United States
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2001
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from _________ to _________
Commission file number 1-11986
TANGER FACTORY OUTLET CENTERS, INC.
(Exact name of Registrant as specified in its charter)
North Carolina 56-1815473
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
3200 Northline Avenue
Suite 360
Greensboro, NC 27408 (336) 292-3010
(Address of principal executive offices) Registrant's telephone number)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of exchange on which registered
Common Shares, $.01 par value New York Stock Exchange
Series A Cumulative Convertible Redeemable New York Stock Exchange
Preferred Shares, $.01 par value
Securities registered pursuant to Section 12(g) of the Act: None
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.
Yes X No
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K.[ ]
The aggregate market value of voting shares held by non-affiliates of the
Registrant was approximately $210,639,411 based on the closing price on the New
York Stock Exchange for such stock on March 15, 2002.
The number of Common Shares of the Registrant outstanding as of March 1, 2002
was 7,930,111.
Documents Incorporated By Reference
Part III incorporates certain information by reference from the Registrant's
definitive proxy statement to be filed with respect to the Annual Meeting of
Shareholders to be held May 17, 2002.
1
PART I
Item 1. Business
The Company
Tanger Factory Outlet Centers, Inc. (the "Company"), a fully-integrated,
self-administered and self-managed real estate investment trust ("REIT"),
focuses exclusively on developing, acquiring, owning and operating factory
outlet centers. Since entering the factory outlet center business 21 years ago,
we have become one of the largest owners and operators of factory outlet centers
in the United States. As of December 31, 2001, we owned and operated 29 centers
with a total gross leasable area ("GLA") of approximately 5.3 million square
feet. These centers were approximately 96% occupied, contained approximately
1,150 stores and represented over 250 store brands as of such date.
Our factory outlet centers and other assets are held by, and all of our
operations are conducted by, Tanger Properties Limited Partnership (the
"Operating Partnership"). Accordingly, the descriptions of our business,
employees and properties are also descriptions of the business, employees and
properties of the Operating Partnership. The terms "we", "our" and "us" refer to
the Company or the Company and the Operating Partnership together, as the text
requires.
We own the majority of the units of partnership interest issued by the Operating
Partnership (the "Units") through our two wholly-owned subsidiaries, the Tanger
GP Trust and the Tanger LP Trust. The Tanger GP Trust controls the Operating
Partnership as its sole general partner. The Tanger LP Trust holds a limited
partnership interest. The Tanger family, through its ownership of the Tanger
Family Limited Partnership ("TFLP"), holds the remaining Units as a limited
partner. Stanley K. Tanger, the Company's Chairman of the Board and Chief
Executive Officer, is the sole general partner of TFLP.
As of December 31, 2001, our wholly-owned subsidiaries owned 7,929,711 Units,
and 80,600 Preferred Units (which are convertible into approximately 726,203
limited partnership Units) and TFLP owned 3,033,305 Units. TFLP's Units are
exchangeable, subject to certain limitations to preserve our status as a REIT,
on a one-for-one basis for our common shares. See "Business-The Operating
Partnership". Preferred Units are automatically converted into limited
partnership Units to the extent of any conversion of our preferred shares into
our common shares. Our management beneficially owns approximately 27% of all
outstanding common shares (assuming the Series A Preferred Shares and the
limited partner's Units are exchanged for common shares but without giving
effect to the exercise of any outstanding stock and partnership Unit options).
Ownership of our common and preferred shares is restricted to preserve our
status as a REIT for federal income tax purposes. Subject to certain exceptions,
a person may not actually or constructively own more than 4% of our common
shares (including common shares which may be issued as a result of conversion of
Series A Preferred Shares) or more than 29,400 Series A Preferred Shares (or a
lesser number in certain cases). We also operate in a manner intended to enable
us to preserve our status as a REIT, including, among other things, making
distributions with respect to our outstanding common and preferred shares equal
to at least 90% of our taxable income each year.
We are a North Carolina corporation that was formed in March 1993. The executive
offices are currently located at 3200 Northline Avenue, Suite 360, Greensboro,
North Carolina, 27408 and the telephone number is (336) 292-3010.
Recent Developments
At December 31, 2001, we owned 29 centers in 20 states totaling 5,332,000 square
feet of operating GLA compared to 29 centers in 20 states totaling 5,179,000
square feet of operating GLA as of December 31, 2000. The increase is primarily
due to the completion of the expansion at our San Marcos, TX center during 2001.
The center now contains over 441,000 square feet of gross leasable space.
In September 2001, we established a 50% ownership joint venture, TWMB
Associates, LLC ("TWMB"), with respect to our Myrtle Beach, South Carolina
project with Rosen-Warren Myrtle Beach LLC ("Rosen-Warren") and began
construction on the first phase of a new 400,000 square foot Tanger Outlet
Center in Myrtle Beach, SC. The first phase will consist of approximately
260,000 square feet and include over 50 brand name outlet tenants. Stores are
tentatively expected to begin opening in July of 2002. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations--Joint
Ventures and Other Developments" for a discussion of the formation and purpose
of TWMB.
2
We have an option to purchase the retail portion of a site at the Bourne Bridge
Rotary in Cape Cod, Massachusetts. Obtaining appropriate approvals for the
Bourne project from the local authorities continues to be a challenge and
consequently, we are reviewing the viability of maintaining an option on the
property.
Any developments or expansions that we, or a joint venture that we are involved
in, have planned or anticipated, may not be started or completed as scheduled,
or may not result in accretive funds from operations. 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
accretive funds from operations.
During 2001, we continued to maintain strong relationships with multiple sources
of capital. We completed the following debt transactions during the year:
o In February 2001, the Operating Partnership issued $100 million of 9.125%
senior, unsecured notes, maturing on February 15, 2008. The net proceeds of
$97 million were used to repay all of the outstanding indebtedness under
the $75 million 8.75% notes which were due March 11, 2001. The net proceeds
were also used to repay the $20 million LIBOR plus 2.25% term loan due
January 2002 with Fleet National Bank and Bank of America. The remaining
proceeds were used for general operating purposes.
o In March 2001, we entered into a five year collateralized loan with Wells
Fargo Bank for $24 million at a variable rate of LIBOR plus 1.75%. The
proceeds were used to reduce amounts outstanding under existing lines of
credit. Additionally, on March 26, 2001, we extended the maturity date of
our existing $29.5 million term loan with Wells Fargo Bank from July 2005
to March 2006.
o In May 2001, we entered into an eight year collateralized loan with John
Hancock Life Insurance Company for $19.45 million at a fixed rate of 7.98%.
The proceeds were used to reduce amounts outstanding under existing lines
of credit.
o We extended the maturities of our three unsecured lines of credit totaling
$75 million with Bank of America, Fleet National Bank and SouthTrust Bank
until June 30, 2003.
During the fourth quarter of 2001, we purchased at par approximately $14.5
million of our outstanding 7.875% senior, unsecured public notes that mature in
October 2004. The purchases were funded by amounts available under our unsecured
lines of credit which do not mature until June 2003 as mentioned above.
Additionally during the first quarter of 2002, we have purchased at par or
below, an additional $4.9 million of the October 2004 notes bringing the total
purchased to $19.4 million.
The Factory Outlet Concept
Factory outlets are manufacturer-operated retail stores that sell primarily
first quality, branded products at significant discounts from regular retail
prices charged by department stores and specialty stores. Factory outlet centers
offer numerous advantages to both consumers and manufacturers. Manufacturers
selling in factory outlet stores are often able to charge customers lower prices
for brand name and designer products by eliminating the third party retailer.
Factory outlet centers also typically have lower operating costs than other
retailing formats. Factory outlet centers enable manufacturers to optimize the
size of production runs while continuing to maintain control of their
distribution channels. In addition, factory outlet centers benefit manufacturers
by permitting them to sell out-of-season, overstocked or discontinued
merchandise without alienating department stores or hampering the manufacturer's
brand name, as is often the case when merchandise is distributed via discount
chains.
Our factory outlet centers range in size from 11,000 to 729,238 square feet of
GLA and are typically located at least 10 miles from densely populated areas,
where major department stores and manufacturer-owned full-price retail stores
are usually located. Manufacturers prefer these locations so that they do not
compete directly with their major customers and their own stores. Many of our
factory outlet centers are located near tourist destinations to attract tourists
who consider shopping to be a recreational activity. These centers are typically
situated in close proximity to interstate highways that provide accessibility
and visibility to potential customers.
3
We believe that factory outlet centers continue to present attractive
opportunities for capital investment, particularly with respect to strategic
re-merchandising plans and expansions of existing centers. We believe that under
present conditions such development or expansion costs, coupled with current
market lease rates, permit attractive investment returns. We further believe,
based upon our contacts with present and prospective tenants, that many
companies, including prospective new entrants into the factory outlet business,
desire to open a number of new factory outlet stores in the next several years,
particularly where there are successful factory outlet centers in which such
companies do not have a significant presence or where there are few factory
outlet centers.
Our Factory Outlet Centers
Each of our factory outlet centers carries the Tanger brand name. We believe
that both national manufacturers and consumers recognize the Tanger brand as one
that provides outlet shopping centers where consumers can trust the brand,
quality and price of the merchandise they purchase directly from the
manufacturers.
As one of the original participants in this industry, we have developed
long-standing relationships with many national and regional manufacturers.
Because of our established relationships with many manufacturers, we believe we
are well positioned to capitalize on industry growth.
As of March 1, 2002, we had a diverse tenant base comprised of over 250
different well-known, upscale, national designer or brand name concepts, such as
Dana Buchman, Liz Claiborne, Reebok, Nike, Tommy Hilfiger, Brooks Brothers,
Nautica, Coach, Polo Ralph Lauren, GAP, Old Navy and Banana Republic. Most of
the factory outlet stores are directly operated by the respective manufacturer.
No single tenant (including affiliates) accounted for 10% or more of combined
base and percentage rental revenues during 2001, 2000 and 1999. As of March 1,
2002, our largest tenant, including all of its store concepts, accounted for
approximately 6.3% of our GLA. Because our typical tenant is a large, national
manufacturer, we have not experienced any material problems with respect to rent
collections or lease defaults.
Revenues from fixed rents and operating expense reimbursements accounted for
approximately 91% of our total revenues in 2001. Revenues from contingent
sources, such as percentage rents, vending income and miscellaneous income,
accounted for approximately 7% of 2001 revenues. As a result, only small
portions of our revenues are dependent on contingent revenue sources.
Business History
Stanley K. Tanger, the Company's founder, Chairman and Chief Executive Officer,
entered the factory outlet center business in 1981. Prior to founding the
Company, Stanley K. Tanger and his son, Steven B. Tanger, the Company's
President and Chief Operating Officer, built and managed a successful family
owned apparel manufacturing business, Tanger/Creighton Inc.
("Tanger/Creighton"), which business included the operation of five factory
outlet stores. Based on their knowledge of the apparel and retail industries, as
well as their experience operating Tanger/Creighton's factory outlet stores, the
Tangers recognized that there would be a demand for factory outlet centers where
a number of manufacturers could operate in a single location and attract a large
number of shoppers.
From 1981 to 1986, Stanley K. Tanger solely developed the first successful
factory outlet centers. Steven Tanger joined the company in 1986 and by June
1993, together, the Tangers had developed 17 centers with a total GLA of
approximately 1.5 million square feet. In June of 1993, we completed our initial
public offering ("IPO"), making Tanger Factory Outlet Centers, Inc. the first
publicly traded outlet center company. Since our IPO, we have developed nine and
acquired seven centers and, together with expansions of existing centers net of
centers disposed of, added approximately 3.8 million square feet of GLA to our
portfolio, bringing our portfolio of properties as of December 31, 2001 to 29
centers totaling approximately 5.3 million square feet of GLA.
Business and Operating Strategy
Our strategy is to increase revenues through new development, selective
acquisitions and expansions of factory outlet centers while minimizing our
operating expenses by designing low maintenance properties and achieving
economies of scale. We continue to focus on strengthening our tenant base in our
centers by replacing low volume tenants with high volume anchor tenants.
4
Effective August 7, 2000, we formed a joint venture with C. Randy Warren Jr.,
former Senior Vice President of Leasing of the Company. The new entity,
Tanger-Warren Development, LLC ("Tanger-Warren"), was formed to identify,
acquire and develop sites exclusively for us. We agreed to be co-managers of
Tanger-Warren, each with 50% ownership interest in the joint venture and any
entities formed with respect to a specific project.
We typically seek opportunities to develop or acquire new centers in locations
that have at least 5 million people residing within an hour's drive, an average
household income within a 50-mile radius of at least $35,000 per year and access
to frontage on a major or interstate highway with a traffic count of at least
50,000 cars per day. We will vary our minimum conditions based on the particular
characteristics of a site, especially if the site is located near or at a
tourist destination. Our current goal is to target sites that are large enough
to support centers with approximately 75 stores totaling at least 300,000 square
feet of GLA.
We generally prelease at least 50% of the space in each center prior to
acquiring the site and beginning construction. Construction of a new factory
outlet center has normally taken us four to six months from groundbreaking to
the opening of the first tenant store. Construction of expansions to existing
properties typically takes less time, usually between three to four months.
Capital Strategy
We intend to achieve a strong and flexible financial position by: (1)
maintaining a quality portfolio of strong income producing properties, (2)
managing our leverage position relative to our portfolio when pursuing new
development and expansion opportunities, (3) extending and sequencing debt
maturities, (4) managing our interest rate risk, (5) maintaining our liquidity
and (6) utilizing internally generated sources of capital by maintaining a low
distribution payout ratio, defined as annual distributions as a percent of funds
from operations, and subsequently reinvesting a significant portion of our cash
flow into our portfolio. For a discussion of funds from operations, see
"Management's Discussion and Analysis of Financial Condition and Results of
Operations--Funds From Operations".
We have successfully increased our dividend each of our first eight years as a
public company. At the same time, we continue to have a low payout ratio, which
for the year ended December 31, 2001, was 75%. As a result, we retained
approximately $9.3 million of our 2001 FFO. A low distribution payout ratio
allows us to retain capital to maintain the quality of our portfolio, as well as
to develop, acquire and expand properties and reduce outstanding debt.
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 our best interest and our
shareholders' interests. During the second quarter of 2001, we amended our shelf
registration for the ability to issue up to $200 million in debt and $200
million in equity securities. We may also consider selling certain properties
that do not meet our long-term investment criteria as well as outparcels on
existing properties to generate capital to reinvest into other attractive
investment opportunities.
We maintain unsecured, revolving lines of credit that provide for unsecured
borrowings up to $75 million. At December 31, 2001, amounts outstanding under
these credit facilities totaled $20.95 million During 2001, we extended the
maturity of each of our three $25 million lines to June 30, 2003.
Based on cash provided by operations, existing credit facilities, ongoing
negotiations with certain financial institutions and our ability to sell debt or
equity subject to market conditions, we believe that we have access to the
necessary financing to fund the planned capital expenditures during 2002.
The Operating Partnership
Our centers and other assets are held by, and all of our operations are
conducted by, the Operating Partnership. As of December 31, 2001, our
wholly-owned subsidiaries owned 7,929,711 Units, and 80,600 Preferred Units
(which are convertible into approximately 726,203 limited partnership Units) and
TFLP owned 3,033,305 Units. TFLP's Units are exchangeable, subject to certain
limitations to preserve our status as a REIT, on a one-for-one basis for our
common shares.
5
Each preferred partnership Unit entitles us to receive distributions from the
Operating Partnership, in an amount equal to the distribution payable with
respect to a share of Series A Preferred Shares, prior to the payment by the
Operating Partnership of distributions with respect to the general partnership
Units. Preferred partnership Units will be automatically converted by holders
into limited partnership Units to the extent that the Series A Preferred Shares
are converted into Common Shares and will be redeemed by the Operating
Partnership to the extent that the Series A Preferred Shares are redeemed by us.
Competition
We carefully consider the degree of existing and planned competition in a
proposed area before deciding to develop, acquire or expand a new center. Our
centers compete for customers primarily with factory outlet centers built and
operated by different developers, traditional shopping malls and full- and
off-price retailers. However, we believe that the majority of our customers
visit factory outlet centers because they are intent on buying name-brand
products at discounted prices. Traditional full- and off-price retailers are
often unable to provide such a variety of name-brand products at attractive
prices.
Tenants of factory outlet centers typically avoid direct competition with major
retailers and their own specialty stores, and, therefore, generally insist that
the outlet centers be located not less than 10 miles from the nearest major
department store or the tenants' own specialty stores. For this reason, our
centers compete only to a very limited extent with traditional malls in or near
metropolitan areas.
We compete favorably with two large national developers of factory outlet
centers and numerous small developers. Competition with other factory outlet
centers for new tenants is generally based on cost, location, quality and mix of
the centers' existing tenants, and the degree and quality of the support and
marketing services provided. As a result of these factors and due to the strong
tenant relationships that presently exist with the current major outlet
developers, we believe there are significant barriers to entry into the outlet
center industry by new developers. We also believe that our centers have an
attractive tenant mix, as a result of our decision to lease substantially all of
our space to manufacturer operated stores rather than to off-price retailers,
and also as a result of the strong brand identity of our major tenants.
Corporate and Regional Headquarters
We rent space in an office building in Greensboro, North Carolina in which our
corporate headquarters are located. In addition, we rent a regional office in
New York City, New York under a lease agreement and sublease agreement,
respectively, to better service our principal fashion-related tenants, many of
who are based in and around that area.
We maintain offices and employ on-site managers at 21 centers. The managers
closely monitor the operation, marketing and local relationships at each of
their centers.
Insurance
We believe that as a whole our properties are covered by adequate comprehensive
liability, fire, flood and extended loss insurance provided by reputable
companies with commercially reasonable and customary deductibles and limits.
Specified types and amounts of insurance are required to be carried by each
tenant under the lease agreement with us. There are however, types of losses,
like those resulting from wars or earthquakes, which may either be uninsurable
or not economically insurable in some or all of our locations. An uninsured loss
could result in a loss to us of both our capital investment and anticipated
profits from the affected property.
Employees
As of March 1, 2002, we had 130 full-time employees, located at our corporate
headquarters in North Carolina, our regional office in New York and our 21
business offices. At that date, we also employed 146 part-time employees at
various locations.
Item 2. Properties
As of March 1, 2002, our portfolio consisted of 29 centers located in 20 states.
