United States
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
 xQUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 
For the quarterly period ended JuneSeptember 30, 2018
OR
 oTRANSITION 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 Partnershipo
 
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,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 JuneSeptember 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 JuneSeptember 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.



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.


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 JuneSeptember 30, 2018 and December 31, 2017
Consolidated Statements of Operations - for the three and sixnine months ended JuneSeptember 30, 2018 and 2017
Consolidated Statements of Comprehensive Income - for the three and sixnine months ended JuneSeptember 30, 2018 and 2017
Consolidated Statements of Shareholders' Equity - for the sixnine months ended JuneSeptember 30, 2018 and 2017
Consolidated Statements of Cash Flows - for the sixnine months ended JuneSeptember 30, 2018 and 2017
  
FINANCIAL STATEMENTS OF TANGER PROPERTIES LIMITED PARTNERSHIP (Unaudited)
 
Consolidated Balance Sheets - as of JuneSeptember 30, 2018 and December 31, 2017
Consolidated Statements of Operations - for the three and sixnine months ended JuneSeptember 30, 2018 and 2017
Consolidated Statements of Comprehensive Income - for the three and sixnine months ended JuneSeptember 30, 2018 and 2017
Consolidated Statements of Equity - for the sixnine months ended JuneSeptember 30, 2018 and 2017
Consolidated Statements of Cash Flows - for the sixnine months ended JuneSeptember 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


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 September 30, 2018 December 31, 2017
Assets  
  
  
  
Rental property:  
  
  
  
Land $279,978
 $279,978
 $278,632
 $279,978
Buildings, improvements and fixtures 2,825,729
 2,793,638
 2,755,698
 2,793,638
Construction in progress 1,329
 14,854
 762
 14,854
 3,107,036
 3,088,470
 3,035,092
 3,088,470
Accumulated depreciation (956,418) (901,967) (953,158) (901,967)
Total rental property, net 2,150,618
 2,186,503
 2,081,934
 2,186,503
Cash and cash equivalents 4,261
 6,101
 4,404
 6,101
Investments in unconsolidated joint ventures 110,502
 119,436
 111,305
 119,436
Deferred lease costs and other intangibles, net 124,234
 132,061
 120,064
 132,061
Prepaids and other assets 98,982
 96,004
 103,910
 96,004
Total assets $2,488,597
 $2,540,105
 $2,421,617
 $2,540,105
Liabilities and Equity        
Liabilities  
  
  
  
Debt:  
  
  
  
Senior, unsecured notes, net $1,135,705
 $1,134,755
 $1,136,184
 $1,134,755
Unsecured term loan, net 323,249
 322,975
 323,416
 322,975
Mortgages payable, net 89,235
 99,761
 88,359
 99,761
Unsecured lines of credit, net 220,018
 206,160
 199,701
 206,160
Total debt 1,768,207
 1,763,651
 1,747,660
 1,763,651
Accounts payable and accrued expenses 65,445
 90,416
 70,132
 90,416
Other liabilities 79,281
 73,736
 79,342
 73,736
Total liabilities 1,912,933
 1,927,803
 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 June 30, 2018 and December 31, 2017, respectively 939
 946
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 770,877
 784,782
 774,724
 784,782
Accumulated distributions in excess of net income  (204,506) (184,865) (259,258) (184,865)
Accumulated other comprehensive loss (20,722) (19,285) (18,413) (19,285)
Equity attributable to Tanger Factory Outlet Centers, Inc. 546,588
 581,578
 497,992
 581,578
Equity attributable to noncontrolling interests:        
Noncontrolling interests in Operating Partnership 29,076
 30,724
 26,491
 30,724
Noncontrolling interests in other consolidated partnerships 
 
 
 
Total equity 575,664
 612,302
 524,483
 612,302
Total liabilities and equity $2,488,597
 $2,540,105
 $2,421,617
 $2,540,105

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


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, Three months ended September 30, Nine months ended September 30,
 2018 2017 2018 2017 2018 2017 2018 2017
Revenues:      
        
  
Base rentals $80,925
 $80,788
 $162,458
 $161,118
 $82,323
 $80,349
 $244,781
 $241,467
Percentage rentals 2,027
 1,805
 3,456
 3,660
 3,210
 3,138
 6,666
 6,798
Expense reimbursements 34,128
 34,023
 72,408
 70,621
 35,468
 34,180
 107,876
 104,801
Management, leasing and other services 630
 609
 1,243
 1,188
 583
 588
 1,826
 1,776
Other income 2,001
 2,389
 3,681
 4,395
 2,652
 2,510
 6,333
 6,905
Total revenues 119,711
 119,614
 243,246
 240,982
 124,236
 120,765
 367,482
 361,747
Expenses:   

    
   

    
Property operating 37,946
 37,116
 80,164
 77,503
 39,653
 37,571
 119,817
 115,074
General and administrative 10,997
 11,500
 22,109
 22,912
 10,752
 10,934
 32,861
 33,846
Abandoned pre-development costs 
 
 
 627
 
 (99) 
 528
Impairment charge 49,739
 
 49,739
 
Depreciation and amortization 32,694
 32,905
 65,817
 64,199
 32,850
 30,976
 98,667
 95,175
Total expenses 81,637
 81,521
 168,090
 165,241
 132,994
 79,382
 301,084
 244,623
Operating income 38,074
 38,093

75,156

75,741
Operating income (loss) (8,758) 41,383

66,398

117,124
Other income (expense):                
Interest expense (16,181) (16,520) (31,981) (33,007) (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
 
 6,943
 
 
 
 6,943
Other non-operating income (expense) 191
 57
 400
 92
 261
 591
 661
 683
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
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 (1,229) (1,557) (2,446) (2,735) 1,172
 815
 (1,274) (1,920)
Noncontrolling interests in other consolidated partnerships (92) 
 278
 
 
 
 278
 
Net income attributable to Tanger Factory Outlet Centers, Inc. $22,969
 $29,390

$45,807

$51,726
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 $0.24
 $0.31
 $0.48
 $0.54
Net income (loss) $(0.24) $(0.17) $0.25
 $0.38
Diluted earnings per common share:                
Net income $0.24
 $0.31
 $0.48
 $0.54
Net income (loss) $(0.24) $(0.17) $0.25
 $0.38
                
Dividends declared per common share $0.3500
 $0.3425
 $0.6925
 $0.6675
 $0.3500
 $0.3425
 $1.0425
 $1.0100
The accompanying notes are an integral part of these consolidated financial statements.


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
  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.



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

 Common sharesPaid in capitalAccumulated distributions in excess of earningsAccumulated other comprehensive lossEquity attributable to Tanger Factory Outlet Centers, Inc.Noncontrolling interests in Operating Partnership
Noncontrolling
interests in
other consolidated partnerships
Total
 equity
 Common sharesPaid in capitalAccumulated distributions in excess of earningsAccumulated other comprehensive lossEquity 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
 $961
$820,251
$(122,701)$(28,295)$670,216
$35,066
$159
$705,441
Net income 

51,726

51,726
2,735

54,461
 

36,507

36,507
1,920

38,427
Other comprehensive income 


4,048
4,048
214

4,262
 


8,582
8,582
456

9,038
Compensation under Incentive Award Plan 
7,306


7,306


7,306
 
10,891


10,891


10,891
Issuance of 1,800 common shares upon exercise of options 
54


54


54
 
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)
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 
(2,435)

(2,435)

(2,435) (1)(2,435)

(2,436)

(2,436)
Adjustment for noncontrolling interests in Operating Partnership 
1,422


1,422
(1,422)

 
1,606


1,606
(1,606)

Common dividends
($.6675 per share)
 

(65,250)
(65,250)

(65,250)
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 




(3,356)
(3,356) 




(5,078)
(5,078)
Balance,
June 30, 2017
 $950
$787,255
$(136,225)$(24,247)$627,733
$33,237
$159
$661,129
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.
    
 








 








 
 
    
    
    


TANGER FACTORY OUTLET CENTERS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
(In thousands, except share and per share data, unaudited)
TANGER FACTORY OUTLET CENTERS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
(In thousands, except share and per share data, unaudited)
TANGER FACTORY OUTLET CENTERS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
(In thousands, except share and per share data, unaudited)
 Common sharesPaid in capitalAccumulated distributions in excess of earningsAccumulated other comprehensive lossEquity attributable to Tanger Factory Outlet Centers, Inc.Noncontrolling interests in Operating Partnership
Noncontrolling
interests in
other consolidated partnerships
Total
 equity
 Common sharesPaid in capitalAccumulated distributions in excess of earningsAccumulated other comprehensive lossEquity 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
 $946
$784,782
$(184,865)$(19,285)$581,578
$30,724
$
$612,302
Net income 

45,807

45,807
2,446
(278)47,975
 

23,948

23,948
1,274
(278)24,944
Other comprehensive loss 


(1,437)(1,437)(77)
(1,514)
Other comprehensive income 


872
872
47

919
Compensation under Incentive Award Plan 
7,596


7,596


7,596
 
11,654


11,654


11,654
Grant of 355,184 restricted common share awards, net of forfeitures 3
(3)





 3
(3)





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

(19,998)

(19,998) (9)(19,989)

(19,998)

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

(2,068)

(2,068) (1)(2,067)

(2,068)

(2,068)
Contributions from noncontrolling interests 





445
445
 





445
445
Adjustment for noncontrolling interests in Operating Partnership 
558


558
(558)

 
347


347
(347)

Common dividends
($.6925 per share)
 

(65,448)
(65,448)

(65,448)
Common dividends
($1.0425 per share)
 

(98,341)
(98,341)

(98,341)
Distributions to noncontrolling interests 




(3,459)(167)(3,626) 




(5,207)(167)(5,374)
Balance,
June 30, 2018
 $939
$770,877
$(204,506)$(20,722)$546,588
$29,076
$
$575,664
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.





TANGER FACTORY OUTLET CENTERS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands, unaudited)
 Six months ended June 30, Nine months ended September 30,
 2018 2017 2018 2017
OPERATING ACTIVITIES    
    
Net income $47,975
 $54,461
 $24,944
 $38,427
Adjustments to reconcile net income to net cash provided by operating activities:        
Depreciation and amortization 65,817
 64,199
 98,667
 95,175
Impairment charge 49,739
 
Amortization of deferred financing costs 1,532
 1,749
 2,280
 2,640
Gain on sale of assets 
 (6,943) 
 (6,943)
Equity in earnings of unconsolidated joint ventures (4,400) (4,692)
Loss on early extinguishment of debt 
 35,626
Equity in (earnings) losses of unconsolidated joint ventures (6,233) 1,201
Equity-based compensation expense 7,045
 6,796
 10,814
 10,114
Amortization of debt (premiums) and discounts, net 204
 245
 309
 363
Amortization (accretion) of market rent rate adjustments, net 1,251
 1,691
 1,980
 2,107
Straight-line rent adjustments (3,294) (3,293) (4,744) (4,749)
Distributions of cumulative earnings from unconsolidated joint ventures 4,332
 4,952
 6,081
 8,128
Changes in other assets and liabilities:        
Other assets 3,738
 787
 (406) (1,131)
Accounts payable and accrued expenses (8,833) (9,198) (3,471) 653
Net cash provided by operating activities 115,367
 110,754
 179,960
 181,611
INVESTING ACTIVITIES        
Additions to rental property (41,212) (88,761) (53,349) (132,612)
Additions to investments in unconsolidated joint ventures (1,497) (3,617) (1,764) (4,033)
Net proceeds from sale of assets 
 39,213
 
 39,213
Additions to non-real estate assets (1,114) (7,959) (1,203) (8,384)
Distributions in excess of cumulative earnings from unconsolidated joint ventures 13,911
 6,330
 16,656
 16,019
Additions to deferred lease costs (2,821) (2,845) (5,220) (4,218)
Other investing activities 4,032
 2,591
 8,065
 4,963
Net cash used in investing activities (28,701) (55,048) (36,815) (89,052)
FINANCING ACTIVITIES        
Cash dividends paid (65,448) (65,250) (98,341) (97,781)
Distributions to noncontrolling interests in Operating Partnership (3,459) (3,356) (5,207) (5,078)
Proceeds from revolving credit facility 295,600
 326,254
 391,900
 543,866
Repayments of revolving credit facility (280,000) (286,127) (396,900) (456,666)
Proceeds from notes, mortgages and loans 
 454
 
 299,460
Repayments of notes, mortgages and loans (10,169) (1,483) (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) (39,354) (19,998) (49,362)
Employee income taxes paid related to shares withheld upon vesting of equity awards (2,068) (2,435) (2,068) (2,436)
Additions to deferred financing costs (2,615) (50) (2,615) (2,900)
Proceeds from exercise of options 
 54
 
 54
Proceeds from other financing activities 445
 11,718
 445
 12,054
Payment for other financing activities (741) 
 (1,027) (782)
Net cash used in financing activities (88,453) (59,575) (144,782) (95,954)
Effect of foreign currency rate changes on cash and cash equivalents (53) 9
 (60) (54)
Net decrease in cash and cash equivalents (1,840) (3,860) (1,697) (3,449)
Cash and cash equivalents, beginning of period 6,101
 12,222
 6,101
 12,222
Cash and cash equivalents, end of period $4,261
 $8,362
 $4,404
 $8,773
The accompanying notes are an integral part of these consolidated financial statements.


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 September 30, 2018 December 31, 2017
Assets  
  
  
  
Rental property:  
  
  
  
Land $279,978
 $279,978
 $278,632
 $279,978
Buildings, improvements and fixtures 2,825,729
 2,793,638
 2,755,698
 2,793,638
Construction in progress 1,329
 14,854
 762
 14,854
 3,107,036
 3,088,470
 3,035,092
 3,088,470
Accumulated depreciation (956,418) (901,967) (953,158) (901,967)
Total rental property, net 2,150,618
 2,186,503
 2,081,934
 2,186,503
Cash and cash equivalents 4,135
 6,050
 4,361
 6,050
Investments in unconsolidated joint ventures 110,502
 119,436
 111,305
 119,436
Deferred lease costs and other intangibles, net 124,234
 132,061
 120,064
 132,061
Prepaids and other assets 98,428
 95,384
 103,313
 95,384
Total assets $2,487,917
 $2,539,434
 $2,420,977
 $2,539,434
Liabilities and Equity 
   
  
Liabilities        
Debt:        
Senior, unsecured notes, net $1,135,705
 $1,134,755
 $1,136,184
 $1,134,755
Unsecured term loan, net 323,249
 322,975
 323,416
 322,975
Mortgages payable, net 89,235
 99,761
 88,359
 99,761
Unsecured lines of credit, net 220,018
 206,160
 199,701
 206,160
Total debt 1,768,207
 1,763,651
 1,747,660
 1,763,651
Accounts payable and accrued expenses 64,765
 89,745
 69,492
 89,745
Other liabilities 79,281
 73,736
 79,342
 73,736
Total liabilities 1,912,253
 1,927,132
 1,896,494
 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
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 (21,859) (20,345) (19,426) (20,345)
Total partners' equity 575,664
 612,302
 524,483
 612,302
Noncontrolling interests in consolidated partnerships 
 
 
 
Total equity 575,664
 612,302
 524,483
 612,302
Total liabilities and equity $2,487,917
 $2,539,434
 $2,420,977
 $2,539,434
The accompanying notes are an integral part of these consolidated financial statements.


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, Three months ended September 30, Nine months ended September 30,
 2018 2017 2018 2017 2018 2017 2018 2017
Revenues:      
        
  
Base rentals $80,925
 $80,788
 $162,458
 $161,118
 $82,323
 $80,349
 $244,781
 $241,467
Percentage rentals 2,027
 1,805
 3,456
 3,660
 3,210
 3,138
 6,666
 6,798
Expense reimbursements 34,128
 34,023
 72,408
 70,621
 35,468
 34,180
 107,876
 104,801
Management, leasing and other services 630
 609
 1,243
 1,188
 583
 588
 1,826
 1,776
Other income 2,001
 2,389
 3,681
 4,395
 2,652
 2,510
 6,333
 6,905
Total revenues 119,711
 119,614

243,246

240,982
 124,236
 120,765

367,482

361,747
Expenses:                
Property operating 37,946
 37,116
 80,164
 77,503
 39,653
 37,571
 119,817
 115,074
General and administrative 10,997
 11,500
 22,109
 22,912
 10,752
 10,934
 32,861
 33,846
Abandoned pre-development costs 
 
 
 627
 
 (99) 
 528
Impairment charge 49,739
 
 49,739
 
Depreciation and amortization 32,694
 32,905
 65,817
 64,199
 32,850
 30,976
 98,667
 95,175
Total expenses 81,637
 81,521

168,090

165,241
 132,994
 79,382

301,084

244,623
Operating income 38,074
 38,093

75,156

75,741
Operating income (loss) (8,758) 41,383

66,398

117,124
Other income (expense):                
Interest expense (16,181) (16,520) (31,981) (33,007) (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
 
 6,943
 
 
 
 6,943
Other non-operating income (expense) 191
 57
 400
 92
 261
 591
 661
 683
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
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 (92) 
 278
 
 
 
 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
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 $0.24
 $0.31
 $0.48
 $0.54
Net income (loss) $(0.24) $(0.17) $0.25
 $0.38
Diluted earnings per common unit:                
Net income $0.24
 $0.31
 $0.48
 $0.54
Net income (loss) $(0.24) $(0.17) $0.25
 $0.38
                
Distribution declared per common unit $0.3500
 $0.3425
 $0.6925
 $0.6675
 $0.3500
 $0.3425
 $1.0425
 $1.0100
The accompanying notes are an integral part of these consolidated financial statements.


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
  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.



TANGER PROPERTIES LIMITED PARTNERSHIP AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EQUITY
(In thousands, except unit and per unit data, unaudited)
 General partnerLimited partnersAccumulated other comprehensive lossTotal partners' equityNoncontrolling interests in consolidated partnershipsTotal equity General partnerLimited partnersAccumulated other comprehensive lossTotal partners' equityNoncontrolling interests in consolidated partnershipsTotal equity
Balance, December 31, 2016 $6,485
$728,631
$(29,834)$705,282
$159
$705,441
 $6,485
$728,631
$(29,834)$705,282
$159
$705,441
Net income 539
53,922

54,461

54,461
 379
38,048

38,427

38,427
Other comprehensive income 

4,262
4,262

4,262
 

9,038
9,038

9,038
Compensation under Incentive Award Plan 
7,306

7,306

7,306
 
10,891

10,891

10,891
Issuance of 1,800 common units upon exercise of options 
54

54

54
 
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)
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 
(2,435)
(2,435)
(2,435) 
(2,436)
(2,436)
(2,436)
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
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 partnerLimited partnersAccumulated other comprehensive lossTotal partners' equityNoncontrolling interests in consolidated partnershipsTotal equity General partnerLimited partnersAccumulated other comprehensive lossTotal partners' equityNoncontrolling interests in consolidated partnershipsTotal equity
Balance, December 31, 2017 $5,844
$626,803
$(20,345)$612,302
$
$612,302
 $5,844
$626,803
$(20,345)$612,302
$
$612,302
Net income 485
47,768

48,253
(278)47,975
 252
24,970

25,222
(278)24,944
Other comprehensive loss 

(1,514)(1,514)
(1,514)
Other comprehensive income 

919
919

919
Compensation under Incentive Award Plan 
7,596

7,596

7,596
 
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) 
(19,998)
(19,998)
(19,998)
Withholding of 89,437 common units for employee income taxes 
(2,068)
(2,068)
(2,068) 
(2,068)
(2,068)
(2,068)
Contributions from noncontrolling interests 



445
445
 



445
445
Common distributions ($.6925
per common unit)
 (692)(68,215)
(68,907)
(68,907)
Common distributions ($1.0425
per common unit)
 (1,042)(102,506)
(103,548)
(103,548)
Distributions to noncontrolling interests 



(167)(167) 



(167)(167)
Balance, June 30, 2018 $5,637
$591,886
$(21,859)$575,664
$
$575,664
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.


