10-Q 1 skt10q09302018.htm 10-Q
United States
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q

| x | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |

For the quarterly period ended September 30, 2018
OR

| o | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |

For the transition period from _________ to _________
Commission file number 1-11986 (Tanger Factory Outlet Centers, Inc.)
Commission file number 333-3526-01 (Tanger Properties Limited Partnership)
TANGER FACTORY OUTLET CENTERS, INC.
TANGER PROPERTIES LIMITED PARTNERSHIP
(Exact name of Registrant as specified in its charter)

North Carolina (Tanger Factory Outlet Centers, Inc.) | 56-1815473
North Carolina (Tanger Properties Limited Partnership) | 56-1822494
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.)
3200 Northline Avenue, Suite 360, Greensboro, NC 27408
(Address of principal executive offices)
(336) 292-3010
(Registrant's telephone number, including area code)

Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Tanger Factory Outlet Centers, Inc. | Yes x No o
Tanger Properties Limited Partnership | Yes x No o

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).

Tanger Factory Outlet Centers, Inc. | Yes x No o
Tanger Properties Limited Partnership | Yes x No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer”, “accelerated filer", “smaller reporting company” and "emerging growth company" in Rule 12b-2 of the Exchange Act.

Tanger Factory Outlet Centers, Inc.
Large accelerated filer x |  | Accelerated filer o
Non-accelerated filer o |  | Smaller reporting company o
|  | Emerging growth company o

Tanger Properties Limited Partnership
Large accelerated filer o |  | Accelerated filer o
Non-accelerated filer x |  | Smaller reporting company o
|  | Emerging growth company o

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

Tanger Factory Outlet Centers, Inc. | o
Tanger Properties Limited Partnership | o

Indicate by check mark whether the registrant is a shell company (as defined by Rule 12b-2 of the Act).

Tanger Factory Outlet Centers, Inc. | Yes o No x
Tanger Properties Limited Partnership | Yes o No x

As of November 1, 2018, there were 93,907,034 common shares of Tanger Factory Outlet Centers, Inc. outstanding, $.01 par value.

EXPLANATORY NOTE
This report combines the unaudited quarterly reports on Form 10-Q for the quarter ended September 30, 2018 of Tanger Factory Outlet Centers, Inc. and Tanger Properties Limited Partnership. Unless the context indicates otherwise, the term "Company" refers to Tanger Factory Outlet Centers, Inc. and subsidiaries and the term "Operating Partnership" refers to Tanger Properties Limited Partnership and subsidiaries. The terms “we”, “our” and “us” refer to the Company or the Company and the Operating Partnership together, as the text requires.
Tanger Factory Outlet Centers, Inc. and subsidiaries is one of the largest owners and operators of outlet centers in the United States and Canada. The Company is a fully-integrated, self-administered and self-managed real estate investment trust ("REIT") which, through its controlling interest in the Operating Partnership, focuses exclusively on developing, acquiring, owning, operating and managing outlet shopping centers. The outlet centers and other assets are held by, and all of the operations are conducted by, the Operating Partnership and its subsidiaries. Accordingly, the descriptions of the business, employees and properties of the Company are also descriptions of the business, employees and properties of the Operating Partnership. As the Operating Partnership is the issuer of our registered debt securities, we are required to present a separate set of financial statements for this entity.
The Company owns the majority of the units of partnership interest issued by the Operating Partnership through its two wholly-owned subsidiaries, Tanger GP Trust and Tanger LP Trust. Tanger GP Trust controls the Operating Partnership as its sole general partner. Tanger LP Trust holds a limited partnership interest. As of September 30, 2018, the Company, through its ownership of Tanger GP Trust and Tanger LP Trust, owned 93,907,034 units of the Operating Partnership and other limited partners (the "Non-Company LPs") collectively owned 4,995,433 Class A common limited partnership units. Each Class A common limited partnership unit held by the Non-Company LPs is exchangeable for one of the Company's common shares, subject to certain limitations to preserve the Company's status as a REIT. Class B common limited partnership units, which are held by Tanger LP Trust, are not exchangeable for common shares of the Company.
Management operates the Company and the Operating Partnership as one enterprise. The management of the Company consists of the same members as the management of the Operating Partnership. These individuals are officers of the Company and employees of the Operating Partnership. The individuals that comprise the Company's Board of Directors are also the same individuals that make up Tanger GP Trust's Board of Trustees.
We believe combining the quarterly reports on Form 10-Q of the Company and the Operating Partnership into this single report results in the following benefits:

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

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

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

There are only a few differences between the Company and the Operating Partnership, which are reflected in the disclosure in this report. We believe it is important, however, to understand these differences between the Company and the Operating Partnership in the context of how the Company and the Operating Partnership operate as an interrelated consolidated company.
As stated above, the Company is a REIT, whose only material asset is its ownership of partnership interests of the Operating Partnership through its wholly-owned subsidiaries, the Tanger GP Trust and Tanger LP Trust. As a result, the Company does not conduct business itself, other than issuing public equity from time to time and incurring expenses required to operate as a public company. However, all operating expenses incurred by the Company are reimbursed by the Operating Partnership, thus the only material item on the Company's income statement is its equity in the earnings of the Operating Partnership. Therefore, the assets and liabilities and the revenues and expenses of the Company and the Operating Partnership are the same on their respective financial statements, except for immaterial differences related to cash, other assets and accrued liabilities that arise from public company expenses paid by the Company. The Company itself does not hold any indebtedness but does guarantee certain debt of the Operating Partnership, as disclosed in this report.
2

The Operating Partnership holds all of the outlet centers and other assets, including the ownership interests in consolidated and unconsolidated joint ventures. The Operating Partnership conducts the operations of the business and is structured as a partnership with no publicly traded equity. Except for net proceeds from public equity issuances by the Company, which are contributed to the Operating Partnership in exchange for partnership units, the Operating Partnership generates the capital required through its operations, its incurrence of indebtedness or through the issuance of partnership units.
Noncontrolling interests, shareholder's equity and partner's capital are the main areas of difference between the consolidated financial statements of the Company and those of the Operating Partnership. The limited partnership interests in the Operating Partnership held by the Non-Company LPs are accounted for as partner's capital in the Operating Partnership's financial statements and as noncontrolling interests in the Company's financial statements.
To help investors understand the significant differences between the Company and the Operating Partnership, this report presents the following separate sections, as applicable, for each of the Company and the Operating Partnership:
•Consolidated financial statements;
•The following notes to the consolidated financial statements:

• | Debt of the Company and the Operating Partnership;

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

• | Earnings Per Share and Earnings Per Unit;

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

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

This report also includes separate Item 4. Controls and Procedures sections and separate Exhibit 31 and 32 certifications for each of the Company and the Operating Partnership in order to establish that the Chief Executive Officer and the Chief Financial Officer of each entity have made the requisite certifications and that the Company and Operating Partnership are compliant with Rule 13a-15 or Rule 15d-15 of the Securities Exchange Act of 1934 and 18 U.S.C. §1350.
The separate sections in this report for the Company and the Operating Partnership specifically refer to the Company and the Operating Partnership. In the sections that combine disclosure of the Company and the Operating Partnership, this report refers to actions or holdings as being actions or holdings of the Company. Although the Operating Partnership is generally the entity that enters into contracts and joint ventures and holds assets and debt, reference to the Company is appropriate because the business is one enterprise and the Company operates the business through the Operating Partnership.
The Company currently consolidates the Operating Partnership because it has (1) the power to direct the activities of the Operating Partnership that most significantly impact the Operating Partnership’s economic performance and (2) the obligation to absorb losses and the right to receive the residual returns of the Operating Partnership that could be potentially significant. The separate discussions of the Company and the Operating Partnership in this report should be read in conjunction with each other to understand the results of the Company on a consolidated basis and how management operates the Company.
3

TANGER FACTORY OUTLET CENTERS, INC. AND TANGER PROPERTIES LIMITED PARTNERSHIP
Index

| Page Number
Part I. Financial Information
Item 1. |
FINANCIAL STATEMENTS OF TANGER FACTORY OUTLET CENTERS, INC. (Unaudited) |
Consolidated Balance Sheets - as of September 30, 2018 and December 31, 2017 | 5
Consolidated Statements of Operations - for the three and nine months ended September 30, 2018 and 2017 | 6
Consolidated Statements of Comprehensive Income - for the three and nine months ended September 30, 2018 and 2017 | 7
Consolidated Statements of Shareholders' Equity - for the nine months ended September 30, 2018 and 2017 | 8
Consolidated Statements of Cash Flows - for the nine months ended September 30, 2018 and 2017 | 10
FINANCIAL STATEMENTS OF TANGER PROPERTIES LIMITED PARTNERSHIP (Unaudited) |
Consolidated Balance Sheets - as of September 30, 2018 and December 31, 2017 | 11
Consolidated Statements of Operations - for the three and nine months ended September 30, 2018 and 2017 | 12
Consolidated Statements of Comprehensive Income - for the three and nine months ended September 30, 2018 and 2017 | 13
Consolidated Statements of Equity - for the nine months ended September 30, 2018 and 2017 | 14
Consolidated Statements of Cash Flows - for the nine months ended September 30, 2018 and 2017 | 15
Condensed Notes to Consolidated Financial Statements of Tanger Factory Outlet Centers, Inc. and Tanger Properties Limited Partnership | 16
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations | 39
Item 3. Quantitative and Qualitative Disclosures about Market Risk | 61
Item 4. Controls and Procedures (Tanger Factory Outlet Centers, Inc. and Tanger Properties Limited Partnership) | 63
Part II. Other Information
Item 1. Legal Proceedings | 64
Item 1A. Risk Factors | 64
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds | 64
Item 4. Mine Safety Disclosure | 64
Item 6. Exhibits | 65
Signatures | 66

4

PART I. - FINANCIAL INFORMATION
Item 1 - Financial Statements of Tanger Factory Outlet Centers, Inc.
TANGER FACTORY OUTLET CENTERS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands, except share data, unaudited)

|  | September 30, 2018 |  | December 31, 2017
Assets |  |  |  |  |  |
Rental property: |  |  |  |  |  |
Land |  | $ | 278,632 |  |  | $ | 279,978 |
Buildings, improvements and fixtures |  | 2,755,698 |  |  | 2,793,638 |
Construction in progress |  | 762 |  |  | 14,854 |
|  | 3,035,092 |  |  | 3,088,470 |
Accumulated depreciation |  | (953,158 | ) |  | (901,967 | )
Total rental property, net |  | 2,081,934 |  |  | 2,186,503 |
Cash and cash equivalents |  | 4,404 |  |  | 6,101 |
Investments in unconsolidated joint ventures |  | 111,305 |  |  | 119,436 |
Deferred lease costs and other intangibles, net |  | 120,064 |  |  | 132,061 |
Prepaids and other assets |  | 103,910 |  |  | 96,004 |
Total assets |  | $ | 2,421,617 |  |  | $ | 2,540,105 |
Liabilities and Equity |  |  |  |
Liabilities |  |  |  |  |  |
Debt: |  |  |  |  |  |
Senior, unsecured notes, net |  | $ | 1,136,184 |  |  | $ | 1,134,755 |
Unsecured term loan, net |  | 323,416 |  |  | 322,975 |
Mortgages payable, net |  | 88,359 |  |  | 99,761 |
Unsecured lines of credit, net |  | 199,701 |  |  | 206,160 |
Total debt |  | 1,747,660 |  |  | 1,763,651 |
Accounts payable and accrued expenses |  | 70,132 |  |  | 90,416 |
Other liabilities |  | 79,342 |  |  | 73,736 |
Total liabilities |  | 1,897,134 |  |  | 1,927,803 |
Commitments and contingencies |  |  |  |  |  |
Equity |  |  |  |  |  |
Tanger Factory Outlet Centers, Inc.: |  |  |  |  |  |
Common shares, $.01 par value, 300,000,000 shares authorized, 93,907,034 and 94,560,536 shares issued and outstanding at September 30, 2018 and December 31, 2017, respectively |  | 939 |  |  | 946 |
Paid in capital |  | 774,724 |  |  | 784,782 |
Accumulated distributions in excess of net income |  | (259,258 | ) |  | (184,865 | )
Accumulated other comprehensive loss |  | (18,413 | ) |  | (19,285 | )
Equity attributable to Tanger Factory Outlet Centers, Inc. |  | 497,992 |  |  | 581,578 |
Equity attributable to noncontrolling interests: |  |  |  |
Noncontrolling interests in Operating Partnership |  | 26,491 |  |  | 30,724 |
Noncontrolling interests in other consolidated partnerships |  | — |  |  | — |
Total equity |  | 524,483 |  |  | 612,302 |
Total liabilities and equity |  | $ | 2,421,617 |  |  | $ | 2,540,105 |

The accompanying notes are an integral part of these consolidated financial statements.
5