Our centers range in size from 11,000 to 729,238 square feet of GLA. These
centers are typically strip shopping centers that enable customers to view all
of the shops from the parking lot, minimizing the time needed to shop. The
centers are generally located near tourist destinations or along major
interstate highways to provide visibility and accessibility to potential
customers.
6
We believe that the centers are well diversified geographically and by tenant
and that we are not dependent upon any single property or tenant. The only
center that represents more than 10% of our consolidated total assets or
consolidated gross revenues as of and for the year ended December 31, 2001 is
the property in Riverhead, NY. See "Business and Properties - Significant
Property". No other center represented more than 10% of our consolidated total
assets or consolidated gross revenues as of December 31, 2001.
We have an ongoing strategy of acquiring centers, developing new centers and
expanding existing centers. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations--Liquidity and Capital Resources"
for a discussion of the cost of such programs and the sources of financing
thereof.
Certain of our centers serve as collateral for mortgage notes payable. Of the 29
centers, we own the land underlying 26 and have ground leases on three. The land
on which the Pigeon Forge and Sevierville centers are located are subject to
long-term ground leases expiring in 2086 and 2046, respectively. The land parcel
on which the original Riverhead Center is located, approximately 47 acres, is
also subject to a ground lease with an initial term expiring in 2004, with
renewal at our option for up to seven additional terms of five years each. The
land parcel on which the Riverhead Center expansion is located, containing
approximately 43 acres, is owned by us.
The term of our typical tenant lease averages approximately five years.
Generally, leases provide for the payment of fixed monthly rent in advance.
There are often contractual base rent increases during the initial term of the
lease. In addition, the rental payments are customarily subject to upward
adjustments based upon tenant sales volume. Most leases provide for payment by
the tenant of real estate taxes, insurance, common area maintenance, advertising
and promotion expenses incurred by the applicable center. As a result,
substantially all operating expenses for the centers are borne by the tenants.
Location of Centers (as of March 1, 2002)
Number of GLA %
State Centers (sq. ft.) of GLA
- ------------------------------ ------------- -------------- ---------------
Georgia 4 950,590 18
New York 1 729,238 14
Texas 2 618,867 12
Tennessee 2 448,691 8
Florida 2 363,789 7
Missouri 1 277,494 5
Iowa 1 277,230 5
Pennsylvania 1 255,059 5
Louisiana 1 245,098 5
North Carolina 2 187,702 4
Arizona 1 184,768 3
Indiana 1 141,051 3
Minnesota 1 134,480 2
Michigan 1 112,420 2
California 1 105,950 2
Maine 2 84,397 2
Alabama 1 80,730 1
New Hampshire 2 61,915 1
West Virginia 1 49,252 1
Massachusetts 1 23,417 ---
- ------------------------------ ------------- -------------- ---------------
Total 29 5,332,138 100
============================== ============= ============== ===============
7
The table set forth below summarizes certain information with respect to our
existing centers as of March 1, 2002.
Mortgage
Debt
GLA % Outstanding Fee or
Date Opened Location (sq. ft.) Occupied (000's) (2) Ground Lease
- ------------------- ------------------------------------------ ----------- ---- ----------- --------------- ---------------------
Jun. 1986 Kittery I, ME 59,694 100 $ 6,445 Fee
Mar. 1987 Clover, North Conway, NH 11,000 100 --- Fee
Nov. 1987 Martinsburg, WV 49,252 73 --- Fee
Apr. 1988 LL Bean, North Conway, NH 50,915 100 --- Fee
Jul. 1988 Pigeon Forge, TN 94,750 96 --- Ground Lease
Aug. 1988 Boaz, AL 80,730 93 --- Fee
Jun. 1988 Kittery II, ME 24,703 94 --- Fee
Jul. 1989 Commerce, GA 185,750 78 8,723 Fee
Oct. 1989 Bourne, MA 23,417 100 --- Fee
Feb. 1991 West Branch, MI 112,420 100 7,190 Fee
May 1991 Williamsburg, IA 277,230 95 19,767 Fee
Feb. 1992 Casa Grande, AZ 184,768 90 --- Fee
Dec. 1992 North Branch, MN 134,480 98 --- Fee
Feb. 1993 Gonzales, LA 245,098 97 --- Fee
May 1993 San Marcos, TX 441,432 97 38,542 Fee
Aug. 1994 Riverhead, NY 729,238 98 --- Ground Lease (1)
Aug. 1994 Terrell, TX 177,435 96 --- Fee
Sep. 1994 Seymour, IN 141,051 73 --- Fee
Oct. 1994 (3) Lancaster, PA 255,059 94 14,822 Fee
Nov. 1994 Branson, MO 277,494 93 24,000 Fee
Nov. 1994 Locust Grove, GA 248,854 97 --- Fee
Jan. 1995 Barstow, CA 105,950 62 --- Fee
Dec. 1995 Commerce II, GA 342,556 95 29,500 Fee
Feb. 1997 (3) Sevierville, TN 353,941 100 --- Ground Lease
Sept. 1997 (3) Blowing Rock, NC 105,448 100 9,782 Fee
Sep. 1997 (3) Nags Head, NC 82,254 100 6,638 Fee
Mar. 1998 (3) Dalton, GA 173,430 94 11,327 Fee
Jul. 1998 (3) Fort Meyers, FL 198,789 97 --- Fee
Nov. 1999 (3) Fort Lauderdale, FL 165,000 100 --- Fee
- ------------------- ----------------------------------------- ------------ ---- -------- --------------- ------------------------
Total 5,332,138 95 $ 176,736
=================== ========================================= ============ ==== ======== =============== ========================
(1) The original Riverhead center is subject to a ground lease which may be
renewed at our option for up to seven additional terms of five years each.
We own the land on which the Riverhead center expansion is located.
(2) As of December 31, 2001. The average interest rate, including loan cost
amortization, for average debt outstanding for the year ended December 31,
2001 was 8.8% and the weighted average maturity date was March 2007.
(3) Represents date acquired by us.
8
Lease Expirations
The following table sets forth, as of December 31, 2001, scheduled lease
expirations, assuming none of the tenants exercise renewal options. Most leases
are renewable for five year terms at the tenant's option.
%of Gross
Annualized
Average Base Rent
No. of Approx. Annualized Annualized Represented
Leases GLA Base Rent Base Rent by Expiring
Year Expiring(1) (sq. ft.) (1) per sq. ft. (000's) (2) Leases
- ------------------------ ----------------- ----------------- ------------- --------------- --------------
2002 207 757,000 (3) $ 12.99 $9,828 14
2003 200 848,000 14.27 12,103 17
2004 232 977,000 14.09 13,763 20
2005 164 736,000 15.26 11,243 16
2006 162 682,000 16.22 11,067 16
2007 75 326,000 14.85 4,837 7
2008 13 76,000 15.91 1,212 2
2009 9 86,000 10.68 917 1
2010 10 59,000 13.28 780 1
2011 10 83,000 11.79 984 1
2012 & thereafter 24 347,000 9.45 3,281 5
- ------------------------ ----------- ----------------------- ---------- -------------- ------------------
Total 1,106 4,977,000 $ 14.07 $ 70,015 100
======================== =========== ======================= ========== ============== ==================
(1) Excludes leases that have been entered into but which tenant has not yet
taken possession, vacant suites, space under construction and
month-to-month leases totaling in the aggregate approximately 355,000
square feet.
(2) Base rent is defined as the minimum payments due, excluding periodic
contractual fixed increases and rents calculated based on a percentage of
tenants' sales.
(3) As of December 31, 2001, approximately 170,000 square feet of the total
scheduled to expire in 2002 had already renewed.
Rental and Occupancy Rates
The following table sets forth information regarding the expiring leases during
each of the last five calendar years.
Renewed by Existing Re-leased to
Total Expiring Tenants New Tenants
----------------------------------- ---------------------------- ----------------------------
% of % of % of
GLA Total Center GLA Expiring GLA Expiring
Year (sq. ft.) GLA (sq. ft.) GLA (sq. ft.) GLA
- ---------------- --------------- ---------------- ------------- ----------- ------------ ------------
2001 684,166 13 560,195 82 55,362 8
2000 690,263 13 520,030 75 67,916 10
1999 715,197 14 606,450 85 22,882 3
1998 548,504 11 407,837 74 38,526 7
1997 238,250 5 195,380 82 18,600 8
9
The following table sets forth the average base rental rate increases per square
foot upon re-leasing stores that were turned over or renewed during each of the
last five calendar years.
Renewals of Existing Leases Stores Re-leased to New Tenants (1)
---------------------------------------------------- ------------------------------------------------------
Average Annualized Base Rents Average Annualized Base Rents
($ per sq. ft.) ($ per sq. ft.)
-------------------------------------- ----------------------------------------
GLA % GLA %
Year (sq. ft.) Expiring New Increase (sq.ft.) Expiring New Change
- --------- ---------- ----------- --------- ---------- ---------- ----------- --------- ----------
2001 560,195 $14.08 $14.89 6 268,888 $14.90 $16.43 10
2000 520,030 13.66 14.18 4 302,724 14.68 15.64 7
1999 606,450 14.36 14.36 -- 240,851 15.51 16.57 7
1998 407,387 13.83 14.07 2 220,890 15.33 13.87 (9)
1997 195,380 14.21 14.41 1 171,421 14.59 13.42 (8)
_____________________
(1) The square footage released to new tenants for 2001, 2000, 1999, 1998 and
1997 contains 55,362, 67,916, 22,882, 38,526 and 18,600 square feet,
respectively, that was released to new tenants upon expiration of an
existing lease during the current year.
The following table shows certain information on rents and occupancy rates for
the centers during each of the last five calendar years.
Average GLA Open at Aggregate
% Annualized Base End of Each Number of Percentage
Year Leased(1) Rent per sq. ft. (2) Year Centers Rents (000's)
- ------------ ----------- ------------------------ ------------------ ----------------- ----------------
2001 96 $14.22 5,332,000 29 $2,735
2000 96 13.97 5,179,000 29 3,253
1999 97 13.85 5,149,000 31 3,141
1998 97 13.88 5,011,000 31 3,087
1997 98 14.04 4,458,000 30 2,637
_____________________
(1) As of December 31st of each year shown.
(2) Represents total base rental revenue divided by Weighted Average GLA of the
portfolio, which amount does not take into consideration fluctuations in
occupancy throughout the year.
Occupancy Costs
We believe that our ratio of average tenant occupancy cost (which includes base
rent, common area maintenance, real estate taxes, insurance, advertising and
promotions) to average sales per square foot is low relative to other forms of
retail distribution. The following table sets forth, for each of the last five
years, tenant occupancy costs per square foot as a percentage of reported tenant
sales per square foot.
Occupancy Costs as a
Year % of Tenant Sales
------------------------------ --------------------------
2001 7.1
2000 7.4
1999 7.8
1998 7.9
1997 8.2
10
Tenants
The following table sets forth certain information with respect to our ten
largest tenants and their store concepts as of March 1, 2002.
Number GLA % of Total
Tenant of Stores (sq. ft.) GLA
- ------------------------------------------ ------------- ------------- --------------
The Gap, Inc.:
GAP 17 148,702 2.8
Old Navy 11 147,641 2.8
Banana Republic 6 41,324 0.8
-------- ---------------- ----------------
34 337,667 6.3
Liz Claiborne:
Liz Claiborne 23 255,868 4.8
Elizabeth 8 28,894 0.5
DKNY Jeans 3 8,820 0.2
Dana Buchman 3 6,600 0.1
Laundry 2 4,333 0.1
Special Brands By Liz Claiborne 1 3,780 0.1
Claiborne Mens 1 3,100 0.1
-------- ---------------- ----------------
41 311,395 5.9
Phillips-Van Heusen Corporation:
Bass Shoe 20 134,166 2.5
Van Heusen 20 85,197 1.6
Geoffrey Beene Co. Store 11 41,992 0.8
Izod 14 32,017 0.6
-------- ---------------- ----------------
65 293,372 5.5
Reebok International, Ltd.:
Reebok 19 153,461 2.9
Rockport 4 11,900 0.2
Greg Norman 1 3,000 0.1
-------- ---------------- ----------------
24 168,361 3.2
Bass Pro Outdoor World 1 165,000 3.1
Dress Barn Inc. 18 123,822 2.3
Sara Lee Corporation:
L'eggs, Hanes, Bali 24 103,809 1.9
Socks Galore 5 6,230 0.1
Understatements 1 3,000 0.1
-------- ---------------- ----------------
30 113,039 2.1
American Commercial, Inc:
Mikasa Factory Store 13 103,480 1.9
Brown Group Retail, Inc:
Factory Brand Shoe 14 81,380 1.5
Naturalizer 6 16,040 0.3
-------- ---------------- ----------------
20 97,420 1.8
Polo Ralph Lauren:
Polo Ralph Lauren 9 74,366 1.4
Polo Jeans 4 15,000 0.3
Club Monaco 1 3,885 0.1
-------- ---------------- ----------------
14 93,251 1.8
- ------------------------------------------ -------- ---------------- ----------------
Total of all tenants listed in table 260 1,806,807 33.9
========================================== ======== ================ ================
11
Significant Property
The center in Riverhead, New York is our only center that comprises more than
10% of consolidated total assets or consolidated total gross revenues. The
Riverhead, NY center represented 20% of our consolidated total assets and 20% of
our consolidated gross revenue for the year ended December 31, 2001. The
Riverhead center was originally constructed in 1994 and now totals 729,238
square feet.
Tenants at the Riverhead center principally conduct retail sales operations. The
occupancy rate as of the end of 2001, 2000 and 1999 was 99%, 94% and 99%.
Average annualized base rental rates during 2001, 2000 and 1999 were $18.68,
$19.72 and $19.15 per weighted average GLA, respectively.
Depreciation on the Riverhead center is recognized on a straight-line basis over
33.33 years, resulting in a depreciation rate of 3% per year. At December 31,
2001, the net federal tax basis of this center was approximately $84.9 million.
Real estate taxes assessed on this center during 2001 amounted to $3.3 million.
Real estate taxes for 2002 are estimated to be approximately $3.4 million.
The following table sets forth, as of December 31, 2001, scheduled lease
expirations at the Riverhead center assuming that none of the tenants exercise
renewal options:
% of Gross
Annualized
Base Rent
No. of Annualized Annualized Represented
Leases GLA Base Rent Base Rent by Expiring
Year Expiring (1) (sq. ft.)(1) per sq. ft. (000)(2) Leases
- --------------------------- ----------------- ----------------- ------------------ ---------------- ----------------
2002 34 112,783 $ 21.58 $ 2,434 18
2003 18 80,050 19.51 1,562 11
2004 35 153,355 19.59 3,004 22
2005 16 84,355 20.35 1,717 13
2006 13 39,430 23.21 915 7
2007 31 110,000 21.34 2,347 17
2008 4 20,500 21.06 432 3
2009 2 37,751 10.27 388 3
2010 -- -- -- -- --
2011 2 31,000 12.31 382 3
2012 and thereafter 4 48,000 10.19 489 3
- ---------------------------- --------- --------------------- ------------------ --------------- --------------------
Total 159 717,224 $ 19.06 $ 13,670 100
============================ ========= ===================== ================== =============== ====================
(1) Excludes leases that have been entered into but which tenant has not taken
possession, vacant suites and month-to-month leases.
(2) Base rent is defined as the minimum payments due, excluding periodic
contractual fixed increases and rents calculated based on a percentage of
tenants' sales.
Item 3. Legal Proceedings
We are subject to legal proceedings and claims that have arisen in the ordinary
course of our business and have not been finally adjudicated. In our opinion,
the ultimate resolution of these matters will have no material effect on our
results of operations or financial condition.
Item 4. Submission of Matters to a Vote of Security Holders
There were no matters submitted to a vote of security holders, through
solicitation of proxies or otherwise, during the fourth quarter of the fiscal
year ended December 31, 2001.
12
EXECUTIVE OFFICERS OF THE REGISTRANT
The following table sets forth certain information concerning our executive
officers:
NAME AGE POSITION
Stanley K. Tanger.......... 78 Founder, Chairman of the Board of Directors
and Chief Executive Officer
Steven B. Tanger........... 53 Director, President and Chief Operating
Officer
Rochelle G. Simpson ....... 63 Secretary and Executive Vice President -
Administration and Finance
Willard A. Chafin, Jr...... 64 Executive Vice President - Leasing,
Site Selection, Operations and Marketing
Frank C. Marchisello, Jr... 43 Senior Vice President -
Chief Financial Officer
Joseph H. Nehmen........... 53 Senior Vice President - Operations
Carrie A. Warren........... 39 Senior Vice President - Marketing
Virginia R. Summerell...... 43 Treasurer and Assistant Secretary
Kevin M. Dillon............ 43 Vice President - Construction
Lisa J. Morrison........... 42 Vice President - Leasing
The following is a biographical summary of the experience of our executive
officers:
Stanley K. Tanger. Mr. Tanger is the founder, Chief Executive Officer and
Chairman of the Board of Directors of the Company. He also served as President
from inception of the Company to December 1994. Mr. Tanger opened one of the
country's first outlet shopping centers in Burlington, North Carolina in 1981.
Before entering the factory outlet center business, Mr. Tanger was President and
Chief Executive Officer of his family's apparel manufacturing business,
Tanger/Creighton, Inc., for 30 years.
Steven B. Tanger. Mr. Tanger is a director of the Company and was named
President and Chief Operating Officer effective January 1, 1995. Previously, Mr.
Tanger served as Executive Vice President since joining the Company in 1986. He
has been with Tanger-related companies for most of his professional career,
having served as Executive Vice President of Tanger/Creighton for 10 years. He
is responsible for all phases of project development, including site selection,
land acquisition and development, leasing, marketing and overall management of
existing outlet centers. Mr. Tanger is a graduate of the University of North
Carolina at Chapel Hill and the Stanford University School of Business Executive
Program. Mr. Tanger is the son of Stanley K. Tanger.
Rochelle G. Simpson. Ms. Simpson was named Executive Vice President -
Administration and Finance in January 1999. She previously held the position of
Senior Vice President - Administration and Finance since October 1995. She is
also the Secretary of the Company and previously served as Treasurer from May
1993 through May 1995. She entered the factory outlet center business in January
1981, in general management and as chief accountant for Stanley K. Tanger and
later became Vice President - Administration and Finance of the Predecessor
Company. Ms. Simpson oversees the accounting and finance departments and has
overall management responsibility for the Company's headquarters.