TANGER PROPERTIES LIMITED PARTNERSHIP AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands, unaudited)
 Six months ended June 30, Nine months ended September 30,
 2018 2017 2018 2017
OPERATING ACTIVITIES  
  
  
  
Net income $47,975
 $54,461
 $24,944
 $38,427
Adjustments to reconcile net income to net cash provided by operating activities:        
Depreciation and amortization 65,817
 64,199
 98,667
 95,175
Impairment charge 49,739
 
Amortization of deferred financing costs 1,532
 1,749
 2,280
 2,640
Gain on sale of assets 
 (6,943) 
 (6,943)
Equity in earnings of unconsolidated joint ventures (4,400) (4,692)
Loss on early extinguishment of debt 
 35,626
Equity in (earnings) losses of unconsolidated joint ventures (6,233) 1,201
Equity-based compensation expense 7,045
 6,796
 10,814
 10,114
Amortization of debt (premiums) and discounts, net 204
 245
 309
 363
Amortization (accretion) of market rent rate adjustments, net 1,251
 1,691
 1,980
 2,107
Straight-line rent adjustments (3,294) (3,293) (4,744) (4,749)
Distributions of cumulative earnings from unconsolidated joint ventures 4,332
 4,952
 6,081
 8,128
Changes in other assets and liabilities:        
Other assets 3,672
 487
 (429) (1,110)
Accounts payable and accrued expenses (8,842) (8,986) (3,440) 551
Net cash provided by operating activities 115,292
 110,666
 179,968
 181,530
INVESTING ACTIVITIES        
Additions to rental property (41,212) (88,761) (53,349) (132,612)
Additions to investments in unconsolidated joint ventures (1,497) (3,617) (1,764) (4,033)
Net proceeds from sale of assets 
 39,213
 
 39,213
Additions to non-real estate assets (1,114) (7,959) (1,203) (8,384)
Distributions in excess of cumulative earnings from unconsolidated joint ventures 13,911
 6,330
 16,656
 16,019
Additions to deferred lease costs (2,821) (2,845) (5,220) (4,218)
Other investing activities 4,032
 2,591
 8,065
 4,963
Net cash used in investing activities (28,701) (55,048) (36,815) (89,052)
FINANCING ACTIVITIES        
Cash distributions paid (68,907) (68,606) (103,548) (102,859)
Proceeds from revolving credit facility 295,600
 326,254
 391,900
 543,866
Repayments of revolving credit facility (280,000) (286,127) (396,900) (456,666)
Proceeds from notes, mortgages and loans 
 454
 
 299,460
Repayments of notes, mortgages and loans (10,169) (1,483) (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) (39,354) (19,998) (49,362)
Employee income taxes paid related to shares withheld upon vesting of equity awards (2,068) (2,435) (2,068) (2,436)
Additions to deferred financing costs (2,615) (50) (2,615) (2,900)
Proceeds from exercise of options 
 54
 
 54
Proceeds from other financing activities 445
 11,718
 445
 12,054
Payment for other financing activities (741) 
 (1,027) (782)
Net cash used in financing activities (88,453) (59,575) (144,782) (95,954)
Effect of foreign currency on cash and cash equivalents (53) 9
 (60) (54)
Net decrease in cash and cash equivalents (1,915) (3,948) (1,689) (3,530)
Cash and cash equivalents, beginning of period 6,050
 12,199
 6,050
 12,199
Cash and cash equivalents, end of period $4,135
 $8,251
 $4,361
 $8,669
The accompanying notes are an integral part of these consolidated financial statements.


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 JuneSeptember 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 JuneSeptember 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.



We consolidate properties that are wholly-owned and properties where we own less than 100% but we control.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.




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 sixnine months ended JuneSeptember 30, 2017:
Property Location Date Sold 
Square Feet
(in 000's)
 
Net Sales Proceeds
(in 000's)
 Gain on Sale(in 000's) 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
 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.



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
As of September 30, 2018As 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)
 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:Investments included in investments in unconsolidated joint ventures:    
National Harbor National Harbor, MD 50.0% 341
 $1.2
 $86.6
 National Harbor, MD 50.0% 341
 $0.6
 $86.7
RioCan Canada Various 50.0% 923
 109.3
 10.2
 Various 50.0% 923
 110.7
 10.2
Investments included in investments in unconsolidated joint ventures     $110.5
 

              $111.3
 

Investments included in other liabilities:Investments included in other liabilities:    
Columbus(2)
 Columbus, OH 50.0% 355
 $(0.3) $84.6
 Columbus, OH 50.0% 355
 $(1.1) $84.7
Charlotte(2)
 Charlotte, NC 50.0% 398
 (9.8) 99.6
 Charlotte, NC 50.0% 398
 (10.3) 99.5
Galveston/Houston (2)
 Texas City, TX 50.0% 353
 (15.5) 79.5
 Texas City, TX 50.0% 353
 (15.3) 79.5
Investments included in other liabilities     $(25.6) 

     $(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)
 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:Investments included in investments in unconsolidated joint ventures:    
Columbus Columbus, OH 50.0% 355
 $1.1
 $84.4
 Columbus, OH 50.0% 355
 $1.1
 $84.4
National Harbor National Harbor, MD 50.0% 341
 2.5
 86.4
 National Harbor, MD 50.0% 341
 2.5
 86.4
RioCan Canada Various 50.0% 923
 115.8
 11.1
 Various 50.0% 923
 115.8
 11.1
Investments included in investments in unconsolidated joint ventures     $119.4
 

              $119.4
 

        
Investments included in other liabilities:Investments included in other liabilities:    
Charlotte(2)
 Charlotte, NC 50.0% 398
 $(4.1) $89.8
 Charlotte, NC 50.0% 398
 $(4.1) $89.8
Galveston/Houston (2)
 Texas City, TX 50.0% 353
 (13.0) 79.4
 Texas City, TX 50.0% 353
 (13.0) 79.4
Investments included in other liabilities     $(17.1) 

     $(17.1) 

(1)Net of debt origination costs and including premiums of $1.4 million as of JuneSeptember 30, 2018 and December 31, 2017.
(2)The negative carrying value is due to distributions exceeding contributions and increases or decreases from theour 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
Six months ended Three months ended
Nine months ended
 June 30,
June 30, September 30,
September 30,
 2018 2017
2018
2017 2018 2017
2018
2017
Fee:      
  
      
  
Management and marketing $565
 $570
 $1,133
 $1,112
 $571
 $564
 $1,704
 $1,676
Leasing and other fees 65
 39
 110
 76
 12
 24
 122
 100
Total Fees $630
 $609
 $1,243
 $1,188
 $583
 $588
 $1,826
 $1,776



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 JuneSeptember 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%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 June 30, 2018 December 31, 2017 September 30, 2018 December 31, 2017
Assets  
  
  
  
Land $93,222
 $95,686
 $94,118
 $95,686
Buildings, improvements and fixtures 497,518
 505,618
 503,430
 505,618
Construction in progress 2,994
 3,005
 3,169
 3,005
 593,734
 604,309
 600,717
 604,309
Accumulated depreciation (103,662) (93,837) (110,213) (93,837)
Total rental property, net 490,072
 510,472
 490,504
 510,472
Cash and cash equivalents 18,352
 25,061
 13,366
 25,061
Deferred lease costs and other intangibles, net 10,057
 10,985
 9,387
 10,985
Prepaids and other assets 16,944
 15,073
 18,142
 15,073
Total assets $535,425
 $561,591
 $531,399
 $561,591
Liabilities and Owners' Equity  
  
  
  
Mortgages payable, net $360,529
 $351,259
 $360,600
 $351,259
Accounts payable and other liabilities 12,253
 14,680
 11,114
 14,680
Total liabilities 372,782
 365,939
 371,714
 365,939
Owners' equity 162,643
 195,652
 159,685
 195,652
Total liabilities and owners' equity $535,425
 $561,591
 $531,399
 $561,591




 Three months ended Six months ended Three months ended Nine months ended
Condensed Combined Statements of Operations June 30, June 30, September 30, September 30,
- Unconsolidated Joint Ventures 2018 2017 2018 2017 2018 2017 2018 2017
Revenues $23,406
 $23,285
 $47,403
 $47,347
 $23,538
 $25,241
 $70,940
 $72,588
Expenses:      
        
  
Property operating 8,958
 8,877
 18,886
 18,255
 9,147
 8,987
 28,032
 27,242
General and administrative 54
 96
 253
 216
 49
 72
 301
 289
Asset impairment 
 18,042
 
 18,042
Depreciation and amortization 6,545
 6,943
 12,907
 14,456
 6,860
 6,998
 19,768
 21,453
Total expenses 15,557
 15,916
 32,046
 32,927
 16,056
 34,099
 48,101
 67,026
Operating income 7,849
 7,369
 15,357
 14,420
Operating income (loss) 7,482
 (8,858) 22,839
 5,562
Interest expense (3,388) (2,460) (6,465) (4,720) (3,810) (2,776) (10,275) (7,497)
Other non-operating income 55
 1
 107
 3
 68
 20
 175
 23
Net income $4,516
 $4,910
 $8,999
 $9,703
Net income (loss) $3,740
 $(11,614) $12,739
 $(1,912)
                
The Company and Operating Partnership's share of:The Company and Operating Partnership's share of:  
  
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
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


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 As of
 June 30, 2018 December 31, 2017 September 30, 2018 December 31, 2017
Unsecured lines of credit $223,700
 $208,100
 $203,100
 $208,100
Unsecured term loan $325,000
 $325,000
 $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   As of As of
   June 30, 2018 December 31, 2017   September 30, 2018 December 31, 2017
 Stated Interest Rate(s) Maturity Date Principal 
Book Value(1)
 Principal 
Book Value(1)
 Stated Interest Rate(s) Maturity Date Principal 
Book Value(1)
 Principal 
Book Value(1)
Senior, unsecured notes:Senior, unsecured notes:  
      Senior, unsecured notes:  
      
Senior notes 3.875% December 2023 $250,000
 $246,348
 $250,000
 $246,036
 3.875% December 2023 $250,000
 $246,505
 $250,000
 $246,036
Senior notes 3.750% December 2024 250,000
 247,587
 250,000
 247,410
 3.750% December 2024 250,000
 247,677
 250,000
 247,410
Senior notes 3.125% September 2026 350,000
 345,397
 350,000
 345,128
 3.125% September 2026 350,000
 345,533
 350,000
 345,128
Senior notes 3.875% July 2027 300,000
 296,373
 300,000
 296,182
 3.875% July 2027 300,000
 296,469
 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
 5.14%-7.65%
 November 2021- December 2026 35,091
 37,211
 37,462
 39,879
Southaven LIBOR + 1.80%
 April 2021 51,400
 51,124
 60,000
 59,881
 LIBOR + 1.80%
 April 2021 51,400
 51,148
 60,000
 59,881
Unsecured term loan LIBOR + 0.95%
 April 2021 325,000
 323,249
 325,000
 322,975
 LIBOR + 0.95%
 April 2021 325,000
 323,416
 325,000
 322,975
Unsecured lines of credit LIBOR + 0.875%
 October 2021 223,700
 220,018
 208,100
 206,160
 LIBOR + 0.875%
 October 2021 203,100
 199,701
 208,100
 206,160
     $1,785,992
 $1,768,207
 $1,780,562
 $1,763,651
     $1,764,591
 $1,747,660
 $1,780,562
 $1,763,651
(1)Including premiums and net of debt discount and debt origination costs.
(2)The effective interest rate assigned during the purchase price allocation to the Atlantic City mortgages assumed during the acquisition in 2011 was 5.05%.
(3)Principal and interest due monthly with remaining principal due at maturity.

Certain of our properties, which had a net book value of approximately $187.0$183.3 million at JuneSeptember 30, 2018, serve as collateral for mortgages payable. We maintain unsecured lines of credit that provide for borrowings of up to $600.0 million. The unsecured lines of credit include a $20.0 million liquidity line and a $580.0 million syndicated line. The syndicated line may be increased up to $1.2 billion through an accordion feature in certain circumstances. As of JuneSeptember 30, 2018, letters of credit totaling approximately $6.0 million were issued under the lines of credit.



We provide guarantees to lenders for our joint ventures which include standard non-recourse carve out indemnifications for losses arising from items such as but not limited to fraud, physical waste, payment of taxes, environmental indemnities, misapplication of insurance proceeds or security deposits and failure to maintain required insurance. For construction and term loans, we may include a guaranty of completion as well as a principal guaranty ranging from 5% to 100% of principal.  The principal guarantees include terms for release or reduction based upon satisfactory completion of construction and performance targets including occupancy thresholds and minimum debt service coverage tests. As of JuneSeptember 30, 2018, the maximum amount of unconsolidated joint venture debt guaranteed by the Company was $28.1$28.2 million.

The unsecured lines of credit and senior unsecured notes include covenants that require the maintenance of certain ratios, including debt service coverage and leverage, and limit the payment of dividends such that dividends and distributions will not exceed funds from operations, as defined in the agreements, for the prior fiscal year on an annual basis or 95% of funds from operations on a cumulative basis. As of JuneSeptember 30, 2018, we believe we were in compliance with all of our debt covenants.

Increased Borrowing Capacity and Extension of Unsecured Lines of Credit

In January 2018, we closed on amendments to our unsecured lines of credit, which increased the borrowing capacity from $520.0 million to $600.0 million and extended the maturity date from October 2019 to October 2021, with a one-year extension option. We also reduced the interest rate spread over LIBOR from 0.90% to 0.875%, and increased the incremental borrowing availability through an accordion feature on the syndicated line from $1.0 billion to $1.2 billion. Loan origination costs associated with the amendments totaled approximately $2.3 million.

Southaven Mortgage

In February 2018, the consolidated joint venture that owns the Tanger outlet center in Southaven, Mississippi amended and restated the $60.0 million mortgage loan secured by the property that was scheduled to mature in April 2018. The amended and restated loan reduced the principal balance to $51.4 million, increased the interest rate from LIBOR + 1.75% to LIBOR + 1.80% and extended the maturity to April 2021, with a two-year extension option. In March 2018, the consolidated joint venture entered into an interest rate swap, effective March 1, 2018, that fixed the base LIBOR rate at 2.47% on a notional amount of $40.0 million through January 31, 2021.

$300.0 Million Unsecured Senior Notes due 2027

In July 2017, we completed an underwritten public offering of $300.0 million of 3.875% senior notes due 2027 (the "2027 Notes"). The 2027 Notes priced at 99.579% of the principal amount to yield 3.926% to maturity. The 2027 Notes pay interest semi-annually at a rate of 3.875% per annum and mature on July 15, 2027. The net proceeds from the offering, after deducting the underwriting discount and offering expenses, were approximately $295.9 million. In August 2017, we used the net proceeds from the sale of the 2027 Notes, together with borrowings under our unsecured lines of credit, to redeem all of our 6.125% senior notes due 2020 (the "2020 Notes") (approximately $300.0 million in aggregate principal amount outstanding). The 2020 Notes were redeemed at par plus a “make-whole” premium of approximately $34.1 million. In addition, we wrote off approximately $1.5 million of unamortized debt discount and debt origination costs related to the 2020 Notes.




Debt Maturities

Maturities of the existing long-term debt as of JuneSeptember 30, 2018 for the next five years and thereafter are as follows (in thousands):
Calendar Year Amount
 Amount
2018 $1,614
 $813
2019 3,369
 3,369
2020 3,566
 3,566
2021 605,893
 585,293
2022 4,436
 4,436
Thereafter 1,167,114
 1,167,114
Subtotal 1,785,992
 1,764,591
Net discount and debt origination costs (17,785) (16,931)
Total $1,768,207
 $1,747,660
  


7. Derivative Financial Instruments

The following table summarizes the terms and fair values of our derivative financial instruments, as well as their classifications within the consolidated balance sheets (notional amounts and fair values in thousands):

     Fair Value     Fair Value
Effective Date Maturity Date Notional Amount Bank Pay Rate Company Fixed Pay Rate June 30, 2018 December 31, 2017 Maturity Date Notional Amount Bank Pay Rate Company Fixed Pay Rate September 30, 2018 December 31, 2017
Assets (Liabilities)(1):
                
November 14, 2013 August 14, 2018 $150,000
 1 month LIBOR 1.30% $150
 $326
 August 14, 2018 $150,000
 1 month LIBOR 1.30% $
 $326
April 13, 2016 January 1, 2021 175,000
 1 month LIBOR 1.03% 6,930
 5,207
 January 1, 2021 175,000
 1 month LIBOR 1.03% 6,988
 5,207
March 1, 2018 January 31, 2021 40,000
 1 month LIBOR 2.47% 180
 
 January 31, 2021 40,000
 1 month LIBOR 2.47% 335
 
August 14, 2018 January 1, 2021 150,000
 1 month LIBOR 2.20% 1,668
 (188) January 1, 2021 150,000
 1 month LIBOR 2.20% 2,117
 (188)
Total   $515,000
     $8,928
 $5,345
   $515,000
     $9,440
 $5,345
(1)Asset balances are recorded in prepaids and other assets on the consolidated balance sheets and liabilities are recorded in other liabilities on the consolidated balance sheets.

The derivative financial instruments are comprised of interest rate swaps, which are designated and qualify as cash flow hedges, each with a separate counterparty. We do not use derivatives for trading or speculative purposes and currently do not have any derivatives that are not designated as hedges.

The effective portion of changes in the fair value of derivatives designated and qualifying as cash flow hedges is recorded in accumulated other comprehensive loss and subsequently reclassified into earnings in the period that the hedged forecasted transaction affects earnings. The ineffective portion of the change in fair value of the derivative, if significant, is recognized directly in earnings. For the three and sixnine months ended JuneSeptember 30, 2018 and 2017, the ineffective portion was not significant.

