Investments in Unconsolidated Real Estate Joint Ventures | 9 Months Ended |
Sep. 30, 2014 |
Investments In Unconsolidated Real Estate Joint Ventures [Abstract] | ' |
Investments in Unconsolidated Real Estate Joint Ventures | ' |
Investments in Unconsolidated Real Estate Joint Ventures |
Our investments in unconsolidated joint ventures as of September 30, 2014 and December 31, 2013 aggregated $249.7 million and $140.2 million, respectively. The equity method of accounting is used to account for each of the individual joint ventures. We have the following unconsolidated real estate joint ventures: |
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As of September 30, 2014 |
Joint Venture | | Center Location | | Ownership % | | Square Feet | | Carrying Value of Investment | | Total Joint Venture Debt |
(in 000's) | (in millions) | (in millions) |
Charlotte | | Charlotte, NC | | 50 | % | | 398 | | | $ | 38.8 | | | $ | — | |
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Galveston/Houston | | Texas City, TX | | 50 | % | | 353 | | | 6.2 | | | 65 | |
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National Harbor | | National Harbor, MD | | 50 | % | | 339 | | | 19.8 | | | 62 | |
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RioCan Canada | | Various | | 50 | % | | 432 | | | 119.8 | | | 16.6 | |
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Savannah (1) | | Savannah, GA | | 50 | % | | — | | | 46.1 | | | 3.4 | |
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Westgate | | Glendale, AZ | | 58 | % | | 332 | | | 14.8 | | | 49.8 | |
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Wisconsin Dells | | Wisconsin Dells, WI | | 50 | % | | 265 | | | 2.4 | | | 24.3 | |
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Other | | | | | | | — | | | 1.8 | | | — | |
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| | | | | | | | $ | 249.7 | | | $ | 221.1 | |
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-1 | 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 the ownership percentage indicated above, which in this case, states our legal interest in this venture. Our economic interest may fluctuate based on a number of factors, including mortgage financing, partnership capital contributions and distributions, and proceeds from gains or losses of asset sales. | | | | | | | | | | | | | | | |
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As of December 31, 2013 |
Joint Venture | | Center Location | | Ownership % | | Square Feet | | Carrying Value of Investment | | Total Joint Venture Debt |
(in 000's) | (in millions) | (in millions) |
Charlotte | | Charlotte, NC | | 50 | % | | — | | | $ | 11.6 | | | $ | — | |
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Galveston/Houston | | Texas City, TX | | 50 | % | | 353 | | | 7.4 | | | 65 | |
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National Harbor | | National Harbor, MD | | 50 | % | | 336 | | | 16.7 | | | 52.4 | |
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RioCan Canada | | Various | | 50 | % | | 433 | | | 85.7 | | | 17.9 | |
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Westgate | | Glendale, AZ | | 58 | % | | 332 | | | 16.1 | | | 43.1 | |
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Wisconsin Dells | | Wisconsin Dells, WI | | 50 | % | | 265 | | | 2.5 | | | 24.3 | |
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Other | | | | | | — | | | 0.2 | | | — | |
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| | | | | | | | $ | 140.2 | | | $ | 202.7 | |
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These investments are recorded initially at cost and subsequently adjusted for our equity in the venture's net income (loss), cash contributions, distributions and other adjustments required by the equity method of accounting as described below. |
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Fees we received for various services provided to our unconsolidated joint ventures were recognized in other income as follows (in thousands): |
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| | Three months ended | | Nine months ended |
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| | September 30, | | September 30, |
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| | 2014 | | 2013 | | 2014 | | 2013 |
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Fee: | | | | | | | | | | |
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Development and leasing | | $ | 624 | | | $ | (6 | ) | | $ | 702 | | | $ | 57 | |
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Loan guarantee | | 23 | | | 40 | | | 209 | | | 121 | |
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Management | | 470 | | | 761 | | | 1,316 | | | 2,391 | |
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Marketing | | 108 | | | 93 | | | 321 | | | 301 | |
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Total Fees | | $ | 1,225 | | | $ | 888 | | | $ | 2,548 | | | $ | 2,870 | |
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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 $4.0 million and $1.6 million as of September 30, 2014 and December 31, 2013) are amortized over the various useful lives of the related assets. |
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Charlotte, North Carolina |
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In May 2013, we formed a 50/50 joint venture for the development of an outlet center in the Charlotte, NC market. Subsequently, during the third quarter of 2013, the joint venture began construction on the outlet center which is located eight miles southwest of uptown Charlotte at the interchange of I-485 and Steele Creek Road (NC Highway 160), the two major thoroughfares for the city. The approximately 400,000 square foot project, which features approximately 90 brand name and designer stores, opened on July 31, 2014. |
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As of September 30, 2014, we and our partner had each contributed approximately $38.0 million in cash to the joint venture to fund development activities. We provided development services to the project; and with our partner, are jointly providing leasing services. Our partner is providing property management and marketing services to the center. |
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RioCan Canada |
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We have entered into a 50/50 co-ownership agreement with RioCan Real Estate Investment Trust ("RioCan Joint Venture") to develop and acquire outlet centers in Canada. Under the agreement, any projects developed or acquired will be branded as Tanger Outlet Centers. We have agreed to provide leasing and marketing services to the venture and RioCan has agreed to provide development and property management services. |
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In March of 2013, the RioCan Joint Venture acquired the land adjacent to the existing Cookstown Outlet Mall for $13.9 million. The land is being used for an expansion of the Cookstown Outlet Mall which began in May 2013. The expansion, which is expected to open in the fourth quarter of 2014, will add approximately 153,000 square feet and approximately 35 new brand name and designer outlet stores to the center. |