Willard A. Chafin, Jr. Mr. Chafin was named Executive Vice President -
Leasing, Site Selection, Operations and Marketing of the Company in January
1999. Mr. Chafin previously held the position of Senior Vice President -
Leasing, Site Selection, Operations and Marketing since October 1995. He joined
the Company in April 1990, and since has held various executive positions where
his major responsibilities included supervising the Marketing, Leasing and
Property Management Departments, and leading the Asset Management Team. Prior to
joining the Company, Mr. Chafin was the Director of Store Development for the
Sara Lee Corporation, where he spent 21 years. Before joining Sara Lee, Mr.
Chafin was employed by Sears Roebuck & Co. for nine years in advertising/sales
promotion, inventory control and merchandising.
13
Frank C. Marchisello, Jr. Mr. Marchisello was named Senior Vice President
and Chief Financial Officer in January 1999. He was named Vice President and
Chief Financial Officer in November 1994. Previously, he served as Chief
Accounting Officer since joining the Company in January 1993 and Assistant
Treasurer since February 1994. He was employed by Gilliam, Coble & Moser,
certified public accountants, from 1981 to 1992, the last six years of which he
was a partner of the firm in charge of various real estate clients. Mr.
Marchisello is a graduate of the University of North Carolina at Chapel Hill and
is a certified public accountant.
Joseph H. Nehmen. Mr. Nehmen was named Senior Vice President of Operations
in January 1999. He joined the Company in September 1995 and was named Vice
President of Operations in October 1995. Mr. Nehmen has over 20 years experience
in private business. Prior to joining Tanger, Mr. Nehmen was owner of Merchants
Wholesaler, a privately held distribution company in St. Louis, Missouri. He is
a graduate of Washington University. Mr. Nehmen is the son-in-law of Stanley K.
Tanger and brother-in-law of Steven B. Tanger.
Carrie A. Warren. Ms. Warren was named Senior Vice President - Marketing in
May 2000. Previously, she held the position of Vice President - Marketing since
September 1996 and Assistant Vice President - Marketing since joining the
Company in December 1995. Prior to joining Tanger, Ms. Warren was with Prime
Retail, L.P. for 4 years where she served as Regional Marketing Director
responsible for coordinating and directing marketing for five outlet centers in
the southeast region. Prior to joining Prime Retail, L.P., Ms. Warren was
Marketing Manager for North Hills, Inc. for five years and also served in the
same role for the Edward J. DeBartolo Corp. for two years. Ms. Warren is a
graduate of East Carolina University.
Virginia R. Summerell. Ms. Summerell was named Treasurer of the Company in
May 1995 and Assistant Secretary in November 1994. Previously, she held the
position of Director of Finance since joining the Company in August 1992, after
nine years with NationsBank. Her major responsibilities include maintaining
banking relationships, oversight of all project and corporate finance
transactions and development of treasury management systems. Ms. Summerell is a
graduate of Davidson College and holds an MBA from the Babcock School at Wake
Forest University.
Kevin M. Dillon. Mr. Dillon was named Vice President - Construction in
October 1997. Previously, he held the position of Director of Construction from
September 1996 to October 1997 and Construction Manager from November 1993, the
month he joined the Company, to September 1996. Prior to joining the Company,
Mr. Dillon was employed by New Market Development Company for six years where he
served as Senior Project Manager. Prior to joining New Market, Mr. Dillon was
the Development Director of Western Development Company where he spent 6 years.
Lisa J. Morrison. Ms. Morrison was named Vice President - Leasing in May
2001. Previously, she held the position of Assistant Vice President of Leasing
from August 2000 to May 2001 and Director of Leasing from April 1999 until
August 2000. Prior to joining the Company, Ms. Morrison was employed by the
Taubman Company and Trizec Properties, Inc. where she served as a leasing agent.
Her major responsibilities include managing the leasing strategies for our
operating properties, as well as expansions and new development. She also
oversees the leasing personnel and the merchandising and occupancy for Tanger
properties.
14
PART II
Item 5. Market For Registrant's Common Equity and Related Shareholder Matters
The Common Shares commenced trading on the New York Stock Exchange on May 28,
1993. The initial public offering price was $22.50 per share. The following
table sets forth the high and low sales prices of the Common Shares as reported
on the New York Stock Exchange Composite Tape, during the periods indicated.
Common
2001 High Low Dividends Paid
- ------------------- -------------- --------------- -----------------
First Quarter $ 23.625 $ 19.750 $ .6075
Second Quarter 23.000 20.340 .6100
Third Quarter 23.000 19.100 .6100
Fourth Quarter 21.400 19.900 .6100
- ------------------- -------------- --------------- -----------------
Year 2001 $ 23.625 $ 19.100 $ 2.4375
- ------------------- -------------- --------------- -----------------
Common
2000 High Low Dividends Paid
- ------------------- -------------- --------------- -----------------
First Quarter $ 22.875 $ 18.500 $ .6050
Second Quarter 24.000 18.875 .6075
Third Quarter 24.875 21.000 .6075
Fourth Quarter 23.125 19.500 .6075
- ------------------- -------------- --------------- -----------------
Year 2000 $ 24.875 $ 18.500 $ 2.4275
- ------------------- -------------- --------------- -----------------
As of March 1, 2002, there were approximately 704 shareholders of record.
Certain of our debt agreements limit the payment of dividends such that
dividends shall not exceed FFO, as defined in the agreements, for the prior
fiscal year on an annual basis or 95% of FFO on a cumulative basis. Based on
continuing favorable operations and available funds from operations, we intend
to continue to pay regular quarterly dividends.
15
Item 6. Selected Financial Data
2001 2000 1999 1998 1997
- ------------------------------------------ ------------- ------------- ------------ -------------- ------------
(In thousands, except per share and center data)
OPERATING DATA
Total revenues $ 111,068 $ 108,821 $ 104,016 $ 97,766 $ 85,271
Income before (loss) gain on sale or
disposal of real estate, minority
interest and extraordinary item 9,492 12,249 17,070 15,109 17,583
Income before extraordinary item 7,356 4,312 15,837 12,159 12,827
Net income 7,112 4,312 15,588 11,827 12,827
- ------------------------------------------ -------------- ------------- ------------- ------------ ------------
SHARE DATA
Basic:
Income before extraordinary item $ .70 $ .32 $ 1.77 $ 1.30 $ 1.57
Net income $ .67 $ .32 $ 1.74 $ 1.26 $ 1.57
Weighted average common shares 7,926 7,894 7,861 7,886 7,028
Diluted:
Income before extraordinary item $ .70 $ .31 $ 1.77 $ 1.28 $ 1.54
Net income $ .67 $ .31 $ 1.74 $ 1.24 $ 1.54
Weighted average common shares 7,948 7,922 7,872 8,009 7,140
Common dividends paid $ 2.44 $ 2.43 $ 2.42 $ 2.35 $ 2.17
- ------------------------------------------ -------------- ------------- ------------- ------------ ------------
BALANCE SHEET DATA
Real estate assets, before depreciation $ 599,266 $ 584,928 $ 566,216 $ 529,247 $ 454,708
Total assets 476,272 487,408 490,069 471,795 416,014
Debt 358,195 346,843 329,647 302,485 229,050
Shareholders' equity 76,371 90,877 107,764 114,039 122,119
- ------------------------------------------ -------------- ------------- ------------- ------------ ------------
OTHER DATA
EBITDA (1) $ 68,198 $ 67,832 $ 66,133 $ 61,991 $ 52,857
Funds from operations (1) $ 37,768 $ 38,203 $ 41,673 $ 37,048 $ 35,840
Cash flows provided by (used in):
Operating activities $ 44,626 $ 38,420 $ 43,175 $ 35,787 $ 39,214
Investing activities $ (23,269) $ (25,815) $ (45,959) $ (79,236) $ (93,636)
Financing activities $ (21,476) $ (12,474)$ (3,043) $ 46,172 $ 55,444
Gross leasable area open at year end 5,332 5,179 5,149 5,011 4,458
Number of centers 29 29 31 31 30
_______________________
(1) EBITDA and Funds from Operations ("FFO") are widely accepted financial
indicators used by certain investors and analysts to analyze and compare
companies on the basis of operating performance. EBITDA represents earnings
before minority interest, gain (loss) on sale or disposal of real estate,
extraordinary item, asset write-down, interest expense, income taxes,
depreciation and amortization. FFO is defined as net income (loss),
computed in accordance with generally accepted accounting principles,
before extraordinary items and gains (losses) on sale or disposal of
depreciable operating properties, plus depreciation and amortization
uniquely significant to real estate. We caution that the calculations of
EBITDA and FFO may vary from entity to entity and as such the presentation
of EBITDA and FFO by us may not be comparable to other similarly titled
measures of other reporting companies. EBITDA and FFO are not intended to
represent cash flows for the period. EBITDA and FFO have not been presented
as an alternative to operating income or as an indicator of operating
performance, and should not be considered in isolation or as a substitute
for measures of performance prepared in accordance with generally accepted
accounting principles.
16
Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations
The following discussion should be read in conjunction with the consolidated
financial statements appearing elsewhere in this report. Historical results and
percentage relationships set forth in the 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 the term "Operating Partnership" refers
to Tanger Properties Limited Partnership. The terms "we", "our" and "us" refer
to the Company or the Company and the Operating Partnership together, as the
text requires.
The discussion of our results of operations reported in the consolidated
statements of operations compares the years ended December 31, 2001 and 2000, as
well as December 31, 2000 and 1999. Certain comparisons between the periods are
made on a percentage basis as well as on a weighted average gross leasable area
("GLA") basis, a technique which adjusts for certain increases or decreases in
the number of centers and corresponding square feet related to the development,
acquisition, expansion or disposition of rental properties. The computation of
weighted average GLA, however, does not adjust for fluctuations in occupancy
that may occur subsequent to the original opening date.
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 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 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 and expectations, are generally identifiable by use
of the words `believe', `expect', `intend', `anticipate', `estimate', `project',
or similar expressions. You should not rely on forward-looking statements since
they involve known and unknown risks, uncertainties and other factors which are,
in some cases, beyond our control and which could materially affect our actual
results, performance or achievements. Factors which may cause actual results to
differ materially from current expectations include, but are not limited to, the
following:
o general economic and local real estate conditions could change (for
example, our tenant's business may change if the economy changes, which
might effect (1) the amount of rent they pay us or their ability to pay
rent to us, (2) their demand for new space, or (3) our ability to renew or
re-lease a significant amount of available space on favorable terms);
o the laws and regulations that apply to us could change (for instance, a
change in the tax laws that apply to REITs could result in unfavorable tax
treatment for us);
o availability and cost of capital (for instance, financing opportunities may
not be available to us, or may not be available to us on favorable terms);
o the level and volatility of interest rates may fluctuate in an unfavorable
manner;
o our operating costs may increase or our costs to construct or acquire new
properties or expand our existing properties may increase or exceed our
original expectations.
General Overview
At December 31, 2001, we owned 29 centers in 20 states totaling 5,332,000 square
feet of operating GLA compared to 29 centers in 20 states totaling 5,179,000
square feet of operating GLA as of December 31, 2000. The increase is primarily
due to the completion of the expansion at our San Marcos, TX center during 2001.
The center now contains over 441,000 square feet of gross leasable space.
In September 2001, we established a 50% ownership joint venture, TWMB
Associates, LLC ("TWMB"), with respect to our Myrtle Beach, South Carolina
project with Rosen-Warren Myrtle Beach LLC ("Rosen-Warren") and began
construction on the first phase of a new 400,000 square foot Tanger Outlet
Center in Myrtle Beach, SC. The first phase will consist of approximately
260,000 square feet and include over 50 brand name outlet tenants. Stores are
tentatively expected to begin opening in July of 2002.
17
A summary of the operating results for the years ended December 31, 2001, 2000
and 1999 is presented in the following table, expressed in amounts calculated on
a weighted average GLA basis.
2001 2000 1999
- --------------------------------------------------------- -------------- -------------- ---------------
GLA open at end of period (000's) 5,332 5,179 5,149
Weighted average GLA (000's) (1) 5,299 5,115 4,996
Outlet centers in operation 29 29 31
New centers acquired --- --- 1
Centers disposed of or sold --- 2 1
Centers expanded 1 5 5
States operated in at end of period 20 20 22
Occupancy percentage at end of period 96 96 97
Per square foot
Revenues
Base rentals $14.22 $13.97 $13.85
Percentage rentals .52 .64 .63
Expense reimbursements 5.70 5.87 5.59
Other income .52 .79 .76
- --------------------------------------------------------- -------------- -------------- ---------------
Total revenues 20.96 21.27 20.83
- --------------------------------------------------------- -------------- -------------- ---------------
Expenses
Property operating 6.54 6.57 6.12
General and administrative 1.55 1.44 1.46
Interest 5.69 5.39 4.85
Depreciation and amortization 5.39 5.13 4.97
- --------------------------------------------------------- -------------- -------------- ---------------
Total expenses 19.17 18.53 17.40
- --------------------------------------------------------- -------------- -------------- ---------------
Income before (loss) gain on sale or disposal of
real estate, minority interest and $ 1.79 $ 2.74 $ 3.43
extraordinary item
- --------------------------------------------------------- -------------- -------------- ---------------
(1) GLA weighted by months of operations. GLA is not adjusted for fluctuations
in occupancy that may occur subsequent to the original opening date.
18
Results of Operations
2001 Compared to 2000
Base rentals increased $3.9 million, or 5%, in the 2001 period when compared to
the same period in 2000. The increase is primarily due to the effect of the
expansion completed in 2001, as mentioned in the General Overview above, and the
full year effect of expansions completed in the fourth quarter of 2000, offset
by the loss of rent from the sales of the centers in Lawrence, Kansas and
McMinnville, Oregon in June 2000. Base rent per weighted average GLA increased
by $.25 per square foot, or 2%, as a result of the expansions which had a higher
average base rent per square foot compared to the portfolio average and the
sales of the centers in Lawrence, KS and McMinnville, OR which had a lower
average base rent per square foot compared to the portfolio average.
Percentage rentals, which represent revenues based on a percentage of tenants'
sales volume above predetermined levels, decreased by $518,000, or 16%, and on a
weighted average GLA basis, decreased $.12 per square foot in 2001 compared to
2000. Same-space sales for the year ended December 31, 2001, defined as the
weighted average sales per square foot reported in space open for the full
duration of each comparison period, increased 5% to $294 per square foot due to
our efforts to re-merchandise selected centers by replacing low volume tenants
with high volume tenants. However, for the year ended December 31, 2001,
reported same-store sales, defined as the weighted average sales per square foot
reported by tenants for stores open since January 1, 2000, decreased by 2%
compared with the previous year.
Expense reimbursements, which represent the contractual recovery from tenants of
certain common area maintenance, insurance, property tax, promotional,
advertising and management expenses generally fluctuates consistently with the
reimbursable property operating expenses to which it relates. Expense
reimbursements, expressed as a percentage of property operating expenses,
decreased to 87% in 2001 from 89% in 2000 primarily as a result of higher real
estate taxes due to revaluations, increases in property insurance premiums and
increases in other non-reimbursable expenses.
Other income decreased $1.3 million in 2001 as compared to 2000. The 2000 period
included gains on sales of land outparcels totaling $908,000 and the recognition
of business interruption insurance proceeds relating to the Stroud, Oklahoma
center, which was destroyed by a tornado in May 1999, totaling $985,000. These
items were offset in part by increases in the 2001 period in vending and
interest income.
Property operating expenses increased by $1.0 million, or 3%, in 2001 as
compared to 2000. On a weighted average GLA basis, property operating expenses
decreased from $6.57 to $6.54 per square foot. The decrease per square foot is
the result of a company-wide effort to improve operating efficiencies and reduce
costs in common area maintenance and marketing partially offset by increases in
real estate taxes, property insurance and other non-reimbursable expenses.
General and administrative expenses increased $865,000, or 12%, in 2001 as
compared to 2000 primarily due to increases in professional fees and provisions
for bad debts. As a percentage of revenues, general and administrative expenses
were approximately 7.4% of revenues in 2001 and 6.8% in 2000. On a weighted
average GLA basis, general and administrative expenses increased $.11 per square
foot from $1.44 in 2000 to $1.55 in 2001.
Interest expense increased $2.6 million during 2001 as compared to 2000 due
primarily to our increased debt levels attributable to development completed in
2001 and the full year effect of expansions completed in the fourth quarter of
2000. Our strategy to replace short-term, variable rate debt with long-term,
fixed rate debt and extend our average debt maturities has resulted in an
overall higher interest rate on outstanding debt. Also, $295,200 paid to
terminate certain interest rate swap agreements during the first quarter of 2001
contributed to the increase in interest expense. Depreciation and amortization
per weighted average GLA increased 5% from $5.13 per square foot in the 2000
period to $5.39 per square foot in the 2001 period due to a higher mix of tenant
finishing allowances included in buildings and improvements which are
depreciated over shorter lives (i.e. over lives generally ranging from 3 to 10
years as opposed to other construction costs which are depreciated over lives
ranging from 15 to 33 years).
19
The asset write-down recognized in 2000 represents the write off of all
development costs associated with our site in Ft. Lauderdale, Florida, as well
as additional costs associated with various other non-recurring development
activities at other sites, which were discontinued. The costs associated with
the Ft. Lauderdale site were written off because we terminated our contract to
purchase twelve acres of land in Dania Beach/Ft. Lauderdale, FL.
The loss on sale of real estate during 2000 represents the loss recognized on
the sale of our centers in Lawrence, KS and McMinnville, OR and the land and the
remaining site improvements in Stroud, OK. Net proceeds received from the sale
of the centers totaled $7.1 million. As a result of the two center sales, we
recognized a loss on sale of real estate of $5.9 million. The combined net
operating income of these two centers represented approximately 1% of the total
portfolio's operating income. We sold the Stroud land and site improvements in
December 2000 and received net proceeds of approximately $723,500 in January
2001. As a result of this sale, we recognized a loss of $1 million on the sale
of real estate in the fourth quarter of 2000.
The extraordinary losses recognized in 2001 represent the write-off of
unamortized deferred financing costs related to debt that was extinguished
during each period prior to its scheduled maturity.
2000 Compared to 1999
Base rentals increased $2.3 million, or 3%, in the 2000 period when compared to
the same period in 1999. The increase is primarily due to the effect of the
expansions during 2000 and the fourth quarter of 1999 plus the acquisition of
the Ft. Lauderdale, FL center in November of 1999, offset by the loss of rent
from the sales of the centers in Lawrence, KS and McMinnville, OR and the full
year effect of the loss of the Stroud, OK center. Base rentals per weighted
average GLA increased $.12 per square foot due to the sale of the Lawrence, KS
and McMinnville, OR centers and the loss of the Stroud, OK center, all of which
had lower average base rentals per square foot than the portfolio average.