The following table represents the effect of the derivative financial instruments on the accompanying consolidated financial statements (in thousands):
 Three months ended June 30, Six months ended June 30, Three months ended September 30, Nine months ended September 30,
 2018 2017 2018 2017 2018 2017 2018 2017
Interest Rate Swaps (Effective Portion): 
 
     
 
    
Amount of gain (loss) recognized in OCI on derivative $844
 $(544) $3,583
 $178
Amount of gain recognized in OCI on derivative $512
 $39
 $4,095
 $217



8. Fair Value Measurements

Fair value guidance establishes a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value. These tiers are defined as follows:
Tier Description
Level 1 Observable inputs such as quoted prices in active markets
Level 2 Inputs other than quoted prices in active markets that are either directly or indirectly observable
Level 3 Unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions


Fair Value Measurements on a Recurring Basis

The following table sets forth our assets and liabilities that are measured at fair value within the fair value hierarchy (in thousands):
   Level 1 Level 2 Level 3   Level 1 Level 2 Level 3
   Quoted Prices in Active Markets for Identical Assets or Liabilities Significant Observable Inputs Significant Unobservable Inputs   Quoted Prices in Active Markets for Identical Assets or Liabilities Significant Observable Inputs Significant Unobservable Inputs
 Total  Total 
Fair value as of June 30, 2018:        
Fair value as of September 30, 2018:        
Asset:                
Interest rate swaps (prepaids and other assets) $8,928
 $
 $8,928
 $
 $9,440
 $
 $9,440
 $
Total assets $8,928
 $
 $8,928
 $
 $9,440
 $
 $9,440
 $
        

    Level 1 Level 2 Level 3
    Quoted Prices in Active Markets for Identical Assets or Liabilities Significant Observable Inputs Significant Unobservable Inputs
  Total   
Fair value as of December 31, 2017:        
Asset:        
Interest rate swaps (prepaids and other assets) $5,533
 $
 $5,533
 $
Total assets $5,533
 $
 $5,533
 $
         
Liabilities:        
Interest rate swaps (other liabilities) $188
 $
 $188
 $
Total liabilities $188
 $
 $188
 $

Fair values of interest rate swaps are approximated using Level 2 inputs based on current market data received from financial sources that trade such instruments and are based on prevailing market data and derived from third party proprietary models based on well recognized financial principles including counterparty risks, credit spreads and interest rate projections, as well as reasonable estimates about relevant future market conditions.







Fair Value Measurements on a Nonrecurring Basis

The following table sets forth our assets that are measured at fair value on a nonrecurring basis within the fair value hierarchy (in thousands):

    Level 1 Level 2 Level 3
    Quoted Prices in Active Markets for Identical Assets or Liabilities Significant Observable Inputs Significant Unobservable Inputs
  Total   
Fair value as of September 30, 2018:        
Asset:        
Long-lived assets $50,000
 $
 $
 $50,000


During the third quarter 2018, we recorded a $49.7 million impairment charge in our consolidated statement of operations which equaled the excess of the our Jeffersonville outlet center carrying value over its estimated fair value. The estimated fair value is based on the income approach. The income approach involves discounting the estimated income stream and reversion (presumed sale) value of a property over an estimated holding period to a present value at a risk-adjusted rate. Discount rates and terminal capitalization rates utilized in this approach are derived from property-specific information, market transactions and other financial and industry data. The terminal capitalization rate and discount rate are significant unobservable inputs in determining the fair value. The terminal capitalization rate used in the calculation was 10% and the discount rate used was 10%. These inputs are classified under Level 3 in the fair value hierarchy above.

Other Fair Value Disclosures

The estimated fair value within the fair value hierarchy and recorded value of our debt consisting of senior unsecured notes, unsecured term loans, secured mortgages and unsecured lines of credit were as follows (in thousands):

 June 30, 2018 December 31, 2017 September 30, 2018 December 31, 2017
Level 1 Quoted Prices in Active Markets for Identical Assets or Liabilities $
 $
 $
 $
Level 2 Significant Observable Inputs 1,082,207
 1,139,064
 1,086,988
 1,139,064
Level 3 Significant Unobservable Inputs 639,392
 636,476
 617,824
 636,476
Total fair value of debt $1,721,599
 $1,775,540
 $1,704,812
 $1,775,540
        
Recorded value of debt $1,768,207
 $1,763,651
 $1,747,660
 $1,763,651

Our senior unsecured notes are publicly-traded which provides quoted market rates. However, due to the limited trading volume of these notes, we have classified these instruments as Level 2 in the hierarchy. Our other debt is classified as Level 3 given the unobservable inputs utilized in the valuation. Our unsecured term loan, unsecured lines of credit and variable interest rate mortgages are all LIBOR based instruments. When selecting the discount rates for purposes of estimating the fair value of these instruments, we evaluated the original credit spreads and do not believe that the use of them differs materially from current credit spreads for similar instruments and therefore the recorded values of these debt instruments is considered their fair value.

The carrying values of cash and cash equivalents, receivables, accounts payable, accrued expenses and other assets and liabilities are reasonable estimates of their fair values because of the short maturities of these instruments.



9. Share Repurchase Program

In May 2017, we announced that our Board of Directors authorized the repurchase of up to $125.0 million of our outstanding common shares as market conditions warrant over a period commencing on May 19, 2017 and expiring on May 18, 2019.  Repurchases may be made from time to time through open market, privately-negotiated, structured or derivative transactions (including accelerated share repurchase transactions), or other methods of acquiring shares. The Company intends to structure open market purchases to occur within pricing and volume requirements of Rule 10b-18.  The Company may, from time to time, enter into Rule 10b5-1 plans to facilitate the repurchase of its shares under this authorization.

Shares repurchased for the three and sixnine months ended JuneSeptember 30, 2018 are as follows:
 Three months ended June 30, Six months ended June 30, Three months ended September 30, Nine months ended September 30,
 2018 2018 2018 2017 2018 2017
Total number of shares purchased 475,549
 919,249
 
 1,265,404
 919,249
 1,911,585
Average price paid per share $21.01
 $21.74
 $
 $25.61
 $21.74
 $25.80
Total price paid exclusive of commissions and related fees (in thousands) $9,990
 $19,980
 $
 $32,407
 $19,980
 $49,324

The remaining amount authorized to be repurchased under the program as of JuneSeptember 30, 2018 was approximately $55.7 million.

10. Partners' Equity of the Operating Partnership

All units of partnership interest issued by the Operating Partnership have equal rights with respect to earnings, dividends and net assets. When the Company issues common shares upon the exercise of options, the grant of restricted common share awards, or the exchange of Class A common limited partnership units, the Operating Partnership issues a corresponding Class B common limited partnership unit to Tanger LP Trust, a wholly-owned subsidiary of the Company. Likewise, when the Company repurchases its outstanding common shares, the Operating Partnership repurchases a corresponding Class B common limited partnership unit held by Tanger LP Trust.



The following table sets forth the changes in outstanding partnership units for the sixnine months ended JuneSeptember 30, 2018 and JuneSeptember 30, 2017:
   Limited Partnership Units   Limited Partnership Units
 General Partnership Units Class A Class B Total General Partnership Units Class A Class B Total
Balance December 31, 2016 1,000,000
 5,027,781
 95,095,891
 100,123,672
 1,000,000
 5,027,781
 95,095,891
 100,123,672
Grant of restricted common share awards by the Company, net of forfeitures 
 
 428,312
 428,312
 
 
 411,968
 411,968
Repurchase of units 
 
 (1,497,981) (1,497,981) 
 
 (1,911,585) (1,911,585)
Units issued upon exercise of options 
 
 1,800
 1,800
 
 
 1,800
 1,800
Units withheld for employee income taxes 
 
 (69,886) (69,886) 
 
 (69,886) (69,886)
Balance June 30, 2017 1,000,000
 5,027,781
 93,958,136
 98,985,917
Balance September 30, 2017 1,000,000
 5,027,781
 93,528,188
 98,555,969
                
Balance December 31, 2017 1,000,000
 4,995,433
 93,560,536
 98,555,969
 1,000,000
 4,995,433
 93,560,536
 98,555,969
Grant of restricted common share awards by the Company, net of forfeitures 
 
 355,184
 355,184
 
 
 355,184
 355,184
Repurchase of units 
 
 (919,249) (919,249) 
 
 (919,249) (919,249)
Units withheld for employee income taxes 
 
 (89,437) (89,437) 
 
 (89,437) (89,437)
Balance June 30, 2018 1,000,000
 4,995,433
 92,907,034
 97,902,467
Balance September 30, 2018 1,000,000
 4,995,433
 92,907,034
 97,902,467

11. Earnings Per Share of the Company

The following table sets forth a reconciliation of the numerators and denominators in computing the Company's earnings per share (in thousands, except per share amounts):
 Three months ended June 30, Six months ended June 30, Three months ended September 30, Nine months ended September 30,
 2018 2017 2018 2017 2018 2017 2018 2017
Numerator:                
Net income attributable to Tanger Factory Outlet Centers, Inc. $22,969
 $29,390
 $45,807
 $51,726
Net income (loss) attributable to Tanger Factory Outlet Centers, Inc. $(21,859) $(15,219) $23,948
 $36,507
Less allocation of earnings to participating securities (313) (306) (576) (601) (313) (306) (889) (907)
Net income available to common shareholders of Tanger Factory Outlet Centers, Inc. $22,656
 $29,084
 $45,231
 $51,125
Net income (loss) available to common shareholders of Tanger Factory Outlet Centers, Inc. $(22,172) $(15,525) $23,059
 $35,600
Denominator:                
Basic weighted average common shares 93,298
 95,025
 93,470
 95,217
 93,109
 93,923
 93,349
 94,781
Effect of outstanding options and certain restricted common shares 
 5
 
 35
 
 
 
 23
Diluted weighted average common shares 93,298
 95,030
 93,470
 95,252
 93,109
 93,923
 93,349
 94,804
Basic earnings per common share:                
Net income $0.24
 $0.31
 $0.48
 $0.54
Net income (loss) $(0.24) $(0.17) $0.25
 $0.38
Diluted earnings per common share:                
Net income $0.24
 $0.31
 $0.48
 $0.54
Net income (loss) $(0.24) $(0.17) $0.25
 $0.38

We determine diluted earnings per share based on the weighted average number of common shares outstanding combined with the incremental weighted average shares that would have been outstanding assuming all potentially dilutive securities were converted into common shares at the earliest date possible.



Notional units granted under our equity compensation plan are considered contingently issuable common shares and are included in earnings per share if the effect is dilutive using the treasury stock method and the common shares would be issuable if the end of the reporting period were the end of the contingency period. For both the three and sixnine months ended JuneSeptember 30, 2018, 1,013,383 notional units were excluded from the computation and for both the three and sixnine months ended JuneSeptember 30, 2017, 871,116858,116 notional units were excluded from the computation because these notional units either would not have been issuable if the end of the reporting period were the end of the contingency period or as they were anti-dilutive.

With respect to outstanding options, the effect of dilutive common shares is determined using the treasury stock method, whereby outstanding options are assumed exercised at the beginning of the reporting period and the exercise proceeds from such options and the average measured but unrecognized compensation cost during the period are assumed to be used to repurchase our common shares at the average market price during the period. For both the three and sixnine months ended JuneSeptember 30, 2018, 557,600547,000 options were excluded from the computation as they were anti-dilutive. For the three monthsended September 30, 2017, 235,700 options were excluded from the computation, and for both the three and sixnine months ended JuneSeptember 30, 2017, 176,300173,500 options were excluded from the computation as they were anti-dilutive.

The assumed exchange of the partnership units held by the Non-Company LPs as of the beginning of the year, which would result in the elimination of earnings allocated to the noncontrolling interest in the Operating Partnership, would have no impact on earnings per share since the allocation of earnings to a common limited partnership unit, as if exchanged, is equivalent to earnings allocated to a common share.

Certain of the Company's unvested restricted common share awards contain non-forfeitable rights to dividends or dividend equivalents. The impact of these unvested restricted common share awards on earnings per share has been calculated using the two-class method whereby earnings are allocated to the unvested restricted common share awards based on dividends declared and the unvested restricted common shares' participation rights in undistributed earnings. Unvested restricted common shares that do not contain non-forfeitable rights to dividends or dividend equivalents are included in the diluted earnings per share computation if the effect is dilutive, using the treasury stock method.

12. Earnings Per Unit of the Operating Partnership

The following table sets forth a reconciliation of the numerators and denominators in computing earnings per unit (in thousands, except per unit amounts):
 Three months ended June 30, Six months ended June 30, Three months ended September 30, Nine months ended September 30,
 2018 2017 2018 2017 2018 2017 2018 2017
Numerator:  
    
  
  
    
  
Net income attributable to partners of the Operating Partnership $24,198
 $30,947
 $48,253
 $54,461
Net income (loss) attributable to partners of the Operating Partnership $(23,031) $(16,034) $25,222
 $38,427
Less allocation of earnings to participating securities (313) (306) (576) (601) (313) (306) (889) (907)
Net income available to common unitholders of the Operating Partnership $23,885
 $30,641
 $47,677
 $53,860
Net income (loss) available to common unitholders of the Operating Partnership $(23,344) $(16,340) $24,333
 $37,520
Denominator:                
Basic weighted average common units 98,294
 100,053
 98,466
 100,245
 98,104
 98,951
 98,344
 99,809
Effect of outstanding options and certain restricted common units 
 5
 
 35
 
 
 
 23
Diluted weighted average common units 98,294
 100,058
 98,466
 100,280
 98,104
 98,951
 98,344
 99,832
Basic earnings per common unit:                
Net income $0.24
 $0.31
 $0.48
 $0.54
Net income (loss) $(0.24) $(0.17) $0.25
 $0.38
Diluted earnings per common unit:                
Net income $0.24
 $0.31
 $0.48
 $0.54
Net income (loss) $(0.24) $(0.17) $0.25
 $0.38

We determine diluted earnings per unit based on the weighted average number of common units outstanding combined with the incremental weighted average units that would have been outstanding assuming all potentially dilutive securities were converted into common units at the earliest date possible.



Notional units granted under our equity compensation plan are considered contingently issuable common units and are included in earnings per unit if the effect is dilutive using the treasury stock method and the common shares would be issuable if the end of the reporting period were the end of the contingency period. For the three and sixnine months ended JuneSeptember 30, 2018, 1,013,383 notional units were excluded from the computation and for both the three and sixnine months ended JuneSeptember 30, 2017, 871,116858,116 units were excluded from the computation because these notional units either would not have been issuable if the end of the reporting period were the end of the contingency period or because they were anti-dilutive.

With respect to outstanding options, the effect of dilutive common units is determined using the treasury stock method, whereby outstanding options are assumed exercised at the beginning of the reporting period and the exercise proceeds from such options and the average measured but unrecognized compensation cost during the period are assumed to be used to repurchase our common units at the average market price during the period. The market price of a common unit is considered to be equivalent to the market price of a Company common share. For both the three and sixnine months ended JuneSeptember 30, 2018, 557,600547,000 options were excluded from the computation as they were anti-dilutive. For the three months ended September 30, 2017, 235,700 options were excluded from the computation and for both the three and sixnine months ended JuneSeptember 30, 2017, 176,300173,500 options were excluded from the computation, respectively, as they were anti-dilutive.

Certain of the Company's unvested restricted common share awards contain non-forfeitable rights to distributions or distribution equivalents. The impact of the corresponding unvested restricted unit awards on earnings per unit has been calculated using the two-class method whereby earnings are allocated to the unvested restricted unit awards based on distributions declared and the unvested restricted units' participation rights in undistributed earnings. Unvested restricted common units that do not contain non-forfeitable rights to dividends or dividend equivalents are included in the diluted earnings per unit computation if the effect is dilutive, using the treasury stock method.

13. Equity-Based Compensation of the Company

We have a shareholder approved equity-based compensation plan, the Incentive Award Plan of Tanger Factory Outlet Centers, Inc. and Tanger Properties Limited Partnership (as amended and restated on April 4, 2014, (the "Plan"), which covers our non-employee directors, officers, employees and consultants. For each common share issued by the Company, the Operating Partnership issues one corresponding unit of partnership interest to the Company's wholly-owned subsidiaries. Therefore, when the Company grants an equity-based award, the Operating Partnership treats each award as having been granted by the Operating Partnership. In the discussion below, the term "we" refers to the Company and the Operating Partnership together and the term "shares" is meant to also include corresponding units of the Operating Partnership.

We recorded equity-based compensation expense in general and administrative expenses in our consolidated statements of operations as follows (in thousands):
 Three months ended Six months ended Three months ended Nine months ended
 June 30, June 30, September 30, September 30,
 2018 2017 2018 2017 2018 2017 2018 2017
Restricted common shares $2,366
 $2,387
 $4,855
 $4,737
 $2,275
 $2,302
 $7,359
 $7,039
Notional unit performance awards 1,014
 1,049
 1,998
 1,931
 1,040
 939
 3,141
 2,870
Options 99
 68
 192
 128
 92
 77
 314
 205
Total equity-based compensation $3,479
 $3,504
 $7,045
 $6,796
 $3,407
 $3,318
 $10,814
 $10,114

Equity-based compensation expense capitalized as a part of rental property and deferred lease costs were as follows (in thousands):
  Three months ended Six months ended
  June 30, June 30,
  2018 2017 2018 2017
Equity-based compensation expense capitalized $461
 $264
 $552
 $510
  Three months ended Nine months ended
  September 30, September 30,
  2018 2017 2018 2017
Equity-based compensation expense capitalized $652
 $267
 $840
 $777



Option Awards

During February 2018, the Company granted 331,000 options to non-executive employees of the Company. The exercise price of the options granted during the first quarter of 2018 is $21.94 per share which equaled the closing market price of the Company's common shares on the day prior to the grant date. The options expire 10 years from the date of grant and 20% of the options become exercisable in each of the first five years commencing one year from the date of grant. The fair value of each option grant is estimated on the date of grant using the Black-Scholes option pricing model, which resulted in a weighted average grant date fair value per share of $3.62 and included the following weighted-average assumptions: expected dividend yield 6.24%; expected life of 7.1 years; expected volatility of 32.47%; a risk-free rate of 2.8%; and forfeiture rates of 3.0% to 10.0% dependent upon the employee's position within the Company.

Restricted Common Share and Restricted Share Unit Awards

During February 2018, the Company granted 407,156 in restricted common shares and restricted share units to the Company's non-employee directors and the Company's senior executive officers. The grant date fair value of the awards ranged from $18.65 to $21.94 per share. The non-employee directors' restricted common shares generally vest ratably over a three year period and the senior executive officers' restricted shares (other than our chief executive officer's) generally vest ratably over a three or five year period. Our chief executive officer’s restricted shares generally vest ratably over a two year period and his restricted share units generally vest on the third anniversary of the grant date. For the restricted shares and units issued to our chief executive officer, the restricted share agreementaward agreements generally requiresrequire him to hold shares or units issued to him for a minimum of three years following vesting. Forvesting or the restricted share units issued to our chief executive officer, the restricted share unit agreement generally requires him to hold shares issued to him thereunder for a minimum of three years following the applicable share issuance date.date, as applicable. Compensation expense related to the amortization of the deferred compensation is being recognized in accordance with the vesting schedule of the restricted shares.

For certain shares that vest during the period, we withhold shares with value equivalent up to the employees' maximum statutory obligation (minimum obligation during 2017) for the applicable income and other employment taxes, and remit cash to the appropriate taxing authorities. The total number of shares withheld upon vesting was 89,437 and 69,886 for the sixnine months ended JuneSeptember 30, 2018 and 2017, respectively. No shares were withheld for the three months ended JuneSeptember 30, 2018 and 2017. The total number of shares withheld was based on the value of the restricted common shares on the vesting date as determined by our closing share price on the day prior to the vesting date. Total amounts paid for the employees' tax obligation to taxing authorities was $2.1 million for the sixnine months ended JuneSeptember 30, 2018 and was $2.4 million for the sixnine months ended JuneSeptember 30, 2017. These amounts are reflected as financing activities within the consolidated statements of cash flows.