TANGER FACTORY OUTLET CENTERS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except share data, unaudited)

|  | Three months ended September 30, |  | Nine months ended September 30,
|  | 2018 |  | 2017 |  | 2018 |  | 2017
Revenues: |  |  |  |  |  |  |  |  |
Base rentals |  | $ | 82,323 |  |  | $ | 80,349 |  |  | $ | 244,781 |  |  | $ | 241,467 |
Percentage rentals |  | 3,210 |  |  | 3,138 |  |  | 6,666 |  |  | 6,798 |
Expense reimbursements |  | 35,468 |  |  | 34,180 |  |  | 107,876 |  |  | 104,801 |
Management, leasing and other services |  | 583 |  |  | 588 |  |  | 1,826 |  |  | 1,776 |
Other income |  | 2,652 |  |  | 2,510 |  |  | 6,333 |  |  | 6,905 |
Total revenues |  | 124,236 |  |  | 120,765 |  |  | 367,482 |  |  | 361,747 |
Expenses: |  |  |  |  |  |  |  |  |  |
Property operating |  | 39,653 |  |  | 37,571 |  |  | 119,817 |  |  | 115,074 |
General and administrative |  | 10,752 |  |  | 10,934 |  |  | 32,861 |  |  | 33,846 |
Abandoned pre-development costs |  | — |  |  | (99 | ) |  | — |  |  | 528 |
Impairment charge |  | 49,739 |  |  | — |  |  | 49,739 |  |  | — |
Depreciation and amortization |  | 32,850 |  |  | 30,976 |  |  | 98,667 |  |  | 95,175 |
Total expenses |  | 132,994 |  |  | 79,382 |  |  | 301,084 |  |  | 244,623 |
Operating income (loss) |  | (8,758 | ) |  | 41,383 |  |  | 66,398 |  |  | 117,124 |
Other income (expense): |  |  |  |  |  |  |  |
Interest expense |  | (16,367 | ) |  | (16,489 | ) |  | (48,348 | ) |  | (49,496 | )
Loss on early extinguishment of debt |  | — |  |  | (35,626 | ) |  | — |  |  | (35,626 | )
Gain on sale of assets |  | — |  |  | — |  |  | — |  |  | 6,943 |
Other non-operating income (expense) |  | 261 |  |  | 591 |  |  | 661 |  |  | 683 |
Income (loss) before equity in earnings (losses) of unconsolidated joint ventures |  | (24,864 | ) |  | (10,141 | ) |  | 18,711 |  |  | 39,628 |
Equity in earnings (losses) of unconsolidated joint ventures |  | 1,833 |  |  | (5,893 | ) |  | 6,233 |  |  | (1,201 | )
Net income (loss) |  | (23,031 | ) |  | (16,034 | ) |  | 24,944 |  |  | 38,427 |
Noncontrolling interests in Operating Partnership |  | 1,172 |  |  | 815 |  |  | (1,274 | ) |  | (1,920 | )
Noncontrolling interests in other consolidated partnerships |  | — |  |  | — |  |  | 278 |  |  | — |
Net income (loss) attributable to Tanger Factory Outlet Centers, Inc. |  | $ | (21,859 | ) |  | $ | (15,219 | ) |  | $ | 23,948 |  |  | $ | 36,507 |
Basic earnings per common share: |  |  |  |  |  |  |  |
Net income (loss) |  | $ | (0.24 | ) |  | $ | (0.17 | ) |  | $ | 0.25 |  |  | $ | 0.38 |
Diluted earnings per common share: |  |  |  |  |  |  |  |
Net income (loss) |  | $ | (0.24 | ) |  | $ | (0.17 | ) |  | $ | 0.25 |  |  | $ | 0.38 |
Dividends declared per common share |  | $ | 0.3500 |  |  | $ | 0.3425 |  |  | $ | 1.0425 |  |  | $ | 1.0100 |

The accompanying notes are an integral part of these consolidated financial statements.
6

TANGER FACTORY OUTLET CENTERS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(In thousands, unaudited)

|  | Three months ended September 30, |  | Nine months ended September 30,
|  | 2018 |  | 2017 |  | 2018 |  | 2017
Net income (loss) |  | $ | (23,031 | ) |  | $ | (16,034 | ) |  | $ | 24,944 |  |  | $ | 38,427 |
Other comprehensive income (loss): |  |  |  |  |  |  |  |
Foreign currency translation adjustments |  | 1,921 |  |  | 4,737 |  |  | (3,176 | ) |  | 8,821 |
Change in fair value of cash flow hedges |  | 512 |  |  | 39 |  |  | 4,095 |  |  | 217 |
Other comprehensive income |  | 2,433 |  |  | 4,776 |  |  | 919 |  |  | 9,038 |
Comprehensive income (loss) |  | (20,598 | ) |  | (11,258 | ) |  | 25,863 |  |  | 47,465 |
Comprehensive (income) loss attributable to noncontrolling interests |  | 1,048 |  |  | 573 |  |  | (1,043 | ) |  | (2,376 | )
Comprehensive income (loss) attributable to Tanger Factory Outlet Centers, Inc. |  | $ | (19,550 | ) |  | $ | (10,685 | ) |  | $ | 24,820 |  |  | $ | 45,089 |

The accompanying notes are an integral part of these consolidated financial statements.
7

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

|  | Common shares | Paid in capital | Accumulated distributions in excess of earnings | Accumulated other comprehensive loss | Equity attributable to Tanger Factory Outlet Centers, Inc. | Noncontrolling interests in Operating Partnership | Noncontrolling interests in other consolidated partnerships | Total equity
Balance, December 31, 2016 |  | $ | 961 |  | $ | 820,251 |  | $ | (122,701 | ) | $ | (28,295 | ) | $ | 670,216 |  | $ | 35,066 |  | $ | 159 |  | $ | 705,441 |
Net income |  | — |  | — |  | 36,507 |  | — |  | 36,507 |  | 1,920 |  | — |  | 38,427 |
Other comprehensive income |  | — |  | — |  | — |  | 8,582 |  | 8,582 |  | 456 |  | — |  | 9,038 |
Compensation under Incentive Award Plan |  | — |  | 10,891 |  | — |  | — |  | 10,891 |  | — |  | — |  | 10,891 |
Issuance of 1,800 common shares upon exercise of options |  | — |  | 54 |  | — |  | — |  | 54 |  | — |  | — |  | 54 |
Grant of 411,968 restricted common share awards, net of forfeitures |  | 4 |  | (4 | ) | — |  | — |  | — |  | — |  | — |  | — |
Repurchase of 1,911,585 common shares, including transaction costs |  | (19 | ) | (49,343 | ) | — |  | — |  | (49,362 | ) | — |  | — |  | (49,362 | )
Withholding of 69,886 common shares for employee income taxes |  | (1 | ) | (2,435 | ) | — |  | — |  | (2,436 | ) | — |  | — |  | (2,436 | )
Adjustment for noncontrolling interests in Operating Partnership |  | — |  | 1,606 |  | — |  | — |  | 1,606 |  | (1,606 | ) | — |  | — |
Acquisition of noncontrolling interest in other consolidated partnership |  | — |  | — |  | — |  | — |  | — |  | — |  | (159 | ) | (159 | )
Common dividends ($1.01 per share) |  | — |  | — |  | (97,781 | ) | — |  | (97,781 | ) | — |  | — |  | (97,781 | )
Distributions to noncontrolling interests |  | — |  | — |  | — |  | — |  | — |  | (5,078 | ) | — |  | (5,078 | )
Balance, September 30, 2017 |  | $ | 945 |  | $ | 781,020 |  | $ | (183,975 | ) | $ | (19,713 | ) | $ | 578,277 |  | $ | 30,758 |  | $ | — |  | $ | 609,035 |
The accompanying notes are an integral part of these consolidated financial statements.

8

TANGER FACTORY OUTLET CENTERS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (In thousands, except share and per share data, unaudited)
|  | Common shares | Paid in capital | Accumulated distributions in excess of earnings | Accumulated other comprehensive loss | Equity attributable to Tanger Factory Outlet Centers, Inc. | Noncontrolling interests in Operating Partnership | Noncontrolling interests in other consolidated partnerships | Total equity
Balance, December 31, 2017 |  | $ | 946 |  | $ | 784,782 |  | $ | (184,865 | ) | $ | (19,285 | ) | $ | 581,578 |  | $ | 30,724 |  | $ | — |  | $ | 612,302 |
Net income |  | — |  | — |  | 23,948 |  | — |  | 23,948 |  | 1,274 |  | (278 | ) | 24,944 |
Other comprehensive income |  | — |  | — |  | — |  | 872 |  | 872 |  | 47 |  | — |  | 919 |
Compensation under Incentive Award Plan |  | — |  | 11,654 |  | — |  | — |  | 11,654 |  | — |  | — |  | 11,654 |
Grant of 355,184 restricted common share awards, net of forfeitures |  | 3 |  | (3 | ) | — |  | — |  | — |  | — |  | — |  | — |
Repurchase of 919,249 common shares, including transaction costs |  | (9 | ) | (19,989 | ) | — |  | — |  | (19,998 | ) | — |  | — |  | (19,998 | )
Withholding of 89,437 common shares for employee income taxes |  | (1 | ) | (2,067 | ) | — |  | — |  | (2,068 | ) | — |  | — |  | (2,068 | )
Contributions from noncontrolling interests |  | — |  | — |  | — |  | — |  | — |  | — |  | 445 |  | 445 |
Adjustment for noncontrolling interests in Operating Partnership |  | — |  | 347 |  | — |  | — |  | 347 |  | (347 | ) | — |  | — |
Common dividends ($1.0425 per share) |  | — |  | — |  | (98,341 | ) | — |  | (98,341 | ) | — |  | — |  | (98,341 | )
Distributions to noncontrolling interests |  | — |  | — |  | — |  | — |  | — |  | (5,207 | ) | (167 | ) | (5,374 | )
Balance, September 30, 2018 |  | $ | 939 |  | $ | 774,724 |  | $ | (259,258 | ) | $ | (18,413 | ) | $ | 497,992 |  | $ | 26,491 |  | $ | — |  | $ | 524,483 |

The accompanying notes are an integral part of these consolidated financial statements.
9

TANGER FACTORY OUTLET CENTERS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands, unaudited)

|  | Nine months ended September 30,
|  | 2018 |  | 2017
OPERATING ACTIVITIES |  |  |  |  |
Net income |  | $ | 24,944 |  |  | $ | 38,427 |
Adjustments to reconcile net income to net cash provided by operating activities: |  |  |  |
Depreciation and amortization |  | 98,667 |  |  | 95,175 |
Impairment charge |  | 49,739 |  |  | — |
Amortization of deferred financing costs |  | 2,280 |  |  | 2,640 |
Gain on sale of assets |  | — |  |  | (6,943 | )
Loss on early extinguishment of debt |  | — |  |  | 35,626 |
Equity in (earnings) losses of unconsolidated joint ventures |  | (6,233 | ) |  | 1,201 |
Equity-based compensation expense |  | 10,814 |  |  | 10,114 |
Amortization of debt (premiums) and discounts, net |  | 309 |  |  | 363 |
Amortization (accretion) of market rent rate adjustments, net |  | 1,980 |  |  | 2,107 |
Straight-line rent adjustments |  | (4,744 | ) |  | (4,749 | )
Distributions of cumulative earnings from unconsolidated joint ventures |  | 6,081 |  |  | 8,128 |
Changes in other assets and liabilities: |  |  |  |
Other assets |  | (406 | ) |  | (1,131 | )
Accounts payable and accrued expenses |  | (3,471 | ) |  | 653 |
Net cash provided by operating activities |  | 179,960 |  |  | 181,611 |
INVESTING ACTIVITIES |  |  |  |
Additions to rental property |  | (53,349 | ) |  | (132,612 | )
Additions to investments in unconsolidated joint ventures |  | (1,764 | ) |  | (4,033 | )
Net proceeds from sale of assets |  | — |  |  | 39,213 |
Additions to non-real estate assets |  | (1,203 | ) |  | (8,384 | )
Distributions in excess of cumulative earnings from unconsolidated joint ventures |  | 16,656 |  |  | 16,019 |
Additions to deferred lease costs |  | (5,220 | ) |  | (4,218 | )
Other investing activities |  | 8,065 |  |  | 4,963 |
Net cash used in investing activities |  | (36,815 | ) |  | (89,052 | )
FINANCING ACTIVITIES |  |  |  |
Cash dividends paid |  | (98,341 | ) |  | (97,781 | )
Distributions to noncontrolling interests in Operating Partnership |  | (5,207 | ) |  | (5,078 | )
Proceeds from revolving credit facility |  | 391,900 |  |  | 543,866 |
Repayments of revolving credit facility |  | (396,900 | ) |  | (456,666 | )
Proceeds from notes, mortgages and loans |  | — |  |  | 299,460 |
Repayments of notes, mortgages and loans |  | (10,971 | ) |  | (302,240 | )
Payment of make-whole premium related to early extinguishment of debt |  | — |  |  | (34,143 | )
Repurchase of common shares, including transaction costs |  | (19,998 | ) |  | (49,362 | )
Employee income taxes paid related to shares withheld upon vesting of equity awards |  | (2,068 | ) |  | (2,436 | )
Additions to deferred financing costs |  | (2,615 | ) |  | (2,900 | )
Proceeds from exercise of options |  | — |  |  | 54 |
Proceeds from other financing activities |  | 445 |  |  | 12,054 |
Payment for other financing activities |  | (1,027 | ) |  | (782 | )
Net cash used in financing activities |  | (144,782 | ) |  | (95,954 | )
Effect of foreign currency rate changes on cash and cash equivalents |  | (60 | ) |  | (54 | )
Net decrease in cash and cash equivalents |  | (1,697 | ) |  | (3,449 | )
Cash and cash equivalents, beginning of period |  | 6,101 |  |  | 12,222 |
Cash and cash equivalents, end of period |  | $ | 4,404 |  |  | $ | 8,773 |