Percentage rentals, which represent revenues based on a percentage of tenants'
sales volume above predetermined levels, increased by $112,000, or 4%, and on a
weighted average GLA basis, increased $.01 per square foot in 2000 compared to
1999. Same-space sales for the year ended December 31, 2000, defined as the
weighted average sales per square foot reported in space open for the full
duration of each comparison period, increased 7% to $281 per square foot due to
our efforts to re-merchandise selected centers by replacing low volume tenants
with high volume tenants. However, for the year ended December 31, 2000,
reported same-store sales, defined as the weighted average sales per square foot
reported by tenants for stores open since January 1, 1999, were flat compared
with the previous year.
Expense reimbursements, which represent the contractual recovery from tenants of
certain common area maintenance, insurance, property tax, promotional,
advertising and management expenses generally fluctuates consistently with the
reimbursable property operating expenses to which it relates. Expense
reimbursements, expressed as a percentage of property operating expenses,
decreased to 89% in 2000 from 91% in 1999 primarily as a result of a lower
average occupancy rate and higher operating expenses in the 2000 period compared
to the 1999 period.
Other income increased $280,000 in 2000 as compared to 1999. The increase is
primarily due to gains on sale of out parcels of land totaling $908,000 during
2000 as compared to $687,000 in 1999.
Property operating expenses increased by $3.0 million, or 10%, in 2000 as
compared to 1999. On a weighted average GLA basis, property operating expenses
increased from $6.12 to $6.57 per square foot. The increases are the result of
certain real estate tax assessments and higher common area maintenance expenses.
General and administrative expenses increased $68,000, or 1%, in 2000 as
compared to 1999. As a percentage of revenues, general and administrative
expenses were approximately 6.8% of revenues in 2000 and 7.0% in 1999. On a
weighted average GLA basis, general and administrative expenses decreased $.02
per square foot from $1.46 in 1999 to $1.44 in 2000. The decrease in general and
administrative expenses per square foot reflects our efforts to control general
and administrative expenditures.
20
Interest expense increased $3.3 million during 2000 as compared to 1999 due to
additional financing necessary to fund the expansions of 2000, the acquisition
in Fort Lauderdale, FL, higher average interest rates and additional
amortization of deferred financing charges incurred during the year for the more
than $75 million in debt obtained during 2000. Depreciation and amortization per
weighted average GLA increased from $4.97 per square foot in 1999 to $5.13 per
square foot in the 2000 period due to a higher mix of tenant finishing
allowances included in buildings and improvements which are depreciated over
shorter lives (i.e., over lives generally ranging from 3 to 10 years as opposed
to other construction costs which are depreciated over lives ranging from 15 to
33 years).
The asset write-down recognized in 2000 represents the write off of all
development costs associated with our site in Ft. Lauderdale, FL, as well as
additional costs associated with various other non-recurring development
activities at other sites, which were discontinued. The costs associated with
the Ft. Lauderdale site were written off because we terminated our contract to
purchase twelve acres of land in Dania Beach/Ft. Lauderdale, FL.
The loss on sale of real estate during 2000 represents the loss recognized on
the sale of our centers in Lawrence, KS and McMinnville, OR and the land and the
remaining site improvements in Stroud, OK. Net proceeds received from the sale
of the centers totaled $7.1 million. As a result of the two center sales, we
recognized a loss on sale of real estate of $5.9 million. The combined net
operating income of these two centers represented approximately 1% of the total
portfolio's operating income. We sold the Stroud land and site improvements in
December 2000 and received net proceeds of approximately $723,500 in January
2001. As a result of this sale, we recognized a loss of $1 million on the sale
of real estate in the fourth quarter of 2000.
The extraordinary losses recognized in 1999 represent the write-off of
unamortized deferred financing costs related to debt that was extinguished
during each period prior to its scheduled maturity.
Liquidity and Capital Resources
Net cash provided by operating activities was $44.6, $38.4 and $43.2 million for
the years ended December 31, 2001, 2000 and 1999, respectively. The increase in
cash provided by operating activities in 2001 compared to 2000 is primarily due
to changes in other assets and accounts payable and accrued expenses. The
decrease in cash provided by operating activities in 2000 compared to 1999 is
primarily due to higher interest rate costs and a decrease in accounts payable.
Net cash used in investing activities amounted to $23.3, $25.8 and $46.0 million
during 2001, 2000 and 1999, respectively, and reflects the acquisitions,
expansions and dispositions of real estate during each year. Cash used in
financing activities of $21.5, $12.5 and $3.0 in 2001, 2000 and 1999,
respectively, has fluctuated consistently with the capital needed to fund the
current development and acquisition activity and reflects increases in dividends
paid during 2001, 2000 and 1999.
Joint Ventures
Effective August 7, 2000, we announced the formation of a joint venture with C.
Randy Warren Jr., former Senior Vice President of Leasing of the Company. The
new entity, Tanger-Warren Development, LLC ("Tanger-Warren"), was formed to
identify, acquire and develop sites exclusively for us. We agreed to be
co-managers of Tanger-Warren, each with 50% ownership interest in the joint
venture and any entities formed with respect to a specific project. As of
December 31, 2001, our investment in Tanger-Warren amounted to approximately
$9,000 and the impact of this joint venture on our results of operations has
been insignificant.
In September 2001, we established a joint venture, TWMB Associates, LLC
("TWMB"), with respect to our Myrtle Beach, South Carolina project with
Rosen-Warren Myrtle Beach LLC ("Rosen-Warren"). We and Rosen-Warren, each as 50%
owners, contributed $4.3 million in cash for a total initial equity in TWMB of
$8.6 million. In September 2001, TWMB began construction on the first phase of a
new 400,000 square foot Tanger Outlet Center in Myrtle Beach, SC. The first
phase is projected to cost $34.6 million and will consist of approximately
260,000 square feet and include over 50 brand name outlet tenants. Currently,
leases for over 215,000 square feet, or 83% of the first phase are fully
executed. Stores are tentatively expected to begin opening in July of 2002. We
currently anticipate construction of a 140,000 square foot second, and final
phase to cost $13.7 million. Prior to beginning construction on the second
phase, Rosen-Warren and we each will be required to contribute an additional
$1.75 million in cash for a total equity contribution in phase two of TWMB of
$3.5 million. Upon the opening of phase one of the Myrtle Beach property, we
will receive on-going asset management fees.
21
In conjunction with the beginning of construction, TWMB closed on a construction
loan in the amount of $36.2 million with Bank of America, NA (Agent) and
SouthTrust Bank, the proceeds of which will be used to develop the Tanger Outlet
Center in Myrtle Beach, SC. As of December 31, 2001, the construction loan had a
$10,000 balance. All debt incurred by this unconsolidated joint venture is
secured by its property as well as joint and several guarantees by Rosen-Warren
and us. We do not expect events to occur that would trigger the provisions of
the guarantee because our properties have historically produced sufficient cash
flow to meet the related debt service requirements.
Either owner in TWMB has the right to initiate the sale or purchase of the other
party's interest no sooner than October 25, 2002. If such action is initiated,
one owner would determine the fair market value purchase price of the joint
venture and the other would determine whether they would take the role of seller
or purchaser. The owner who is to designate the fair market value purchase price
would be determined by the toss of a coin. If either Rosen-Warren or we enacted
this provision and depending on our role in the transaction as either seller or
purchaser, we could potentially incur a cash outflow for the purchase of
Rosen-Warren's interest. However, we do not expect this event to occur in the
near future based on the positive expectations of developing and operating an
outlet center in the Myrtle Beach area.
Other Developments
We have an option to purchase the retail portion of a site at the Bourne Bridge
Rotary in Cape Cod, Massachusetts. Obtaining appropriate approvals for the
Bourne project from the local authorities continues to be a challenge and
consequently, we are reviewing the viability of maintaining an option on the
property.
Any developments or expansions that we, or a joint venture that we are involved
in, have planned or anticipated may not be started or completed as scheduled, or
may not result in accretive funds from operations. 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
accretive funds from operations.
Financing Arrangements
On February 9, 2001, we issued $100 million of 9 1/8% senior, unsecured notes,
maturing on February 15, 2008. The net proceeds of $97 million were used to
repay all of the outstanding indebtedness under the $75 million 8 3/4% notes
which were due March 11, 2001. The net proceeds were also used to repay the $20
million LIBOR plus 2.25% term loan due January 2002 with Fleet National Bank and
Bank of America. The interest rate swap agreements associated with this loan
were terminated at a cost of $295,200 which has been included in interest
expense. In addition, approximately $180,000 of unamortized costs were written
off as an extraordinary item. The remaining proceeds were used for general
operating purposes.
On March 26, 2001, we entered into a five year collateralized loan with Wells
Fargo Bank for $24.0 million at a variable rate of LIBOR plus 1.75%. The
proceeds were used to reduce amounts outstanding under existing lines of credit.
Additionally, on March 26, 2001, we extended the maturity date of our existing
$29.5 million term loan with Wells Fargo Bank from July 2005 to March 2006.
On May 1, 2001, we entered into an eight year collateralized loan with John
Hancock Life Insurance Company for $19.45 million at a fixed rate of 7.98%. The
proceeds were used to reduce amounts outstanding under existing lines of credit.
During the fourth quarter of 2001, we purchased at par approximately $14.5
million of our outstanding 7 7/8% senior, unsecured public notes that mature in
October 2004. The purchases were funded by amounts available under our unsecured
lines of credit which do not mature until June 2003. Additionally during the
first quarter of 2002, we have purchased at par or below, an additional $4.9
million of the October 2004 notes bringing the total purchased to $19.4 million.
22
At December 31, 2001, approximately 51% of our outstanding debt represented
unsecured borrowings and approximately 59% of our real estate portfolio was
unencumbered. The average interest rate, including loan cost amortization, on
average debt outstanding for the year-ended December 31, 2001 was 8.79%.
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 our best interest and our
shareholders' interests. During the second quarter of 2001, we amended our shelf
registration for the ability to issue up to $200 million in debt and $200
million in equity securities. We may also consider the use of operational and
developmental joint ventures, selling certain properties that do not meet our
long-term investment criteria as well as outparcels on existing properties to
generate capital to reinvest into other attractive investment opportunities.
We maintain unsecured, revolving lines of credit that provide for unsecured
borrowings up to $75 million at December 31, 2001. During 2001, we extended the
maturity of each of our three $25 million lines to June 30, 2003. Also during
2001, we cancelled a $25 million line of credit which reduced our borrowing
ability from lines of credit from $100 million to $75 million.
Based on cash provided by operations, existing credit facilities, ongoing
negotiations with certain financial institutions and our ability to sell debt or
equity subject to market conditions, we believe that we have access to the
necessary financing to fund the planned capital expenditures during 2002.
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 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
the existing lines of credit or invested in short-term money market or other
suitable instruments.
Contractual Obligations and Commercial Commitments
The following table details our contractual obligations and commercial
commitments over the next five years and thereafter (in thousands):
Contractual Obligations
2002 2003 2004 2005 2006 Thereafter
---------- ----------- ---------- ----------- ----------- --------------
Debt $2,288 $23,785 $63,941 $23,888 $53,899 $190,394
Operating leases 2,264 1,914 1,832 1,824 1,819 64,401
- -------------------- ---------- ----------- ---------- ----------- ----------- --------------
$4,552 $25,699 $65,773 $25,712 $55,718 $254,795
- -------------------- ---------- ----------- ---------- ----------- ----------- --------------
Our 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% of funds
from operations 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 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 operate in a manner intended to enable us to qualify as a REIT under the
Internal Revenue Code (the "Code"). A REIT which distributes at least 90% of its
taxable income to its shareholders each year and which meets certain other
conditions is not taxed on that portion of its taxable income which is
distributed to its shareholders. Based on our 2001 taxable income to
shareholders, we were required to distribute approximately $3,044,000 in order
to maintain our REIT status as described above. We distributed approximately
$19,315,000 to common shareholders during 2001, significantly more than our
required distributions. If events were to occur that would cause our actual
dividend to be reduced, we believe we still have an adequate margin regarding
required dividend payments based on our historic dividend and taxable income
levels to maintain our REIT status.
23
The following table details our commercial commitments (in thousands):
Commercial Commitments 2003 2004
---------- -----------
Lines of credit $54,050 ---
Joint venture guarantee --- $36,200
- ----------------------------------- ---------- -----------
$54,050 $36,200
- ----------------------------------- ---------- -----------
We currently maintain three unsecured revolving credit facilities with major
national banking institutions, totaling $75 million. As of December 31, 2001
amounts outstanding under these credit facilities totaled $20.95 million. All
three credit facilities expire in June 2003.
We are party to a joint and several guarantee with respect to the $36.2 million
construction loan obtained by TWMB. See "Joint Ventures" section above for
further discussion of the guarantee.
Related Party Transactions
In May 2000, demand notes receivable totaling $3.4 million from Stanley K.
Tanger, our Chairman of the Board and Chief Executive Officer, were converted
into two separate term notes of which $2.5 million was due from Stanley K.
Tanger and $845,000 was due from Steven B. Tanger, our President and Chief
Operating Officer. The notes amortize evenly over five years with principal and
interest at a rate of 8% per annum due quarterly. The balance of Stanley K.
Tanger's note at December 31, 2001, through accelerated payments, was $797,000.
Steven B. Tanger's note was paid in full during 2001. Additionally in August
2001, the Board of Directors amended the notes to adjust the interest rate from
8% per annum to 90 day LIBOR plus 1.75%. We believe the amended interest rate is
at arm's length based on our current unsecured, variable borrowing rate.
During the first quarter of 2002, Stanley K. Tanger made a quarterly payment of
$100,000.
Market 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 do not enter into derivatives or other
financial instruments for trading or speculative purposes.
We negotiate long-term fixed rate debt instruments and enter into interest rate
swap agreements to manage our exposure to interest rate changes on our floating
rate debt. The swaps involve the exchange of fixed and variable interest rate
payments based on a contractual principal amount and time period. Payments or
receipts on the agreements are recorded as adjustments to interest expense. In
January 2000, we entered into new interest rate swap agreements on notional
amounts totaling $20.0 million. In order to fix the interest rate, we paid
$162,000. As mentioned previously in the "Financing Arrangements" section, these
agreements subsequently were terminated in February 2001 at a cost of $295,200
which has been included in interest expense. In December 2000, we entered into
another interest rate swap agreement on notional amounts totaling $25.0 million.
This agreement fixes the 30-day LIBOR index at 5.97% through January 2003. At
December 31, 2001, we would have had to pay $973,000 to terminate this
agreement. A 1% decrease in the 30-day LIBOR index would increase this amount by
approximately $252,000. The fair value is based on dealer quotes, considering
current interest rates. We do not intend to terminate our remaining interest
rate swap agreement prior to its maturity. This derivative is currently carried
on our books as a liability; however if held until maturity, the value of the
swap will be zero at that time.
The fair market value of long-term fixed interest rate debt is subject to
interest rate risk. Generally, the fair market value of fixed interest rate debt
will increase as interest rates fall and decrease as interest rates rise. The
estimated fair value of our total debt at December 31, 2001 was $358.2 million
while the recorded value was $358.2 million, respectively. A 1% increase from
prevailing interest rates at December 31, 2001 would result in a decrease in
fair value of total debt by approximately $12.1 million. Fair values were
determined from quoted market prices, where available, using current interest
rates considering credit ratings and the remaining terms to maturity.
24
Critical Accounting Policies
We believe the following critical accounting policies affect our more
significant judgments and estimates used in the preparation of our consolidated
financial statements.
Cost Capitalization
We capitalize fees and costs incurred to originate operating leases, including
certain payroll, fringe benefits and other incremental direct costs, as deferred
charges. The amount of these costs we capitalize is based on our estimate of the
amount of costs directly related to executing successful leases. We amortize
these costs to expense over the average minimum lease term.
We capitalize costs incurred for the construction and development of properties,
including certain payroll, fringe benefits and direct and indirect project
costs. The amount of these costs we capitalize is based on our estimate of the
amount of costs directly related to the construction or development of these
assets. Direct costs to acquire assets are capitalized once the acquisition
becomes probable. The American Institute of Certified Public Accountants'
Accounting Standards Executive Committee is currently considering a proposal
that would limit the amount of overhead costs companies capitalize to certain
payroll or payroll related costs. If this proposal is adopted, the amount of
costs we capitalize will be less than would have been capitalized before the
adoption of this proposal.
Impairment of Long-Lived Assets
Rental property held and used 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. We believe that no material impairment existed at December 31,
2001.
Revenue Recognition
Base rentals are recognized on a straight-line basis over the terms of the
related leases. Substantially all leases contain provisions which provide
additional rents based on tenants' sales volume ("percentage rentals") and
reimbursement of the tenants' share of advertising and promotion, common area
maintenance, insurance and real estate tax expenses. Percentage rentals are
recognized when specified targets that trigger the contingent rent are met.
Expense reimbursements are recognized in the period the applicable expenses are
incurred. Payments received from the early termination of leases are recognized
when the applicable space is released, or, otherwise are recognized over the
remaining lease term. Business interruption insurance proceeds received are
recognized as other income over the estimated period of interruption.
Funds from Operations
We believe that for a clear understanding of our consolidated historical
operating results, FFO should be considered along with net income as presented
in the audited consolidated financial statements included elsewhere in this
report. FFO is presented because it is a widely accepted financial indicator
used by certain investors and analysts to analyze and compare one equity real
estate investment trust ("REIT") with another on the basis of operating
performance. FFO is generally defined as net income (loss), computed in
accordance with generally accepted accounting principles, before extraordinary
items and gains (losses) on sale or disposal of depreciable operating
properties, plus depreciation and amortization uniquely significant to real
estate. We caution that the calculation of FFO may vary from entity to entity
and as such the presentation of FFO by us may not be comparable to other
similarly titled measures of other reporting companies. FFO does not represent
net income or cash flow from operations as defined by generally accepted
accounting principles and should not be considered an alternative to net income
as an indication of operating performance or to cash flows from operations as a
measure of liquidity. FFO is not necessarily indicative of cash flows available
to fund dividends to shareholders and other cash needs.