2018 Outperformance Plan

In February 2018, the Compensation Committee of Tanger Factory Outlet Centers, Inc. approved the terms of the Tanger Factory Outlet Centers, Inc. 2018 Outperformance Plan (the “2018 OPP"), a long-term incentive compensation plan. Recipients receive notional units which may convert, subject to the achievement of the goals described below, into common shares of the Company based on the Company’s absolute total shareholder return and its total shareholder return relative to its peer group over a three-year measurement period. For all recipients (other than our chief executive officer), any shares earned at the end of the three-year measurement period are issued immediately following such measurement period, but are restricted and remain subject to a time-based vesting schedule, with 50% of the shares vesting immediately following issuance, and the remaining 50% vesting one year thereafter, contingent upon continued employment with the Company through the vesting dates (unless terminated prior thereto (a) by the Company without cause, (b) by participant for good reason or (c) due to death or disability). For our chief executive officer, any shares earned at the end of the three-year measurement period remain subject to a time-based vesting schedule and are issued following vesting, with 50% of the shares vesting immediately following issuance, and the remaining 50% vesting one year thereafter, contingent upon continued employment with the Company through the vesting dates (unless terminated prior thereto (a) by the Company without cause, (b) by participant for good reason or due to retirement or (c) due to death or disability).



The following table sets forth 2018 OPP performance targets and other relevant information about the 2018 OPP:
Performance targets (1)
  
Absolute portion of award:  
Percent of total award 33.3%
Absolute total shareholder return range 19.1% - 29.5%
Percentage of units to be earned 20%-100%
   
Relative portion of award:  
Percent of total award 66.7%
Percentile rank of peer group range(2)
 30th - 80th
Percentage of units to be earned 20%-100%
   
Maximum number of restricted common shares that may be earned 409,972
Grant date fair value per share $12.42
(1)The number of restricted common shares received under the 2018 OPP will be determined on a pro-rata basis by linear interpolation between total shareholder return thresholds, both for absolute total shareholder return and for relative total shareholder return amongst the Company's peer group.
(2)The peer group is based on companies included in the FTSE NAREIT Retail Index.

The fair values of the 2018 OPP awards granted during the sixnine months ended JuneSeptember 30, 2018 were determined at the grant dates using a Monte Carlo simulation pricing model and the following assumptions:
Risk free interest rate (1)
 2.40%
Expected dividend yield (2)
 4.8%
Expected volatility (3)
 27%
(1)Represents the interest rate as of the grant date on US treasury bonds having the same life as the estimated life of the restricted unit grants.
(2)The dividend yield is calculated utilizing the dividends paid for the previous five-year period.
(3)Based on a mix of historical and implied volatility for our common shares and the common shares of our peer index companies over the measurement period.



14. Accumulated Other Comprehensive Income (Loss) of the Company

The following table presents changes in the balances of each component of accumulated comprehensive income (loss) for the three and sixnine months ended JuneSeptember 30, 2018 (in thousands):
 
 
 Tanger Factory Outlet Centers, Inc. Accumulated Other Comprehensive Income (Loss) Noncontrolling Interest in Operating Partnership Accumulated Other Comprehensive Income (Loss) Tanger Factory Outlet Centers, Inc. Accumulated Other Comprehensive Income (Loss) Noncontrolling Interest in Operating Partnership Accumulated Other Comprehensive Income (Loss)
 Foreign Currency Cash flow hedges Total Foreign Currency Cash flow hedges Total Foreign Currency Cash flow hedges Total Foreign Currency Cash flow hedges Total
Balance March 31, 2018 $(27,298) $7,675
 $(19,623) $(1,486) $408
 $(1,078)
Other comprehensive income (loss) before reclassifications (1,900) 1,340
 (560) (102) 72
 (30)
Balance June 30, 2018 $(29,198) $8,476
 $(20,722) $(1,588) $451
 $(1,137)
Other comprehensive income before reclassifications 1,823
 1,013
 2,836
 98
 54
 152
Reclassification out of accumulated other comprehensive income into interest expense 
 (539) (539) 
 (29) (29) 
 (527) (527) 
 (28) (28)
Balance June 30, 2018 $(29,198) $8,476
 $(20,722) $(1,588) $451
 $(1,137)
Balance September 30, 2018 $(27,375) $8,962
 $(18,413) $(1,490) $477
 $(1,013)
                        
    
 Tanger Factory Outlet Centers, Inc. Accumulated Other Comprehensive Income (Loss) Noncontrolling Interest in Operating Partnership Accumulated Other Comprehensive Income (Loss) Tanger Factory Outlet Centers, Inc. Accumulated Other Comprehensive Income (Loss) Noncontrolling Interest in Operating Partnership Accumulated Other Comprehensive Income (Loss)
 Foreign Currency Cash flow hedges Total Foreign Currency Cash flow hedges Total Foreign Currency Cash flow hedges Total Foreign Currency Cash flow hedges Total
Balance December 31, 2017 $(24,360) $5,075
 $(19,285) $(1,329) $269
 $(1,060) $(24,360) $5,075
 $(19,285) $(1,329) $269
 $(1,060)
Other comprehensive income (loss) before reclassifications (4,838) 4,254
 (584) (259) 228
 (31) (3,015) 5,267
 2,252
 (161) 282
 121
Reclassification out of accumulated other comprehensive income into interest expense 
 (853) (853) 
 (46) (46) 
 (1,380) (1,380) 
 (74) (74)
Balance June 30, 2018 $(29,198) $8,476
 $(20,722) $(1,588) $451
 $(1,137)
Balance September 30, 2018 $(27,375) $8,962
 $(18,413) $(1,490) $477
 $(1,013)



The following table presents changes in the balances of each component of accumulated comprehensive income (loss) for the three and sixnine months ended JuneSeptember 30, 2017 (in thousands):
 
 
 Tanger Factory Outlet Centers, Inc. Accumulated Other Comprehensive Income (Loss) Noncontrolling Interest in Operating Partnership Accumulated Other Comprehensive Income (Loss) Tanger Factory Outlet Centers, Inc. Accumulated Other Comprehensive Income (Loss) Noncontrolling Interest in Operating Partnership Accumulated Other Comprehensive Income (Loss)
 Foreign Currency Cash flow hedges Total Foreign Currency Cash flow hedges Total Foreign Currency Cash flow hedges Total Foreign Currency Cash flow hedges Total
Balance March 31, 2017 $(31,128) $4,496
 $(26,632) $(1,689) $219
 $(1,470)
Other comprehensive income (loss) before reclassifications 2,919
 (655) 2,264
 155
 (16) 139
Balance June 30, 2017 $(28,209) $3,962
 $(24,247) $(1,534) $209
 $(1,325)
Other comprehensive income before reclassifications 4,497
 89
 4,586
 240
 5
 245
Reclassification out of accumulated other comprehensive income into interest expense 
 121
 121
 
 6
 6
 
 (52) (52) 
 (3) (3)
Balance June 30, 2017 $(28,209) $3,962
 $(24,247) $(1,534) $209
 $(1,325)
Balance September 30, 2017 $(23,712) $3,999
 $(19,713) $(1,294) $211
 $(1,083)
                        
    
 Tanger Factory Outlet Centers, Inc. Accumulated Other Comprehensive Income (Loss) Noncontrolling Interest in Operating Partnership Accumulated Other Comprehensive Income (Loss) Tanger Factory Outlet Centers, Inc. Accumulated Other Comprehensive Income (Loss) Noncontrolling Interest in Operating Partnership Accumulated Other Comprehensive Income (Loss)
 Foreign Currency Cash flow hedges Total Foreign Currency Cash flow hedges Total Foreign Currency Cash flow hedges Total Foreign Currency Cash flow hedges Total
Balance December 31, 2016 $(32,087) $3,792
 $(28,295) $(1,740) $201
 $(1,539) $(32,087) $3,792
 $(28,295) $(1,740) $201
 $(1,539)
Other comprehensive income (loss) before reclassifications 3,878
 (244) 3,634
 206
 (13) 193
 8,375
 (154) 8,221
 446
 (9) 437
Reclassification out of accumulated other comprehensive income into interest expense 
 414
 414
 
 21
 21
 
 361
 361
 
 19
 19
Balance June 30, 2017 $(28,209) $3,962
 $(24,247) $(1,534) $209
 $(1,325)
Balance September 30, 2017 $(23,712) $3,999
 $(19,713) $(1,294) $211
 $(1,083)

We expect within the next twelve months to reclassify into earnings as a decrease to interest expense approximately $2.4$3.1 million of the amounts recorded within accumulated other comprehensive income related to the interest rate swap agreements in effect as of JuneSeptember 30, 2018.



15. Accumulated Other Comprehensive Income (Loss) of the Operating Partnership

The following table presents changes in the balances of each component of accumulated comprehensive income (loss) for the three and sixnine months ended JuneSeptember 30, 2018 (in thousands):
 Foreign Currency Cash flow hedges Accumulated Other Comprehensive Income (Loss) Foreign Currency Cash flow hedges Accumulated Other Comprehensive Income (Loss)
Balance March 31, 2018 $(28,784) $8,083
 $(20,701)
Other comprehensive income (loss) before reclassifications (2,002) 1,412
 (590)
Balance June 30, 2018 $(30,786) $8,927
 $(21,859)
Other comprehensive income before reclassifications 1,921
 1,067
 2,988
Reclassification out of accumulated other comprehensive income into interest expense 
 (568) (568) 
 (555) (555)
Balance June 30, 2018 $(30,786) $8,927
 $(21,859)
Balance September 30, 2018 $(28,865) $9,439
 $(19,426)
            
 Foreign Currency Cash flow hedges Accumulated Other Comprehensive Income (Loss) Foreign Currency Cash flow hedges Accumulated Other Comprehensive Income (Loss)
Balance December 31, 2017 $(25,689) $5,344
 $(20,345) $(25,689) $5,344
 $(20,345)
Other comprehensive income (loss) before reclassifications (5,097) 4,482
 (615) (3,176) 5,549
 2,373
Reclassification out of accumulated other comprehensive income into interest expense 
 (899) (899) 
 (1,454) (1,454)
Balance June 30, 2018 $(30,786) $8,927
 $(21,859)
Balance September 30, 2018 $(28,865) $9,439
 $(19,426)

The following table presents changes in the balances of each component of accumulated comprehensive income (loss) for the three and sixnine months ended JuneSeptember 30, 2017 (in thousands):
 Foreign Currency Cash flow hedges Accumulated Other Comprehensive Income (Loss) Foreign Currency Cash flow hedges Accumulated Other Comprehensive Income (Loss)
Balance March 31, 2017 $(32,817) $4,715
 $(28,102)
Other comprehensive income (loss) before reclassifications 3,074
 (671) 2,403
Balance June 30, 2017 $(29,743) $4,171
 $(25,572)
Other comprehensive income before reclassifications 4,737
 94
 4,831
Reclassification out of accumulated other comprehensive income into interest expense 
 127
 127
 
 (55) (55)
Balance June 30, 2017 $(29,743) $4,171
 $(25,572)
Balance September 30, 2017 $(25,006) $4,210
 $(20,796)
            
 Foreign Currency Cash flow hedges Accumulated Other Comprehensive Income (Loss) Foreign Currency Cash flow hedges Accumulated Other Comprehensive Income (Loss)
Balance December 31, 2016 $(33,827) $3,993
 $(29,834) $(33,827) $3,993
 $(29,834)
Other comprehensive income (loss) before reclassifications 4,084
 (257) 3,827
 8,821
 (163) 8,658
Reclassification out of accumulated other comprehensive income into interest expense 
 435
 435
 
 380
 380
Balance June 30, 2017 $(29,743) $4,171
 $(25,572)
Balance September 30, 2017 $(25,006) $4,210
 $(20,796)

We expect within the next twelve months to reclassify into earnings as a decrease to interest expense approximately $2.4$3.1 million of the amounts recorded within accumulated other comprehensive income related to the interest rate swap agreements in effect as of JuneSeptember 30, 2018.



16. Supplemental Cash Flow Information

We purchase capital equipment and incur costs relating to construction of facilities, including tenant finishing allowances. Expenditures included in accounts payable and accrued expenses were as follows (in thousands):
  As of As of
  June 30, 2018 June 30, 2017
Costs relating to construction included in accounts payable and accrued expenses $15,187
 $24,679
  As of As of
  September 30, 2018 September 30, 2017
Costs relating to construction included in accounts payable and accrued expenses $14,307
 $27,090

Interest paid, net of interest capitalized was as follows (in thousands):
  Six months ended June 30,
  2018 2017
Interest paid, net of interest capitalized $30,074
 $31,212
  Nine months ended September 30,
  2018 2017
Interest paid, net of interest capitalized $46,154
 $43,102

17. New Accounting Pronouncements

Recently adopted accounting standards

In November 2016, the FASB issued ASU 2016-18, Statement of Cash Flows (Topic 230): Restricted Cash. This ASU requires that a statement of cash flows explain the change during the period in cash, cash equivalents, and amounts generally described as restricted cash. Amounts generally described as restricted cash should be included with cash and cash equivalents when reconciling the beginning-of-period and end-of-period total amounts shown on the statement of cash flows. The update should be applied retrospectively to each period presented.  The pronouncement is effective for fiscal years, and for interim periods within those fiscal years, beginning after December 15, 2017. We adopted this pronouncement on January 1, 2018, and the pronouncement did not result in changes to our consolidated statements of cash flows as there were no restricted cash amounts included in the beginning-of-period and end-of-period cash and cash equivalents totals.

In February 2017, the FASB issued ASU 2017-05, "Other Income - Gains and Losses from the Derecognition of Nonfinancial Assets (Subtopic 610-20): Clarifying the Scope of Asset Derecognition Guidance and Accounting for Partial Sales of Nonfinancial Assets." ASU 2017-05 clarifies the definition of an in-substance nonfinancial asset and changes the accounting for partial sales of nonfinancial assets to be more consistent with the accounting for a sale of a business pursuant to ASU 2017-01. This update is effective for interim and annual periods beginning after December 15, 2017 using a full retrospective or modified retrospective method and is required to be adopted in conjunction with ASU 2014-09, "Revenue from Contracts with Customers" discussed below. We adopted ASU 2017-05 effective January 1, 2018, along with our adoption of ASU 2014-09, using the modified retrospective approach only to contracts that are not completed contracts as of January 1, 2018. The adoption of this standard did not have a material impact on our consolidated financial statements. Subsequent to adoption, we believe most of our future contributions of nonfinancial assets to our joint ventures where we cease to have a controlling financial interest, if any, will result in the recognition of a full gain or loss as if we sold 100% of the nonfinancial asset and we will also measure our retained interest at fair value.

In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers: Topic 606, as amended, (collectively, Topic 606). Topic 606 is based on the principle that revenue is recognized to depict the transfer of goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. Topic 606 applies to all contracts with customers, except those that are within the scope of other topics in the FASB's Accounting Standards Codification, including real estate lease contracts, which the majority of our revenue is derived. The guidance also provides a model for the measurement and recognition of gains and losses on the sale of certain nonfinancial assets, such as property, including real estate.



We adopted Topic 606 effective January 1, 2018 using the modified retrospective approach. Results for reporting periods beginning after January 1, 2018, are presented under Topic 606, while prior period amounts are not adjusted and continue to be reported in accordance with our historic accounting under Revenue Recognition (Topic 605). The new guidance provides a unified model to determine how revenue is recognized. To determine the proper amount of revenue to be recognized, the Company performs the following steps: (i) identify the contract with the customer, (ii) identify the performance obligations within the contract, (iii) determine the transaction price, (iv) allocate the transaction price to the performance obligations and (v) recognize revenue when (or as) a performance obligation is satisfied. As of JuneSeptember 30, 2018, the Company has no outstanding contract assets or contract liabilities and we did not have a cumulative catch-up upon the adoption of this standard. The adoption of this standard did not result in any material changes to our revenue recognition as compared to the previous guidance.

The Company’s revenue-producing contracts are primarily leases that are not within the scope of this standard, except for the lease component relating to common area maintenance (“CAM”) reimbursement revenue, which will be within the scope of this standard upon the effective date of ASU 2016-02, Leases (Topic 842). The revenues which will bewere impacted by the initial adoption of Topic 606 include revenues from management, leasing and other services provided to our unconsolidated joint ventures that we manage and other income earned at our properties. We receive management, leasing and other services revenue for services provided to our unconsolidated joint ventures that we manage and recognize this revenue as the services are transferred. Our other income earned at our properties consist primarily of revenues from vending and other on-site services or products provided to shoppers or tenants. The other income earned at our properties is recorded as the goods are transferred at a point in time or as the service is transferred over time. We have elected to disaggregate our revenue streams into the following line items on our Consolidated Statements of Operations: base rentals; percentage rentals; expense reimbursements; management, leasing and other services; and other income. We believe that these are the proper disaggregated categories as they are the best depiction of our revenue streams both qualitatively and quantitatively.

Recently issued accounting standards to be adopted

In August 2017, the FASB issued ASU 2017-12, Derivatives and Hedging (Topic 815), Targeted Improvements to Accounting for Hedging Activities. The new guidance will make more financial and nonfinancial hedging strategies eligible for hedge accounting. It also amends the presentation and disclosure requirements and changes how companies assess effectiveness. It is intended to more closely align hedge accounting with companies’ risk management strategies, simplify the application of hedge accounting, and increase transparency as to the scope and results of hedging programs. The amendments can be adopted immediately in any interim or annual period (including the current period). The mandatory effective date for calendar year-end public companies is January 1, 2019. We are currently evaluating the impact of adopting the new guidance, but we do not expect the adoption to have a material impact on our consolidated financial statements.

In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842), issued subsequent amendments to the initial guidance in September 2017 within ASU 2017-13 and January 2018 within ASU 2018-01  (collectively, Topic 842). Topic 842, amends the existing accounting standards for lease accounting, including requiring lessees to recognize most leases on their balance sheets and making targeted changes to lessor accounting. Topic 842 will be effective beginning in the first quarter of 2019. Early adoption of Topic 842 as of its issuance is permitted. We will adopt Topic 842 effective January 1, 2019. The new leases standard requires a modified retrospective transition approach for all leases existing at, or entered into after, the date of initial application, with an option to use certain transition relief. Based on a preliminary assessment, we expect our significant operating lease commitments, primarily ground leases at seven of our outlet centers, will be required to be recognized as operating lease liabilities and right-of-use assets upon adoption, resulting in an increase in the assets and liabilities on our consolidated balance sheets. Information about our undiscounted future lease payments and the timing of those payments is in Note 23, Commitments and Contingencies of Consolidated Properties, in our Form 10-K for the year ended December 31, 2017.

In addition, direct internal leasing costs will continue to be capitalized, however, indirect internal leasing costs previously capitalized will be expensed. For the sixnine months ended JuneSeptember 30, 2018 and for the year ended December 31, 2017, based on existing accounting guidance, we capitalized approximately $2.8$4.3 million and $6.1 million, respectively, of internal leasing and legal payroll and related costs. Upon adoption of this ASU in 2019, we will only be able to capitalize the portion of these types of costs incurred that are a direct result of an executed lease.