The accompanying notes are an integral part of these consolidated financial statements.
10

Item 1 - Financial Statements of Tanger Properties Limited Partnership
TANGER PROPERTIES LIMITED PARTNERSHIP AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands, except unit data, unaudited)

|  | September 30, 2018 |  | December 31, 2017
Assets |  |  |  |  |  |
Rental property: |  |  |  |  |  |
Land |  | $ | 278,632 |  |  | $ | 279,978 |
Buildings, improvements and fixtures |  | 2,755,698 |  |  | 2,793,638 |
Construction in progress |  | 762 |  |  | 14,854 |
|  | 3,035,092 |  |  | 3,088,470 |
Accumulated depreciation |  | (953,158 | ) |  | (901,967 | )
Total rental property, net |  | 2,081,934 |  |  | 2,186,503 |
Cash and cash equivalents |  | 4,361 |  |  | 6,050 |
Investments in unconsolidated joint ventures |  | 111,305 |  |  | 119,436 |
Deferred lease costs and other intangibles, net |  | 120,064 |  |  | 132,061 |
Prepaids and other assets |  | 103,313 |  |  | 95,384 |
Total assets |  | $ | 2,420,977 |  |  | $ | 2,539,434 |
Liabilities and Equity |  |  |  |
Liabilities |  |  |  |
Debt: |  |  |  |
Senior, unsecured notes, net |  | $ | 1,136,184 |  |  | $ | 1,134,755 |
Unsecured term loan, net |  | 323,416 |  |  | 322,975 |
Mortgages payable, net |  | 88,359 |  |  | 99,761 |
Unsecured lines of credit, net |  | 199,701 |  |  | 206,160 |
Total debt |  | 1,747,660 |  |  | 1,763,651 |
Accounts payable and accrued expenses |  | 69,492 |  |  | 89,745 |
Other liabilities |  | 79,342 |  |  | 73,736 |
Total liabilities |  | 1,896,494 |  |  | 1,927,132 |
Commitments and contingencies |  |  |  |  |  |
Equity |  |  |  |
Partners' Equity: |  |  |  |
General partner, 1,000,000 units outstanding at September 30, 2018 and December 31, 2017 |  | 5,054 |  |  | 5,844 |
Limited partners, 4,995,433 and 4,995,433 Class A common units, and 92,907,034 and 93,560,536 Class B common units outstanding at September 30, 2018 and December 31, 2017, respectively |  | 538,855 |  |  | 626,803 |
Accumulated other comprehensive loss |  | (19,426 | ) |  | (20,345 | )
Total partners' equity |  | 524,483 |  |  | 612,302 |
Noncontrolling interests in consolidated partnerships |  | — |  |  | — |
Total equity |  | 524,483 |  |  | 612,302 |
Total liabilities and equity |  | $ | 2,420,977 |  |  | $ | 2,539,434 |

The accompanying notes are an integral part of these consolidated financial statements.
11

TANGER PROPERTIES LIMITED PARTNERSHIP AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per unit data, unaudited)

|  | Three months ended September 30, |  | Nine months ended September 30,
|  | 2018 |  | 2017 |  | 2018 |  | 2017
Revenues: |  |  |  |  |  |  |  |  |
Base rentals |  | $ | 82,323 |  |  | $ | 80,349 |  |  | $ | 244,781 |  |  | $ | 241,467 |
Percentage rentals |  | 3,210 |  |  | 3,138 |  |  | 6,666 |  |  | 6,798 |
Expense reimbursements |  | 35,468 |  |  | 34,180 |  |  | 107,876 |  |  | 104,801 |
Management, leasing and other services |  | 583 |  |  | 588 |  |  | 1,826 |  |  | 1,776 |
Other income |  | 2,652 |  |  | 2,510 |  |  | 6,333 |  |  | 6,905 |
Total revenues |  | 124,236 |  |  | 120,765 |  |  | 367,482 |  |  | 361,747 |
Expenses: |  |  |  |  |  |  |  |
Property operating |  | 39,653 |  |  | 37,571 |  |  | 119,817 |  |  | 115,074 |
General and administrative |  | 10,752 |  |  | 10,934 |  |  | 32,861 |  |  | 33,846 |
Abandoned pre-development costs |  | — |  |  | (99 | ) |  | — |  |  | 528 |
Impairment charge |  | 49,739 |  |  | — |  |  | 49,739 |  |  | — |
Depreciation and amortization |  | 32,850 |  |  | 30,976 |  |  | 98,667 |  |  | 95,175 |
Total expenses |  | 132,994 |  |  | 79,382 |  |  | 301,084 |  |  | 244,623 |
Operating income (loss) |  | (8,758 | ) |  | 41,383 |  |  | 66,398 |  |  | 117,124 |
Other income (expense): |  |  |  |  |  |  |  |
Interest expense |  | (16,367 | ) |  | (16,489 | ) |  | (48,348 | ) |  | (49,496 | )
Loss on early extinguishment of debt |  | — |  |  | (35,626 | ) |  | — |  |  | (35,626 | )
Gain on sale of assets |  | — |  |  | — |  |  | — |  |  | 6,943 |
Other non-operating income (expense) |  | 261 |  |  | 591 |  |  | 661 |  |  | 683 |
Income (loss) before equity in earnings (losses) of unconsolidated joint ventures |  | (24,864 | ) |  | (10,141 | ) |  | 18,711 |  |  | 39,628 |
Equity in earnings (losses) of unconsolidated joint ventures |  | 1,833 |  |  | (5,893 | ) |  | 6,233 |  |  | (1,201 | )
Net income (loss) |  | (23,031 | ) |  | (16,034 | ) |  | 24,944 |  |  | 38,427 |
Noncontrolling interests in consolidated partnerships |  | — |  |  | — |  |  | 278 |  |  | — |
Net income (loss) available to partners |  | (23,031 | ) |  | (16,034 | ) |  | 25,222 |  |  | 38,427 |
Net income (loss) available to limited partners |  | (22,798 | ) |  | (15,874 | ) |  | 24,970 |  |  | 38,048 |
Net income (loss) available to general partner |  | $ | (233 | ) |  | $ | (160 | ) |  | $ | 252 |  |  | $ | 379 |
Basic earnings per common unit: |  |  |  |  |  |  |  |  |
Net income (loss) |  | $ | (0.24 | ) |  | $ | (0.17 | ) |  | $ | 0.25 |  |  | $ | 0.38 |
Diluted earnings per common unit: |  |  |  |  |  |  |  |
Net income (loss) |  | $ | (0.24 | ) |  | $ | (0.17 | ) |  | $ | 0.25 |  |  | $ | 0.38 |
Distribution declared per common unit |  | $ | 0.3500 |  |  | $ | 0.3425 |  |  | $ | 1.0425 |  |  | $ | 1.0100 |

The accompanying notes are an integral part of these consolidated financial statements.
12

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

|  | Three months ended September 30, |  | Nine months ended September 30,
|  | 2018 |  | 2017 |  | 2018 |  | 2017
Net income (loss) |  | $ | (23,031 | ) |  | $ | (16,034 | ) |  | $ | 24,944 |  |  | $ | 38,427 |
Other comprehensive income (loss): |  |  |  |  |  |  |  |
Foreign currency translation adjustments |  | 1,921 |  |  | 4,737 |  |  | (3,176 | ) |  | 8,821 |
Changes in fair value of cash flow hedges |  | 512 |  |  | 39 |  |  | 4,095 |  |  | 217 |
Other comprehensive income |  | 2,433 |  |  | 4,776 |  |  | 919 |  |  | 9,038 |
Comprehensive income (loss) |  | (20,598 | ) |  | (11,258 | ) |  | 25,863 |  |  | 47,465 |
Comprehensive loss attributable to noncontrolling interests in consolidated partnerships |  | — |  |  | — |  |  | 278 |  |  | — |
Comprehensive income (loss) attributable to the Operating Partnership |  | $ | (20,598 | ) |  | $ | (11,258 | ) |  | $ | 26,141 |  |  | $ | 47,465 |

The accompanying notes are an integral part of these consolidated financial statements.
13

TANGER PROPERTIES LIMITED PARTNERSHIP AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EQUITY
(In thousands, except unit and per unit data, unaudited)

|  | General partner | Limited partners | Accumulated other comprehensive loss | Total partners' equity | Noncontrolling interests in consolidated partnerships | Total equity
Balance, December 31, 2016 |  | $ | 6,485 |  | $ | 728,631 |  | $ | (29,834 | ) | $ | 705,282 |  | $ | 159 |  | $ | 705,441 |
Net income |  | 379 |  | 38,048 |  | — |  | 38,427 |  | — |  | 38,427 |
Other comprehensive income |  | — |  | — |  | 9,038 |  | 9,038 |  | — |  | 9,038 |
Compensation under Incentive Award Plan |  | — |  | 10,891 |  | — |  | 10,891 |  | — |  | 10,891 |
Issuance of 1,800 common units upon exercise of options |  | — |  | 54 |  | — |  | 54 |  | — |  | 54 |
Grant of 411,968 restricted common share awards by the Company, net of forfeitures |  | — |  | — |  | — |  | — |  | — |  | — |
Repurchase of 1,911,585 units, including transaction costs |  | — |  | (49,362 | ) | — |  | (49,362 | ) | — |  | (49,362 | )
Withholding of 69,886 common units for employee income taxes |  | — |  | (2,436 | ) | — |  | (2,436 | ) | — |  | (2,436 | )
Acquisition of noncontrolling interest in other consolidated partnership |  | — |  | — |  | — |  | — |  | (159 | ) | (159 | )
Common distributions ($1.01 per common unit) |  | (1,010 | ) | (101,849 | ) | — |  | (102,859 | ) | — |  | (102,859 | )
Balance, September 30, 2017 |  | $ | 5,854 |  | $ | 623,977 |  | $ | (20,796 | ) | $ | 609,035 |  | $ | — |  | $ | 609,035 |
|  | General partner | Limited partners | Accumulated other comprehensive loss | Total partners' equity | Noncontrolling interests in consolidated partnerships | Total equity
Balance, December 31, 2017 |  | $ | 5,844 |  | $ | 626,803 |  | $ | (20,345 | ) | $ | 612,302 |  | $ | — |  | $ | 612,302 |
Net income |  | 252 |  | 24,970 |  | — |  | 25,222 |  | (278 | ) | 24,944 |
Other comprehensive income |  | — |  | — |  | 919 |  | 919 |  | — |  | 919 |
Compensation under Incentive Award Plan |  | — |  | 11,654 |  | — |  | 11,654 |  | — |  | 11,654 |
Grant of 355,184 restricted common share awards by the Company |  | — |  | — |  | — |  | — |  | — |  | — |
Repurchase of 919,249 units, including transaction costs |  | — |  | (19,998 | ) | — |  | (19,998 | ) | — |  | (19,998 | )
Withholding of 89,437 common units for employee income taxes |  | — |  | (2,068 | ) | — |  | (2,068 | ) | — |  | (2,068 | )
Contributions from noncontrolling interests |  | — |  | — |  | — |  | — |  | 445 |  | 445 |
Common distributions ($1.0425 per common unit) |  | (1,042 | ) | (102,506 | ) | — |  | (103,548 | ) | — |  | (103,548 | )
Distributions to noncontrolling interests |  | — |  | — |  | — |  | — |  | (167 | ) | (167 | )
Balance, September 30, 2018 |  | $ | 5,054 |  | $ | 538,855 |  | $ | (19,426 | ) | $ | 524,483 |  | $ | — |  | $ | 524,483 |

The accompanying notes are an integral part of these consolidated financial statements.
14