25
Below is a calculation of FFO for the years ended December 31, 2001, 2000 and
1999 as well as actual cash flow and other data for those respective periods (in
thousands):
2001 2000 1999
- -------------------------------------------------------------- ------------ -------------- -------------
Funds from Operations:
Net income $ 7,112 $ 4,312 $ 15,588
Adjusted for:
Extraordinary item-loss on early extinguishment of debt 244 --- 249
Minority interest 2,136 956 5,374
Depreciation and amortization uniquely significant
to real estate 28,276 25,954 24,603
Loss (gain) on sale or disposal of real estate --- 6,981 (4,141)
- -------------------------------------------------------------- ------------ -------------- -------------
Funds from operations before minority interest (1) $ 37,768 $ 38,203 $ 41,673
Cash flow provided by (used in):
Operating activities $ 44,626 $ 38,420 $ 43,175
Investing activities $ (23,269) $ (25,815) $ (45,959)
Financing activities $ (21,476) $ (12,474) $ (3,043)
Weighted average shares outstanding (2) 11,707 11,706 11,698
- -------------------------------------------------------------- ------------ -------------- -------------
(1) For the years ended December 31, 2000 and 1999, includes $908 and $687 in
gains on sales of outparcels of land. (2) Assumes our preferred shares,
share and unit options and partnership units of the Operating Partnership
held by the minority interest are all converted to our common shares.
New Accounting Pronouncements
The Financial Accounting Standards Board ("FASB") issued Statement of Financial
Accounting Standards No. 133, "Accounting for Derivative Instruments and Hedging
Activities", as amended by FAS 137 and FAS 138, (collectively, "FAS 133"). Upon
adoption on January 1, 2001, we recorded a cumulative effect adjustment of
$216,500, net of minority interest of $83,000, in other comprehensive income
(loss). At December 31, 2001 in accordance with the provisions of FAS 133, our
sole interest rate swap agreement has been designated as a cash flow hedge and
is carried on the balance sheet at fair value. At December 31, 2001, the fair
value of the hedge is recorded as a liability of $973,000 in accounts payable
and accrued expenses.
The FASB also issued SFAS Nos. 141 and 142, "Business Combinations" and
"Goodwill and Other Intangible Assets" ("FAS 141") and ("FAS 142"), respectively
on June 29, 2001. The provisions of FAS 141 apply to all business combinations
initiated after June 30, 2001. FAS 142 is required to be adopted beginning
January 1, 2002. We currently do not have any assets identified as either
goodwill or intangible assets.
In 2001, the FASB issued SFAS No. 143, "Accounting for Obligations Associated
with Retirement of Long-Lived Assets" ("FAS 143"). FAS 143 establishes
accounting standards for the recognition and measurement of an asset retirement
obligation and its associated asset retirement costs. It also provides
accounting guidance for legal obligations associated with the retirement of
tangible long-lived assets. FAS No. 143 is effective for fiscal years beginning
after June 15, 2002. We believe the provisions of FAS No. 143 will not have a
significant effect on our results of operations or our financial position.
In 2001, the FASB issued SFAS No. 144, "Accounting for the Impairment or
Disposal of Long-Lived Assets" ("FAS 144"), which replaces SFAS No. 121
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to
be Disposed Of" ("FAS 121"). FAS 144 retains the requirements of FAS 121 to
recognized an impairment loss only if the carrying amount of a long-lived asset
is not recoverable from its undiscounted cash flows and to measure an impairment
loss as the difference between the carrying amount and fair value of the asset.
The provisions of FAS 144 are effective for financial statements issued for
fiscal years beginning after December 15, 2001. We will implement the provisions
of FAS 144 on January 1, 2002. We believe FAS 144 will not have a significant
effect on our results of operations or our financial position.
26
Under both FAS No. 121 and 144, real estate assets designated as held for sale
are stated at their fair value less costs to sell. We classify real estate as
held for sale when our Board of Directors approves the sale of the assets and we
have commenced an active program to sell the assets. Subsequent to this
classification, no further depreciation is recorded on the assets. Under FAS No.
121, the operating results of real estate assets held for sale are included in
continuing operations. Upon implementation of FAS No. 144 in 2002, the operating
results of newly designated real estate assets held for sale will be included in
discontinued operations in our results of operations. We currently do not have
any assets that are held for sale.
During 2000, the American Institute of Certified Public Accountants' Accounting
Standards Executive Committee issued an exposure draft Statement of Position
("SOP") regarding the capitalization of costs associated with property, plant
and equipment. Under the proposed SOP, all property plant and equipment related
costs would be expensed unless the costs are directly identifiable with specific
projects and the proposal would limit the amount of overhead costs companies
capitalize to certain payroll or payroll related costs. If this proposal is
adopted, the amount of costs we capitalize will be less than would have been
capitalized before the adoption of this proposal. The expected effective date of
the final SOP is expected in late 2002 or 2003.
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 we believe often are lower than traditional
retail industry standards) which generally increase as prices rise. Most of the
leases require the tenant to pay their share of property operating expenses,
including common area maintenance, real estate taxes, insurance and advertising
and promotion, thereby reducing exposure to increases in costs and operating
expenses resulting from inflation.
While factory outlet stores continue to be a profitable and fundamental
distribution channel for brand name manufacturers, some retail formats are more
successful than others. As 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.
Approximately 33% of our lease portfolio is scheduled to expire during the next
two years. Approximately 927,000 square feet of space is up for renewal during
2002, 20% of which is located in our dominant center in Riverhead, NY, and
approximately 848,000 square feet will come up for renewal in 2003. If we were
unable to successfully renew or release 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.
We renewed 82% of the 684,000 square feet that came up for renewal in 2001 with
the existing tenants at an average base rental rate of approximately 6% higher
than the expiring rate. This compares with the renewal of 75% of the 690,000
square feet that came up for renewal in 2000 with the existing tenants at an
average base rental rate 4% higher than the expiring rate. We also re-tenanted
269,000 square feet during 2001 at a 10% increase in the average base rental
rate. This compares favorably with the 303,000 square feet that were released in
2000 at an average increase of 7%.
Existing tenants' sales have remained stable and renewals by existing tenants
have remained strong. As of March 1, 2002, existing tenants have already renewed
approximately 341,000, or 37%, of the square feet scheduled to expire in 2002.
In addition, we continue to attract and retain additional tenants. Our factory
outlet centers typically include well-known, national, brand name companies. By
maintaining a broad base of creditworthy tenants and a geographically diverse
portfolio of properties located across the United States, we reduce our
operating and leasing risks. No one tenant (including affiliates) accounts for
more than 6% of our combined base and percentage rental revenues. Accordingly,
we do not expect any material adverse impact on our results of operation and
financial condition as a result of leases to be renewed or stores to be
released.
As of December 31, 2001 and 2000, our centers were 96% occupied. Consistent with
our long-term strategy of re-merchandising centers, we will continue to hold
space off the market until an appropriate tenant is identified. While we believe
this strategy will add value to our centers in the long-term, it may continue to
reduce our average occupancy rates in the near term.
27
Item 8. Financial Statements and Supplementary Data
The information required by this Item is set forth at the pages indicated in
Item 14(a) below.
Item 9. Changes in and Disagreements With Accountants on Accounting and
Financial Disclosure
Not applicable.
PART III
Certain information required by Part III is omitted from this Report in that the
registrant will file a definitive proxy statement pursuant to Regulation 14A
(the "Proxy Statement") not later than 120 days after the end of the fiscal year
covered by this Report, and certain information included therein is incorporated
herein by reference. Only those sections of the Proxy Statement which
specifically address the items set forth herein are incorporated by reference.
Item 10. Directors and Executive Officers of the Registrant
The information concerning our directors required by this Item is incorporated
by reference to our Proxy Statement.
The information concerning our executive officers required by this Item is
incorporated by reference herein to the section in Part I, Item 4, entitled
"Executive Officers of the Registrant".
The information regarding compliance with Section 16 of the Securities and
Exchange Act of 1934 is to be set forth in the Proxy Statement and is hereby
incorporated by reference.
Item 11. Executive Compensation
The information required by this Item is incorporated by reference to our Proxy
Statement.
Item 12. Security Ownership of Certain Beneficial Owners and Management
The information required by this Item is incorporated by reference to our Proxy
Statement.
Item 13. Certain Relationships and Related Transactions
The information required by this Item is incorporated by reference to our Proxy
Statement.
28
PART IV
Item 14. Exhibits, Financial Statements Schedules, and Reports on Form 8-K
(a) Documents filed as a part of this report:
1. Financial Statements
Report of Independent Accountants F-1
Consolidated Balance Sheets-December 31, 2001 and 2000 F-2
Consolidated Statements of Operations-
Years Ended December 31, 2001, 2000 and 1999 F-3
Consolidated Statements of Shareholders' Equity-
For the Years Ended December 31, 2001, 2000 and 1999 F-4
Consolidated Statements of Cash Flows-
Years Ended December 31, 2001, 2000 and 1999 F-5
Notes to Consolidated Financial Statements F-6 to F-17
2. Financial Statement Schedule
Schedule III
Report of Independent Accountants F-18
Real Estate and Accumulated Depreciation F-19 to F-21
29
All other schedules have been omitted because of the absence of
conditions under which they are required or because the required
information is given in the above-listed financial statements or notes
thereto.
3. Exhibits
Exhibit No. Description
3.1 Amended and Restated Articles of Incorporation of the Company. (Note 6)
3.1A Amendment to Amended and Restated Articles of Incorporation dated May
29, 1996. (Note 6)
3.1B Amendment to Amended and Restated Articles of Incorporation dated August
20, 1998. (Note 9)
3.1C Amendment to Amended and Restated Articles of Incorporation dated
September 30, 1999. (Note 11)
3.2 Restated By-Laws of the Company. (Note 11)
3.3 Amended and Restated Agreement of Limited Partnership for the Operating
Partnership. (Note 11)
4.1 Form of Deposit Agreement, by and between the Company and the
Depositary, including Form of Depositary Receipt. (Note 1)
4.2 Form of Preferred Stock Certificate. (Note 1)
4.3 Rights Agreement, dated as of August 20, 1998, between Tanger Factory
Outlet Centers, Inc. and BankBoston, N.A., which includes the form of
Articles of Amendment to the Amended and Restated Articles of
Incorporation, designating the preferences, limitations and relative
rights of the Class B Preferred Stock as Exhibit A, the form of Right
Certificate as Exhibit B and the Summary of Rights as Exhibit C. (Note
8)
4.3A Amendment to Rights Agreement, dated as of October 30, 2001.
10.1 Amended and Restated Unit Option Plan. (Note 9)
10.2 Amended and Restated Share Option Plan of the Company. (Note 9)
10.3 Form of Stock Option Agreement between the Company and certain
Directors. (Note 3)
10.4 Form of Unit Option Agreement between the Operating Partnership and
certain employees. (Note 3)
10.5 Amended and Restated Employment Agreement for Stanley K. Tanger, as of
January 1, 1998. (Note 9)
10.5A Amended Employment Agreement for Stanley K. Tanger, as of January 1,
2001.
10.6 Amended and Restated Employment Agreement for Steven B. Tanger, as of
January 1, 1998. (Note 9)
10.6A Amended Employment Agreement for Steven B. Tanger, as of January 1,
2001.
10.7 Amended and Restated Employment Agreement for Willard Albea Chafin, Jr.,
as of January 1, 2002
10.8 Amended and Restated Employment Agreement for Rochelle Simpson, as of
January 1, 2002
10.9 Not applicable.
10.10 Amended and Restated Employment Agreement for Frank C. Marchisello, Jr.,
as of January 1, 2002
30
10.11 Registration Rights Agreement among the Company, the Tanger Family
Limited Partnership and Stanley K. Tanger. (Note 2)
10.11A Amendment to Registration Rights Agreement among the Company, the Tanger
Family Limited Partnership and Stanley K. Tanger. (Note 4)
10.12 Agreement Pursuant to Item 601(b)(4)(iii)(A) of Regulation S-K. (Note 2)
10.13 Assignment and Assumption Agreement among Stanley K. Tanger, Stanley K.
Tanger & Company, the Tanger Family Limited Partnership, the Operating
Partnership and the Company. (Note 2)
10.14 Promissory Notes by and between the Operating Partnership and John
Hancock Mutual Life Insurance Company aggregating $66,500,000. (Note 10)
10.15 Form of Senior Indenture. (Note 5)
10.16 Form of First Supplemental Indenture (to Senior Indenture). (Note 5)
10.16A Form of Second Supplemental Indenture (to Senior Indenture) dated
October 24, 1997 among Tanger Properties Limited Partnership, Tanger
Factory Outlet Centers, Inc. and State Street Bank & Trust Company.
(Note 7)
10.17 Promissory Note 05/16/2000 (Note 12)
10.18 Promissory Note 05/16/2000 (Note 12)
21.1 List of Subsidiaries.
23.1 Consent of PricewaterhouseCoopers LLP.
Notes to Exhibits:
1. Incorporated by reference to the exhibits to the Company's Registration
Statement on Form S-11 filed October 6, 1993, as amended.
2. Incorporated by reference to the exhibits to the Company's Registration
Statement on Form S-11 filed May 27, 1993, as amended.
3. Incorporated by reference to the exhibits to the Company's Annual Report
on Form 10-K for the year ended December 31, 1993.
4. Incorporated by reference to the exhibits to the Company's Annual Report
on Form 10-K for the year ended December 31, 1995.
5. Incorporated by reference to the exhibits to the Company's Current
Report on Form 8-K dated March 6, 1996.
6. Incorporated by reference to the exhibits to the Company's Annual Report
on Form 10-K for the year ended December 31, 1996.
7. Incorporated by reference to the exhibits to the Company's Current
Report on Form 8-K dated October 24, 1997.
8. Incorporated by reference to Exhibit 1.1 to the Company's Registration
Statement on Form 8-A, filed August 24, 1998.
9. Incorporated by reference to the exhibits to the Company's Annual Report
on Form 10-K for the year ended December 31, 1998.
10. Incorporated by reference to the exhibit to the Company's Quarterly
Report on 10-Q for the quarter ended March 31, 1999.
11. Incorporated by reference to the exhibits to the Company's Annual Report
on Form 10-K for the year ended December 31, 1999.
12. Incorporated by reference to the exhibits to the Company's Annual Report
on Form 10-K for the year ended December 31, 2000.
(b) Reports on Form 8-K - none.
31
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
TANGER FACTORY OUTLET CENTERS, INC.
By:/s/ Stanley K. Tanger
Stanley K. Tanger
Chairman of the Board and
Chief Executive Officer
March 28, 2002
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated:
Signature Title Date
/s/ Stanley K. Tanger Chairman of the Board and Chief March 28, 2002
Stanley K. Tanger Executive Officer (Principal
Executive Officer)
/s/ Steven B. Tanger Director, President and March 28, 2002
Steven B. Tanger Chief Operating Officer
/s/ Frank C. Marchisello Jr. Senior Vice President and March 28, 2002
Frank C. Marchisello, Jr. Chief Financial Officer
(Principal Financial and
Accounting Officer)
/s/ Jack Africk Director March 28, 2002
Jack Africk
/s/ William G. Benton Director March 28, 2002
William G. Benton
/s/ Thomas E. Robinson Director March 28, 2002
Thomas E. Robinson
32
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Shareholders of
TANGER FACTORY OUTLET CENTERS, INC. AND SUBSIDIARIES:
In our opinion, the accompanying consolidated balance sheets and the related
consolidated statements of operations, of shareholders' equity and of cash flows
present fairly, in all material respects, the financial position of Tanger
Factory Outlet Centers, Inc. and its subsidiaries at December 31, 2001 and 2000,
and the results of their operations and their cash flows for each of the three
years in the period ended December 31, 2001, in conformity with accounting
principles generally accepted in the United States of America. These financial
statements are the responsibility of the Company's management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these statements in accordance with
auditing standards generally accepted in the United States of America, which
require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
As discussed in Note 4 to the consolidated financial statements and in
accordance with SFAS No. 133 "Accounting for Derivative Instruments and Hedging
Activities", the Company changed its accounting method for derivative
instruments and hedging activities.
/s/ PricewaterhouseCoopers LLP
Raleigh, NC
January 17, 2002
F-1
TANGER FACTORY OUTLET CENTERS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands, except share data)
December 31,
2001 2000
- -----------------------------------------------------------------------------------------------------------
ASSETS
Rental Property
Land $ 60,158 $ 59,858
Buildings, improvements and fixtures 539,108 505,554
Developments under construction - 19,516
- -----------------------------------------------------------------------------------------------------------
599,266 584,928
Accumulated depreciation (148,950) (122,365)
- -----------------------------------------------------------------------------------------------------------
Rental property, net 450,316 462,563
Cash and cash equivalents 515 634
Deferred charges, net 11,413 8,566
Other assets 14,028 15,645
- -----------------------------------------------------------------------------------------------------------
Total assets $ 476,272 $ 487,408
===========================================================================================================
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities
Debt
Senior, unsecured notes $ 160,509 $ 150,000
Mortgages payable 176,736 135,313
Term note, unsecured - 20,000
Lines of credit 20,950 41,530
- -----------------------------------------------------------------------------------------------------------
358,195 346,843
Construction trade payables 3,722 9,784
Accounts payable and accrued expenses 16,478 12,807
- -----------------------------------------------------------------------------------------------------------
Total liabilities 378,395 369,434
- -----------------------------------------------------------------------------------------------------------
Commitments
Minority interest 21,506 27,097
- -----------------------------------------------------------------------------------------------------------
Shareholders' equity
Preferred shares, $.01 par value, 1,000,000 shares authorized,
80,600 shares issued and outstanding at December 31, 2001 and 2000 1 1
Common shares, $.01 par value, 50,000,000 shares authorized,
7,929,711 and 7,918,911 shares issued and outstanding
at December 31, 2001 and 2000 79 79
Paid in capital 136,529 136,358
Distributions in excess of net income (59,534) (45,561)
Accumulated other comprehensive loss (704) -
- -----------------------------------------------------------------------------------------------------------
Total shareholders' equity 76,371 90,877
- -----------------------------------------------------------------------------------------------------------
Total liabilities and shareholders' equity $ 476,272 $ 487,408
- -----------------------------------------------------------------------------------------------------------
The accompanying notes are an integral part of these consolidated financial statements.