Within the terms of our leases where we are the lessor, we are entitled to receive reimbursement amounts from tenants for operating expenses such as real estate taxes, insurance and other CAM. Upon adoption of this ASU, CAM reimbursement revenue will be accounted for in accordance with ASU 2016-12 Revenue from Contracts with Customers (Topic 606). We are continuing our evaluation of the effect that this adoption will have on our CAM reimbursement revenue; however, we currently do not believe that the adoption will significantly affect the timing of our revenue recognition. We are continuing our evaluation of Topic 842, which may identify additional impacts this standard will have on our consolidated financial statements and related disclosures.

18. Subsequent Events

In JulyOctober 2018, the Company's Board of Directors declared a $0.35 cash dividend per common share payable on AugustNovember 15, 2018 to each shareholder of record on JulyOctober 31, 2018, and the Trustees of Tanger GP Trust declared a $0.35 cash distribution per Operating Partnership unit to the Operating Partnership's unitholders.

In October 2018, we amended and restated our unsecured term loan, increasing the size of the loan from $325.0 million to $350.0 million, extending maturity from April 2021 to April 2024, and reducing the interest rate spread over LIBOR from 0.95% to 0.90%. The $25.0 million of proceeds were used to pay down the balances outstanding under our unsecured lines of credit.



Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations

The discussion of our results of operations reported in the unaudited, consolidated statements of operations compares the three and sixnine months ended JuneSeptember 30, 2018 with the three and sixnine months ended JuneSeptember 30, 2017. The results of operations discussion is combined for Tanger Factory Outlet Centers, Inc. and Tanger Properties Limited Partnership because the results are virtually the same for both entities. The following discussion should be read in conjunction with the unaudited consolidated financial statements appearing elsewhere in this report. Historical results and percentage relationships set forth in the unaudited, consolidated statements of operations, including trends which might appear, are not necessarily indicative of future operations. 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.

Cautionary Statements

Certain statements made below are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. We intend for such forward-looking statements to be covered by the safe harbor provisions for forward-looking statements contained in the Private Securities Reform Act of 1995 and have included this statement for purposes of complying with these safe harbor provisions. Forward-looking statements, which are based on certain assumptions and describe our future plans, strategies, beliefs and expectations, are generally identifiable by use of the words "believe", "expect", "intend", "anticipate", "estimate", "project", or similar expressions. Such forward-looking statements include, but are not limited to, statements regarding our: ability to raise additional capital, including via future issuances of equity and debt, and the use of proceeds from such issuances; results of operations and financial condition; our capital expenditure and working capital needs and the funding thereof; repurchase of the Company's shares; potential developments, expansions, renovations, acquisitions or dispositions of outlet centers; compliance with debt covenants; renewal and re-lease of leased space; outcome of legal proceedings arising in the normal course of business; and real estate joint ventures. You should not rely on forward-looking statements since they involve known and unknown risks, uncertainties and other important factors which are, in some cases, beyond our control and which could materially affect our actual results, performance or achievements. Important factors which may cause actual results to differ materially from current expectations include, but are not limited to: our inability to develop new outlet centers or expand existing outlet centers successfully; risks related to the economic performance and market value of our outlet centers; the relative illiquidity of real property investments; impairment charges affecting our properties; our dispositions of assets may not achieve anticipated results; competition for the acquisition and development of outlet centers, and our inability to complete outlet centers we have identified; environmental regulations affecting our business; risk associated with a possible terrorist activity or other acts or threats of violence and threats to public safety; our dependence on rental income from real property; our dependence on the results of operations of our retailers; the fact that certain of our properties are subject to ownership interests held by third parties, whose interests may conflict with ours; risks related to uninsured losses; the risk that consumer, travel, shopping and spending habits may change; risks associated with our Canadian investments; risks associated with attracting and retaining key personnel; risks associated with debt financing; risk associated with our guarantees of debt for, or other support we may provide to, joint venture properties; our potential failure to qualify as a REIT; our legal obligation to make distributions to our shareholders; legislative or regulatory actions that could adversely affect our shareholders, including the recent changes in the U.S. federal income taxation of U.S. businesses; our dependence on distributions from the Operating Partnership to meet our financial obligations, including dividends; the risk of a cyber-attack or an act of cyber-terrorism and other important factors set forth under Item 1A - "Risk Factors" in the Company's and the Operating Partnership's Annual Report on Form 10-K for the year ended December 31, 2017.



General Overview

As of JuneSeptember 30, 2018, we had 36 consolidated outlet centers in 22 states totaling 12.9 million square feet. We also had 8 unconsolidated outlet centers in 6 states or provinces totaling 2.4 million square feet. The table below details our new developments, expansions and dispositions of consolidated and unconsolidated outlet centers that significantly impacted our results of operations and liquidity from January 1, 2017 to JuneSeptember 30, 2018 (square feet in thousands):
   Consolidated Outlet Centers Unconsolidated Joint Venture Outlet Centers   Consolidated Outlet Centers Unconsolidated Joint Venture Outlet Centers
Outlet Center Quarter Opened/Disposed Square Feet Number of Outlet Centers Square Feet Number of Outlet Centers Quarter Opened/Disposed Square Feet Number of Outlet Centers Square Feet Number of Outlet Centers
As of January 1, 2017   12,710
 36
 2,348
 8
   12,710
 36
 2,348
 8
New Developments:                
Fort Worth Fourth Quarter 352
 1
 
 
 Fourth Quarter 352
 1
 
 
Expansion:                
Ottawa First & Second Quarter 
 
 39
 
 First & Second Quarter 
 
 39
 
Lancaster Third Quarter 148
 
 
 
 Third Quarter 148
 
 
 
Dispositions:                
Westbrook Second Quarter (290) (1) 
 
 Second Quarter (290) (1) 
 
Other   10
 
 (17) 
   10
 
 (17) 
As of December 31, 2017   12,930
 36
 2,370
 8
   12,930
 36
 2,370
 8
Other   (11) 
 
 
   (7) 
 
 
As of June 30, 2018   12,919
 36
 2,370
 8
As of September 30, 2018   12,923
 36
 2,370
 8



The following table summarizes certain information for our existing outlet centers in which we have an ownership interest as of JuneSeptember 30, 2018. Except as noted, all properties are fee owned.
Consolidated Outlet Centers Legal Square % Legal Square %
Location Ownership % Feet Occupied Ownership % Feet Occupied
Deer Park, New York 100 739,109
 97  100 739,109
 97 
Riverhead, New York (1)
 100 729,706
 92  100 729,778
 95 
Rehoboth Beach, Delaware (1)
 100 557,353
 98  100 557,353
 97 
Foley, Alabama 100 556,673
 95  100 556,673
 94 
Atlantic City, New Jersey (1) (4)
 100 489,706
 87  100 489,706
 86 
San Marcos, Texas 100 471,816
 96  100 471,816
 97 
Sevierville, Tennessee (1)
 100 448,150
 99  100 448,150
 100 
Savannah, Georgia 100 429,089
 96  100 429,089
 97 
Myrtle Beach Hwy 501, South Carolina 100 425,334
 88  100 426,523
 99 
Jeffersonville, Ohio 100 411,785
 96  100 411,859
 97 
Glendale, Arizona (Westgate) 100 410,734
 97  100 410,734
 99 
Myrtle Beach Hwy 17, South Carolina (1)
 100 403,346
 100  100 403,425
 99 
Charleston, South Carolina 100 382,180
 97  100 382,180
 98 
Lancaster, Pennsylvania 100 376,997
 92  100 376,997
 92 
Pittsburgh, Pennsylvania 100 372,944
 98  100 372,944
 99 
Commerce, Georgia 100 371,408
 96  100 371,408
 99 
Grand Rapids, Michigan 100 357,103
 95  100 357,105
 95 
Fort Worth, Texas 100 351,741
 97  100 351,741
 98 
Daytona Beach, Florida 100 351,721
 99  100 351,721
 100 
Branson, Missouri 100 329,861
 99  100 329,861
 100 
Locust Grove, Georgia 100 321,082
 100  100 321,082
 99 
Gonzales, Louisiana 100 321,066
 98  100 321,066
 96 
Southaven, Mississippi (2) (4)
 50 320,348
 94  50 320,348
 93 
Park City, Utah 100 319,661
 94  100 319,661
 98 
Mebane, North Carolina 100 318,886
 99  100 318,886
 99 
Howell, Michigan 100 314,459
 94  100 314,438
 95 
Mashantucket, Connecticut (Foxwoods) (1)
 100 311,516
 95  100 311,593
 95 
Williamsburg, Iowa 100 276,331
 93  100 276,331
 93 
Tilton, New Hampshire 100 250,107
 94  100 250,107
 94 
Hershey, Pennsylvania 100 247,500
 100  100 249,696
 99 
Hilton Head II, South Carolina 100 206,564
 92  100 206,564
 92 
Ocean City, Maryland (1)
 100 199,425
 96  100 199,425
 96 
Hilton Head I, South Carolina 100 181,670
 97  100 181,670
 97 
Terrell, Texas 100 177,800
 96  100 177,800
 95 
Blowing Rock, North Carolina 100 104,009
 96  100 104,009
 96 
Nags Head, North Carolina 100 82,161
 100  100 82,161
 98 
Totals   12,919,341
 96
(3) 
   12,923,009
 96
(3) 
(1)These properties or a portion thereof are subject to a ground lease.
(2)Based on capital contribution and distribution provisions in the joint venture agreement, we expect our economic interest in the venture's cash flow to be greater than our legal ownership percentage. We currently receive substantially all the economic interest of the property.
(3)Excludes the occupancy rate at our Fort Worth center which opened during the fourth quarter of 2017 and has not yet stabilized.
(4)Property encumbered by mortgage. See notes 5 and 6 to the consolidated financial statements for further details of our debt obligations.



Unconsolidated joint venture properties Legal Square %  Legal Square % 
Location Ownership % Feet Occupied  Ownership % Feet Occupied 
Charlotte, North Carolina (1)
 50 397,857
 99  50 397,857
 99 
Columbus, Ohio (1)
 50 355,245
 95  50 355,245
 96 
Ottawa, Ontario 50 354,978
 94  50 355,003
 94 
Texas City, Texas (Galveston/Houston) (1)
 50 352,705
 95  50 352,705
 95 
National Harbor, Maryland (1)
 50 341,156
 95  50 341,156
 95 
Cookstown, Ontario 50 307,779
 99  50 307,779
 100 
Bromont, Quebec 50 161,307
 73  50 161,307
 80 
Saint-Sauveur, Quebec (1)
 50 99,405
 89  50 99,405
 96 
Total   2,370,432
 94    2,370,457
 95 
(1)Property encumbered by mortgage. See note 4 to the consolidated financial statements for further details of the joint venture debt obligations.

Leasing Activity

The tables below show changes in rent (base rent and common area maintenance ("CAM")) for leases for new stores that opened or renewals that started during the respective trailing twelve month periods ended JuneSeptember 30, 2018 and 2017:
Trailing twelve months ended June 30, 2018(1)
Trailing twelve months ended September 30, 2018(1)
# of Leases
Square Feet
(in 000's)
Average
Annual
Straight-line Rent (psf)
Average
Tenant
Allowance (psf)
Average Initial Term
 (in years)
Net Average
Annual
Straight-line Rent (psf) (2)
# of Leases
Square Feet
(in 000's)
Average
Annual
Straight-line Rent (psf)
Average
Tenant
Allowance (psf)
Average Initial Term
 (in years)
Net Average
Annual
Straight-line Rent (psf) (2)
Re-tenant103
457
$33.54
$69.41
7.75
$24.58
99
478
$32.92
$63.74
7.86
$24.81
Renewal261
1,349
$29.92
$0.11
3.63
$29.89
265
1,343
$29.79
$0.26
3.79
$29.72
        
Trailing twelve months ended June 30, 2017(1)
Trailing twelve months ended September 30, 2017(1)
# of Leases
Square Feet
(in 000's)
Average
Annual
Straight-line Rent (psf)
Average
Tenant
Allowance (psf)
Average Initial Term
 (in years)
Net Average
Annual
Straight-line Rent (psf) (2)
# of Leases
Square Feet
(in 000's)
Average
Annual
Straight-line Rent (psf)
Average
Tenant
Allowance (psf)
Average Initial Term
 (in years)
Net Average
Annual
Straight-line Rent (psf) (2)
Re-tenant89
353
$40.29
$46.39
8.73
$34.98
87
380
$34.76
$55.47
8.94
$28.56
Renewal263
1,179
$31.92
$0.46
4.34
$31.81
253
1,126
$32.56
$0.24
4.50
$32.51
(1)Excludes license agreements, seasonal tenants, and month-to-month leases.
(2)Net average straight-line base rent is calculated by dividing the average tenant allowance costs per square foot by the average initial term and subtracting this calculated number from the average straight-line base rent per year amount. The average annual straight-line base rent disclosed in the table above includes all concessions, abatements and reimbursements of rent to tenants. The average tenant allowance disclosed in the table above includes landlord costs.








RESULTS OF OPERATIONS
Comparison of the three months ended JuneSeptember 30, 2018 to the three months ended JuneSeptember 30, 2017

NET INCOMELOSS
Net income decreased $6.7 millionloss in the 2018 period to $24.3was $23.0 million as compared to $30.9a net loss of $16.0 million for the 2017 period. The 2018 period primarily dueincluded a $49.7 million impairment charge related to our Jeffersonville outlet center. The 2017 period included a loss on the early extinguishment of debt of $35.6 million and equity in earnings (losses) includes our share of impairment charges totaling $9.0 million related to the gain of $6.9 million on the sale of our Westbrook centerBromont and Saint-Sauveur outlet centers in May 2017.Canada.

In the tables below, information set forth for new developments and expansions represent our Fort Worth outlet center, which opened in October 2017 and our Lancaster outlet center, which had an expansion and opened in September 2017. Properties disposed include our Westbrook outlet center sold in May 2017.

BASE RENTALS
Base rentals increased $137,000$2.0 million in the 2018 period compared to the 2017 period. The following table sets forth the changes in various components of base rentals (in thousands):
  2018 2017 Increase/(Decrease)
Base rentals from existing properties $76,011
 $76,411
 $(400)
Base rentals from new development and expansion 4,130
 1,671
 2,459
Base rentals from property disposed 
 524
 (524)
Straight-line rent adjustments 1,346
 1,588
 (242)
Termination fees 13
 1,450
 (1,437)
Amortization of above and below market rent adjustments, net (575) (856) 281
  $80,925
 $80,788
 $137

Base rentals from existing properties decreased primarily due to a slight decrease in average portfolio occupancy and lease modifications for certain tenants in the prior year.
  2018 2017 Increase/(Decrease)
Base rentals from existing properties $77,218
 $77,121
 $97
Base rentals from new development and expansion 4,199
 1,912
 2,287
Straight-line rent adjustments 1,451
 1,456
 (5)
Lease termination fees 70
 162
 (92)
Amortization of above and below market rent adjustments, net (615) (302) (313)
  $82,323
 $80,349
 $1,974

PERCENTAGE RENTALS
Percentage rentals increased $222,000$72,000 in the 2018 period compared to the 2017 period. The following table sets forth the changes in various components of percentage rentals (in thousands):
 2018 2017 Increase/(Decrease) 2018 2017 Increase/(Decrease)
Percentage rentals from existing properties $1,957
 $1,804
 $153
 $3,055
 $3,138
 $(83)
Percentage rentals from new development and expansion 70
 
 70
 155
 
 155
Percentage rentals from property disposed 
 1
 (1)
 $2,027
 $1,805
 $222
 $3,210
 $3,138
 $72

Percentage rentals represents revenues based on a percentage of tenants' sales volume above theircertain predetermined levels (“("contractual breakpoints").

EXPENSE REIMBURSEMENTS
Expense reimbursements increased $105,000$1.3 million in the 2018 period compared to the 2017 period. The following table sets forth the changes in various components of expense reimbursements (in thousands):
 2018 2017 Increase/(Decrease) 2018 2017 Increase/(Decrease)
Expense reimbursements from existing properties $31,902
 $33,148
 $(1,246) $33,543
 $33,223
 $320
Expense reimbursements from new development and expansion 2,226
 667
 1,559
 1,925
 957
 968
Expense reimbursements from property disposed 
 208
 (208)
 $34,128
 $34,023
 $105
 $35,468
 $34,180
 $1,288



Expense reimbursements represent the contractual recovery from tenants of certain CAM, insurance, property tax, promotional, advertising and management expenses. Certain expense reimbursements are based on the tenant's proportionate share of the allocable operating expenses for the property and thus generally fluctuate consistently with the related expenses. Other expense reimbursements, such as promotional, advertising and certain CAM payments, are contractually fixed and may escalate each year. See "Property Operating Expenses" below for a discussion of the decrease in operating expenses from our existing properties.

MANAGEMENT, LEASING AND OTHER SERVICES
Management, leasing and other services increased $21,000 in the 2018 period compared to the 2017 period. The following table sets forth the changes in various components of management, leasing and other services (in thousands):
  2018 2017 Increase/(Decrease)
Management and marketing $565
 $570
 $(5)
Leasing and other fees 65
 39
 26
  $630
 $609
 $21

OTHER INCOME
Other income decreased $388,000increased $142,000 in the 2018 period as compared to the 2017 period. The following table sets forth the changes in various components of other income (in thousands):

  2018 2017 Increase/(Decrease)
Other income from existing properties $1,934
 $2,331
 $(397)
Other income from new development and expansion 67
 39
 28
Other income from property disposed 
 19
 (19)
  $2,001
 $2,389
 $(388)

The decrease in other income from existing properties was primarily related to the expiration in July 2017 of a certain national sponsorship program that was not renewed.
  2018 2017 Increase/(Decrease)
Other income from existing properties $2,565
 $2,455
 $110
Other income from new development and expansion 87
 55
 32
  $2,652
 $2,510
 $142

PROPERTY OPERATING EXPENSES
Property operating expenses increased $830,000$2.1 million in the 2018 period compared to the 2017 period. The following table sets forth the changes in various components of property operating expenses (in thousands):
 2018 2017 Increase/(Decrease) 2018 2017 Increase/(Decrease)
Property operating expenses from existing properties $35,667
 $36,052
 $(385) $36,470
 $36,226
 $244
Property operating expenses from new development and expansion 2,279
 675
 1,604
 1,813
 1,002
 811
Property operating expenses from property disposed 
 389
 (389)
Other property operating expenses 1,370
 343
 1,027
 $37,946
 $37,116
 $830
 $39,653
 $37,571
 $2,082

Property operating expense from existing properties decreasedincreased primarily due to lower marketing expense.higher property tax expense at a few select outlet centers. Other property operating expenses increased primarily due to expenses related to due diligence for potential new developments.

GENERAL AND ADMINISTRATIVE EXPENSES
General and administrative expenses decreased $503,000$182,000 in the 2018 period compared to the 2017 period primarily due to lower payroll-related expenses.payroll related expenses and lower expenses related to the allowance for doubtful accounts receivable.

IMPAIRMENT CHARGE

During the third quarter 2018, we determined that the estimated future undiscounted cash flows of our Jeffersonville 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.