TANGER PROPERTIES LIMITED PARTNERSHIP AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands, unaudited)

|  | Nine months ended September 30,
|  | 2018 |  | 2017
OPERATING ACTIVITIES |  |  |  |  |  |
Net income |  | $ | 24,944 |  |  | $ | 38,427 |
Adjustments to reconcile net income to net cash provided by operating activities: |  |  |  |
Depreciation and amortization |  | 98,667 |  |  | 95,175 |
Impairment charge |  | 49,739 |  |  | — |
Amortization of deferred financing costs |  | 2,280 |  |  | 2,640 |
Gain on sale of assets |  | — |  |  | (6,943 | )
Loss on early extinguishment of debt |  | — |  |  | 35,626 |
Equity in (earnings) losses of unconsolidated joint ventures |  | (6,233 | ) |  | 1,201 |
Equity-based compensation expense |  | 10,814 |  |  | 10,114 |
Amortization of debt (premiums) and discounts, net |  | 309 |  |  | 363 |
Amortization (accretion) of market rent rate adjustments, net |  | 1,980 |  |  | 2,107 |
Straight-line rent adjustments |  | (4,744 | ) |  | (4,749 | )
Distributions of cumulative earnings from unconsolidated joint ventures |  | 6,081 |  |  | 8,128 |
Changes in other assets and liabilities: |  |  |  |
Other assets |  | (429 | ) |  | (1,110 | )
Accounts payable and accrued expenses |  | (3,440 | ) |  | 551 |
Net cash provided by operating activities |  | 179,968 |  |  | 181,530 |
INVESTING ACTIVITIES |  |  |  |
Additions to rental property |  | (53,349 | ) |  | (132,612 | )
Additions to investments in unconsolidated joint ventures |  | (1,764 | ) |  | (4,033 | )
Net proceeds from sale of assets |  | — |  |  | 39,213 |
Additions to non-real estate assets |  | (1,203 | ) |  | (8,384 | )
Distributions in excess of cumulative earnings from unconsolidated joint ventures |  | 16,656 |  |  | 16,019 |
Additions to deferred lease costs |  | (5,220 | ) |  | (4,218 | )
Other investing activities |  | 8,065 |  |  | 4,963 |
Net cash used in investing activities |  | (36,815 | ) |  | (89,052 | )
FINANCING ACTIVITIES |  |  |  |
Cash distributions paid |  | (103,548 | ) |  | (102,859 | )
Proceeds from revolving credit facility |  | 391,900 |  |  | 543,866 |
Repayments of revolving credit facility |  | (396,900 | ) |  | (456,666 | )
Proceeds from notes, mortgages and loans |  | — |  |  | 299,460 |
Repayments of notes, mortgages and loans |  | (10,971 | ) |  | (302,240 | )
Payment of make-whole premium related to early extinguishment of debt |  | — |  |  | (34,143 | )
Repurchase of units, including transaction costs |  | (19,998 | ) |  | (49,362 | )
Employee income taxes paid related to shares withheld upon vesting of equity awards |  | (2,068 | ) |  | (2,436 | )
Additions to deferred financing costs |  | (2,615 | ) |  | (2,900 | )
Proceeds from exercise of options |  | — |  |  | 54 |
Proceeds from other financing activities |  | 445 |  |  | 12,054 |
Payment for other financing activities |  | (1,027 | ) |  | (782 | )
Net cash used in financing activities |  | (144,782 | ) |  | (95,954 | )
Effect of foreign currency on cash and cash equivalents |  | (60 | ) |  | (54 | )
Net decrease in cash and cash equivalents |  | (1,689 | ) |  | (3,530 | )
Cash and cash equivalents, beginning of period |  | 6,050 |  |  | 12,199 |
Cash and cash equivalents, end of period |  | $ | 4,361 |  |  | $ | 8,669 |

The accompanying notes are an integral part of these consolidated financial statements.
15

TANGER FACTORY OUTLET CENTERS, INC. AND SUBSIDIARIES
TANGER PROPERTIES LIMITED PARTNERSHIP AND SUBSIDIARIES
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Business
Tanger Factory Outlet Centers, Inc. and subsidiaries is one of the largest owners and operators of outlet centers in the United States and Canada. We are a fully-integrated, self-administered and self-managed real estate investment trust ("REIT") which, through our controlling interest in the Operating Partnership, focuses exclusively on developing, acquiring, owning, operating and managing outlet shopping centers. As of September 30, 2018, we owned and operated 36 consolidated outlet centers, with a total gross leasable area of approximately 12.9 million square feet. We also had partial ownership interests in 8 unconsolidated outlet centers totaling approximately 2.4 million square feet, including 4 outlet centers in Canada.
Our outlet centers and other assets are held by, and all of our operations are conducted by, Tanger Properties Limited Partnership and subsidiaries. Accordingly, the descriptions of our business, employees and properties are also descriptions of the business, employees and properties of the Operating Partnership. Unless the context indicates otherwise, the term "Company" refers to Tanger Factory Outlet Centers, Inc. and subsidiaries and the term, "Operating Partnership", refers to Tanger Properties Limited Partnership and subsidiaries. The terms "we", "our" and "us" refer to the Company or the Company and the Operating Partnership together, as the text requires.
The Company owns the majority of the units of partnership interest issued by the Operating Partnership through its two wholly-owned subsidiaries, Tanger GP Trust and Tanger LP Trust. Tanger GP Trust is the sole general partner of the Operating Partnership. Tanger LP Trust holds a limited partnership interest. As of September 30, 2018, the Company, through its ownership of Tanger GP Trust and Tanger LP Trust, owned 93,907,034 units of the Operating Partnership and other limited partners (the "Non-Company LPs") collectively owned 4,995,433 Class A common limited partnership units. Each Class A common limited partnership unit held by the Non-Company LPs is exchangeable for one of the Company's common shares, subject to certain limitations to preserve the Company's REIT status. Class B common limited partnership units, which are held by Tanger LP Trust, are not exchangeable for common shares of the Company.
2. Basis of Presentation
The unaudited consolidated financial statements included herein have been prepared pursuant to accounting principles generally accepted in the United States of America and should be read in conjunction with the consolidated financial statements and notes thereto of the Company's and the Operating Partnership's combined Annual Report on Form 10-K for the year ended December 31, 2017. The December 31, 2017 balance sheet data in this Form 10-Q was derived from audited financial statements. Certain information and note disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted pursuant to the SEC's rules and regulations, although management believes that the disclosures are adequate to make the information presented not misleading. In the opinion of management, all adjustments (consisting only of normal recurring adjustments) necessary for a fair presentation of the financial statements for the interim periods have been made. The results of interim periods are not necessarily indicative of the results for a full year.
The Company currently consolidates the Operating Partnership because it has (1) the power to direct the activities of the Operating Partnership that most significantly impact the Operating Partnership’s economic performance and (2) the obligation to absorb losses and the right to receive the residual returns of the Operating Partnership that could be potentially significant.
16

We consolidate properties that are wholly-owned and properties where we own less than 100% but control such properties. Control is determined using an evaluation based on accounting standards related to the consolidation of voting interest entities and variable interest entities ("VIE"). For joint ventures that are determined to be a VIE, we consolidate the entity where we are deemed to be the primary beneficiary. Determination of the primary beneficiary is based on whether an entity has (1) the power to direct the activities of the VIE that most significantly impact the entity's economic performance, and (2) the obligation to absorb losses of the entity that could potentially be significant to the VIE or the right to receive benefits from the entity that could potentially be significant to the VIE. Our determination of the primary beneficiary considers all relationships between us and the VIE, including management agreements and other contractual arrangements.
Investments in real estate joint ventures that we do not control but may exercise significant influence on are accounted for using the equity method of accounting. These investments are recorded initially at cost and subsequently adjusted for our equity in the joint venture's net income or loss, cash contributions, distributions and other adjustments required under the equity method of accounting.
For certain investments in real estate joint ventures, we record our equity in the venture's net income or loss under the hypothetical liquidation at book value (“HLBV”) method of accounting due to the structures and the preferences we receive on the distributions from our joint ventures pursuant to the respective joint venture agreements for those joint ventures. Under this method, we recognize income and loss in each period based on the change in liquidation proceeds we would receive from a hypothetical liquidation of our investment based on depreciated book value. Therefore, income or loss may be allocated disproportionately as compared to the ownership percentages due to specified preferred return rate thresholds and may be more or less than actual cash distributions received and more or less than what we may receive in the event of an actual liquidation.
We separately report investments in joint ventures for which accumulated distributions have exceeded investments in, and our share of net income or loss of, the joint ventures within other liabilities in the consolidated balance sheets because we are committed to provide further financial support to these joint ventures. The carrying amount of our investments in the Charlotte, Galveston/Houston, and Columbus joint ventures are less than zero because of financing or operating distributions that were greater than net income, as net income includes non-cash charges for depreciation and amortization.
"Noncontrolling interests in the Operating Partnership" reflects the Non-Company LP's percentage ownership of the Operating Partnership's units. "Noncontrolling interests in other consolidated partnerships" consist of outside equity interests in partnerships or joint ventures not wholly-owned by the Company or the Operating Partnership that are consolidated with the financial results of the Company and Operating Partnership because the Operating Partnership exercises control over the entities that own the properties. Noncontrolling interests are initially recorded in the consolidated balance sheets at fair value based upon purchase price allocations. Income is allocated to the noncontrolling interests based on the allocation provisions within the partnership or joint venture agreements.
17

3. Impairment Charge and Disposition of Property
Impairment Charge
Rental property held and used by us is reviewed for impairment in the event that facts and circumstances indicate the carrying amount of an asset may not be recoverable. In such an event, we compare the estimated future undiscounted cash flows associated with the asset to the asset's carrying amount, and if less, recognize an impairment loss in an amount by which the carrying amount exceeds its fair value.
During the third quarter 2018, we determined that the estimated future undiscounted cash flows of our Jeffersonville, OH outlet center did not exceed the property's carrying value due to a decline of operating results at the center likely resulting from increased competition from the Company's center in Columbus, OH and slower than expected improvement from remerchandising activities. Therefore, we recorded a $49.7 million non-cash impairment charge in our consolidated statement of operations which equaled the excess of the property's carrying value over its estimated fair value, see Note 8, for additional information on the fair market value calculation.
Disposition of Property
The following table sets forth certain summarized information regarding the property sold during the nine months ended September 30, 2017:

Property |  | Location |  | Date Sold |  | Square Feet (in 000's) |  | Net Sales Proceeds (in 000's) |  | Gain on Sale (in 000's)
Westbrook |  | Westbrook, CT |  | May 2017 |  | 290 |  |  | $ | 39,213 |  |  | $ | 6,943 |

The rental property sold did not meet the criteria to be reported as discontinued operations, thus its results of operations have been reported as part of continuing operations.
18

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

As of September 30, 2018
Joint Venture |  | Outlet Center Location |  | Ownership % |  | Square Feet (in 000's) |  | Carrying Value of Investment (in millions) |  | Total Joint Venture Debt, Net (in millions)(1)
Investments included in investments in unconsolidated joint ventures: |  |  |  |
National Harbor |  | National Harbor, MD |  | 50.0 | % |  | 341 |  |  | $ | 0.6 |  |  | $ | 86.7 |
RioCan Canada |  | Various |  | 50.0 | % |  | 923 |  |  | 110.7 |  |  | 10.2 |
|  |  |  |  |  | $ | 111.3 |  |  |  |
Investments included in other liabilities: |  |  |  |
Columbus(2) |  | Columbus, OH |  | 50.0 | % |  | 355 |  |  | $ | (1.1 | ) |  | $ | 84.7 |
Charlotte(2) |  | Charlotte, NC |  | 50.0 | % |  | 398 |  |  | (10.3 | ) |  | 99.5 |
Galveston/Houston (2) |  | Texas City, TX |  | 50.0 | % |  | 353 |  |  | (15.3 | ) |  | 79.5 |
|  |  |  |  |  | $ | (26.7 | ) |  |  |

As of December 31, 2017
Joint Venture |  | Outlet Center Location |  | Ownership % |  | Square Feet (in 000's) |  | Carrying Value of Investment (in millions) |  | Total Joint Venture Debt, Net (in millions)(1)
Investments included in investments in unconsolidated joint ventures: |  |  |  |
Columbus |  | Columbus, OH |  | 50.0 | % |  | 355 |  |  | $ | 1.1 |  |  | $ | 84.4 |
National Harbor |  | National Harbor, MD |  | 50.0 | % |  | 341 |  |  | 2.5 |  |  | 86.4 |
RioCan Canada |  | Various |  | 50.0 | % |  | 923 |  |  | 115.8 |  |  | 11.1 |
|  |  |  |  |  | $ | 119.4 |  |  |  |
Investments included in other liabilities: |  |  |  |
Charlotte(2) |  | Charlotte, NC |  | 50.0 | % |  | 398 |  |  | $ | (4.1 | ) |  | $ | 89.8 |
Galveston/Houston (2) |  | Texas City, TX |  | 50.0 | % |  | 353 |  |  | (13.0 | ) |  | 79.4 |
|  |  |  |  |  | $ | (17.1 | ) |  |  |

(1) | Net of debt origination costs and including premiums of $1.4 million as of September 30, 2018 and December 31, 2017.

(2) | The negative carrying value is due to distributions exceeding contributions and increases or decreases from our equity in earnings of the joint venture.