F-2
TANGER FACTORY OUTLET CENTERS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
Year Ended December 31,
2001 2000 1999
- -------------------------------------------------------------------------------------------------------
REVENUES
Base rentals $ 75,354 $ 71,457 $ 69,180
Percentage rentals 2,735 3,253 3,141
Expense reimbursements 30,207 30,046 27,910
Other income 2,772 4,065 3,785
- -------------------------------------------------------------------------------------------------------
Total revenues 111,068 108,821 104,016
- -------------------------------------------------------------------------------------------------------
EXPENSES
Property operating 34,639 33,623 30,585
General and administrative 8,231 7,366 7,298
Interest 30,134 27,565 24,239
Depreciation and amortization 28,572 26,218 24,824
Asset write-down --- 1,800 ---
- -------------------------------------------------------------------------------------------------------
Total expenses 101,576 96,572 86,946
- -------------------------------------------------------------------------------------------------------
Income before (loss) gain on sale or disposal of real estate,
minority interest and extraordinary item 9,492 12,249 17,070
(Loss) gain on sale or disposal of real estate --- (6,981) 4,141
- -------------------------------------------------------------------------------------------------------
Income before minority interest and extraordinary item 9,492 5,268 21,211
Minority interest (2,136) (956) (5,374)
- -------------------------------------------------------------------------------------------------------
Income before extraordinary item 7,356 4,312 15,837
Extraordinary item - Loss on early extinguishment of debt,
net of minority interest of $94 and $96 in 2001 and 1999 (244) --- (249)
- -------------------------------------------------------------------------------------------------------
Net income 7,112 4,312 15,588
Less applicable preferred share dividends (1,771) (1,823) (1,917)
- -------------------------------------------------------------------------------------------------------
Net income available to common shareholders $ 5,341 $ 2,489 $ 13,671
- ------------------------------------------------------------------------------------------------------
Basic earnings per common share:
Income before extraordinary item $ 0.70 $ 0.32 $ 1.77
Extraordinary item (0.03) --- (0.03)
- -------------------------------------------------------------------------------------------------------
Net income $ 0.67 $ 0.32 $ 1.74
- -------------------------------------------------------------------------------------------------------
Diluted earnings per common share:
Income before extraordinary item $ 0.70 $ 0.31 $ 1.77
Extraordinary item (0.03) --- (0.03)
- -------------------------------------------------------------------------------------------------------
Net income $ 0.67 $ 0.31 $ 1.74
- -------------------------------------------------------------------------------------------------------
The accompanying notes are an integral part of these consolidated financial statements.
F-3
TANGER FACTORY OUTLET CENTERS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
For the Years Ended December 31, 2001, 2000, and 1999
(In thousands, except share data)
Distributions Accumulated Other Total
Preferred Common Paid in in Excess of Comprehensive Shareholder
Shares Shares Capital Net Income Loss Equity
- ------------------------------------------------------------------------------------------------------------------------------------
Balance, December 31, 1998 $ 1 $ 79 $ 137,530 $ (23,571) $ - $ 114,039
Net income --- --- --- 15,588 --- 15,588
Conversion of 3,000 preferred shares
into 27,029 common shares --- 1 (1) --- --- ---
Issuance of 500 common shares upon
exercise of unti options --- --- 12 --- --- 12
Repurchase and retirement of 48,300
common shares --- (1) (957) --- --- (958)
Adjustment for minority interest in
the Operating Partnership --- --- (13) --- --- (13)
Preferred dividends ($21.76 per share) --- --- --- (1,918) --- (1,918)
Common dividends ($2.42 per share) --- --- --- (18,986) --- (18,986)
- ------------------------------------------------------------------------------------------------------------------------------------
Balance, December 31, 1999 1 79 136,571 (28,887) --- 107,764
Net income --- --- --- 4,312 --- 4,312
Conversion of 4,670 preferred shares
into 42,076 common shares --- --- --- --- --- ---
Adjustment for minority interest in
the Operating Partnership --- --- (213) --- --- (213)
Preferred dividends ($21.87 per share) --- --- --- (1,840) --- (1,840)
Common dividends ($2.43 per share) --- --- --- (19,146) --- (19,146)
- ------------------------------------------------------------------------------------------------------------------------------------
Balance, December 31, 2000 1 79 136,358 (45,561) --- 90,877
Comprehensive income:
Net income --- --- --- 7,112 --- 7,112
Unrealized loss on mark-to-market
of cash flow hedge --- --- --- --- (704) (704)
- ------------------------------------------------------------------------------------------------------------------------------------
Total comprehensive income --- --- --- 7,112 (704) 6,408
Issuance of 10,800 common shares
upon exercise of unit options --- --- 201 --- --- 201
Adjustment for minority interest in
the Operating Partnership --- --- (30) --- --- (30)
Preferred dividends ($21.96 per share) --- --- --- (1,770) (1,770)
Common dividends ($2.44 per share) --- --- --- (19,315) (19,315)
- ------------------------------------------------------------------------------------------------------------------------------------
Balance, December 31, 2001 $ 1 $ 79 $ 136,529 $ (59,534) $ (704) $ 76,371
- ------------------------------------------------------------------------------------------------------------------------------------
The accompanying notes are an integral part of these consolidated financial
statements.
F-4
TANGER FACTORY OUTLET CENTERS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
Year Ended December 31,
2001 2000 1999
- ---------------------------------------------------------------------------------------------------------
OPERATING ACTIVITIES
Net income $ 7,112 $ 4,312 $ 15,588
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization 28,572 26,218 24,824
Amortization of deferred financing costs 1,309 1,264 1,005
Minority interest 2,042 956 5,278
Loss on early extinguishment of debt 338 0 345
Asset write-down --- 1,800 0
Gain on disposal or sale of real estate --- 6,981 (4,141)
Gain on sale of outparcels of land --- (908) (687)
Straight-line base rent adjustment 342 92 (214)
Increase (decrease) due to changes in:
Other assets 2,213 (2,021) (1,181)
Accounts payable and accrued expenses 2,698 (274) 2,358
- ---------------------------------------------------------------------------------------------------------
Net cash provided by operating activities 44,626 38,420 43,175
- ---------------------------------------------------------------------------------------------------------
INVESTING ACTIVITIES
Acquisition of rental properties --- --- (15,500)
Additions to rental properties (20,368) (36,056) (34,224)
Additions to investments in joint ventures (4,068) (117)
Additions to deferred lease costs (1,618) (2,238) (1,862)
Net proceeds from sale of real estate 723 8,598 1,987
Net insurance proceeds from property losses --- 4,046 6,451
Collections from (advances to) officers, net 2,062 (48) (2,811)
- ---------------------------------------------------------------------------------------------------------
Net cash used in investing activities (23,269) (25,815) (45,959)
- ---------------------------------------------------------------------------------------------------------
FINANCING ACTIVITIES
Repurchase of common shares --- --- (958)
Cash dividends paid (21,085) (20,986) (20,904)
Distributions to minority interest (7,394) (7,362) (7,325)
Proceeds from issuance of debt 279,075 172,595 185,055
Repayments of debt (267,723) (155,399) (157,893)
Additions to deferred financing costs (4,550) (1,322) (1,030)
Proceeds from exercise of unit options 201 --- 12
- ---------------------------------------------------------------------------------------------------------
Net cash used in financing activities (21,476) (12,474) (3,043)
- ---------------------------------------------------------------------------------------------------------
Net increase (decrease) in cash and cash equivalents (119) 131 (5,827)
Cash and cash equivalents, beginning of period 634 503 6,330
- ---------------------------------------------------------------------------------------------------------
Cash and cash equivalents, end of period $ 515 $ 634 $ 503
- ---------------------------------------------------------------------------------------------------------
The accompanying notes are an integral part of these consolidated financial
statements.
F-5
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Organization of the Company
Tanger Factory Outlet Centers, Inc., a fully-integrated, self-administered,
self-managed real estate investment trust ("REIT"), develops, owns and operates
factory outlet centers. Recognized as one of the largest owners and operators of
factory outlet centers in the United States, we own and operate 29 factory
outlet centers located in 20 states with a total gross leasable area of
approximately 5.3 million square feet at the end of 2001. We provide all
development, leasing and management services for our centers.
Our factory outlet centers and other assets are held by, and all of our
operations are conducted by, Tanger Properties Limited Partnership (the
"Operating Partnership"). Prior to 1999, we owned the majority of the units of
partnership interest issued by the Operating Partnership (the "Units") and
served as its sole general partner. During 1999, we transferred our ownership of
Units into two wholly owned subsidiaries, the Tanger GP Trust and the Tanger LP
Trust. The Tanger GP Trust controls the Operating Partnership as its sole
general partner. The Tanger LP Trust holds a limited partnership interest. All
of the remaining Units are owned by the Tanger Family in an entity named the
Tanger Family Limited Partnership ("TFLP"). TFLP holds a limited partnership
interest in and is a minority owner of the Operating Partnership. Stanley K.
Tanger, the Company's Chairman of the Board and Chief Executive Officer, is the
sole general partner of TFLP.
As of December 31, 2001, our wholly owned subsidiaries owned 7,929,711 Units,
and 80,600 Preferred Units (which are convertible into approximately 726,203
limited partnership Units) and TFLP owned 3,033,305 Units. TFLP's Units are
exchangeable, subject to certain limitations to preserve our status as a REIT,
on a one-for-one basis for our common shares. Preferred Units are automatically
converted into limited partnership Units to the extent of any conversion of our
preferred shares into our common shares.
2. Summary of Significant Accounting Policies
Principles of Consolidation - The consolidated financial statements include our
accounts, our wholly-owned subsidiaries and the Operating Partnership. All
significant intercompany balances and transactions have been eliminated in
consolidation. Investments in real estate joint ventures that represent
non-controlling ownership interests are accounted for using the equity method of
accounting.
Minority Interest - Minority interest reflects TFLP's percentage ownership of
the Operating Partnership's Units. Income is allocated to the TFLP based on its
respective ownership interest.
Reclassifications - Certain amounts in the 2000 and 1999 financial statements
have been reclassified to conform to the 2001 presentation.
Use of Estimates - The preparation of financial statements in conformity with
accounting principles generally accepted in the United States of America
requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the reported amounts of
revenues and expenses during the reporting period. Actual results could differ
from those estimates.
Operating Segments - We aggregate the financial information of all centers into
one reportable operating segment because the centers all have similar economic
characteristics and provide similar products and services to similar types and
classes of customers.
Rental Properties - Rental properties are recorded at cost less accumulated
depreciation. Costs incurred for the construction and development of properties,
including certain payroll, fringe benefits and direct and indirect project
costs, are capitalized. The amount of these costs capitalized is based on our
estimate of the amount of costs directly related to the construction or
development of these assets. Direct costs to acquire assets are capitalized once
the acquisition becomes probable. Depreciation is computed on the straight-line
basis over the estimated useful lives of the assets. We generally use estimated
lives ranging from 25 to 33 years for buildings, 15 years for land improvements
and seven years for equipment. Expenditures for ordinary maintenance and repairs
are charged to operations as incurred while significant renovations and
improvements, including tenant finishing allowances, that improve and/or extend
the useful life of the asset are capitalized and depreciated over their
estimated useful life.
F-6
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Buildings, improvements and fixtures consist primarily of permanent buildings
and improvements made to land such as landscaping and infrastructure and costs
incurred in providing rental space to tenants. Interest costs capitalized during
2001, 2000 and 1999 amounted to $551,000, $1,020,000 and $1,242,000 and
development costs capitalized amounted to $616,000, $843,000 and $1,711,000,
respectively. Depreciation expense for each of the years ended December 31,
2001, 2000 and 1999 was $26,585,000 $24,239,000 and $23,095,000, respectively.
The pre-construction stage of project development involves certain costs to
secure land control and zoning and complete other initial tasks essential to the
development of the project. These costs are transferred from other assets to
developments under construction when the pre-construction tasks are completed.
Costs of potentially unsuccessful pre-construction efforts are charged to
operations when the project is abandoned.
Cash and Cash Equivalents - All highly liquid investments with an original
maturity of three months or less at the date of purchase are considered to be
cash and cash equivalents. Cash balances at a limited number of banks may
periodically exceed insurable amounts. We believe that we mitigate our risk by
investing in or through major financial institutions. Recoverability of
investments is dependent upon the performance of the issuer.
Deferred Charges - Deferred lease costs consist of fees and costs incurred,
including payroll, fringe benefits and other incremental direct costs, to
originate successful, operating leases and are amortized over the average
minimum lease term. Deferred financing costs include fees and costs incurred to
obtain long-term financing and are amortized over the terms of the respective
loans. Unamortized deferred financing costs are charged to expense when debt is
retired before the maturity date.
Impairment of Long-Lived Assets - Rental property held and used 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. We believe that no material
impairment existed at December 31, 2001.
Derivatives - We selectively enter into interest rate protection agreements to
mitigate changes in interest rates on our variable rate borrowings. The notional
amounts of such agreements are used to measure the interest to be paid or
received and do not represent the amount of exposure to loss. None of these
agreements are used for speculative or trading purposes. The cost of these
agreements is included in deferred financing costs and is amortized on a
straight-line basis over the life of the agreements.
On January 1, 2001 we adopted Statement of Financial Accounting Standards No.
133, "Accounting for Derivative Instruments and Hedging Activities" as amended
by FAS 137 and FAS 138, (collectively, "FAS 133"). FAS 133 requires entities to
recognize all derivatives as either assets or liabilities in the statement of
financial position and measure those instruments at their fair value. FAS 133
also requires us to measure the effectiveness, as defined by FAS 133, of all
derivatives to be accounted for as hedges. We formally document our derivative
transactions, including identifying the hedge instruments and hedged items, as
well as our risk management objectives and strategies for entering into the
hedge transaction. At inception and on a quarterly basis thereafter, we assess
the effectiveness of derivatives used to hedge transactions. If a derivative is
deemed effective, we record the change in fair value in other comprehensive
income. If after assessment it is determined that a portion of the derivative is
ineffective, then that portion of the derivative's change in fair value will be
immediately recognized in earnings.
F-7
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Income Taxes - We operate in a manner intended to enable us to qualify as a REIT
under the Internal Revenue Code (the "Code"). A REIT which distributes at least
90% of its taxable income to its shareholders each year and which meets certain
other conditions is not taxed on that portion of its taxable income which is
distributed to its shareholders. We intend to continue to qualify as a REIT and
to distribute substantially all of our taxable income to our shareholders.
Accordingly, no provision has been made for Federal income taxes. We paid
preferred dividends per share of $21.96, $21.87, and $21.76 in 2001, 2000 and
1999, respectively, all of which are treated as ordinary income. For income tax
purposes, distributions paid to common shareholders consist of ordinary income,
capital gains, return of capital or a combination thereof. For the year ended
December 31, 1999, we elected to distribute all of our taxable capital gains.
Dividends per share were taxable as follows:
Common dividends per share: 2001 2000 1999
- ------------------------------- ---------------- ------------- --------------
Ordinary income $ .536 $ .341 $ 1.328
Return of capital 1.902 2.087 1.039
Long-term capital gain --- --- .048
- ------------------------------- ---------------- ------------- --------------
- ------------------------------- ---------------- ------------- --------------
$2.438 $2.428 $ 2.415
- ------------------------------- ---------------- ------------- --------------
The following reconciles net income available to common shareholders to taxable
income available to common shareholders for the years ended December 31, 2001,
2000 and 1999:
2001 2000 1999
- ------------------------------------------------------------- ------------ ------------- --------------
Net income available to common shareholders $ 5,341 $ 2,489 $13,671
Book/tax difference on:
Depreciation and amortization (667) (1,114) (3,763)
Gain/(Loss) on sale or disposal of real estate (1,116) 643 (3,241)
Other differences (176) 73 468
- ------------------------------------------------------------- ------------ ------------- --------------
Taxable income available to common shareholders 3,382 2,091 7,135
- ------------------------------------------------------------- ------------ ------------- --------------
Revenue Recognition - Base rentals are recognized on a straight-line basis over
the term of the lease. Substantially all leases contain provisions which provide
additional rents based on tenants' sales volume ("percentage rentals") and
reimbursement of the tenants' share of advertising and promotion, common area
maintenance, insurance and real estate tax expenses. Percentage rentals are
recognized when specified targets that trigger the contingent rent are met.
Expense reimbursements are recognized in the period the applicable expenses are
incurred. Payments received from the early termination of leases are recognized
when the applicable space is released, or, otherwise are amortized over the
remaining lease term. Business interruption insurance proceeds received are
recognized as other income over the estimated period of interruption.
Concentration of Credit Risk - We perform ongoing credit evaluations of our
tenants. Although the tenants operate principally in the retail industry, the
properties are geographically diverse. No single tenant accounted for 10% or
more of combined base and percentage rental income during 2001, 2000 or 1999.
New Accounting Pronouncements - The Financial Accounting Standards Board (the
"FASB") issued Statement of Financial Accounting Standards Nos. 141 and 142,
"Business Combinations" and "Goodwill and Other Intangible Assets" ("FAS 141")
and ("FAS 142"), respectively on June 29, 2001. The provisions of FAS 141 apply
to all business combinations initiated after June 30, 2001. FAS 142 is required
to be adopted beginning January 1, 2002. We currently do not have any assets
identified as either goodwill or intangible assets.
In 2001, the FASB issued SFAS No. 143, "Accounting for Obligations Associated
with Retirement of Long-Lived Assets" ("FAS 143"). FAS 143 establishes
accounting standards for the recognition and measurement of an asset retirement
obligation and its associated asset retirement costs. It also provides
accounting guidance for legal obligations associated with the retirement of
tangible long-lived assets. FAS No. 143 is effective for fiscal years beginning
after June 15, 2002. We believe the provisions of FAS No. 143 will not have a
significant effect on our results of operations or our financial position.
F-8
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
In 2001, the FASB issued SFAS No. 144, "Accounting for the Impairment or
Disposal of Long-Lived Assets" ("FAS 144"), which replaces SFAS No. 121
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to
be Disposed Of" ("FAS 121"). FAS 144 retains the requirements of FAS 121 to
recognized an impairment loss only if the carrying amount of a long-lived asset
is not recoverable from its undiscounted cash flows and to measure an impairment
loss as the difference between the carrying amount and fair value of the asset.
The provisions of FAS 144 are effective for financial statements issued for
fiscal years beginning after December 15, 2001. We will implement the provisions
of FAS 144 on January 1, 2002. We believe FAS 144 will not have a significant
effect on our results of operations or our financial position.
Under both FAS No. 121 and 144, real estate assets designated as held for sale
are stated at their fair value less costs to sell. We classify real estate as
held for sale when our Board of Directors approves the sale of the assets and we
have commenced an active program to sell the assets. Subsequent to this
classification, no further depreciation is recorded on the assets. Under FAS No.