DEPRECIATION AND AMORTIZATION
Depreciation and amortization costs decreased $211,000increased $1.9 million in the 2018 period compared to the 2017 period. The following table sets forth the changes in various components of depreciation and amortization costs from the 2017 period to the 2018 period (in thousands):
  2018 2017 Increase/(Decrease)
Depreciation and amortization from existing properties $30,597
 $32,383
 $(1,786)
Depreciation and amortization from new development and expansion 2,097
 275
 1,822
Depreciation and amortization from property disposed 
 247
 (247)
  $32,694
 $32,905
 $(211)

Depreciation and amortization decreased at our existing properties due to the accelerated amortization of lease related intangibles upon store closures and also due to demolition activities at one of our centers in the 2017 period.
  2018 2017 Increase/(Decrease)
Depreciation and amortization from existing properties $30,752
 $30,547
 $205
Depreciation and amortization from new development and expansion 2,098
 429
 1,669
  $32,850
 $30,976
 $1,874

INTEREST EXPENSE AND LOSS ON EARLY EXTINGUISHMENT OF DEBT
Interest expense decreased $339,000$122,000 in the 2018 period compared to the 2017 period, primarily as a result of the July 2017 bond refinancing which effectively loweredwhere incremental interest incurred during the interest rate from 6.125% to 3.875% on $300.0 million of senior notes. These savingsredemption notice period when both the 2020 Notes and the 2027 Notes were outstanding. This decrease was partially offset by higher debt levels and higher LIBOR interest rate levels on our outstanding variable rate debt. The approximate average 30 day LIBOR rate for the 2018 period was 1.97%2.10% compared to 1.07%1.23% for the 2017 period. In addition, the 2018 period had significantly less capitalized interest due to less construction activity compared to the 2017 period.

GAIN ON SALE OF ASSETS
In MayJuly 2017, we soldcompleted an underwritten public offering of $300.0 million of 3.875% senior notes due 2027 (the "2027 Notes"). In August 2017, we used the net proceeds from the sale of the 2027 Notes, together with borrowings under our Westbrook outlet center forunsecured lines of credit, to redeem all of our 6.125% senior notes due 2020 (the "2020 Notes") (approximately $300.0 million in aggregate principal amount outstanding). The 2020 Notes were redeemed at par plus a make-whole premium of approximately $40.0$34.1 million. The loss on early extinguishment of debt includes the make-whole premium and approximately $1.5 million which resulted inof costs written off related to a gaindebt discount and the remaining net book value of $6.9 million.deferred 2020 Notes origination costs.

EQUITY IN EARNINGS (LOSSES) OF UNCONSOLIDATED JOINT VENTURES
Equity in earnings of unconsolidated joint ventures decreasedincreased approximately $168,000$7.7 million in the 2018 period compared to the 2017 period. Equity in earnings (losses) includes our share of impairment charges totaling $9.0 million in the 2017 period primarily duerelated to the Bromont and Saint-Sauveur outlet centers in Canada. The increase in equity in earnings of unconolidated joint ventures was partially offset by higher LIBOR interest rate levels on variable rate mortgages at our unconsolidated joint ventures. The approximate average 30 day LIBOR rate for the 2018 period was 1.97%2.10% compared to 1.07%1.23% for the 2017 period.

Comparison of the sixnine months ended JuneSeptember 30, 2018 to the sixnine months ended JuneSeptember 30, 2017

NET INCOME
Net income decreased $6.5$13.5 million in the 2018 period to $48.0$24.9 million as compared to $54.5$38.4 million for the 2017 period. The 2018 period primarily dueincluded a $49.7 million impairment charge related to our Jeffersonville outlet center. The 2017 period included a loss on the early extinguishment of debt of $35.6 million and equity in earnings (losses) includes our share of impairment charges totaling $9.0 million related to the gain of $6.9 million on the sale of our Westbrook centerBromont and Saint-Sauveur outlet centers in May 2017.Canada.

In the tables below, information set forth for new developments and expansions represent our Fort Worth outlet center, which opened in October 2017 and our Lancaster outlet center, which had an expansion and opened in September 2017. Properties disposed include our Westbrook outlet center sold in May 2017.
 


BASE RENTALS
Base rentals increased $1.3$3.3 million in the 2018 period compared to the 2017 period. The following table sets forth the changes in various components of base rentals (in thousands):
 2018 2017 Increase/(Decrease) 2018 2017 Increase/(Decrease)
Base rentals from existing properties $150,910
 $151,690
 $(780) $228,130
 $228,810
 $(680)
Base rentals from new development and expansion 8,213
 3,370
 4,843
 12,412
 5,282
 7,130
Base rentals from property disposed 
 1,596
 (1,596) 
 1,596
 (1,596)
Straight-line rent adjustments 3,294
 3,293
 1
 4,744
 4,749
 (5)
Termination fees 1,064
 2,633
 (1,569)
Lease termination fees 1,134
 2,796
 (1,662)
Amortization of above and below market rent adjustments, net (1,023) (1,464) 441
 (1,639) (1,766) 127
 $162,458
 $161,118
 $1,340
 $244,781
 $241,467
 $3,314

Base rentals from existing properties decreased primarily due to a slight decrease in average portfolio occupancy and lease modifications for certain tenantstenants. The decrease in lease termination fees is due to fewer store closings prior to natural expiration of the prior year.lease.

PERCENTAGE RENTALS
Percentage rentals decreased $204,000$132,000 in the 2018 period compared to the 2017 periodperiod. The following table sets forth the changes in various components of percentage rentals (in thousands):
 2018 2017 Increase/(Decrease) 2018 2017 Increase/(Decrease)
Percentage rentals from existing properties $3,331
 $3,593
 $(262) $6,386
 $6,731
 $(345)
Percentage rentals from new development and expansion 125
 2
 123
 280
 2
 278
Percentage rentals from property disposed 
 65
 (65) 
 65
 (65)
 $3,456
 $3,660
 $(204) $6,666
 $6,798
 $(132)

Percentage rentals represents revenues based on a percentage of tenants' sales volume above their contractual breakpoints. The decrease in percentage rentals is primarily due to annual increases in contractual breakpoints in certain leases.leases without corresponding increases in sales volume.

EXPENSE REIMBURSEMENTS
Expense reimbursements increased $1.8$3.1 million in the 2018 period compared to the 2017 period. The following table sets forth the changes in various components of expense reimbursements (in thousands):
 2018 2017 Change 2018 2017 Increase/(Decrease)
Expense reimbursements from existing properties $68,002
 $68,550
 $(548) $101,546
 $101,773
 $(227)
Expense reimbursements from new development and expansions 4,406
 1,319
 3,087
 6,330
 2,276
 4,054
Expense reimbursements from properties disposed 
 752
 (752) 
 752
 (752)
 $72,408
 $70,621
 $1,787
 $107,876
 $104,801
 $3,075

Expense reimbursements represent the contractual recovery from tenants of certain CAM, insurance, property tax, promotional, advertising and management expenses. Certain expense reimbursements are based on the tenant's proportionate share of the allocable operating expenses for the property and thus generally fluctuate consistently with the related expenses. Other expense reimbursements, such as promotional, advertising and certain CAM payments, are contractually fixed and may escalate each year. See "Property Operating Expenses" below for a discussion of the decrease in operating expenses from our existing properties.

MANAGEMENT, LEASING AND OTHER SERVICES
Management, leasing and other services increased $55,000 in the 2018 period compared to the 2017 period. The following table sets forth the changes in various components of management, leasing and other services (in thousands):
  2018 2017 Increase/(Decrease)
Management and marketing $1,133
 $1,112
 $21
Leasing and other fees 110
 76
 34
  $1,243
 $1,188
 $55



OTHER INCOME
Other income decreased 714,000572,000 in the 2018 period as compared to the 2017 period. The following table sets forth the changes in various components of other income (in thousands):
 2018 2017 Increase/(Decrease) 2018 2017 Increase/(Decrease)
Other income from existing properties $3,550
 $4,279
 $(729) $6,115
 $6,724
 $(609)
Other income from new development and expansions 131
 70
 61
 218
 126
 92
Other income from property disposed 
 46
 (46) 
 55
 (55)
 $3,681
 $4,395
 $(714) $6,333
 $6,905
 $(572)

The decrease in other income from existing properties was primarily related to the expiration in July 2017 of a certain national sponsorship program that was not renewed.

PROPERTY OPERATING EXPENSES
Property operating expenses increased $2.7$4.7 million in the 2018 period as compared to the 2017 period. The following table sets forth the changes in various components of property operating expenses (in thousands):
 2018 2017 Increase/(Decrease) 2018 2017 Increase/(Decrease)
Property operating expenses from existing properties $75,694
 $75,074
 $620
 $109,742

$109,382
 $360
Property operating expenses from new development and expansion 4,470
 1,347
 3,123
 6,308
 2,298
 4,010
Property operating expenses from property disposed 
 1,082
 (1,082) 
 1,061
 (1,061)
Other property operating expense 3,767
 2,333
 1,434
 $80,164
 $77,503
 $2,661
 $119,817
 $115,074
 $4,743

Property operating expense from existing properties increased primarily due to higher snow removal costs partially offset by lower marketing expense in the 2018 period compared to the 2017 period. Other property operating expenses increased primarily due to expenses related to due diligence for potential new developments.

GENERAL AND ADMINISTRATIVE EXPENSES
General and administrative expenses decreased $803,000$985,000 in the 2018 period compared to the 2017 period, primarily due to lower payroll-related expenses.payroll related expenses and lower expenses related to the allowance for doubtful accounts receivable.

ABANDONED PRE-DEVELOPMENT COSTS
During the 2017 period, we decided to terminate a purchase option for a pre-development stage project near Detroit, Michigan and as a result, recorded a $627,000$528,000 charge, representing the cumulative related pre-development costs.

IMPAIRMENT CHARGE
During the third quarter 2018, we determined that the estimated future undiscounted cash flows of our Jeffersonville 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.



DEPRECIATION AND AMORTIZATION
Depreciation and amortization costs increased $1.6$3.5 million in the 2018 period compared to the 2017 period. The following table sets forth the changes in various components of depreciation and amortization costs from the 2018 period to the 2017 period (in thousands):
 2018 2017 Increase/(Decrease) 2018 2017 Increase/(Decrease)
Depreciation and amortization expenses from existing properties $61,635
 $62,926
 $(1,291) $92,387
 $93,472
 $(1,085)
Depreciation and amortization expenses from new development and expansion 4,182
 596
 3,586
 6,280
 1,026
 5,254
Depreciation and amortization from property disposed 
 677
 (677) 
 677
 (677)
 $65,817
 $64,199
 $1,618
 $98,667
 $95,175
 $3,492

Depreciation and amortization decreased at our existing properties due to the accelerated amortization of lease related intangibles upon store closures and also due to demolition activities at one of our centers in the 2017 period.



INTEREST EXPENSE AND LOSS ON EARLY EXTINGUISHMENT OF DEBT
Interest expense decreased $1.0$1.1 million in the 2018 period compared to the 2017 period, primarily as a result of the July 2017 bond refinancing, which effectively lowered the interest rate from 6.125% to 3.875% on $300.0 million of senior notes. TheseThis savings werewas partially offset by higher debt levels and higher LIBOR interest rate levels on our outstanding variable rate debt. The approximate average 30 day LIBOR rate for the 2018 period was 1.81%1.91% compared to 0.94%1.04% for the 2017 period.

In July 2017, we completed an underwritten public offering of $300.0 million of 3.875% senior notes due 2027 (the "2027 Notes"). In August 2017, we used the net proceeds from the sale of the 2027 Notes, together with borrowings under our unsecured lines of credit, to redeem all of our 6.125% senior notes due 2020 (the "2020 Notes") (approximately $300.0 million in aggregate principal amount outstanding). The 2020 Notes were redeemed at par plus a make-whole premium of approximately $34.1 million. The loss on early extinguishment of debt includes the make-whole premium and approximately $1.5 million of costs written off related to a debt discount and the remaining net book value of deferred 2020 Notes origination costs.

GAIN ON SALE OF ASSETS
In May 2017, we sold our Westbrook outlet center for approximately $40.0 million, which resulted in a gain of $6.9 million.

EQUITY IN EARNINGS (LOSSES) OF UNCONSOLIDATED JOINT VENTURES
Equity in earnings of unconsolidated joint ventures decreasedincreased approximately $292,000$7.4 million in the 2018 period compared to the 2017 period. Equity in earnings (losses) includes our share of impairment charges totaling $9.0 million in the 2017 period primarily duerelated to the Bromont and Saint-Sauveur outlet centers in Canada. The increase in equity in earnings of unconsolidated joint ventures was partially offset by higher LIBOR interest rate levels on variable rate mortgages at our unconsolidated joint ventures. The approximate average 30 day LIBOR rate for the 2018 period was 1.81%1.91% compared to 0.94%1.04% for the 2017 period.




LIQUIDITY AND CAPITAL RESOURCES OF THE COMPANY

In this "Liquidity and Capital Resources of the Company" section, the term "the Company" refers only to Tanger Factory Outlet Centers, Inc. on an unconsolidated basis, excluding the Operating Partnership.

The Company's business is operated primarily through the Operating Partnership. The Company issues public equity from time to time, but does not otherwise generate any capital itself or conduct any business itself, other than incurring certain expenses in operating as a public company, which are fully reimbursed by the Operating Partnership. The Company does not hold any indebtedness, and its only material asset is its ownership of partnership interests of the Operating Partnership. The Company's principal funding requirement is the payment of dividends on its common shares. The Company's principal source of funding for its dividend payments is distributions it receives from the Operating Partnership.

Through its ownership of the sole general partner of the Operating Partnership, the Company has the full, exclusive and complete responsibility for the Operating Partnership's day-to-day management and control. The Company causes the Operating Partnership to distribute all, or such portion as the Company may in its discretion determine, of its available cash in the manner provided in the Operating Partnership's partnership agreement. The Company receives proceeds from equity issuances from time to time, but is required by the Operating Partnership's partnership agreement to contribute the proceeds from its equity issuances to the Operating Partnership in exchange for partnership units of the Operating Partnership.



We are a well-known seasoned issuer with a shelf registration that expires in March 2021 that allows the Company to register unspecified various classes of equity securities and the Operating Partnership to register unspecified, various classes of debt securities. As circumstances warrant, the Company may issue equity from time to time on an opportunistic basis, dependent upon market conditions and available pricing. The Operating Partnership may use the proceeds to repay debt, including borrowings under its lines of credit, to develop new or existing properties, to make acquisitions of properties or portfolios of properties, to invest in existing or newly created joint ventures or for general corporate purposes.

The liquidity of the Company is dependent on the Operating Partnership's ability to make sufficient distributions to the Company. The Operating Partnership is a party to loan agreements with various bank lenders that require the Operating Partnership to comply with various financial and other covenants before it may make distributions to the Company. The Company also guarantees some of the Operating Partnership's debt. If the Operating Partnership fails to fulfill its debt requirements, which trigger the Company's guarantee obligations, then the Company may be required to fulfill its cash payment commitments under such guarantees. However, the Company's only material asset is its investment in the Operating Partnership.

The Company believes the Operating Partnership's sources of working capital, specifically its cash flow from operations, and borrowings available under its unsecured lines of credit, are adequate for it to make its distribution payments to the Company and, in turn, for the Company to make its dividend payments to its shareholders and to finance its continued operations, growth strategy and additional expenses we expect to incur for at least the next twelve months. However, there can be no assurance that the Operating Partnership's sources of capital will continue to be available at all or in amounts sufficient to meet its needs, including its ability to make distribution payments to the Company. The unavailability of capital could adversely affect the Operating Partnership's ability to pay its distributions to the Company which will, in turn, adversely affect the Company's ability to pay cash dividends to its shareholders.

For the Company to maintain its qualification as a REIT, it must pay dividends to its shareholders aggregating annually at least 90% of its taxable income (excluding capital gains). While historically the Company has satisfied this distribution requirement by making cash distributions to its shareholders, it may choose to satisfy this requirement by making distributions of cash or other property, including, in limited circumstances, the Company's own shares.

As a result of this distribution requirement, the Operating Partnership cannot rely on retained earnings to fund its on-going operations to the same extent that other companies whose parent companies are not real estate investment trusts can. The Company may need to continue to raise capital in the equity markets to fund the Operating Partnership's working capital needs, as well as potential new developments, expansions and renovations of existing properties, acquisitions, or investments in existing or newly created joint ventures.



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 Company does not have significant assets other than its investment in 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. However, all debt is held directly or indirectly at the Operating Partnership level, and the Company has guaranteed some of the Operating Partnership's unsecured debt as discussed below. Because the Company consolidates the Operating Partnership, the section entitled "Liquidity and Capital Resources of the Operating Partnership" should be read in conjunction with this section to understand the liquidity and capital resources of the Company on a consolidated basis and how the Company is operated as a whole.

In May 2017, we announced that our Board of Directors authorized the repurchase of up to $125.0 million of our outstanding common shares as market conditions warrant over a period commencing on May 19, 2017 and expiring on May 18, 2019.  Repurchases may be made from time to time through open market, privately-negotiated, structured or derivative transactions (including accelerated share repurchase transactions), or other methods of acquiring shares. The Company intends to structure open market purchases to occur within pricing and volume requirements of Rule 10b-18.  The Company may, from time to time, enter into Rule 10b5-1 plans to facilitate the repurchase of its shares under this authorization.





Shares repurchased for the three and sixnine months ended JuneSeptember 30, 2018 arewere as follows:
 Three months ended June 30, Six months ended June 30, Three months ended September 30, Nine months ended September 30,
 2018 2018 2018 2018
Total number of shares purchased 475,549
 919,249
 
 919,249
Average price paid per share $21.01
 $21.74
 $
 $21.74
Total price paid exclusive of commissions and related fees (in thousands) $9,990
 $19,980
 $
 $19,980

The remaining amount authorized to be repurchased under the program as of JuneSeptember 30, 2018 was approximately $55.7 million. For more information, see “Item 2. Unregistered Sales of Equity Securities and Use of Proceeds” in Part II of this Quarterly Report on Form 10-Q.

In JulyOctober 2018, the Company's Board of Directors declared a $0.35 cash dividend per common share payable on AugustNovember 15, 2018 to each shareholder of record on JulyOctober 31, 2018, and the Trustees of Tanger GP Trust declared a $0.35 cash distribution per Operating Partnership unit to the Operating Partnership's unitholders.

LIQUIDITY AND CAPITAL RESOURCES OF THE OPERATING PARTNERSHIP

General Overview

In this "Liquidity and Capital Resources of the Operating Partnership" section, the terms "we", "our" and "us" refer to the Operating Partnership or the Operating Partnership and the Company together, as the text requires.

Property rental income represents our primary source to pay property operating expenses, debt service, distributions and capital expenditures needed to maintain our properties. To the extent that our cash flow from operating activities is insufficient to cover our capital needs, including new developments, expansions of existing outlet centers, acquisitions and investments in unconsolidated joint ventures, we finance such activities from borrowings under our unsecured lines of credit or from the proceeds from the Operating Partnership's debt offerings and the Company's equity offerings.



We believe we achieve a strong and flexible financial position by attempting to: (1) maintain a conservative leverage position relative to our portfolio when pursuing new development, expansion and acquisition opportunities, (2) extend and sequence debt maturities, (3) manage our interest rate risk through a proper mix of fixed and variable rate debt, (4) maintain access to liquidity by using our unsecured lines of credit in a conservative manner and (5) preserve internally generated sources of capital by strategically divesting of underperforming assets and maintaining a conservative distribution payout ratio. We manage our capital structure to reflect a long term investment approach and utilize multiple sources of capital to meet our requirements.