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

|  | Three months ended |  | Nine months ended
|  | September 30, |  | September 30,
|  | 2018 |  | 2017 |  | 2018 |  | 2017
Fee: |  |  |  |  |  |  |  |  |  |
Management and marketing |  | $ | 571 |  |  | $ | 564 |  |  | $ | 1,704 |  |  | $ | 1,676 |
Leasing and other fees |  | 12 |  |  | 24 |  |  | 122 |  |  | 100 |
Total Fees |  | $ | 583 |  |  | $ | 588 |  |  | $ | 1,826 |  |  | $ | 1,776 |

19

Our investments in real estate joint ventures are reduced by the percentage of the profits earned for leasing and development services associated with our ownership interest in each joint venture. Our carrying value of investments in unconsolidated joint ventures differs from our share of the assets reported in the "Summary Balance Sheets - Unconsolidated Joint Ventures" shown below due to adjustments to the book basis, including intercompany profits on sales of services that are capitalized by the unconsolidated joint ventures. The differences in basis (totaling $4.1 million and $4.2 million as of September 30, 2018 and December 31, 2017, respectively) are amortized over the various useful lives of the related assets.
Charlotte
In June 2018, the Charlotte joint venture closed on a $100.0 million mortgage loan with a fixed interest rate of 4.3% and a maturity date of July 2028. The proceeds from the loan were used to pay off the $90.0 million mortgage loan with an interest rate of LIBOR + 1.45%, which had an original maturity date of November 2018. The joint venture distributed the incremental net loan proceeds of $9.3 million equally to the partners.
RioCan Canada
During the third quarter of 2017, the joint venture determined for its Bromont and Saint Sauveur, Quebec outlet centers that the estimated future undiscounted cash flows of those properties did not exceed the properties' carrying values based on the joint venture's expectations of the future performance of the centers. Therefore, the joint venture recorded an $18.0 million non-cash impairment charge in its statement of operations, which equaled the excess of the properties' carrying values over their fair values. The fair values were determined using a market approach considering the prevailing market income capitalization rates for similar assets. Our share of this impairment charge, $9.0 million, was recorded in equity in earnings of unconsolidated joint ventures in our consolidated statement of operations.
Condensed combined summary financial information of unconsolidated joint ventures accounted for using the equity method is as follows (in thousands):

Condensed Combined Balance Sheets - Unconsolidated Joint Ventures |  | September 30, 2018 |  | December 31, 2017
Assets |  |  |  |  |  |
Land |  | $ | 94,118 |  |  | $ | 95,686 |
Buildings, improvements and fixtures |  | 503,430 |  |  | 505,618 |
Construction in progress |  | 3,169 |  |  | 3,005 |
|  | 600,717 |  |  | 604,309 |
Accumulated depreciation |  | (110,213 | ) |  | (93,837 | )
Total rental property, net |  | 490,504 |  |  | 510,472 |
Cash and cash equivalents |  | 13,366 |  |  | 25,061 |
Deferred lease costs and other intangibles, net |  | 9,387 |  |  | 10,985 |
Prepaids and other assets |  | 18,142 |  |  | 15,073 |
Total assets |  | $ | 531,399 |  |  | $ | 561,591 |
Liabilities and Owners' Equity |  |  |  |  |  |
Mortgages payable, net |  | $ | 360,600 |  |  | $ | 351,259 |
Accounts payable and other liabilities |  | 11,114 |  |  | 14,680 |
Total liabilities |  | 371,714 |  |  | 365,939 |
Owners' equity |  | 159,685 |  |  | 195,652 |
Total liabilities and owners' equity |  | $ | 531,399 |  |  | $ | 561,591 |

20

|  | Three months ended |  | Nine months ended
Condensed Combined Statements of Operations |  | September 30, |  | September 30,
- Unconsolidated Joint Ventures |  | 2018 |  | 2017 |  | 2018 |  | 2017
Revenues |  | $ | 23,538 |  |  | $ | 25,241 |  |  | $ | 70,940 |  |  | $ | 72,588 |
Expenses: |  |  |  |  |  |  |  |  |
Property operating |  | 9,147 |  |  | 8,987 |  |  | 28,032 |  |  | 27,242 |
General and administrative |  | 49 |  |  | 72 |  |  | 301 |  |  | 289 |
Asset impairment |  | — |  |  | 18,042 |  |  | — |  |  | 18,042 |
Depreciation and amortization |  | 6,860 |  |  | 6,998 |  |  | 19,768 |  |  | 21,453 |
Total expenses |  | 16,056 |  |  | 34,099 |  |  | 48,101 |  |  | 67,026 |
Operating income (loss) |  | 7,482 |  |  | (8,858 | ) |  | 22,839 |  |  | 5,562 |
Interest expense |  | (3,810 | ) |  | (2,776 | ) |  | (10,275 | ) |  | (7,497 | )
Other non-operating income |  | 68 |  |  | 20 |  |  | 175 |  |  | 23 |
Net income (loss) |  | $ | 3,740 |  |  | $ | (11,614 | ) |  | $ | 12,739 |  |  | $ | (1,912 | )
The Company and Operating Partnership's share of: |  |  |  |  |  |
Net income (loss) |  | $ | 1,833 |  |  | $ | (5,893 | ) |  | $ | 6,233 |  |  | $ | (1,201 | )
Depreciation and amortization and asset impairments (real estate related) |  | $ | 3,466 |  |  | $ | 12,604 |  |  | $ | 10,020 |  |  | $ | 19,992 |

21

5. Debt Guaranteed by the Company
All of the Company's debt is held by the Operating Partnership and its consolidated subsidiaries.
The Company guarantees the Operating Partnership's obligations with respect to its unsecured lines of credit which have a total borrowing capacity of $600.0 million. The Company also guarantees the Operating Partnership's unsecured term loan.
The Operating Partnership had the following principal amounts outstanding on the debt guaranteed by the Company (in thousands):

|  | As of
|  | September 30, 2018 |  | December 31, 2017
Unsecured lines of credit |  | $ | 203,100 |  |  | $ | 208,100 |
Unsecured term loan |  | $ | 325,000 |  |  | $ | 325,000 |

6. Debt of the Operating Partnership
The debt of the Operating Partnership consisted of the following (in thousands):

|  |  |  |  |  | As of |  | As of
|  |  |  |  |  | September 30, 2018 |  | December 31, 2017
|  | Stated Interest Rate(s) |  | Maturity Date |  | Principal |  | Book Value(1) |  | Principal |  | Book Value(1)
Senior, unsecured notes: |  |  |  |  |  |  |  |  |  |  |
Senior notes |  | 3.875 | % |  | December 2023 |  | $ | 250,000 |  |  | $ | 246,505 |  |  | $ | 250,000 |  |  | $ | 246,036 |
Senior notes |  | 3.750 | % |  | December 2024 |  | 250,000 |  |  | 247,677 |  |  | 250,000 |  |  | 247,410 |
Senior notes |  | 3.125 | % |  | September 2026 |  | 350,000 |  |  | 345,533 |  |  | 350,000 |  |  | 345,128 |
Senior notes |  | 3.875 | % |  | July 2027 |  | 300,000 |  |  | 296,469 |  |  | 300,000 |  |  | 296,182 |
Mortgages payable: |  |  |  |  |  |  |  |  |  |  |  |
Atlantic City (2)(3) |  | 5.14%-7.65% |  |  | November 2021- December 2026 |  | 35,091 |  |  | 37,211 |  |  | 37,462 |  |  | 39,879 |
Southaven |  | LIBOR + 1.80% |  |  | April 2021 |  | 51,400 |  |  | 51,148 |  |  | 60,000 |  |  | 59,881 |
Unsecured term loan |  | LIBOR + 0.95% |  |  | April 2021 |  | 325,000 |  |  | 323,416 |  |  | 325,000 |  |  | 322,975 |
Unsecured lines of credit |  | LIBOR + 0.875% |  |  | October 2021 |  | 203,100 |  |  | 199,701 |  |  | 208,100 |  |  | 206,160 |
|  |  |  |  |  | $ | 1,764,591 |  |  | $ | 1,747,660 |  |  | $ | 1,780,562 |  |  | $ | 1,763,651 |

(1) | Including premiums and net of debt discount and debt origination costs.

(2) | The effective interest rate assigned during the purchase price allocation to the Atlantic City mortgages assumed during the acquisition in 2011 was 5.05%.

(3) | Principal and interest due monthly with remaining principal due at maturity.

Certain of our properties, which had a net book value of approximately $183.3 million at September 30, 2018, serve as collateral for mortgages payable. We maintain unsecured lines of credit that provide for borrowings of up to $600.0 million. The unsecured lines of credit include a $20.0 million liquidity line and a $580.0 million syndicated line. The syndicated line may be increased up to $1.2 billion through an accordion feature in certain circumstances. As of September 30, 2018, letters of credit totaling approximately $6.0 million were issued under the lines of credit.
22

We provide guarantees to lenders for our joint ventures which include standard non-recourse carve out indemnifications for losses arising from items such as but not limited to fraud, physical waste, payment of taxes, environmental indemnities, misapplication of insurance proceeds or security deposits and failure to maintain required insurance. For construction and term loans, we may include a guaranty of completion as well as a principal guaranty ranging from 5% to 100% of principal. The principal guarantees include terms for release or reduction based upon satisfactory completion of construction and performance targets including occupancy thresholds and minimum debt service coverage tests. As of September 30, 2018, the maximum amount of unconsolidated joint venture debt guaranteed by the Company was $28.2 million.
The unsecured lines of credit and senior unsecured notes include covenants that require the maintenance of certain ratios, including debt service coverage and leverage, and limit the payment of dividends such that dividends and distributions will not exceed funds from operations, as defined in the agreements, for the prior fiscal year on an annual basis or 95% of funds from operations on a cumulative basis. As of September 30, 2018, we believe we were in compliance with all of our debt covenants.
Increased Borrowing Capacity and Extension of Unsecured Lines of Credit
In January 2018, we closed on amendments to our unsecured lines of credit, which increased the borrowing capacity from $520.0 million to $600.0 million and extended the maturity date from October 2019 to October 2021, with a one-year extension option. We also reduced the interest rate spread over LIBOR from 0.90% to 0.875%, and increased the incremental borrowing availability through an accordion feature on the syndicated line from $1.0 billion to $1.2 billion. Loan origination costs associated with the amendments totaled approximately $2.3 million.
Southaven Mortgage
In February 2018, the consolidated joint venture that owns the Tanger outlet center in Southaven, Mississippi amended and restated the $60.0 million mortgage loan secured by the property that was scheduled to mature in April 2018. The amended and restated loan reduced the principal balance to $51.4 million, increased the interest rate from LIBOR + 1.75% to LIBOR + 1.80% and extended the maturity to April 2021, with a two-year extension option. In March 2018, the consolidated joint venture entered into an interest rate swap, effective March 1, 2018, that fixed the base LIBOR rate at 2.47% on a notional amount of $40.0 million through January 31, 2021.
$300.0 Million Unsecured Senior Notes due 2027
In July 2017, we completed an underwritten public offering of $300.0 million of 3.875% senior notes due 2027 (the "2027 Notes"). The 2027 Notes priced at 99.579% of the principal amount to yield 3.926% to maturity. The 2027 Notes pay interest semi-annually at a rate of 3.875% per annum and mature on July 15, 2027. The net proceeds from the offering, after deducting the underwriting discount and offering expenses, were approximately $295.9 million. In August 2017, we used the net proceeds from the sale of the 2027 Notes, together with borrowings under our unsecured lines of credit, to redeem all of our 6.125% senior notes due 2020 (the "2020 Notes") (approximately $300.0 million in aggregate principal amount outstanding). The 2020 Notes were redeemed at par plus a “make-whole” premium of approximately $34.1 million. In addition, we wrote off approximately $1.5 million of unamortized debt discount and debt origination costs related to the 2020 Notes.
23

Debt Maturities
Maturities of the existing long-term debt as of September 30, 2018 for the next five years and thereafter are as follows (in thousands):

Calendar Year |  | Amount |
2018 |  | $ | 813 |
2019 |  | 3,369 |
2020 |  | 3,566 |
2021 |  | 585,293 |
2022 |  | 4,436 |
Thereafter |  | 1,167,114 |
Subtotal |  | 1,764,591 |
Net discount and debt origination costs |  | (16,931 | )
Total |  | $ | 1,747,660 |

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

|  |  |  |  |  |  |  |  |  | Fair Value
Effective Date |  | Maturity Date |  | Notional Amount |  | Bank Pay Rate |  | Company Fixed Pay Rate |  | September 30, 2018 |  | December 31, 2017
Assets (Liabilities)(1): |  |  |  |  |  |  |  |  |  |  |  |
November 14, 2013 |  | August 14, 2018 |  | $ | 150,000 |  |  | 1 month LIBOR |  | 1.30 | % |  | $ | — |  |  | $ | 326 |
April 13, 2016 |  | January 1, 2021 |  | 175,000 |  |  | 1 month LIBOR |  | 1.03 | % |  | 6,988 |  |  | 5,207 |
March 1, 2018 |  | January 31, 2021 |  | 40,000 |  |  | 1 month LIBOR |  | 2.47 | % |  | 335 |  |  | — |
August 14, 2018 |  | January 1, 2021 |  | 150,000 |  |  | 1 month LIBOR |  | 2.20 | % |  | 2,117 |  |  | (188 | )
Total |  |  |  | $ | 515,000 |  |  |  |  |  |  | $ | 9,440 |  |  | $ | 5,345 |

(1) | Asset balances are recorded in prepaids and other assets on the consolidated balance sheets and liabilities are recorded in other liabilities on the consolidated balance sheets.