121, the operating results of real estate assets held for sale are included in
continuing operations. Upon implementation of FAS No. 144 in 2002, the operating
results of newly designated real estate assets held for sale will be included in
discontinued operations in the consolidated results of operations. We currently
do not have any assets that are held for sale.
Supplemental Cash Flow Information - We purchase capital equipment and incur
costs relating to construction of new facilities, including tenant finishing
allowances. Expenditures included in construction trade payables as of December
31, 2001, 2000 and 1999 amounted to $3,722,000, $9,784,000 and $6,287,000,
respectively. Interest paid, net of interest capitalized, in 2001, 2000 and 1999
was $27,379,000 $25,644,000 and $23,179,000, respectively.
Other assets includes a receivable from the sale of real estate of $723,500 as
of December 31, 2000.
3. Investments in Real Estate Joint Ventures
At December 31, 2001, our investment in unconsolidated real estate joint
ventures, of which we own 50%, was $4.2 million. These investments are recorded
initially at cost and subsequently adjusted for net equity in income (loss) and
cash contributions and distributions and are included in other assets. Equity in
income (loss) is included in other income. Our investment in real estate joint
ventures is reduced by 50% of the profits earned for services we provided to the
joint ventures.
Effective August 7, 2000, we announced the formation of a joint venture with C.
Randy Warren Jr., former Senior Vice President of Leasing of the Company. The
new entity, Tanger-Warren Development, LLC ("Tanger-Warren"), was formed to
identify, acquire and develop sites exclusively for us. We agreed to be
co-managers of Tanger-Warren, each with 50% ownership interest in the joint
venture and any entities formed with respect to a specific project. As of
December 31, 2001, our investment in Tanger-Warren amounted to approximately
$9,000 and the impact of this joint venture on our results of operations has
been insignificant.
In September 2001, we established a joint venture, TWMB Associates, LLC
("TWMB"), with respect to our Myrtle Beach, South Carolina project with
Rosen-Warren Myrtle Beach LLC ("Rosen-Warren"). Rosen-Warren and we each own 50%
of TWMB. Also, in September 2001 TWMB began construction on the first phase of a
new 400,000 square foot Tanger Outlet Center in Myrtle Beach, SC. In conjunction
with the beginning of construction, TWMB closed on a construction loan in the
amount of $36.2 million with Bank of America, NA (Agent) and SouthTrust Bank,
the proceeds of which will be used to develop the Tanger Outlet Center in Myrtle
Beach, SC. As of December 31, 2001, the construction loan had a $10,000 balance.
All debt incurred by this unconsolidated joint venture is secured by its
property as well as joint and several guarantees by us and by our respective
venture partner.
We receive fees from TWMB for our respective development, leasing and other
services and, upon the opening of phase one of the Myrtle Beach property, will
receive on-going asset management fees. Since this project was under
construction during 2001, the impact of this joint venture to our consolidated
results of operations was insignificant.
F-9
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Summary unaudited financial information of joint ventures accounted for using
the equity method as of December 31, 2001 and 2000 is as follows (in thousands):
2001 2000
- ----------------------------------------------- --------------- --------------
Assets:
Investment properties at cost, net $7,348 $ -
Cash and cash equivalents 136 141
Other assets 2,199 175
- ----------------------------------------------- --------------- --------------
Total assets $9,683 $ 316
- ----------------------------------------------- --------------- --------------
Liabilities and Owners' Equity
Debt $ 10 $ -
Accounts payable and other liabilities 1,030 85
- ----------------------------------------------- --------------- --------------
Total liabilities 1,040 85
Owners' equity 8,643 231
- ----------------------------------------------- --------------- --------------
Total liabilities and owners' equity $9,683 $ 316
- ----------------------------------------------- --------------- --------------
4. Accounting Change - Derivative Financial Instruments
Effective January 1, 2001, we adopted Statement of Financial Accounting
Standards No. 133, "Accounting for Derivative Instruments and Hedging
Activities", as amended by FAS 137 and FAS 138 (collectively, "FAS 133"). Upon
adoption we recorded a cumulative effect adjustment of $216,500 loss, net of
minority interest of $83,000, in other comprehensive income (loss). As discussed
in Note 7, certain interest rate swap agreements were terminated during the
first quarter of 2001 and the other comprehensive loss totaling $106,000, net of
minority interest of $41,000, recognized at adoption relating to these
agreements was reclassified to earnings. In accordance with the provisions of
FAS 133, our sole remaining interest rate swap agreement has been designated as
a cash flow hedge and is carried on the balance sheet at fair value. At December
31, 2001, the fair value of the hedge is recorded as a liability of $973,000 in
accounts payable and accrued expenses. For the year ended December 31, 2001, the
change in the fair value of the remaining derivative instrument was recorded as
a $593,000 loss, net of minority interest of $227,000, to accumulated other
comprehensive income. Total comprehensive income for the year ended December 31,
2001 is as follows (in thousands):
2001
- -------------------------------------------------------------- --------------
Net income $ 7,112
Other comprehensive income (loss):
Cumulative effect adjustment of FAS 133 adoption,
net of minority interest of $83 (217)
Reclassification to earnings on termination of cash
flow hedge, net of minority interest of $41 106
Change in fair value of cash flow hedge,
net of minority interest of $227 (593)
- -------------------------------------------------------------- --------------
Other comprehensive loss (704)
- -------------------------------------------------------------- --------------
Total comprehensive income $ 6,408
- -------------------------------------------------------------- --------------
5. Deferred Charges
Deferred charges as of December 31, 2001 and 2000 consists of the following (in
thousands):
2001 2000
- --------------------------------------------- -------------- ---------------
Deferred lease costs $ 14,467 $12,849
Deferred financing costs 8,210 6,697
- --------------------------------------------- -------------- ---------------
22,677 19,546
Accumulated amortization (11,264) (10,980)
- --------------------------------------------- -------------- ---------------
$ 11,413 $ 8,566
- --------------------------------------------- -------------- ---------------
F-10
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Amortization of deferred lease costs for the years ended December 31, 2001, 2000
and 1999 was $1,642,000, $1,578,000 and $1,459,000, respectively. Amortization
of deferred financing costs, included in interest expense in the accompanying
consolidated statements of operations, for the years ended December 31, 2001,
2000 and 1999 was $1,277,000, $1,264,000 and $1,005,000, respectively. During
2001 and 1999, we expensed the unamortized financing costs totaling $338,000 and
$345,000 related to debt extinguished prior to its respective maturity date.
Such amounts are shown as an extraordinary item in the accompanying consolidated
statements of operations.
6. Related Party Transactions
In May 2000, the demand notes receivable totaling $3.4 million from Stanley K.
Tanger, our Chairman of the Board and Chief Executive Officer, were converted
into two separate term notes of which $2.5 million was due from Mr. Tanger and
$845,000 was due from Steven B. Tanger, our President and Chief Operating
Officer. The notes amortize evenly over five years with principal and interest
at a rate of 8% per annum due quarterly. The balance of Mr. Tanger's note at
December 31, 2001, through accelerated payments, was $797,000. Steven B.
Tanger's note was paid in full during 2001. Additionally in August 2001, the
Board of Directors amended the notes to adjust the interest rate from 8% per
annum to 90 day LIBOR plus 1.75%.
During the first quarter of 2002, Stanley K. Tanger made a quarterly payment of
$100,000.
7. Debt
Debt at December 31, 2001 and 2000 consists of the following (in thousands):
2001 2000
- ---------------------------------------------------------------- -------------- ---------------
8.75% Senior, unsecured notes, maturing March 2001 $ --- $ 75,000
7.875% Senior, unsecured notes, maturing October 2004 60,509 75,000
9.125% Senior, unsecured notes, maturing February 2008 100,000 ---
Mortgage notes with fixed interest:
9.77%, maturing April 2005 14,822 15,099
9.125%, maturing September 2005 8,723 9,120
7.875%, maturing April 2009 63,968 64,980
7.98%, maturing April 2009 19,303 ---
8.86%, maturing September 2010 16,420 16,614
Mortgage notes with variable interest:
LIBOR plus 1.75%, maturing March 2006 53,500 29,500
Term note, unsecured, with variable interest:
LIBOR plus 2.25%, maturing January 2002 --- 20,000
Revolving lines of credit with variable interest rates ranging
from either prime less .25% to prime or from LIBOR plus
1.60% to LIBOR plus 1.75% 20,950 41,530
- ---------------------------------------------------------------- -------------- ---------------
$ 358,195 $ 346,843
- ---------------------------------------------------------------- -------------- ---------------
During 2001 we cancelled a $25 million revolving credit facility which reduced
our unsecured lines of credit borrowing capacity to $75 million. All line of
credit agreements expire in June 2003. Interest is payable based on alternative
interest rate bases at our option. Certain of our properties, which had a net
book value of approximately $181.7 million at December 31, 2001, serve as
collateral for the fixed and variable rate mortgages.
The credit 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% of funds
from operations on a cumulative basis. All four existing fixed rate mortgage
notes are with insurance companies and contain prepayment penalty clauses.
F-11
On February 9, 2001, we issued $100 million of 9.125% senior, unsecured notes,
maturing on February 15, 2008. The net proceeds of $97 million were used to
repay all of the outstanding indebtedness under our $75 million 8.75% notes
which were due March 11, 2001. The net proceeds were also used to repay the $20
million LIBOR plus 2.25% term loan due January 2002 with Fleet National Bank and
Bank of America. The interest rate swap agreements associated with this loan
were terminated at a cost of $295,200 which has been included in interest
expense. In addition, approximately $180,000 of unamortized costs were written
off as an extraordinary item. The remaining proceeds were used for general
operating purposes.
On March 26, 2001, we entered into a five year collateralized loan with Wells
Fargo Bank for $24 million at a variable rate of LIBOR plus 1.75%. The proceeds
were used to reduce amounts outstanding under existing lines of credit.
Additionally on March 26, 2001, we extended the maturity date of our existing
$29.5 million term loan with Wells Fargo Bank from July 2005 to March 2006.
On May 1, 2001, we entered into an eight year collateralized loan with John
Hancock Life Insurance Company for $19.45 million at a fixed rate of 7.98%. The
proceeds were used to reduce amounts outstanding under existing lines of credit.
During the fourth quarter of 2001, we purchased at par approximately $14.5
million of our outstanding 7 7/8% senior, unsecured public notes that mature in
October 2004. The purchases were funded by amounts available under our unsecured
lines of credit which do not mature until June 2003. Accordingly, approximately
$158,000 of unamortized bond issuance costs were written off as an extraordinary
item. Additionally during the first quarter of 2002, we have purchased at or
below par, an additional $4.9 million of October 2004 notes bringing our total
notes purchased to $19.4 million.
Maturities of the existing debt are as follows (in thousands):
Year Amount %
---------------------------------- ------------- ------------
2002 $ 2,288 1
2003 23,785 7
2004 63,941 18
2005 23,888 7
2006 53,899 15
Thereafter 190,394 52
---------------------------------- ------------- ------------
$ 358,195 100
---------------------------------- ------------- ------------
8. Derivatives and Fair Value of Financial Instruments
In December 2000, we entered an interest rate swap agreement effective through
January 2003 with a notional amount of $25 million that fixed the 30 day LIBOR
index at 5.97%. At December 31, 2001, we would have had to pay $973,000 to
terminate the agreement.
In January 2000, we entered into interest rate swap agreements on notional
amounts totaling $20.0 million. In order to fix the interest rate, we paid
$162,000. As mentioned above in Note 7, these agreements subsequently were
terminated in February 2001 at a cost of $295,200.
The carrying amount of cash equivalents approximates fair value due to the
short-term maturities of these financial instruments. The fair value of debt at
December 31, 2001 and 2000, estimated at the present value of future cash flows,
discounted at interest rates available at the reporting date for new debt of
similar type and remaining maturity, was approximately $358.2 and $346.1
million, respectively.
F-12
9. Shareholders' Equity
The Series A Cumulative Convertible Redeemable Preferred Shares (the "Preferred
Shares") were sold to the public during 1993 in the form of Depositary Shares,
each representing 1/10 of a Preferred Share. Proceeds from this offering, net of
underwriters discount and estimated offering expenses, were contributed to the
Operating Partnership in return for preferred partnership Units. The Preferred
Shares have a liquidation preference equivalent to $25 per Depositary Share and
dividends accumulate per Depositary Share equal to the greater of (i) $1.575 per
year or (ii) the dividends on the common shares or portion thereof, into which a
depositary share is convertible. The Preferred Shares rank senior to the common
shares in respect of dividend and liquidation rights.
The Preferred Shares are convertible at the option of the holder at any time
into common shares at a rate equivalent to .901 common shares for each
Depositary Share. At December 31, 2001, 726,203 common shares were reserved for
the conversion of Depositary Shares. The Preferred Shares and Depositary Shares
may be redeemed at the option of the Company, in whole or in part, at a
redemption price of $25 per Depositary Share, plus accrued and unpaid dividends.
During 1998, our Board of Directors authorized the repurchase of up to $6
million of our common shares. The timing and amount of purchases will be at the
discretion of management. During 1999, we purchased and retired 48,300 common
shares at a price of $958,000. We purchased no common shares during 2001 or
2000. The amount authorized for future repurchases remaining at December 31,
2001 totaled $4.8 million.
10. Shareholders' Rights Plan
On July 30, 1998, our Board of Directors declared a distribution of one
Preferred Share Purchase Right (a "Right") for each then outstanding common
share to shareholders of record on August 27, 1998. The Rights are exercisable
only if a person or group acquires 15% or more of our outstanding common shares
or announces a tender offer the consummation of which would result in ownership
by a person or group of 15% or more of the common shares. Each Right entitles
shareholders to buy one-hundredth of a share of a new series of Junior
Participating Preferred Shares at an exercise price of $120, subject to
adjustment.
If an acquiring person or group acquires 15% or more of our outstanding common
shares, an exercisable Right will entitle its holder (other than the acquirer)
to buy, at the Right's then-current exercise price, our common shares having a
market value of two times the exercise price of one Right. If an acquirer
acquires at least 15%, but less than 50%, of our common shares, the Board may
exchange each Right (other than those of the acquirer) for one common share (or
one-hundredth of a Class B Preferred Share) per Right. In addition, under
certain circumstances, if we are involved in a merger or other business
combination where we are not the surviving corporation, an exercisable Right
will entitle its holder to buy, at the Right's then-current exercise price,
common shares of the acquiring company having a market value of two times the
exercise price of one Right. We may redeem the Rights at $.01 per Right at any
time prior to a person or group acquiring a 15% position. The Rights will expire
on August 26, 2008.
F-13
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
11. Earnings Per Share
A reconciliation of the numerators and denominators in computing earnings per
share in accordance with Statement of Financial Accounting Standards No. 128,
Earnings per Share, for the years ended December 31, 2001, 2000 and 1999 is set
forth as follows (in thousands, except per share amounts):
2001 2000 1999
- --------------------- -------------------------------------------- ------------- ---------------- -------------
NUMERATOR:
Income before extraordinary item $ 7,356 $ 4,312 $15,837
Less applicable preferred share dividends (1,771) (1,823) (1,917)
- ------------------------------------------------------------------ ------------- ---------------- -------------
Income available to common shareholders-
numerator for basic and diluted earnings per share 5,585 2,489 13,920
- ------------------------------------------------------------------ ------------- ---------------- -------------
DENOMINATOR:
Basic weighted average common shares 7,926 7,894 7,861
Effect of outstanding share and unit options 22 28 11
- ------------------------------------------------------------------ ------------- ---------------- -------------
Diluted weighted average common shares 7,948 7,922 7,872
- ------------------------------------------------------------------ ------------- ---------------- -------------
Basic earnings per share before extraordinary item $ .70 $ 0.32 $ 1.77
- ------------------------------------------------------------------ ------------- ---------------- -------------
Diluted earnings per share before extraordinary item $ .70 $ 0.31 $ 1.77
- ------------------------------------------------------------------ ------------- ---------------- -------------
Options to purchase common shares excluded from the computation of diluted
earnings per share during 2001, 2000 and 1999 because the exercise price was
greater than the average market price of the common shares totaled 1,244,000,
1,270,078 and 683,218 shares. The assumed conversion of the preferred shares as
of the beginning of each year would have been anti-dilutive. The assumed
conversion of the Units held by TFLP as of the beginning of the year, which
would result in the elimination of earnings allocated to the minority interest,
would have no impact on earnings per share since the allocation of earnings to
an Operating Partnership Unit is equivalent to earnings allocated to a common
share.
12. Employee Benefit Plans
We have a non-qualified and incentive share option plan ("The Share Option
Plan") and the Operating Partnership has a non-qualified Unit option plan ("The
Unit Option Plan"). Units received upon exercise of Unit options are
exchangeable for common shares. We account for these plans under APB Opinion No.
25, under which no compensation cost has been recognized.
Had compensation cost for these plans been determined for options granted since
January 1, 1995 consistent with Statement of Financial Accounting Standards No.
123, Accounting for Stock-Based Compensation ("SFAS 123"), our net income and
earnings per share would have been reduced to the following pro forma amounts
(in thousands, except per share amounts):
2001 2000 1999
--------------- ---------------- ------------ ------------- ------------
Net income: As reported $7,112 $ 4,312 $15,588
Pro forma $6,937 $ 4,094 $15,387
Basic EPS: As reported $ .67 $ .32 $ 1.74
Pro forma $ .65 $ .29 $ 1.71
Diluted EPS: As reported $ .67 $ .31 $ 1.74
Pro forma $ .65 $ .29 $ 1.71
F-14
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Because the SFAS 123 method of accounting has not been applied to options
granted prior to January 1, 1995, the resulting pro forma compensation cost may
not be representative of that to be expected in future years. The fair value of
each option grant is estimated on the date of grant using the Black-Scholes
option pricing model with the following weighted-average assumptions used for
grants in 2000 and 1999, respectively: expected dividend yields ranging from 10%
to 11%; expected lives ranging from 5 years to 7 years; expected volatility
ranging from 20% to 23%; and risk-free interest rates ranging from 4.72% to
6.61%. There were no option grants in 2001.
We may issue up to 1,750,000 shares under The Share Option Plan and The Unit
Option Plan. We have granted 1,529,310 options, net of options forfeited,
through December 31, 2001. Under both plans, the option exercise price is
determined by the Share and Unit Option Committee of the Board of Directors.