The following table sets forth our changes in cash flows (in thousands):
 Six months ended June 30,   Nine months ended September 30,  
 2018 2017 Change 2018 2017 Change
Net cash provided by operating activities $115,292
 $110,666
 $4,626
 $179,968
 $181,530
 $(1,562)
Net cash used in investing activities (28,701) (55,048) 26,347
 (36,815) (89,052) 52,237
Net cash used in financing activities (88,453) (59,575) (28,878) (144,782) (95,954) (48,828)
Effect of foreign currency rate changes on cash and equivalents (53) 9
 (62) (60) (54) (6)
Net decrease in cash and cash equivalents $(1,915) $(3,948) $2,033
 $(1,689) $(3,530) $1,841

Operating Activities

The increasedecrease in net cash provided by operating activities in the 2018 period is primarily due to the increase in bond interest payments due to the change in the timing of the payments partially offset by the incremental cash flow provided by the addition of the Fort Worth outlet center and the expansion of the Lancaster outlet center during the second half of 2017 and the change in other assets.



2017.

Investing Activities

The primary cause for the decrease in net cash used in investing activities was due to higherlower levels of development activity in the 2018 period compared to the 2017 period. In 2017, we had construction expenditures for our Fort Worth and Lancaster outlet centers. In the 2018 period, we had no new developments under construction. Partially offsetting the decrease in net cash used in investing activities was the net proceeds from the sale of our Westbrook center in May 2017.

Financing Activities

The primary cause forGiven the increase in net cash used in financing activities was lower borrowingsdevelopment activity in the 2018 period whenas discussed above, we borrowed less in the 2018 period compared to the 2017 period due to higher development activity inperiod. In the 2017 period, partially offset by lower amounts ofwe used cash used to repurchase our$49.4 million of the Company's common shares, compared to $20.0 million in the 2018 period. Also in 2017, we used cash to fund the payment of a make-whole premium totaling $34.1 million related to early extinguishment of debt.



Capital Expenditures

The following table details our capital expenditures (in thousands):
 Six months ended June 30,   Nine months ended September 30,  
 2018 2017 Change 2018 2017 Change
Capital expenditures analysis:            
New outlet center developments and expansions $5,285
 $56,306
 $(51,021) $6,398
 $87,486
 $(81,088)
Major outlet center renovations 1,786
 10,243
 (8,457) 1,973
 13,813
 (11,840)
Second generation tenant allowances 8,326
 10,034
 (1,708) 11,588
 15,815
 (4,227)
Other capital expenditures 9,134
 14,190
 (5,056) 15,929
 20,056
 (4,127)
 24,531
 90,773
 (66,242) 35,888
 137,170
 (101,282)
Conversion from accrual to cash basis 16,681
 (2,012) 18,693
 17,461
 (4,558) 22,019
Additions to rental property-cash basis $41,212
 $88,761
 $(47,549) $53,349
 $132,612
 $(79,263)
The decrease in new outlet center developments and expansions expenditures was primarily due to construction expenditures, including first generation tenant allowances, that occurred in the 2017 period for our Fort Worth and Lancaster outlet centers.
The decrease in major outlet center renovations in the 2018 period was primarily due to construction activities at our Myrtle Beach Hwy 17, Riverhead and Rehoboth Beach outlet centers that occurred in 2017.
The decrease in second generation tenant allowances was due to the re-merchandising efforts that occurred in the 2017 period to bring high volume tenants to 5 outlet centers.
The decrease in other capital expenditures in the 2018 period is primarily due to tenant interior build outs and the installation of solar panels at several of our outlet centers that occurred in 2017.
Current Developments

We intend to continue to grow our portfolio by developing, expanding or acquiring additional outlet centers. However, you should note that any developments or expansions that we, or a joint venture that we have an ownership interest in, have planned or anticipated may not be started or completed as scheduled, or may not result in accretive net income or funds from operations ("FFO"). See the section "Non-GAAP Supplemental Earnings Measures" - "Funds From Operations" below for further discussion of FFO.

In addition, we regularly evaluate acquisition or disposition proposals and engage from time to time in negotiations for acquisitions or dispositions of properties. We may also enter into letters of intent for the purchase or sale of properties. Any prospective acquisition or disposition that is being evaluated or which is subject to a letter of intent may not be consummated, or if consummated, may not result in an increase in earnings or liquidity.



Potential Future Developments

As of the date of this filing, we are in the initial study period for potential new developments. We may also use joint venture arrangements to develop other potential sites. There can be no assurance, however, that these potential future projects will ultimately be developed.

In the case of projects to be wholly-owned by us, we expect to fund these projects from amounts available under our unsecured lines of credit, but may also fund them with capital from additional public debt and equity offerings. For projects to be developed through joint venture arrangements, we may use collateralized construction loans to fund a portion of the project, with our share of the equity requirements funded from sources described above. See “Off-Balance Sheet Arrangements” for a discussion of unconsolidated joint venture development activities.



Financing Arrangements

As of JuneSeptember 30, 2018, unsecured borrowings represented 95% of our outstanding debt and 93% of the gross book value of our real estate portfolio was unencumbered. The Company guarantees the Operating Partnership's obligations under our lines of credit. As of JuneSeptember 30, 2018, we had $370.3$390.9 million available under our unsecured lines of credit after taking into account outstanding letters of credit of $6.0 million.

Increased Borrowing Capacity and Extension of Unsecured Lines of Credit

In January 2018, we closed on amendments to our unsecured lines of credit, which increased the borrowing capacity from $520.0 million to $600.0 million and extended the maturity date from October 2019 to October 2021, with a one-year extension option. We also reduced the interest rate spread over LIBOR from 0.90% to 0.875%, and increased the incremental borrowing availability through an accordion feature on the syndicated line from $1.0 billion to $1.2 billion. Loan origination costs associated with the amendments totaled approximately $2.3 million.

Southaven Mortgage

In February 2018, the consolidated joint venture that owns the Tanger outlet center in Southaven, Mississippi amended and restated the $60.0 million mortgage loan secured by the property that was scheduled to mature in April 2018. The amended and restated loan reduced the principal balance to $51.4 million, increased the interest rate from LIBOR + 1.75% to LIBOR + 1.80% and extended the maturity to April 2021, with a two-year extension option. In March 2018, the consolidated joint venture entered into an interest rate swap, effective March 1, 2018, which fixed the base LIBOR rate at 2.47% on a notional amount of $40.0 million through January 31, 2021.

Unsecured Term Loan

In October 2018, we amended and restated our unsecured term loan, increasing the size of the loan from $325.0 million to $350.0 million, extending maturity from April 2021 to April 2024, and reducing the interest rate spread over LIBOR from 0.95% to 0.90%. The $25.0 million of proceeds were used to pay down the balances outstanding under our unsecured lines of credit.

We intend to retain the ability to raise additional capital, including public debt or equity, to pursue attractive investment opportunities that may arise and to otherwise act in a manner that we believe to be in the best interests of our shareholders and unitholders. The Company is a well-known seasoned issuer with a joint shelf registration with the Operating Partnership, expiring in March 2021, that allows us to register unspecified amounts of different classes of securities on Form S-3. To generate capital to reinvest into other attractive investment opportunities, we may also consider the use of additional operational and developmental joint ventures, the sale or lease of outparcels on our existing properties and the sale of certain properties that do not meet our long-term investment criteria. Based on cash provided by operations, existing lines of credit, ongoing relationships with certain financial institutions and our ability to sell debt or issue equity subject to market conditions, we believe that we have access to the necessary financing to fund the planned capital expenditures for at least the next twelve months.

We anticipate that adequate cash will be available to fund our operating and administrative expenses, regular debt service obligations, and the payment of dividends in accordance with REIT requirements in both the short and long-term. Although we receive most of our rental payments on a monthly basis, distributions to shareholders and unitholders are made quarterly and interest payments on the senior, unsecured notes are made semi-annually. Amounts accumulated for such payments will be used in the interim to reduce the outstanding borrowings under our existing unsecured lines of credit or invested in short-term money market or other suitable instruments.

We believe our current balance sheet position is financially sound; however, due to the uncertainty and unpredictability of the capital and credit markets, we can give no assurance that affordable access to capital will exist between now and when our next significant debt maturity,matures, which is for our unsecured term loan, occurslines of credit. The unsecured lines of credit expire in 2021.2021, with a one-year extension option that may extend the maturity to 2022.
 


The interest rate spreads associated with our unsecured lines of credit and our unsecured term loan are based on our current investment grade credit rating.  If our credit rating is downgraded or upgraded, our interest rate spread would adjust accordingly. 



The Operating Partnership's debt agreements require the maintenance of certain ratios, including debt service coverage and leverage, and limit the payment of dividends such that dividends and distributions will not exceed funds from operations, as defined in the agreements, for the prior fiscal year on an annual basis or 95% on a cumulative basis. We have historically been and currently are in compliance with all of our debt covenants. We expect to remain in compliance with all of our existing debt covenants; however, should circumstances arise that would cause us to be in default, the various lenders would have the ability to accelerate the maturity on our outstanding debt.

We believe our most restrictive covenants are contained in our senior, unsecured notes. Key financial covenants and their covenant levels, which are calculated based on contractual terms, include the following:
Senior unsecured notes financial covenantsRequiredActual
Total consolidated debt to adjusted total assets<60%51%
Total secured debt to adjusted total assets<40%3%
Total unencumbered assets to unsecured debt>150%187184%

OFF-BALANCE SHEET ARRANGEMENTS

The following table details certain information as of JuneSeptember 30, 2018 about various unconsolidated real estate joint ventures in which we have an ownership interest:
Joint Venture Outlet Center Location Ownership % 
Square Feet
(in 000's)
 Carrying Value of Investment (in millions) Outlet Center Location Ownership % 
Square Feet
(in 000's)
 Carrying Value of Investment (in millions)
Investments included in investments in unconsolidated joint ventures:Investments included in investments in unconsolidated joint ventures:    
National Harbor National Harbor, MD 50.0% 341
 $1.2
 National Harbor, MD 50.0% 341
 $0.6
RioCan Canada Various 50.0% 923
 109.3
 Various 50.0% 923
 110.7
Investments included in investments in unconsolidated joint ventures     $110.5
            $111.3
      
Investments included in other liabilities:Investments included in other liabilities:      
Columbus (1)
 Columbus, OH 50.0% 355
 $(0.3) Columbus, OH 50.0% 355
 $(1.1)
Charlotte(1)
 Charlotte, NC 50.0% 398
 (9.8) Charlotte, NC 50.0% 398
 (10.3)
Galveston/Houston(1)
 Texas City, TX 50.0% 353
 (15.5) Texas City, TX 50.0% 353
 (15.3)
Investments included in other liabilities     $(25.6)
     $(26.7)
(1)The negative carrying value is due to distributions exceeding contributions and increases or decreases from the equity in earnings of the joint venture.

Our joint ventures are generally subject to buy-sell provisions which are customary for joint venture agreements in the real estate industry. Either partner may initiate these provisions (subject to any applicable lock up period), which could result in either the sale of our interest or the use of available cash or additional borrowings to acquire the other party's interest. Under these provisions, one partner sets a price for the property, then the other partner has the option to either (1) purchase their partner's interest based on that price or (2) sell its interest to the other partner based on that price. Since the partner other than the partner who triggers the provision has the option to be the buyer or seller, we do not consider this arrangement to be a mandatory redeemable obligation.

We provide guarantees to lenders for our joint ventures which include standard non-recourse carve out indemnifications for losses arising from items such as but not limited to fraud, physical waste, payment of taxes, environmental indemnities, misapplication of insurance proceeds or security deposits and failure to maintain required insurance. For construction and term loans, we may include a guaranty of completion as well as a principal guaranty ranging from 5% to 100% of principal.  The principal guarantees include terms for release based upon satisfactory completion of construction and achievement of performance targets including occupancy thresholds and minimum debt service coverage tests. Our joint ventures may contain make-whole provisions in the event that demands are made on any existing guarantees.




Charlotte

In June 2018, the Charlotte joint venture closed on a $100.0 million mortgage loan with a fixed interest rate of 4.27%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.

Debt of unconsolidated joint ventures

The following table details information regarding the outstanding debt of the unconsolidated joint ventures and guarantees of such debt provided by us as of JuneSeptember 30, 2018 (dollars in millions):

Joint Venture Total Joint
Venture Debt
 Maturity Date Interest Rate Percent Guaranteed by the Operating Partnership Maximum Guaranteed Amount by the Company Total Joint
Venture Debt
 Maturity Date Interest Rate Percent Guaranteed by the Operating Partnership Maximum Guaranteed Amount by the Company
Charlotte $100.0
 July 2028 4.27% % $
 $100.0
 July 2028 4.27%
 % $
Columbus 85.0
 November 2019 LIBOR + 1.65% 7.5% 6.4
 85.0
 November 2019 LIBOR + 1.65%
 7.5% 6.4
Galveston/Houston 80.0
 July 2020 LIBOR + 1.65% 12.5% 10.0
 80.0
 July 2020 LIBOR + 1.65%
 12.5% 10.0
National Harbor 87.0
 November 2019 LIBOR + 1.65% 10.0% 8.7
 87.0
 November 2019 LIBOR + 1.65%
 10.0% 8.7
RioCan Canada 9.9
 May 2020 5.75% 30.3% 3.0
 10.0
 May 2020 5.75% 31.0% 3.1
Debt premium and debt origination costs (1.4)         (1.4)        
 $360.5
       $28.1
 $360.6
       $28.2

Fees from unconsolidated joint ventures

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 Three months ended Nine months ended
 June 30, June 30, September 30, September 30,
 2018 2017 2018 2017 2018 2017 2018 2017
Fee:      
  
      
  
Management and marketing $565
 $570
 $1,133
 $1,112
 $571
 $564
 $1,704
 $1,676
Leasing and other fees 65
 39
 110
 76
 12
 24
 122
 100
Total Fees $630
 $609
 $1,243
 $1,188
 $583
 $588
 $1,826
 $1,776



CRITICAL ACCOUNTING POLICIES AND ESTIMATES

Refer to our 2017 Annual Report on Form 10-K of the Company and the Operating Partnership for a discussion of our critical accounting policies which include principles of consolidation, acquisition of real estate, cost capitalization, impairment of long-lived assets and revenue recognition. There have been no material changes to these policies in 2018.




NON-GAAP SUPPLEMENTAL MEASURES

Funds From Operations

Funds From Operations ("FFO") is a widely used measure of the operating performance for real estate companies that supplements net income (loss) determined in accordance with GAAP. We determine FFO based on the definition set forth by the National Association of Real Estate Investment Trusts ("NAREIT"), of which we are a member. FFO represents net income (loss) (computed in accordance with GAAP) before extraordinary items and gains (losses) on sale or disposal of depreciable operating properties, plus depreciation and amortization of real estate assets, impairment lossescharges on depreciable real estate of consolidated real estate and after adjustments for unconsolidated partnerships and joint ventures, including depreciation and amortization, and impairment losses on investments in unconsolidated joint ventures driven by a measurable decrease in the fair value of depreciable real estate held by the unconsolidated joint ventures.

FFO is intended to exclude historical cost depreciation of real estate as required by GAAP which assumes that the value of real estate assets diminishes ratably over time. Historically, however, real estate values have risen or fallen with market conditions. Because FFO excludes depreciation and amortization of real estate assets, gains and losses from property dispositions and extraordinary items, it provides a performance measure that, when compared year over year, reflects the impact to operations from trends in occupancy rates, rental rates, operating costs, development activities and interest costs, providing perspective not immediately apparent from net income.

We present FFO because we consider it an important supplemental measure of our operating performance. In addition, a portion of cash bonus compensation to certain members of management is based on our FFO or Adjusted Funds From Operations ("AFFO"), which is described in the section below. We believe it is useful for investors to have enhanced transparency into how we evaluate our performance and that of our management. In addition, FFO is frequently used by securities analysts, investors and other interested parties in the evaluation of REITs, many of which present FFO when reporting their results. FFO is also widely used by us and others in our industry to evaluate and price potential acquisition candidates. NAREIT has encouraged its member companies to report their FFO as a supplemental, industry-wide standard measure of REIT operating performance.

FFO has significant limitations as an analytical tool, and you should not consider it in isolation, or as a substitute for analysis of our results as reported under GAAP. Some of these limitations are:

FFO does not reflect our cash expenditures, or future requirements, for capital expenditures or contractual commitments;

FFO does not reflect changes in, or cash requirements for, our working capital needs;

Although depreciation and amortization are non-cash charges, the assets being depreciated and amortized will often have to be replaced in the future, and FFO does not reflect any cash requirements for such replacements;

FFO, which includes discontinued operations, may not be indicative of our ongoing operations; and

Other companies in our industry may calculate FFO differently than we do, limiting its usefulness as a comparative measure.

Because of these limitations, FFO should not be considered as a measure of discretionary cash available to us to invest in the growth of our business or our dividend paying capacity. We compensate for these limitations by relying primarily on our GAAP results and using FFO only as a supplemental measure.



Adjusted Funds From Operations

We present AFFO as a supplemental measure of our performance. We define AFFO as FFO further adjusted to eliminate the impact of certain items that we do not consider indicative of our ongoing operating performance. These further adjustments are itemized in the table below. You are encouraged to evaluate these adjustments and the reasons we consider them appropriate for supplemental analysis. In evaluating AFFO you should be aware that in the future we may incur expenses that are the same as or similar to some of the adjustments in this presentation. Our presentation of AFFO should not be construed as an inference that our future results will be unaffected by unusual or non-recurring items.

We present AFFO because we believe it assists investors and analysts in comparing our performance across reporting periods on a consistent basis by excluding items that we do not believe are indicative of our core operating performance. In addition, we believe it is useful for investors to have enhanced transparency into how we evaluate management’s performance and the effectiveness of our business strategies. We use AFFO when certain material, unplanned transactions occur as a factor in evaluating management's performance and to evaluate the effectiveness of our business strategies, and may use AFFO when determining incentive compensation.

AFFO has limitations as an analytical tool. Some of these limitations are:

AFFO does not reflect our cash expenditures, or future requirements, for capital expenditures or contractual commitments;

AFFO does not reflect changes in, or cash requirements for, our working capital needs;

Although depreciation and amortization are non-cash charges, the assets being depreciated and amortized will often have to be replaced in the future, and AFFO does not reflect any cash requirements for such replacements;

AFFO does not reflect the impact of certain cash charges resulting from matters we consider not to be indicative of our ongoing operations; and

Other companies in our industry may calculate AFFO differently than we do, limiting its usefulness as a comparative measure.

Because of these limitations, AFFO should not be considered in isolation or as a substitute for performance measures calculated in accordance with GAAP. We compensate for these limitations by relying primarily on our GAAP results and using AFFO only as a supplemental measure.