The derivative financial instruments are comprised of interest rate swaps, which are designated and qualify as cash flow hedges, each with a separate counterparty. We do not use derivatives for trading or speculative purposes and currently do not have any derivatives that are not designated as hedges.
The effective portion of changes in the fair value of derivatives designated and qualifying as cash flow hedges is recorded in accumulated other comprehensive loss and subsequently reclassified into earnings in the period that the hedged forecasted transaction affects earnings. The ineffective portion of the change in fair value of the derivative, if significant, is recognized directly in earnings. For the three and nine months ended September 30, 2018 and 2017, the ineffective portion was not significant.
The following table represents the effect of the derivative financial instruments on the accompanying consolidated financial statements (in thousands):

|  | Three months ended September 30, |  | Nine months ended September 30,
|  | 2018 |  | 2017 |  | 2018 |  | 2017
Interest Rate Swaps (Effective Portion): |  |  |  |  |  |  |  |
Amount of gain recognized in OCI on derivative |  | $ | 512 |  |  | $ | 39 |  |  | $ | 4,095 |  |  | $ | 217 |

24

8. Fair Value Measurements
Fair value guidance establishes a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value. These tiers are defined as follows:

Tier |  | Description
Level 1 |  | Observable inputs such as quoted prices in active markets
Level 2 |  | Inputs other than quoted prices in active markets that are either directly or indirectly observable
Level 3 |  | Unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions

Fair Value Measurements on a Recurring Basis
The following table sets forth our assets and liabilities that are measured at fair value within the fair value hierarchy (in thousands):

|  |  |  | Level 1 |  | Level 2 |  | Level 3
|  |  |  | Quoted Prices in Active Markets for Identical Assets or Liabilities |  | Significant Observable Inputs |  | Significant Unobservable Inputs
|  | Total |  |  |
Fair value as of September 30, 2018: |  |  |  |  |  |  |  |
Asset: |  |  |  |  |  |  |  |
Interest rate swaps (prepaids and other assets) |  | $ | 9,440 |  |  | $ | — |  |  | $ | 9,440 |  |  | $ | — |
Total assets |  | $ | 9,440 |  |  | $ | — |  |  | $ | 9,440 |  |  | $ | — |

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

Fair values of interest rate swaps are approximated using Level 2 inputs based on current market data received from financial sources that trade such instruments and are based on prevailing market data and derived from third party proprietary models based on well recognized financial principles including counterparty risks, credit spreads and interest rate projections, as well as reasonable estimates about relevant future market conditions.
25

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

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

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

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

Our senior unsecured notes are publicly-traded which provides quoted market rates. However, due to the limited trading volume of these notes, we have classified these instruments as Level 2 in the hierarchy. Our other debt is classified as Level 3 given the unobservable inputs utilized in the valuation. Our unsecured term loan, unsecured lines of credit and variable interest rate mortgages are all LIBOR based instruments. When selecting the discount rates for purposes of estimating the fair value of these instruments, we evaluated the original credit spreads and do not believe that the use of them differs materially from current credit spreads for similar instruments and therefore the recorded values of these debt instruments is considered their fair value.
The carrying values of cash and cash equivalents, receivables, accounts payable, accrued expenses and other assets and liabilities are reasonable estimates of their fair values because of the short maturities of these instruments.
26

9. Share Repurchase Program
In May 2017, we announced that our Board of Directors authorized the repurchase of up to $125.0 million of our outstanding common shares as market conditions warrant over a period commencing on May 19, 2017 and expiring on May 18, 2019. Repurchases may be made from time to time through open market, privately-negotiated, structured or derivative transactions (including accelerated share repurchase transactions), or other methods of acquiring shares. The Company intends to structure open market purchases to occur within pricing and volume requirements of Rule 10b-18. The Company may, from time to time, enter into Rule 10b5-1 plans to facilitate the repurchase of its shares under this authorization.
Shares repurchased for the three and nine months ended September 30, 2018 are as follows:

|  | Three months ended September 30, |  | Nine months ended September 30,
|  | 2018 |  | 2017 |  | 2018 |  | 2017
Total number of shares purchased |  | — |  |  | 1,265,404 |  |  | 919,249 |  |  | 1,911,585 |
Average price paid per share |  | $ | — |  |  | $ | 25.61 |  |  | $ | 21.74 |  |  | $ | 25.80 |
Total price paid exclusive of commissions and related fees (in thousands) |  | $ | — |  |  | $ | 32,407 |  |  | $ | 19,980 |  |  | $ | 49,324 |

The remaining amount authorized to be repurchased under the program as of September 30, 2018 was approximately $55.7 million.
10. Partners' Equity of the Operating Partnership
All units of partnership interest issued by the Operating Partnership have equal rights with respect to earnings, dividends and net assets. When the Company issues common shares upon the exercise of options, the grant of restricted common share awards, or the exchange of Class A common limited partnership units, the Operating Partnership issues a corresponding Class B common limited partnership unit to Tanger LP Trust, a wholly-owned subsidiary of the Company. Likewise, when the Company repurchases its outstanding common shares, the Operating Partnership repurchases a corresponding Class B common limited partnership unit held by Tanger LP Trust.
27

The following table sets forth the changes in outstanding partnership units for the nine months ended September 30, 2018 and September 30, 2017:

|  |  |  | Limited Partnership Units
|  | General Partnership Units |  | Class A |  | Class B |  | Total
Balance December 31, 2016 |  | 1,000,000 |  |  | 5,027,781 |  |  | 95,095,891 |  |  | 100,123,672 |
Grant of restricted common share awards by the Company, net of forfeitures |  | — |  |  | — |  |  | 411,968 |  |  | 411,968 |
Repurchase of units |  | — |  |  | — |  |  | (1,911,585 | ) |  | (1,911,585 | )
Units issued upon exercise of options |  | — |  |  | — |  |  | 1,800 |  |  | 1,800 |
Units withheld for employee income taxes |  | — |  |  | — |  |  | (69,886 | ) |  | (69,886 | )
Balance September 30, 2017 |  | 1,000,000 |  |  | 5,027,781 |  |  | 93,528,188 |  |  | 98,555,969 |
Balance December 31, 2017 |  | 1,000,000 |  |  | 4,995,433 |  |  | 93,560,536 |  |  | 98,555,969 |
Grant of restricted common share awards by the Company, net of forfeitures |  | — |  |  | — |  |  | 355,184 |  |  | 355,184 |
Repurchase of units |  | — |  |  | — |  |  | (919,249 | ) |  | (919,249 | )
Units withheld for employee income taxes |  | — |  |  | — |  |  | (89,437 | ) |  | (89,437 | )
Balance September 30, 2018 |  | 1,000,000 |  |  | 4,995,433 |  |  | 92,907,034 |  |  | 97,902,467 |

11. Earnings Per Share of the Company
The following table sets forth a reconciliation of the numerators and denominators in computing the Company's earnings per share (in thousands, except per share amounts):

|  | Three months ended September 30, |  | Nine months ended September 30,
|  | 2018 |  | 2017 |  | 2018 |  | 2017
Numerator: |  |  |  |  |  |  |  |
Net income (loss) attributable to Tanger Factory Outlet Centers, Inc. |  | $ | (21,859 | ) |  | $ | (15,219 | ) |  | $ | 23,948 |  |  | $ | 36,507 |
Less allocation of earnings to participating securities |  | (313 | ) |  | (306 | ) |  | (889 | ) |  | (907 | )
Net income (loss) available to common shareholders of Tanger Factory Outlet Centers, Inc. |  | $ | (22,172 | ) |  | $ | (15,525 | ) |  | $ | 23,059 |  |  | $ | 35,600 |
Denominator: |  |  |  |  |  |  |  |
Basic weighted average common shares |  | 93,109 |  |  | 93,923 |  |  | 93,349 |  |  | 94,781 |
Effect of outstanding options and certain restricted common shares |  | — |  |  | — |  |  | — |  |  | 23 |
Diluted weighted average common shares |  | 93,109 |  |  | 93,923 |  |  | 93,349 |  |  | 94,804 |
Basic earnings per common share: |  |  |  |  |  |  |  |
Net income (loss) |  | $ | (0.24 | ) |  | $ | (0.17 | ) |  | $ | 0.25 |  |  | $ | 0.38 |
Diluted earnings per common share: |  |  |  |  |  |  |  |
Net income (loss) |  | $ | (0.24 | ) |  | $ | (0.17 | ) |  | $ | 0.25 |  |  | $ | 0.38 |

We determine diluted earnings per share based on the weighted average number of common shares outstanding combined with the incremental weighted average shares that would have been outstanding assuming all potentially dilutive securities were converted into common shares at the earliest date possible.
28

Notional units granted under our equity compensation plan are considered contingently issuable common shares and are included in earnings per share if the effect is dilutive using the treasury stock method and the common shares would be issuable if the end of the reporting period were the end of the contingency period. For both the three and nine months ended September 30, 2018, 1,013,383 notional units were excluded from the computation and for both the three and nine months ended September 30, 2017, 858,116 notional units were excluded from the computation because these notional units either would not have been issuable if the end of the reporting period were the end of the contingency period or as they were anti-dilutive.
With respect to outstanding options, the effect of dilutive common shares is determined using the treasury stock method, whereby outstanding options are assumed exercised at the beginning of the reporting period and the exercise proceeds from such options and the average measured but unrecognized compensation cost during the period are assumed to be used to repurchase our common shares at the average market price during the period. For both the three and nine months ended September 30, 2018, 547,000 options were excluded from the computation as they were anti-dilutive. For the three months ended September 30, 2017, 235,700 options were excluded from the computation, and for the nine months ended September 30, 2017, 173,500 options were excluded from the computation as they were anti-dilutive.
The assumed exchange of the partnership units held by the Non-Company LPs as of the beginning of the year, which would result in the elimination of earnings allocated to the noncontrolling interest in the Operating Partnership, would have no impact on earnings per share since the allocation of earnings to a common limited partnership unit, as if exchanged, is equivalent to earnings allocated to a common share.
Certain of the Company's unvested restricted common share awards contain non-forfeitable rights to dividends or dividend equivalents. The impact of these unvested restricted common share awards on earnings per share has been calculated using the two-class method whereby earnings are allocated to the unvested restricted common share awards based on dividends declared and the unvested restricted common shares' participation rights in undistributed earnings. Unvested restricted common shares that do not contain non-forfeitable rights to dividends or dividend equivalents are included in the diluted earnings per share computation if the effect is dilutive, using the treasury stock method.
12. Earnings Per Unit of the Operating Partnership
The following table sets forth a reconciliation of the numerators and denominators in computing earnings per unit (in thousands, except per unit amounts):

|  | Three months ended September 30, |  | Nine months ended September 30,
|  | 2018 |  | 2017 |  | 2018 |  | 2017
Numerator: |  |  |  |  |  |  |  |  |  |  |
Net income (loss) attributable to partners of the Operating Partnership |  | $ | (23,031 | ) |  | $ | (16,034 | ) |  | $ | 25,222 |  |  | $ | 38,427 |
Less allocation of earnings to participating securities |  | (313 | ) |  | (306 | ) |  | (889 | ) |  | (907 | )
Net income (loss) available to common unitholders of the Operating Partnership |  | $ | (23,344 | ) |  | $ | (16,340 | ) |  | $ | 24,333 |  |  | $ | 37,520 |
Denominator: |  |  |  |  |  |  |  |
Basic weighted average common units |  | 98,104 |  |  | 98,951 |  |  | 98,344 |  |  | 99,809 |
Effect of outstanding options and certain restricted common units |  | — |  |  | — |  |  | — |  |  | 23 |
Diluted weighted average common units |  | 98,104 |  |  | 98,951 |  |  | 98,344 |  |  | 99,832 |
Basic earnings per common unit: |  |  |  |  |  |  |  |
Net income (loss) |  | $ | (0.24 | ) |  | $ | (0.17 | ) |  | $ | 0.25 |  |  | $ | 0.38 |
Diluted earnings per common unit: |  |  |  |  |  |  |  |
Net income (loss) |  | $ | (0.24 | ) |  | $ | (0.17 | ) |  | $ | 0.25 |  |  | $ | 0.38 |

We determine diluted earnings per unit based on the weighted average number of common units outstanding combined with the incremental weighted average units that would have been outstanding assuming all potentially dilutive securities were converted into common units at the earliest date possible.
29

Notional units granted under our equity compensation plan are considered contingently issuable common units and are included in earnings per unit if the effect is dilutive using the treasury stock method and the common shares would be issuable if the end of the reporting period were the end of the contingency period. For the three and nine months ended September 30, 2018, 1,013,383 notional units were excluded from the computation and for both the three and nine months ended September 30, 2017, 858,116 units were excluded from the computation because these notional units either would not have been issuable if the end of the reporting period were the end of the contingency period or because they were anti-dilutive.
With respect to outstanding options, the effect of dilutive common units is determined using the treasury stock method, whereby outstanding options are assumed exercised at the beginning of the reporting period and the exercise proceeds from such options and the average measured but unrecognized compensation cost during the period are assumed to be used to repurchase our common units at the average market price during the period. The market price of a common unit is considered to be equivalent to the market price of a Company common share. For both the three and nine months ended September 30, 2018, 547,000 options were excluded from the computation as they were anti-dilutive. For the three months ended September 30, 2017, 235,700 options were excluded from the computation and for the nine months ended September 30, 2017, 173,500 options were excluded from the computation, as they were anti-dilutive.
Certain of the Company's unvested restricted common share awards contain non-forfeitable rights to distributions or distribution equivalents. The impact of the corresponding unvested restricted unit awards on earnings per unit has been calculated using the two-class method whereby earnings are allocated to the unvested restricted unit awards based on distributions declared and the unvested restricted units' participation rights in undistributed earnings. Unvested restricted common units that do not contain non-forfeitable rights to dividends or dividend equivalents are included in the diluted earnings per unit computation if the effect is dilutive, using the treasury stock method.
13. Equity-Based Compensation of the Company
We have a shareholder approved equity-based compensation plan, the Incentive Award Plan of Tanger Factory Outlet Centers, Inc. and Tanger Properties Limited Partnership (as amended and restated on April 4, 2014, (the "Plan"), which covers our non-employee directors, officers, employees and consultants. For each common share issued by the Company, the Operating Partnership issues one corresponding unit of partnership interest to the Company's wholly-owned subsidiaries. Therefore, when the Company grants an equity-based award, the Operating Partnership treats each award as having been granted by the Operating Partnership. In the discussion below, the term "we" refers to the Company and the Operating Partnership together and the term "shares" is meant to also include corresponding units of the Operating Partnership.
We recorded equity-based compensation expense in general and administrative expenses in our consolidated statements of operations as follows (in thousands):

|  | Three months ended |  | Nine months ended
|  | September 30, |  | September 30,
|  | 2018 |  | 2017 |  | 2018 |  | 2017
Restricted common shares |  | $ | 2,275 |  |  | $ | 2,302 |  |  | $ | 7,359 |  |  | $ | 7,039 |
Notional unit performance awards |  | 1,040 |  |  | 939 |  |  | 3,141 |  |  | 2,870 |
Options |  | 92 |  |  | 77 |  |  | 314 |  |  | 205 |
Total equity-based compensation |  | $ | 3,407 |  |  | $ | 3,318 |  |  | $ | 10,814 |  |  | $ | 10,114 |