Non-qualified share and Unit options granted 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.
Options outstanding at December 31, 2001 have exercise prices between $18.625
and $31.25, with a weighted average exercise price of $23.72 and a weighted
average remaining contractual life of 4.75 years.
A summary of the status of the our two plans at December 31, 2001, 2000 and 1999
and changes during the years then ended is presented in the table and narrative
below:
2001 2000 1999
--------------------------- ------------------------- -----------------------
Wtd Avg Wtd Avg Wtd Avg
Shares Ex Price Shares Ex Price Shares Ex Price
- ----------------------------- ------------- ------------- ------------ ------------ ----------- -----------
Outstanding at beginning
of year 1,475,270 $ 23.68 1,280,890 $ 24.63 1,069,060 $ 25.27
Granted --- --- 240,200 18.63 241,800 22.13
Exercised (10,800) 18.625 --- --- (500) 23.80
Forfeited (8,640) 23.66 (45,820) 23.72 (29,470) 26.94
- ----------------------------- -------------- ---------- -------------- ----------- ------------- -----------
Outstanding at end of year 1,455,830 $ 23.72 1,475,270 $ 23.68 1,280,890 $ 24.63
- ----------------------------- -------------- ---------- -------------- ----------- ------------- -----------
Exercisable at end of year 1,047,890 $ 24.25 888,230 $ 24.28 742.030 $ 24.08
Weighted average fair value
of options granted $ --- $ 1.20 $ 1.05
We have a qualified retirement plan, with a salary deferral feature designed to
qualify under Section 401 of the Code (the "401(k) Plan"), which covers
substantially all of our officers and employees. The 401(k) Plan permits our
employees, in accordance with the provisions of Section 401(k) of the Code, to
defer up to 20% of their eligible compensation on a pre-tax basis subject to
certain maximum amounts. Employee contributions are fully vested and are matched
by us at a rate of compensation deferred to be determined annually at our
discretion. The matching contribution is subject to vesting under a schedule
providing for 20% annual vesting starting with the third year of employment and
100% vesting after seven years of employment. The employer matching contribution
expense for the years 2001, 2000 and 1999 was immaterial.
Effective January 1, 2002, the vesting schedule of our 401(k) Plan was amended
providing for 20% annual vesting starting with the second year of employment
with 100% vesting after six years of employment.
13. Asset Write-Down
During November 2000, we terminated our contract to purchase twelve acres of
land in Dania Beach/Ft. Lauderdale, FL. Because of this event, we wrote off all
development costs associated with the site in Ft. Lauderdale. In addition, other
costs associated with various other non-recurring development activities at
other sites were written off. The total non-cash, non-recurring charge for
abandoned development costs in the fourth quarter of 2000 was $1.8 million.
F-15
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
14. Disposition of Properties
In June 2000, we sold our centers in Lawrence, KS and McMinnville, OR. Net
proceeds received from the sales totaled $7.1 million. As a result of the sales,
we recognized a loss on sale of real estate of $5.9 million. The combined net
operating income of these two centers represented approximately 1% of our total
portfolio's operating income.
In December 2000, we sold the real estate that the Stroud, OK center was located
on prior to its destruction in May 1999 by a tornado. The land and site work had
a net book value of $1.8 million and we recognized a loss on sale of real estate
of $1,046,000. The net proceeds from the sale of the real estate of
approximately $723,500 were received in January 2001.
15. Supplementary Income Statement Information
The following amounts are included in property operating expenses for the years
ended December 31, 2001, 2000 and 1999 (in thousands):
2001 2000 1999
- -------------------------------- ------------- ------------ ------------
Advertising and promotion $ 9,250 $ 9,114 $ 8,579
Common area maintenance 13,155 13,777 12,296
Real estate taxes 8,902 7,434 7,396
Other operating expenses 3,332 3,298 2,314
- -------------------------------- ------------- ------------ ------------
$ 34,639 $ 33,623 $ 30,585
- -------------------------------- ------------- ------------ ------------
16. Lease Agreements
The Company is the lessor of a total of 1,147 stores in 29 factory outlet
centers, under operating leases with initial terms that expire from 2002 to
2019. Most leases are renewable for five years at the lessee's option. Future
minimum lease receipts under non-cancelable operating leases as of December 31,
2001 are as follows (in thousands):
2002 $ 67,523
2003 55,147
2004 43,520
2005 30,041
2006 17,328
Thereafter 40,422
-------------------- --------------------
$ 253,981
-------------------- --------------------
17. Commitments and Contingencies
At December 31, 2001, there were no material commitments for construction of new
developments or additions to existing properties. Commitments for construction
represent only those costs contractually required to be paid by us.
We purchased the rights to lease land on which two of the outlet centers are
situated for $1,520,000. These leasehold rights are being amortized on a
straight-line basis over 30 and 40 year periods. Accumulated amortization was
$664,000 and $615,000 at December 31, 2001 and 2000, respectively.
F-16
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Our non-cancelable operating leases, with initial terms in excess of one year,
have terms that expire from 2002 to 2085. Annual rental payments for these
leases aggregated $2,333,000, $2,023,000 and $1,481,000, for the years ended
December 31, 2001, 2000 and 1999, respectively. Minimum lease payments for the
next five years and thereafter are as follows (in thousands):
2002 $ 2,264
2003 1,914
2004 1,832
2005 1,824
2006 1,819
Thereafter 64,401
------------------- ---------------------
$ 74,054
------------------- ---------------------
We are also subject to legal proceedings and claims which have arisen in the
ordinary course of business and have not been finally adjudicated. In our
opinion, the ultimate resolution of these matters will have no material effect
on our results of operations, financial condition or cash flows.
F-17
REPORT OF INDEPENDENT ACCOUNTANTS
ON FINANCIAL STATEMENT SCHEDULE
To the Board of Directors of
Tanger Factory Outlet Centers, Inc.
and Subsidiaries
Our audits of the consolidated financial statements referred to in our report
dated January 17, 2002 appearing in the 2001 Form 10-K of Tanger Factory Outlet
Centers, Inc. also included an audit of the financial statement schedule listed
in Item 14(a)(2) of this Form 10-K. In our opinion, this financial statement
schedule presents fairly, in all material respects, the information set forth
therein when read in conjunction with the related consolidated financial
statements.
/s/ PricewaterhouseCoopers LLP
Raleigh, North Carolina
January 17, 2002
F-18
TANGER FACTORY OUTLET CENTERS, INC. and SUBSIDIARIES
SCHEDULE III
REAL ESTATE AND ACCUMULATED DEPRECIATION
For the Year Ended December 31, 2001
(In thousands)
- ------------------------------------- -------------- ------------------------ -----------------------
Costs Capitalized
Subsequent to
Acquisition
Description Initial cost to Company (Improvements)
- ------------------------------------- -------------- ------------------------ -----------------------
Buildings, Buildings,
Outlet Center Improvements Improvements
Name Location Encumbrances Land & Fixtures Land & Fixtures
- ----------------- ------------------- -------------- --------- -------------- -------- --------------
Barstow Barstow, CA -- $3,941 $ 12,533 $ --- $ 1,209
- ----------------- ------------------- -------------- --------- -------------- -------- --------------
Blowing Rock Blowing Rock, NC $ 9,782 1,963 9,424 --- 2,185
- ----------------- ------------------- -------------- --------- -------------- -------- --------------
Boaz Boaz, AL --- 616 2,195 --- 2,142
- ----------------- ------------------- -------------- --------- -------------- -------- --------------
Bourne Bourne, MA --- 899 1,361 --- 290
- ----------------- ------------------- -------------- --------- -------------- -------- --------------
Branch North Branch, MN --- 247 5,644 249 4,030
- ----------------- ------------------- -------------- --------- -------------- -------- --------------
Branson Branson, MO 24,000 4,557 25,040 --- 7,751
- ----------------- ------------------- -------------- --------- -------------- -------- --------------
Casa Grande Casa Grande, AZ --- 753 9,091 --- 1,907
- ----------------- ------------------- -------------- --------- -------------- -------- --------------
Clover North Conway, NH --- 393 672 --- 247
- ----------------- ------------------- -------------- --------- -------------- -------- --------------
Commerce I Commerce, GA 8,723 755 3,511 492 9,273
- ----------------- ------------------- -------------- --------- -------------- -------- --------------
Commerce II Commerce, GA 29,500 1,262 14,046 541 17,838
- ----------------- ------------------- -------------- --------- -------------- -------- --------------
Dalton Dalton, GA 11,327 1,641 15,596 --- 444
- ----------------- ------------------- -------------- --------- -------------- -------- --------------
Ft. Lauderdale Ft. Lauderdale, FL 9,412 6,986 300 18
- ----------------- ------------------- -------------- --------- -------------- -------- --------------
Gonzales Gonzales, LA --- 876 15,895 17 5,248
- ----------------- ------------------- -------------- --------- -------------- -------- --------------
Kittery-I Kittery, ME 6,445 1,242 2,961 229 1,339
- ----------------- ------------------- -------------- --------- -------------- -------- --------------
Kittery-II Kittery, ME --- 921 1,835 529 597
- ----------------- ------------------- -------------- --------- -------------- -------- --------------
Lancaster Lancaster, PA 14,822 3,691 19,907 --- 11,091
- ----------------- ------------------- -------------- --------- -------------- -------- --------------
LL Bean North Conway, NH --- 1,894 3,351 --- 1,063
- ----------------- ------------------- -------------- --------- -------------- -------- --------------
Locust Grove Locust Grove, GA --- 2,558 11,801 --- 8,365
- ----------------- ------------------- -------------- --------- -------------- -------- --------------
Martinsburg Martinsburg, WV --- 800 2,812 --- 1,391
- ----------------- ------------------- -------------- --------- -------------- -------- --------------
Nags Head Nags Head, NC 6,638 1,853 6,679 --- 1,747
- ----------------- ------------------- -------------- --------- -------------- -------- --------------
Pigeon Forge Pigeon Forge, TN --- 299 2,508 --- 2,046
- ----------------- ------------------- -------------- --------- -------------- -------- --------------
Riverhead Riverhead, NY --- --- 36,374 6,152 72,640
- ----------------- ------------------- -------------- --------- -------------- -------- --------------
San Marcos San Marcos, TX 38,542 1,801 9,440 17 35,170
- ----------------- ------------------- -------------- --------- -------------- -------- --------------
Sanibel Sanibel, FL --- 4,916 23,196 --- 3,014
- ----------------- ------------------- -------------- --------- -------------- -------- --------------
Sevierville Sevierville, TN --- --- 18,495 --- 25,823
- ----------------- ------------------- -------------- --------- -------------- -------- --------------
Seymour Seymour, IN --- 1,671 13,249 --- 692
- ----------------- ------------------- -------------- --------- -------------- -------- --------------
Terrell Terrell, TX --- 778 13,432 --- 5,660
- ----------------- ------------------- -------------- --------- -------------- -------- --------------
West Branch West Branch, MI 7,190 350 3,428 121 5,216
- ----------------- ------------------- -------------- --------- -------------- -------- --------------
Williamsburg Williamsburg, IA 19,767 706 6,781 716 12,429
- ----------------- ------------------- -------------- --------- -------------- -------- --------------
$ 176,736 $ 50,795 $298,243 $9,363 $240,865
- ----------------- ------------------- -------------- --------- -------------- -------- --------------
F-19
TANGER FACTORY OUTLET CENTERS, INC. and SUBSIDIARIES
SCHEDULE III -(Continued)
REAL ESTATE AND ACCUMULATED DEPRECIATION
For the Year Ended December 31, 2001
(In thousands)
- ------------------------------------- -------------------------------------- ------------- ------------- --------------
Gross Amount Carried
at Close of Period
Description 12/31/01 (1)
- ------------------------------------- -------------------------------------- ------------- ------------- --------------
Life Used to
Compute
Buildings, Depreciation
Outlet Center Improvements Accumulated Date of in Income
Name Location Land & Fixtures Total Depreciation Construction Statement
- ----------------- ------------------- --------- --------------- ------------ ------------- ------------- --------------
Barstow Barstow, CA $3,941 $13,742 $17,683 $4,724 1995 (2)
- ----------------- ------------------- --------- --------------- ------------ ------------- ------------- --------------
Blowing Rock Blowing Rock, NC 1,963 11,609 13,572 1,693 1997 (3) (2)
- ----------------- ------------------- --------- --------------- ------------ ------------- ------------- --------------
Boaz Boaz, AL 616 4,337 4,953 2,140 1988 (2)
- ----------------- ------------------- --------- --------------- ------------ ------------- ------------- --------------
Bourne Bourne, MA 899 1,651 2,550 892 1989 (2)
- ----------------- ------------------- --------- --------------- ------------ ------------- ------------- --------------
Branch North Branch, MN 496 9,674 10,170 4,010 1992 (2)
- ----------------- ------------------- --------- --------------- ------------ ------------- ------------- --------------
Branson Branson, MO 4,557 32,790 37,347 11,202 1994 (2)
- ----------------- ------------------- --------- --------------- ------------ ------------- ------------- --------------
Casa Grande Casa Grande, AZ 753 10,998 11,751 5,199 1992 (2)
- ----------------- ------------------- --------- --------------- ------------ ------------- ------------- --------------
Clover North Conway, NH 393 919 1,312 533 1987 (2)
- ----------------- ------------------- --------- --------------- ------------ ------------- ------------- --------------
Commerce I Commerce, GA 1,247 12,784 14,031 5,143 1989 (2)
- ----------------- ------------------- --------- --------------- ------------ ------------- ------------- --------------
Commerce II Commerce, GA 1,803 31,884 33,687 7,979 1995 (2)
- ----------------- ------------------- --------- --------------- ------------ ------------- ------------- --------------
Dalton Dalton, GA 1,641 16,040 17,681 2,023 1998 (3) (2)
- ----------------- ------------------- --------- --------------- ------------ ------------- ------------- --------------
Ft. Lauderdale Ft. Lauderdale, FL 9,712 7,004 16,716 571 1999 (3) (2)
- ----------------- ------------------- --------- --------------- ------------ ------------- ------------- --------------
Gonzales Gonzales, LA 893 21,143 22,036 8,869 1992 (2)
- ----------------- ------------------- --------- --------------- ------------ ------------- ------------- --------------
Kittery-I Kittery, ME 1,471 4,300 5,771 2,569 1986 (2)
- ----------------- ------------------- --------- --------------- ------------ ------------- ------------- --------------
Kittery-II Kittery, ME 1,450 2,432 3,882 1,124 1989 (2)
- ----------------- ------------------- --------- --------------- ------------ ------------- ------------- --------------
Lancaster Lancaster, PA 3,691 30,998 34,689 8,953 1994 (3) (2)
- ----------------- ------------------- --------- --------------- ------------ ------------- ------------- --------------
LL Bean North Conway, NH 1,894 4,414 6,308 2,247 1988 (2)
- ----------------- ------------------- --------- --------------- ------------ ------------- ------------- --------------
Locust Grove Locust Grove, GA 2,558 20,166 22,724 6,470 1994 (2)
- ----------------- ------------------- --------- --------------- ------------ ------------- ------------- --------------
Martinsburg Martinsburg, WV 800 4,203 5,003 2,250 1987 (2)
- ----------------- ------------------- --------- --------------- ------------ ------------- ------------- --------------
Nags Head Nags Head, NC 1,853 8,426 10,279 1,526 1997 (3) (2)
- ----------------- ------------------- --------- --------------- ------------ ------------- ------------- --------------
Pigeon Forge Pigeon Forge, TN 299 4,554 4,853 2,254 1988 (2)
- ----------------- ------------------- --------- --------------- ------------ ------------- ------------- --------------
Riverhead Riverhead, NY 6,152 109,014 115,166 24,336 1993 (2)
- ----------------- ------------------- --------- --------------- ------------ ------------- ------------- --------------
San Marcos San Marcos, TX 1,818 44,610 46,428 8,356 1993 (2)
- ----------------- ------------------- --------- --------------- ------------ ------------- ------------- --------------
Sanibel Sanibel, FL 4,916 26,210 31,126 2,871 1998 (3) (2)
- ----------------- ------------------- --------- --------------- ------------ ------------- ------------- --------------
Sevierville Sevierville, TN --- 44,318 44,318 6,847 1997 (3) (2)
- ----------------- ------------------- --------- --------------- ------------ ------------- ------------- --------------
Seymour Seymour, IN 1,671 13,941 15,612 5,360 1994 (2)
- ----------------- ------------------- --------- --------------- ------------ ------------- ------------- --------------
Terrell Terrell, TX 778 19,092 19,870 6,721 1994 (2)
- ----------------- ------------------- --------- --------------- ------------ ------------- ------------- --------------
West Branch West Branch, MI 471 8,644 9,115 3,475 1991 (2)
- ----------------- ------------------- --------- --------------- ------------ ------------- ------------- --------------
Williamsburg Williamsburg, IA 1,422 19,210 20,632 8,613 1991 (2)
- ----------------- ------------------- --------- --------------- ------------ ------------- ------------- --------------
$60,158 $539,108 $599,266 $148,950
- ----------------- ------------------- --------- --------------- ------------ ------------- ------------- --------------
(1) Aggregate cost for federal income tax purposes is approximately
$618,886,000 (2) The Company generally uses estimated lives ranging from 25
to 33 years for buildings and 15 years for land improvements. Tenant
finishing allowances are depreciated over the initial lease term.
(3) Represents year acquired
F-20
TANGER FACTORY OUTLET CENTERS, INC. and SUBSIDIARIES
SCHEDULE III - (Continued)
REAL ESTATE AND ACCUMULATED DEPRECIATION
For the Year Ended December 31, 2001
(In Thousands)
The changes in total real estate for the three years ended December 31, 2001 are
as follows:
2001 2000 1999
-------------- ---------------- -----------------
Balance, beginning of year $584,928 $566,216 $529,247
Acquisition of real estate --- --- 15,500
Improvements 14,338 39,701 31,343
Dispositions and other --- (20,989) (9,874)
-------------- ---------------- -----------------
Balance, end of year $599,266 $584,928 $566,216
============== ================ =================
The changes in accumulated depreciation for the three years ended December 31,
2001 are as follows:
2001 2000 1999
-------------- ---------------- ----------------
Balance, beginning of year $ 122,365 $ 104,511 $84,685
Depreciation for the period 26,585 24,239 23,095
Dispositions and other --- (6,385) (3,269)
-------------- ---------------- ----------------
Balance, end of year $148,950 $122,365 $104,511
============== ================ ================
F-21