Below is a reconciliation of net income to FFO available to common shareholders and AFFO available to common shareholders (in thousands, except per share amounts):
 Three months ended Six months ended Three months ended Nine months ended
 June 30, June 30, September 30, September 30,
 2018 2017 2018 2017 2018 2017 2018 2017
Net income $24,290
 $30,947
 $47,975
 $54,461
Net income (loss) $(23,031) $(16,034) $24,944
 $38,427
Adjusted for:                
Depreciation and amortization of real estate assets - consolidated 32,062
 32,383
 64,604
 63,238
 32,237
 30,396
 96,841
 93,634
Depreciation and amortization of real estate assets - unconsolidated joint ventures 3,325
 3,550
 6,554
 7,388
 3,466
 3,583
 10,020
 10,971
Impairment charge - consolidated 49,739
 
 49,739
 
Impairment charges - unconsolidated joint ventures 
 9,021
 
 9,021
Gain on sale of assets 
 (6,943) 
 (6,943) 
 
 
 (6,943)
FFO 59,677
 59,937
 119,133
 118,144
 62,411
 26,966
 181,544
 145,110
FFO attributable to noncontrolling interests in other consolidated partnerships (92) 
 278
 
 
 
 278
 
Allocation of earnings to participating securities (534) (528) (1,011) (1,040) (560) (306) (1,571) (1,346)
FFO available to common shareholders (1)
 $59,051
 $59,409
 $118,400
 $117,104
 $61,851
 $26,660
 $180,251
 $143,764
As further adjusted for:                
Abandoned pre-development costs 
 
 
 627
 
 (99) 
 528
Make-whole premium due to early extinguishment of debt 
 34,143
 
 34,143
Write-off of debt discount and debt origination costs due to early extinguishment of debt 
 1,483
 
 1,483
Impact of above adjustments to the allocation of earnings to participating securities 
 
 
 (5) 
 (249) 
 (254)
AFFO available to common shareholders (1)
 $59,051
 $59,409
 $118,400
 $117,726
 $61,851
 $61,938
 $180,251
 $179,664
FFO available to common shareholders per share - diluted (1)
 $0.60
 $0.59
 $1.20
 $1.17
 $0.63
 $0.27
 $1.83
 $1.44
AFFO available to common shareholders per share - diluted (1)
 $0.60
 $0.59
 $1.20
 $1.17
 $0.63
 $0.63
 $1.83
 $1.80
                
Weighted Average Shares:                
Basic weighted average common shares 93,298
 95,025
 93,470
 95,217
 93,109
 93,923
 93,349
 94,781
Effect of outstanding options and restricted common shares 
 5
 
 35
 
 
 
 23
Diluted weighted average common shares (for earnings per share computations) 93,298
 95,030
 93,470
 95,252
 93,109
 93,923
 93,349
 94,804
Exchangeable operating partnership units 4,996
 5,028
 4,996
 5,028
 4,995
 5,028
 4,995
 5,028
Diluted weighted average common shares (for FFO and AFFO per share computations) (1)
 98,294
 100,058
 98,466
 100,280
 98,104
 98,951
 98,344
 99,832
(1)Assumes the Class A common limited partnership units of the Operating Partnership held by the noncontrolling interests are exchanged for common shares of the Company. Each Class A common limited partnership unit is exchangeable for one of the Company's common shares, subject to certain limitations to preserve the Company's REIT status.






Portfolio Net Operating Income and Same Center NOI

We present portfolio net operating income ("Portfolio NOI") and same center net operating income ("Same Center NOI") as supplemental measures of our operating performance. Portfolio NOI represents our property level net operating income which is defined as total operating revenues less property operating expenses and excludes termination fees and non-cash adjustments including straight-line rent, net above and below market rent amortization and gains or losses on the sale of outparcels recognized during the periods presented. We define Same Center NOI as Portfolio NOI for the properties that were operational for the entire portion of both comparable reporting periods and which were not acquired or subject to a material expansion or non-recurring event, such as a natural disaster, during the comparable reporting periods.

We believe Portfolio NOI and Same Center NOI are non-GAAP metrics used by industry analysts, investors and management to measure the operating performance of our properties because they provide performance measures directly related to the revenues and expenses involved in owning and operating real estate assets and provide a perspective not immediately apparent from net income, FFO or AFFO. Because Same Center NOI excludes properties developed, redeveloped, acquired and sold; as well as non-cash adjustments, gains or losses on the sale of outparcels and termination rents; it highlights operating trends such as occupancy levels, rental rates and operating costs on properties that were operational for both comparable periods. Other REITs may use different methodologies for calculating Portfolio NOI and Same Center NOI, and accordingly, our Portfolio NOI and Same Center NOI may not be comparable to other REITs.

Portfolio NOI and Same Center NOI should not be considered alternatives to net income (loss) or as an indicator of our financial performance since they do not reflect the entire operations of our portfolio, nor do they reflect the impact of general and administrative expenses, acquisition-related expenses, interest expense, depreciation and amortization costs, other non-property income and losses, the level of capital expenditures and leasing costs necessary to maintain the operating performance of our properties, or trends in development and construction activities which are significant economic costs and activities that could materially impact our results from operations. Because of these limitations, Portfolio NOI and Same Center NOI should not be viewed in isolation or as a substitute for performance measures calculated in accordance with GAAP. We compensate for these limitations by relying primarily on our GAAP results and using Portfolio NOI and Same Center NOI only as supplemental measures.




Below is a reconciliation of net income to Portfolio NOI and Same Center NOI for the consolidated portfolio (in thousands):
 Three months ended Six months ended Three months ended Nine months ended
 June 30, June 30, September 30, September 30,
 2018 2017 2018 2017 2018 2017 2018 2017
Net income $24,290
 $30,947
 $47,975
 $54,461
Net income (loss) $(23,031) $(16,034) $24,944
 $38,427
Adjusted to exclude:                
Equity in earnings of unconsolidated joint ventures (2,206) (2,374) (4,400) (4,692)
Equity in (earnings) losses of unconsolidated joint ventures (1,833) 5,893
 (6,233) 1,201
Interest expense 16,181
 16,520
 31,981
 33,007
 16,367
 16,489
 48,348
 49,496
Gain on sale of assets 
 (6,943) 
 (6,943) 
 
 
 (6,943)
Loss on early extinguishment of debt 
 35,626
 
 35,626
Other non-operating income (191) (57) (400) (92) (261) (591) (661) (683)
Impairment charge 49,739
 
 49,739
 
Depreciation and amortization 32,694
 32,905
 65,817
 64,199
 32,850
 30,976
 98,667
 95,175
Other non-property expense 209
 309
 640
 621
 501
 371
 1,143
 993
Abandoned pre-development costs 
 
 
 627
 
 (99) 
 528
Corporate general and administrative expenses 10,784
 11,202
 21,807
 22,479
 10,725
 11,020
 32,532
 33,499
Non-cash adjustments(1)
 (638) (597) (2,004) (1,561) (702) (1,020) (2,707) (2,580)
Termination rents (13) (1,450) (1,064) (2,633)
Lease termination fees (70) (162) (1,134) (2,796)
Portfolio NOI 81,110
 80,462
 160,352
 159,473
 84,285
 82,469
 244,638
 241,943
Non-same center NOI(2)
 (4,226) (2,081) (8,441) (4,937) (4,580) (1,972) (13,022) (6,910)
Same Center NOI $76,884
 $78,381
 $151,911
 $154,536
 $79,705
 $80,497
 $231,616
 $235,033
(1)Non-cash items include straight-line rent, net above and below market rent amortization and gains or losses on outparcel sales, as applicable.
(2)Excluded from Same Center NOI:
Outlet centers opened: Outlet centers sold: Outlet center expansions:
Fort WorthOctober 2017 WestbrookMay 2017 LancasterSeptember 2017










ECONOMIC CONDITIONS AND OUTLOOK

The majority of our leases contain provisions designed to mitigate the impact of inflation. Such provisions include clauses for the escalation of base rent and clauses enabling us to receive percentage rentals based on tenants' gross sales (above predetermined levels) which generally increase as prices rise. A component of most leases includes a pro-rata share or escalating fixed contributions by the tenant for property operating expenses, including CAM, real estate taxes, insurance and advertising and promotion, thereby reducing exposure to increases in costs and operating expenses resulting from inflation.

A portion of our rental revenues are derived from percentage rents that directly depend on the sales volume of certain tenants. Accordingly, declines in these tenants' sales would reduce the income produced by our properties. If the sales or profitability of our retail tenants decline sufficiently, whether due to a change in consumer preferences, legislative changes that increase the cost of their operations or otherwise, such tenants may be unable to pay their existing rents as such rents would represent a higher percentage of their sales.

The current challenging retail environment could impact our business in the short-term as our operations are subject to the results of operations of our retail tenants. While we believe outlet stores will continue to be a profitable and fundamental distribution channel for many brand name manufacturers, some retail formats are more successful than others. As is typical in the retail industry, certain tenants have closed, or will close, certain stores by terminating their lease prior to its natural expiration or as a result of filing for protection under bankruptcy laws, or may request modifications to their existing lease terms. During 2017, 13 tenants in our consolidated portfolio filed for bankruptcy protection, as compared to two tenants in 2016, and a number of other retailers engaged in brand wide restructurings during 2017 that resulted in store closings. During the first 6nine months of 2018, an additional 4 tenants have filed for bankruptcy protection. Largely due to the number of bankruptcy filings, store closings and lease modifications in 2017 and 2018, we currently expect our Same Center NOI for 2018 compared to 2017 to be down by 1.5% to 2.5%2.0%. If the level of bankruptcy filings, store closings and lease modifications during 2018 are at similar or greater amounts as those experienced in 2017, our 2018 results of operations and Same Center NOI could be further negatively impacted.

Due to the relatively short-term nature of our tenants' leases, a significant portion of the leases in our portfolio come up for renewal each year. As of January 1, 2018, we had approximately 1.7 million square feet, or 13% of our consolidated portfolio at that time, coming up for renewal during 2018. As of JuneSeptember 30, 2018, we had renewed approximately 69%73% of this space. In addition, for the rolling twelve months ended JuneSeptember 30, 2018, we completed renewals and re-tenanted space totaling 1.8 million square feet at a blended 6.3%6.1% increase in average base rental rates compared to the expiring rates. While we continue to attract and retain additional tenants, there can be no assurance that we can achieve similar base rental rates. In addition, if we were unable to successfully renew or re-lease a significant amount of this space on favorable economic terms, the loss in rent could have a material adverse effect on our results of operations.

Our outlet centers typically include well-known, national, brand name companies. By maintaining a broad base of well-known tenants and a geographically diverse portfolio of properties located across the United States, we believe we reduce our operating and leasing risks. No one tenant (including affiliates) accounts for more than 8% of our square feet or 7% of our combined base and percentage rental revenues. Accordingly, although we can give no assurance, we do not expect any material adverse impact on our results of operations and financial condition as a result of leases to be renewed or stores to be re-leased. Occupancy at our consolidated centers was 95.6%96.4% and 96.9% as of JuneSeptember 30, 2018 and 2017.2017, respectively.




Item 3. Quantitative and Qualitative Disclosures about Market Risk
Market Risk

Interest Rate Risk

We are exposed to various market risks, including changes in interest rates. Market risk is the potential loss arising from adverse changes in market rates and prices, such as interest rates. We may periodically enter into certain interest rate protection and interest rate swap agreements to effectively convert existing floating rate debt to a fixed rate basis. We do not enter into derivatives or other financial instruments for trading or speculative purposes.

We may periodically enter into certain interest rate protection and interest rate swap agreements to effectively convert existing floating rate debt to a fixed rate basis. We do not enter into derivatives or other financial instruments for trading or speculative purposes. The following table summarizes the terms and fair values of our derivative financial instruments (notional amounts and fair values in thousands):
     Fair Value     Fair Value
Effective Date Maturity Date Notional Amount Bank Pay Rate Company Fixed Pay Rate June 30, 2018 Maturity Date Notional Amount Bank Pay Rate Company Fixed Pay Rate September 30, 2018
Assets (Liabilities):            
November 14, 2013 August 14, 2018 $150,000
 1 month LIBOR 1.30% $150
April 13, 2016 January 1, 2021 175,000
 1 month LIBOR 1.03% 6,930
 January 1, 2021 175,000
 1 month LIBOR 1.03% 6,988
March 1, 2018 January 31, 2021 40,000
 1 month LIBOR 2.47% 180
 January 31, 2021 40,000
 1 month LIBOR 2.47% 335
August 14, 2018 January 1, 2021 150,000
 1 month LIBOR 2.20% 1,668
 January 1, 2021 150,000
 1 month LIBOR 2.20% 2,117
Total   $515,000
     $8,928
   $365,000
     $9,440

The fair value of the interest rate swap agreements represents the estimated receipts or payments that would be made to terminate the agreement. The fair value is based on dealer quotes, considering current interest rates, remaining term to maturity and our credit standing.

As of JuneSeptember 30, 2018, 13%12% of our outstanding consolidated debt, excluding variable rate debt with interest rate protection agreements in place, had variable interest rates and therefore were subject to market fluctuations. An increase in the LIBOR index of 100 basis points would result in an increase of approximately $2.4$2.1 million in interest expense on an annual basis. The information presented herein is merely an estimate and has limited predictive value.  As a result, the ultimate effect upon our operating results of interest rate fluctuations will depend on the interest rate exposures that arise during the period, our hedging strategies at that time and future changes in the level of interest rates.

The estimated fair value and recorded value of our debt consisting of senior unsecured notes, unsecured term loans, secured mortgages and unsecured lines of credit were as follows (in thousands):
 June 30, 2018 December 31, 2017 September 30, 2018 December 31, 2017
Fair value of debt $1,721,599
 $1,775,540
 $1,704,812
 $1,775,540
Recorded value of debt $1,768,207
 $1,763,651
 $1,747,660
 $1,763,651

A 100 basis point increase from prevailing interest rates at JuneSeptember 30, 2018 and December 31, 2017 would result in a decrease in fair value of total consolidated debt of approximately $69.4$67.7 million and $77.9 million, respectively. Refer to Note 8 to the consolidated financial statements for a description of our methodology in calculating the estimated fair value of debt. Considerable judgment is necessary to develop estimated fair values of financial instruments. Accordingly, the estimates presented herein are not necessarily indicative of the amounts the Company could realize on the disposition of the financial instruments.



Foreign Currency Risk

We are also exposed to foreign currency risk on investments in outlet centers that are located in Canada. Our currency exposure is concentrated in the Canadian Dollar. To mitigate some of the risk related to changes in foreign currency, cash flows received from our Canadian joint ventures are either reinvested to fund ongoing Canadian development activities, if applicable, or converted to US dollars and utilized to repay amounts outstanding under our unsecured lines of credit. We generally do not hedge currency translation exposures.

Item 4. Controls and Procedures

Tanger Factory Outlet Centers, Inc. Controls and Procedures

The Company's management carried out an evaluation, with the participation of the Company's Chief Executive Officer and Chief Financial Officer of the effectiveness of the Company's disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) as of JuneSeptember 30, 2018. Based on this evaluation, the Company's Chief Executive Officer and Chief Financial Officer have concluded that the Company's disclosure controls and procedures were effective as of JuneSeptember 30, 2018. There were no changes to the Company's internal controls over financial reporting during the quarter ended JuneSeptember 30, 2018, that materially affected, or are reasonably likely to materially affect, the Company's internal control over financial reporting.

Tanger Properties Limited Partnership Controls and Procedures

The management of the Operating Partnership's general partner carried out an evaluation, with the participation of the Chief Executive Officer and the Vice-President and Treasurer (Principal Financial Officer) of the Operating Partnership's general partner of the effectiveness of the Operating Partnership's disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) as of JuneSeptember 30, 2018. Based on this evaluation, the Chief Executive Officer of the Operating Partnership's general partner, and the Vice-President and Treasurer of the Operating Partnership's general partner, have concluded that the Operating Partnership's disclosure controls and procedures were effective as of JuneSeptember 30, 2018. There were no changes to the Operating Partnership's internal controls over financial reporting during the quarter ended JuneSeptember 30, 2018, that materially affected, or are reasonably likely to materially affect, the Operating Partnership's internal control over financial reporting.



PART II. OTHER INFORMATION

Item 1. Legal Proceedings

The Company and the Operating Partnership are, from time to time, engaged in a variety of legal proceedings arising in the normal course of business. Although the results of these legal proceedings cannot be predicted with certainty, management believes that the final outcome of such proceedings will not have a material adverse effect on our results of operations or financial condition.

Item 1A. Risk Factors

There have been no material changes from the risk factors disclosed in the "Risk Factors" section of our Annual Report on Form 10-K for the year ended December 31, 2017.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

(c) Issuer Purchases of Equity Securities

On May 19, 2017, we announced that our Board of Directors authorized the repurchase of up to $125.0 million of our outstanding common shares as market conditions warrant over a period commencing on May 19, 2017 and expiring on May 18, 2019.  Repurchases may be made from time to time through open market, privately-negotiated, structured or derivative transactions (including accelerated stock repurchase transactions), or other methods of acquiring shares. The Company intends to structure open market purchases to occur within pricing and volume requirements of Rule 10b-18.  The Company may, from time to time, enter into Rule 10b5-1 plans to facilitate the repurchase of its shares under this authorization.

The following table summarizes our common share repurchases for the fiscal quarter ended JuneSeptember 30, 2018:
Period Total number of shares purchased Average price paid per share Total number of shares purchased as part of publicly announced plans or programs 
Approximate dollar value of shares that may yet be purchased under the plans or programs
(in millions)
April 1, 2018 to April 30, 2018 
 $
 
 $65.7
May 1, 2018 to May 31, 2018 475,549
 21.01
 475,549
 55.7
June 1, 2018 to June 30, 2018 
 
 
 55.7
Total 475,549
   475,549
 $55.7

Period Total number of shares purchased Average price paid per share Total number of shares purchased as part of publicly announced plans or programs 
Approximate dollar value of shares that may yet be purchased under the plans or programs
(in millions)
July 1, 2018 to July 31, 2018 
 $
 
 $55.7
August 1, 2018 to August 31, 2018 
 
 
 55.7
September 1, 2018 to September 30, 2018 
 
 
 55.7
Total 
   
 $55.7


Item 4.Mine Safety Disclosures

Not applicable




Item 6. Exhibits
Exhibit Number Exhibit Descriptions
   
   
10.1
10.2
12.1*
 
   
12.2*
 
   
31.1*
 
   
31.2*
 
   
31.3*
 
   
31.4*
 
   
32.1**
 
   
32.2**
 
   
32.3**
 
   
32.4**
 
   
101***
 The following financial statements from Tanger Factory Outlet Centers, Inc. and Tanger Properties Limited Partnership's dual Quarterly Report on Form 10-Q for the quarter ended JuneSeptember 30, 2018, formatted in XBRL: (i) Consolidated Balance Sheets (unaudited), (ii) Consolidated Statements of Operations (unaudited), (iii) Consolidated Statements of Other Comprehensive Income (unaudited), (iv) Consolidated Statements of Equity (unaudited), (v) Consolidated Statements of Cash Flows (unaudited), and (vi) Notes to Consolidated Financial Statements (unaudited).
   
   
  * Filed herewith.
  ** Furnished herewith.
  
*** Submitted herewith.



SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934, the Registrant has duly caused this Report to be signed on its behalf by the undersigned thereunto duly authorized.
DATE: August 2,November 5, 2018
TANGER FACTORY OUTLET CENTERS, INC.
By:/s/ James F. Williams
 James F. Williams
 Executive Vice President and Chief Financial Officer
 
TANGER PROPERTIES LIMITED PARTNERSHIP
By: TANGER GP TRUST, its sole general partner
By:/s/ James F. Williams
 James F. Williams
 Vice President and Treasurer (Principal Financial Officer)




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