Equity-based compensation expense capitalized as a part of rental property and deferred lease costs were as follows (in thousands):

|  | Three months ended |  | Nine months ended
|  | September 30, |  | September 30,
|  | 2018 |  | 2017 |  | 2018 |  | 2017
Equity-based compensation expense capitalized |  | $ | 652 |  |  | $ | 267 |  |  | $ | 840 |  |  | $ | 777 |

30

Option Awards
During February 2018, the Company granted 331,000 options to non-executive employees of the Company. The exercise price of the options granted during the first quarter of 2018 is $21.94 per share which equaled the closing market price of the Company's common shares on the day prior to the grant date. The options expire 10 years from the date of grant and 20% of the options become exercisable in each of the first five years commencing one year from the date of grant. The fair value of each option grant is estimated on the date of grant using the Black-Scholes option pricing model, which resulted in a weighted average grant date fair value per share of $3.62 and included the following weighted-average assumptions: expected dividend yield 6.24%; expected life of 7.1 years; expected volatility of 32.47%; a risk-free rate of 2.8%; and forfeiture rates of 3.0% to 10.0% dependent upon the employee's position within the Company.
Restricted Common Share and Restricted Share Unit Awards
During February 2018, the Company granted 407,156 in restricted common shares and restricted share units to the Company's non-employee directors and the Company's senior executive officers. The grant date fair value of the awards ranged from $18.65 to $21.94 per share. The non-employee directors' restricted common shares generally vest ratably over a three year period and the senior executive officers' restricted shares (other than our chief executive officer's) generally vest ratably over a three or five year period. Our chief executive officer’s restricted shares generally vest ratably over a two year period and his restricted share units generally vest on the third anniversary of the grant date. For the restricted shares and units issued to our chief executive officer, the award agreements generally require him to hold shares or units issued to him for a minimum of three years following vesting or the share issuance date, as applicable. Compensation expense related to the amortization of the deferred compensation is being recognized in accordance with the vesting schedule of the restricted shares.
For certain shares that vest during the period, we withhold shares with value equivalent up to the employees' maximum statutory obligation (minimum obligation during 2017) for the applicable income and other employment taxes, and remit cash to the appropriate taxing authorities. The total number of shares withheld upon vesting was 89,437 and 69,886 for the nine months ended September 30, 2018 and 2017, respectively. No shares were withheld for the three months ended September 30, 2018 and 2017. The total number of shares withheld was based on the value of the restricted common shares on the vesting date as determined by our closing share price on the day prior to the vesting date. Total amounts paid for the employees' tax obligation to taxing authorities was $2.1 million for the nine months ended September 30, 2018 and was $2.4 million for the nine months ended September 30, 2017. These amounts are reflected as financing activities within the consolidated statements of cash flows.
2018 Outperformance Plan
In February 2018, the Compensation Committee of Tanger Factory Outlet Centers, Inc. approved the terms of the Tanger Factory Outlet Centers, Inc. 2018 Outperformance Plan (the “2018 OPP"), a long-term incentive compensation plan. Recipients receive notional units which may convert, subject to the achievement of the goals described below, into common shares of the Company based on the Company’s absolute total shareholder return and its total shareholder return relative to its peer group over a three-year measurement period. For all recipients (other than our chief executive officer), any shares earned at the end of the three-year measurement period are issued immediately following such measurement period, but are restricted and remain subject to a time-based vesting schedule, with 50% of the shares vesting immediately following issuance, and the remaining 50% vesting one year thereafter, contingent upon continued employment with the Company through the vesting dates (unless terminated prior thereto (a) by the Company without cause, (b) by participant for good reason or (c) due to death or disability). For our chief executive officer, any shares earned at the end of the three-year measurement period remain subject to a time-based vesting schedule and are issued following vesting, with 50% of the shares vesting immediately following issuance, and the remaining 50% vesting one year thereafter, contingent upon continued employment with the Company through the vesting dates (unless terminated prior thereto (a) by the Company without cause, (b) by participant for good reason or due to retirement or (c) due to death or disability).
31

The following table sets forth 2018 OPP performance targets and other relevant information about the 2018 OPP:

Performance targets (1) |  |
Absolute portion of award: |  |
Percent of total award |  | 33.3%
Absolute total shareholder return range |  | 19.1% - 29.5%
Percentage of units to be earned |  | 20%-100%
Relative portion of award: |  |
Percent of total award |  | 66.7%
Percentile rank of peer group range(2) |  | 30th - 80th
Percentage of units to be earned |  | 20%-100%
Maximum number of restricted common shares that may be earned |  | 409,972 |
Grant date fair value per share |  | $ | 12.42 |

(1) | The number of restricted common shares received under the 2018 OPP will be determined on a pro-rata basis by linear interpolation between total shareholder return thresholds, both for absolute total shareholder return and for relative total shareholder return amongst the Company's peer group.

(2) | The peer group is based on companies included in the FTSE NAREIT Retail Index.

The fair values of the 2018 OPP awards granted during the nine months ended September 30, 2018 were determined at the grant dates using a Monte Carlo simulation pricing model and the following assumptions:

Risk free interest rate (1) |  | 2.40 | %
Expected dividend yield (2) |  | 4.8 | %
Expected volatility (3) |  | 27 | %

(1) | Represents the interest rate as of the grant date on US treasury bonds having the same life as the estimated life of the restricted unit grants.

(2) | The dividend yield is calculated utilizing the dividends paid for the previous five-year period.

(3) | Based on a mix of historical and implied volatility for our common shares and the common shares of our peer index companies over the measurement period.

32

14. Accumulated Other Comprehensive Income (Loss) of the Company
The following table presents changes in the balances of each component of accumulated comprehensive income (loss) for the three and nine months ended September 30, 2018 (in thousands):

|  | Tanger Factory Outlet Centers, Inc. Accumulated Other Comprehensive Income (Loss) |  | Noncontrolling Interest in Operating Partnership Accumulated Other Comprehensive Income (Loss)
|  | Foreign Currency |  | Cash flow hedges |  | Total |  | Foreign Currency |  | Cash flow hedges |  | Total
Balance June 30, 2018 |  | $ | (29,198 | ) |  | $ | 8,476 |  |  | $ | (20,722 | ) |  | $ | (1,588 | ) |  | $ | 451 |  |  | $ | (1,137 | )
Other comprehensive income before reclassifications |  | 1,823 |  |  | 1,013 |  |  | 2,836 |  |  | 98 |  |  | 54 |  |  | 152 |
Reclassification out of accumulated other comprehensive income into interest expense |  | — |  |  | (527 | ) |  | (527 | ) |  | — |  |  | (28 | ) |  | (28 | )
Balance September 30, 2018 |  | $ | (27,375 | ) |  | $ | 8,962 |  |  | $ | (18,413 | ) |  | $ | (1,490 | ) |  | $ | 477 |  |  | $ | (1,013 | )
|  | Tanger Factory Outlet Centers, Inc. Accumulated Other Comprehensive Income (Loss) |  | Noncontrolling Interest in Operating Partnership Accumulated Other Comprehensive Income (Loss)
|  | Foreign Currency |  | Cash flow hedges |  | Total |  | Foreign Currency |  | Cash flow hedges |  | Total
Balance December 31, 2017 |  | $ | (24,360 | ) |  | $ | 5,075 |  |  | $ | (19,285 | ) |  | $ | (1,329 | ) |  | $ | 269 |  |  | $ | (1,060 | )
Other comprehensive income (loss) before reclassifications |  | (3,015 | ) |  | 5,267 |  |  | 2,252 |  |  | (161 | ) |  | 282 |  |  | 121 |
Reclassification out of accumulated other comprehensive income into interest expense |  | — |  |  | (1,380 | ) |  | (1,380 | ) |  | — |  |  | (74 | ) |  | (74 | )
Balance September 30, 2018 |  | $ | (27,375 | ) |  | $ | 8,962 |  |  | $ | (18,413 | ) |  | $ | (1,490 | ) |  | $ | 477 |  |  | $ | (1,013 | )

33

The following table presents changes in the balances of each component of accumulated comprehensive income (loss) for the three and nine months ended September 30, 2017 (in thousands):

|  | Tanger Factory Outlet Centers, Inc. Accumulated Other Comprehensive Income (Loss) |  | Noncontrolling Interest in Operating Partnership Accumulated Other Comprehensive Income (Loss)
|  | Foreign Currency |  | Cash flow hedges |  | Total |  | Foreign Currency |  | Cash flow hedges |  | Total
Balance June 30, 2017 |  | $ | (28,209 | ) |  | $ | 3,962 |  |  | $ | (24,247 | ) |  | $ | (1,534 | ) |  | $ | 209 |  |  | $ | (1,325 | )
Other comprehensive income before reclassifications |  | 4,497 |  |  | 89 |  |  | 4,586 |  |  | 240 |  |  | 5 |  |  | 245 |
Reclassification out of accumulated other comprehensive income into interest expense |  | — |  |  | (52 | ) |  | (52 | ) |  | — |  |  | (3 | ) |  | (3 | )
Balance September 30, 2017 |  | $ | (23,712 | ) |  | $ | 3,999 |  |  | $ | (19,713 | ) |  | $ | (1,294 | ) |  | $ | 211 |  |  | $ | (1,083 | )
|  | Tanger Factory Outlet Centers, Inc. Accumulated Other Comprehensive Income (Loss) |  | Noncontrolling Interest in Operating Partnership Accumulated Other Comprehensive Income (Loss)
|  | Foreign Currency |  | Cash flow hedges |  | Total |  | Foreign Currency |  | Cash flow hedges |  | Total
Balance December 31, 2016 |  | $ | (32,087 | ) |  | $ | 3,792 |  |  | $ | (28,295 | ) |  | $ | (1,740 | ) |  | $ | 201 |  |  | $ | (1,539 | )
Other comprehensive income (loss) before reclassifications |  | 8,375 |  |  | (154 | ) |  | 8,221 |  |  | 446 |  |  | (9 | ) |  | 437 |
Reclassification out of accumulated other comprehensive income into interest expense |  | — |  |  | 361 |  |  | 361 |  |  | — |  |  | 19 |  |  | 19 |
Balance September 30, 2017 |  | $ | (23,712 | ) |  | $ | 3,999 |  |  | $ | (19,713 | ) |  | $ | (1,294 | ) |  | $ | 211 |  |  | $ | (1,083 | )

We expect within the next twelve months to reclassify into earnings as a decrease to interest expense approximately $3.1 million of the amounts recorded within accumulated other comprehensive income related to the interest rate swap agreements in effect as of September 30, 2018.
34

15. Accumulated Other Comprehensive Income (Loss) of the Operating Partnership
The following table presents changes in the balances of each component of accumulated comprehensive income (loss) for the three and nine months ended September 30, 2018 (in thousands):

|  | Foreign Currency |  | Cash flow hedges |  | Accumulated Other Comprehensive Income (Loss)
Balance June 30, 2018 |  | $ | (30,786 | ) |  | $ | 8,927 |  |  | $ | (21,859 | )
Other comprehensive income before reclassifications |  | 1,921 |  |  | 1,067 |  |  | 2,988 |
Reclassification out of accumulated other comprehensive income into interest expense |  | — |  |  | (555 | ) |  | (555 | )
Balance September 30, 2018 |  | $ | (28,865 | ) |  | $ | 9,439 |  |  | $ | (19,426 | )
|  | Foreign Currency |  | Cash flow hedges |  | Accumulated Other Comprehensive Income (Loss)
Balance December 31, 2017 |  | $ | (25,689 | ) |  | $ | 5,344 |  |  | $ | (20,345 | )
Other comprehensive income (loss) before reclassifications |  | (3,176 | ) |  | 5,549 |  |  | 2,373 |
Reclassification out of accumulated other comprehensive income into interest expense |  | — |  |  | (1,454 | ) |  | (1,454 | )
Balance September 30, 2018 |  | $ | (28,865 | ) |  | $ | 9,439 |  |  | $ | (19,426 | )

