017
Fee:
 
 
 
 
 
 

 
 

Management and marketing
 
$
571

 
$
564

 
$
1,704

 
$
1,676

Leasing and other fees
 
12

 
24

 
122

 
100

Total Fees
 
$
583

 
$
588

 
$
1,826

 
$
1,776



19



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 September 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 4.3% 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.

RioCan Canada

During the third quarter of 2017, the joint venture determined for its Bromont and Saint Sauveur, Quebec outlet centers that the estimated future undiscounted cash flows of those properties did not exceed the properties' carrying values based on the joint venture's expectations of the future performance of the centers. Therefore, the joint venture recorded an $18.0 million non-cash impairment charge in its statement of operations, which equaled the excess of the properties' carrying values over their fair values. The fair values were determined using a market approach considering the prevailing market income capitalization rates for similar assets. Our share of this impairment charge, $9.0 million, was recorded in equity in earnings of unconsolidated joint ventures in our consolidated statement of operations.

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
 
September 30, 2018
 
December 31, 2017
Assets
 
 

 
 

Land
 
$
94,118

 
$
95,686

Buildings, improvements and fixtures
 
503,430

 
505,618

Construction in progress
 
3,169

 
3,005

 
 
600,717

 
604,309

Accumulated depreciation
 
(110,213
)
 
(93,837
)
Total rental property, net
 
490,504

 
510,472

Cash and cash equivalents
 
13,366

 
25,061

Deferred lease costs and other intangibles, net
 
9,387

 
10,985

Prepaids and other assets
 
18,142

 
15,073

Total assets
 
$
531,399

 
$
561,591

Liabilities and Owners' Equity
 
 

 
 

Mortgages payable, net
 
$
360,600

 
$
351,259

Accounts payable and other liabilities
 
11,114

 
14,680

Total liabilities
 
371,714

 
365,939

Owners' equity
 
159,685

 
195,652

Total liabilities and owners' equity
 
$
531,399

 
$
561,591




20



 
 
Three months ended
 
Nine months ended
Condensed Combined Statements of Operations
 
September 30,
 
September 30,
 - Unconsolidated Joint Ventures
 
2018
 
2017
 
2018
 
2017
Revenues
 
$
23,538

 
$
25,241

 
$
70,940

 
$
72,588

Expenses:
 
 
 
 
 
 

 
 
Property operating
 
9,147

 
8,987

 
28,032

 
27,242

General and administrative
 
49

 
72

 
301

 
289

Asset impairment
 

 
18,042

 

 
18,042

Depreciation and amortization
 
6,860

 
6,998

 
19,768

 
21,453

Total expenses
 
16,056

 
34,099

 
48,101

 
67,026

Operating income (loss)
 
7,482

 
(8,858
)
 
22,839

 
5,562

Interest expense
 
(3,810
)
 
(2,776
)
 
(10,275
)
 
(7,497
)
Other non-operating income
 
68

 
20

 
175

 
23

Net income (loss)
 
$
3,740

 
$
(11,614
)
 
$
12,739

 
$
(1,912
)
 
 
 
 
 
 
 
 
 
The Company and Operating Partnership's share of:
 
 

 
 

Net income (loss)
 
$
1,833

 
$
(5,893
)
 
$
6,233

 
$
(1,201
)
Depreciation and amortization and asset impairments (real estate related)
 
$
3,466

 
$
12,604

 
$
10,020

 
$
19,992


21



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
 
 
September 30, 2018
 
December 31, 2017
Unsecured lines of credit
 
$
203,100

 
$
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):