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Also, during the second quarter of 2013, the joint venture purchased land for $28.7 million and broke ground on Tanger Outlets Ottawa, the first ground up development of a Tanger Outlet Center in Canada. Located in suburban Kanata off the TransCanada Highway (Highway 417) at Palladium Drive, this center opened on October 17, 2014 and contains approximately 316,000 square feet and features approximately 80 brand name and designer outlet stores. As of September 30, 2014, we and our co-owner had each contributed $51.3 million in cash to fund development activities on these two projects. |
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Savannah, Georgia |
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In January 2014, we announced our plans to develop Tanger Outlets Savannah through a joint venture arrangement. The center will include approximately 377,000 square feet. The site is located on I-95, just north of I-16 in Pooler, Georgia, adjacent to the City of Savannah, and near the Savannah International Airport. As of September 30, 2014, our equity contributions totaled $45.4 million and our partner's equity contribution totaled $7.4 million. Contributions we make in excess of $7.4 million will earn a preferred rate of return equal to 8% from the date the contributions are made until the outlet center’s grand opening date, and then 10% annually thereafter. We are providing development, management and marketing services to the joint venture; and with our partner, are jointly providing leasing services to the center. |
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In May 2014, the joint venture closed on a $97.7 million interest only mortgage loan with a rate of LIBOR + 1.65% and a maturity date of May 21, 2017, with the option for two, one year extensions. As of September 30, 2014 the balance on the loan was $3.4 million. |
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Westgate, Glendale, Arizona |
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During the second quarter of 2014, Westgate began a 78,000 square foot expansion of the existing property which is expected to open in time for the 2014 holiday season. The expansion is being substantially funded by amounts available under the amended Westgate mortgage loan which had its maximum borrowing capacity increased from $48.3 million to $62.0 million in May 2014. We provide property management, construction supervision, leasing and marketing services to the joint venture. |
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Condensed combined summary financial information of unconsolidated joint ventures accounted for using the equity method is as follows (in thousands): |
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Condensed Combined Balance Sheets - Unconsolidated Joint Ventures | | 30-Sep-14 | | December 31, | | | | | | | | |
2013 | | | | | | | | |
Assets | | | | | | | | | | | | | | |
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Land | | $ | 73,864 | | | $ | 66,020 | | | | | | | | | |
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Buildings, improvements and fixtures | | 394,399 | | | 327,972 | | | | | | | | | |
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Construction in progress, including land | | 198,694 | | | 86,880 | | | | | | | | | |
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| | 666,957 | | | 480,872 | | | | | | | | | |
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Accumulated depreciation | | (42,011 | ) | | (29,523 | ) | | | | | | | | |
Total rental property, net | | 624,946 | | | 451,349 | | | | | | | | | |
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Cash and cash equivalents | | 34,926 | | | 22,704 | | | | | | | | | |
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Deferred lease costs, net | | 22,021 | | | 19,281 | | | | | | | | | |
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Deferred debt origination costs, net | | 2,746 | | | 1,737 | | | | | | | | | |
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Prepaids and other assets | | 11,558 | | | 9,107 | | | | | | | | | |
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Total assets | | $ | 696,197 | | | $ | 504,178 | | | | | | | | | |
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Liabilities and Owners' Equity | | | | | | | | | | | | | | |
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Mortgages payable | | $ | 221,079 | | | $ | 202,688 | | | | | | | | | |
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Construction trade payables | | 19,343 | | | 19,370 | | | | | | | | | |
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Accounts payable and other liabilities | | 19,611 | | | 8,540 | | | | | | | | | |
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Total liabilities | | 260,033 | | | 230,598 | | | | | | | | | |
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Owners' equity | | 436,164 | | | 273,580 | | | | | | | | | |
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Total liabilities and owners' equity | | $ | 696,197 | | | $ | 504,178 | | | | | | | | | |
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| | Three months ended | | Nine months ended |
Condensed Combined Statements of Operations | | September 30, | | September 30, |
- Unconsolidated Joint Ventures | | 2014 | | 2013 | | 2014 | | 2013 |
Revenues | | $ | 19,969 | | | $ | 29,013 | | | $ | 52,803 | | | $ | 70,961 | |
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Expenses | | | | | | | | | |
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Property operating | | 7,292 | | | 7,808 | | | 20,562 | | | 25,440 | |
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General and administrative | | 198 | | | 629 | | | 354 | | | 962 | |
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Acquisition costs | | — | | | 19 | | | — | | | 474 | |
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Abandoned development costs | | 472 | | | 19 | | | 472 | | | 153 | |
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Depreciation and amortization | | 5,831 | | | 6,232 | | | 15,369 | | | 21,200 | |
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Total expenses | | 13,793 | | | 14,707 | | | 36,757 | | | 48,229 | |
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Operating income | | 6,176 | | | 14,306 | | | 16,046 | | | 22,732 | |
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Gain on early extinguishment of debt | | — | | | 13,820 | | | — | | | 13,820 | |
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Interest expense | | (1,316 | ) | | (2,840 | ) | | (3,925 | ) | | (10,406 | ) |
Net income | | $ | 4,860 | | | $ | 25,286 | | | $ | 12,121 | | | $ | 26,146 | |
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The Company and Operating Partnership's share of: | | | | | | |
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Net income | | $ | 2,479 | | | $ | 9,014 | | | $ | 6,200 | | | $ | 10,107 | |
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Depreciation and impairment charge (real estate related) | | $ | 3,040 | | | $ | 2,861 | | | $ | 8,048 | | | $ | 9,465 | |
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