The following table presents changes in the balances of each component of accumulated comprehensive income (loss) for the three and nine months ended September 30, 2017 (in thousands):

|  | Foreign Currency |  | Cash flow hedges |  | Accumulated Other Comprehensive Income (Loss)
Balance June 30, 2017 |  | $ | (29,743 | ) |  | $ | 4,171 |  |  | $ | (25,572 | )
Other comprehensive income before reclassifications |  | 4,737 |  |  | 94 |  |  | 4,831 |
Reclassification out of accumulated other comprehensive income into interest expense |  | — |  |  | (55 | ) |  | (55 | )
Balance September 30, 2017 |  | $ | (25,006 | ) |  | $ | 4,210 |  |  | $ | (20,796 | )
|  | Foreign Currency |  | Cash flow hedges |  | Accumulated Other Comprehensive Income (Loss)
Balance December 31, 2016 |  | $ | (33,827 | ) |  | $ | 3,993 |  |  | $ | (29,834 | )
Other comprehensive income (loss) before reclassifications |  | 8,821 |  |  | (163 | ) |  | 8,658 |
Reclassification out of accumulated other comprehensive income into interest expense |  | — |  |  | 380 |  |  | 380 |
Balance September 30, 2017 |  | $ | (25,006 | ) |  | $ | 4,210 |  |  | $ | (20,796 | )

We expect within the next twelve months to reclassify into earnings as a decrease to interest expense approximately $3.1 million of the amounts recorded within accumulated other comprehensive income related to the interest rate swap agreements in effect as of September 30, 2018.
35

16. Supplemental Cash Flow Information
We purchase capital equipment and incur costs relating to construction of facilities, including tenant finishing allowances. Expenditures included in accounts payable and accrued expenses were as follows (in thousands):

|  | As of |  | As of
|  | September 30, 2018 |  | September 30, 2017
Costs relating to construction included in accounts payable and accrued expenses |  | $ | 14,307 |  |  | $ | 27,090 |

Interest paid, net of interest capitalized was as follows (in thousands):

|  | Nine months ended September 30,
|  | 2018 |  | 2017
Interest paid, net of interest capitalized |  | $ | 46,154 |  |  | $ | 43,102 |

17. New Accounting Pronouncements
Recently adopted accounting standards
In November 2016, the FASB issued ASU 2016-18, Statement of Cash Flows (Topic 230): Restricted Cash. This ASU requires that a statement of cash flows explain the change during the period in cash, cash equivalents, and amounts generally described as restricted cash. Amounts generally described as restricted cash should be included with cash and cash equivalents when reconciling the beginning-of-period and end-of-period total amounts shown on the statement of cash flows. The update should be applied retrospectively to each period presented. The pronouncement is effective for fiscal years, and for interim periods within those fiscal years, beginning after December 15, 2017. We adopted this pronouncement on January 1, 2018, and the pronouncement did not result in changes to our consolidated statements of cash flows as there were no restricted cash amounts included in the beginning-of-period and end-of-period cash and cash equivalents totals.
In February 2017, the FASB issued ASU 2017-05, "Other Income - Gains and Losses from the Derecognition of Nonfinancial Assets (Subtopic 610-20): Clarifying the Scope of Asset Derecognition Guidance and Accounting for Partial Sales of Nonfinancial Assets." ASU 2017-05 clarifies the definition of an in-substance nonfinancial asset and changes the accounting for partial sales of nonfinancial assets to be more consistent with the accounting for a sale of a business pursuant to ASU 2017-01. This update is effective for interim and annual periods beginning after December 15, 2017 using a full retrospective or modified retrospective method and is required to be adopted in conjunction with ASU 2014-09, "Revenue from Contracts with Customers" discussed below. We adopted ASU 2017-05 effective January 1, 2018, along with our adoption of ASU 2014-09, using the modified retrospective approach only to contracts that are not completed contracts as of January 1, 2018. The adoption of this standard did not have a material impact on our consolidated financial statements. Subsequent to adoption, we believe most of our future contributions of nonfinancial assets to our joint ventures where we cease to have a controlling financial interest, if any, will result in the recognition of a full gain or loss as if we sold 100% of the nonfinancial asset and we will also measure our retained interest at fair value.
In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers: Topic 606, as amended, (collectively, Topic 606). Topic 606 is based on the principle that revenue is recognized to depict the transfer of goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. Topic 606 applies to all contracts with customers, except those that are within the scope of other topics in the FASB's Accounting Standards Codification, including real estate lease contracts, which the majority of our revenue is derived. The guidance also provides a model for the measurement and recognition of gains and losses on the sale of certain nonfinancial assets, such as property, including real estate.
36

We adopted Topic 606 effective January 1, 2018 using the modified retrospective approach. Results for reporting periods beginning after January 1, 2018, are presented under Topic 606, while prior period amounts are not adjusted and continue to be reported in accordance with our historic accounting under Revenue Recognition (Topic 605). The new guidance provides a unified model to determine how revenue is recognized. To determine the proper amount of revenue to be recognized, the Company performs the following steps: (i) identify the contract with the customer, (ii) identify the performance obligations within the contract, (iii) determine the transaction price, (iv) allocate the transaction price to the performance obligations and (v) recognize revenue when (or as) a performance obligation is satisfied. As of September 30, 2018, the Company has no outstanding contract assets or contract liabilities and we did not have a cumulative catch-up upon the adoption of this standard. The adoption of this standard did not result in any material changes to our revenue recognition as compared to the previous guidance.
The Company’s revenue-producing contracts are primarily leases that are not within the scope of this standard, except for the lease component relating to common area maintenance (“CAM”) reimbursement revenue, which will be within the scope of this standard upon the effective date of ASU 2016-02, Leases (Topic 842). The revenues which were impacted by the initial adoption of Topic 606 include revenues from management, leasing and other services provided to our unconsolidated joint ventures that we manage and other income earned at our properties. We receive management, leasing and other services revenue for services provided to our unconsolidated joint ventures that we manage and recognize this revenue as the services are transferred. Our other income earned at our properties consist primarily of revenues from vending and other on-site services or products provided to shoppers or tenants. The other income earned at our properties is recorded as the goods are transferred at a point in time or as the service is transferred over time. We have elected to disaggregate our revenue streams into the following line items on our Consolidated Statements of Operations: base rentals; percentage rentals; expense reimbursements; management, leasing and other services; and other income. We believe that these are the proper disaggregated categories as they are the best depiction of our revenue streams both qualitatively and quantitatively.
Recently issued accounting standards to be adopted
In August 2017, the FASB issued ASU 2017-12, Derivatives and Hedging (Topic 815), Targeted Improvements to Accounting for Hedging Activities. The new guidance will make more financial and nonfinancial hedging strategies eligible for hedge accounting. It also amends the presentation and disclosure requirements and changes how companies assess effectiveness. It is intended to more closely align hedge accounting with companies’ risk management strategies, simplify the application of hedge accounting, and increase transparency as to the scope and results of hedging programs. The amendments can be adopted immediately in any interim or annual period (including the current period). The mandatory effective date for calendar year-end public companies is January 1, 2019. We are currently evaluating the impact of adopting the new guidance, but we do not expect the adoption to have a material impact on our consolidated financial statements.
In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842), issued subsequent amendments to the initial guidance in September 2017 within ASU 2017-13 and January 2018 within ASU 2018-01 (collectively, Topic 842). Topic 842, amends the existing accounting standards for lease accounting, including requiring lessees to recognize most leases on their balance sheets and making targeted changes to lessor accounting. Topic 842 will be effective beginning in the first quarter of 2019. Early adoption of Topic 842 as of its issuance is permitted. We will adopt Topic 842 effective January 1, 2019. The new leases standard requires a modified retrospective transition approach for all leases existing at, or entered into after, the date of initial application, with an option to use certain transition relief. Based on a preliminary assessment, we expect our significant operating lease commitments, primarily ground leases at seven of our outlet centers, will be required to be recognized as operating lease liabilities and right-of-use assets upon adoption, resulting in an increase in the assets and liabilities on our consolidated balance sheets. Information about our undiscounted future lease payments and the timing of those payments is in Note 23, Commitments and Contingencies of Consolidated Properties, in our Form 10-K for the year ended December 31, 2017.
In addition, direct internal leasing costs will continue to be capitalized, however, indirect internal leasing costs previously capitalized will be expensed. For the nine months ended September 30, 2018 and for the year ended December 31, 2017, based on existing accounting guidance, we capitalized approximately $4.3 million and $6.1 million, respectively, of internal leasing and legal payroll and related costs. Upon adoption of this ASU in 2019, we will only be able to capitalize the portion of these types of costs incurred that are a direct result of an executed lease.
37

Within the terms of our leases where we are the lessor, we are entitled to receive reimbursement amounts from tenants for operating expenses such as real estate taxes, insurance and other CAM. Upon adoption of this ASU, CAM reimbursement revenue will be accounted for in accordance with ASU 2016-12 Revenue from Contracts with Customers (Topic 606). We are continuing our evaluation of the effect that this adoption will have on our CAM reimbursement revenue; however, we currently do not believe that the adoption will significantly affect the timing of our revenue recognition. We are continuing our evaluation of Topic 842, which may identify additional impacts this standard will have on our consolidated financial statements and related disclosures.
18. Subsequent Events
In October 2018, the Company's Board of Directors declared a $0.35 cash dividend per common share payable on November 15, 2018 to each shareholder of record on October 31, 2018, and the Trustees of Tanger GP Trust declared a $0.35 cash distribution per Operating Partnership unit to the Operating Partnership's unitholders.
In October 2018, we amended and restated our unsecured term loan, increasing the size of the loan from $325.0 million to $350.0 million, extending maturity from April 2021 to April 2024, and reducing the interest rate spread over LIBOR from 0.95% to 0.90%. The $25.0 million of proceeds were used to pay down the balances outstanding under our unsecured lines of credit.
38

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
The discussion of our results of operations reported in the unaudited, consolidated statements of operations compares the three and nine months ended September 30, 2018 with the three and nine months ended September 30, 2017. The results of operations discussion is combined for Tanger Factory Outlet Centers, Inc. and Tanger Properties Limited Partnership because the results are virtually the same for both entities. The following discussion should be read in conjunction with the unaudited consolidated financial statements appearing elsewhere in this report. Historical results and percentage relationships set forth in the unaudited, consolidated statements of operations, including trends which might appear, are not necessarily indicative of future operations. Unless the context indicates otherwise, the term "Company" refers to Tanger Factory Outlet Centers, Inc. and subsidiaries and the term "Operating Partnership" refers to Tanger Properties Limited Partnership and subsidiaries. The terms "we", "our" and "us" refer to the Company or the Company and the Operating Partnership together, as the text requires.
Cautionary Statements
Certain statements made below are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. We intend for such forward-looking statements to be covered by the safe harbor provisions for forward-looking statements contained in the Private Securities Reform Act of 1995 and have included this statement for purposes of complying with these safe harbor provisions. Forward-looking statements, which are based on certain assumptions and describe our future plans, strategies, beliefs and expectations, are generally identifiable by use of the words "believe", "expect", "intend", "anticipate", "estimate", "project", or similar expressions. Such forward-looking statements include, but are not limited to, statements regarding our: ability to raise additional capital, including via future issuances of equity and debt, and the use of proceeds from such issuances; results of operations and financial condition; capital expenditure and working capital needs and the funding thereof; repurchase of the Company's shares; potential developments, expansions, renovations, acquisitions or dispositions of outlet centers; compliance with debt covenants; renewal and re-lease of leased space; outcome of legal proceedings arising in the normal course of business; and real estate joint ventures. You should not rely on forward-looking statements since they involve known and unknown risks, uncertainties and other important factors which are, in some cases, beyond our control and which could materially affect our actual results, performance or achievements. Important factors which may cause actual results to differ materially from current expectations include, but are not limited to: our inability to develop new outlet centers or expand existing outlet centers successfully; risks related to the economic performance and market value of our outlet centers; the relative illiquidity of real property investments; impairment charges affecting our properties; our dispositions of assets may not achieve anticipated results; competition for the acquisition and development of outlet centers, and our inability to complete outlet centers we have identified; environmental regulations affecting our business; risk associated with a possible terrorist activity or other acts or threats of violence and threats to public safety; our dependence on rental income from real property; our dependence on the results of operations of our retailers; the fact that certain of our properties are subject to ownership interests held by third parties, whose interests may conflict with ours; risks related to uninsured losses; the risk that consumer, travel, shopping and spending habits may change; risks associated with our Canadian investments; risks associated with attracting and retaining key personnel; risks associated with debt financing; risk associated with our guarantees of debt for, or other support we may provide to, joint venture properties; our potential failure to qualify as a REIT; our legal obligation to make distributions to our shareholders; legislative or regulatory actions that could adversely affect our shareholders, including the recent changes in the U.S. federal income taxation of U.S. businesses; our dependence on distributions from the Operating Partnership to meet our financial obligations, including dividends; the risk of a cyber-attack or an act of cyber-terrorism and other important factors set forth under Item 1A - "Risk Factors" in the Company's and the Operating Partnership's Annual Report on Form 10-K for the year ended December 31, 2017.
39

General Overview
As of September 30, 2018, we had 36 consolidated outlet centers in 22 states totaling 12.9 million square feet. We also had 8 unconsolidated outlet centers in 6 states or provinces totaling 2.4 million square feet. The table below details our new developments, expansions and dispositions of consolidated and unconsolidated outlet centers that significantly impacted our results of operations and liquidity from January 1, 2017 to September 30, 2018 (square feet in thousands):

|  |  |  | Consolidated Outlet Centers |  | Unconsolidated Joint Venture Outlet Centers
Outlet Center |  | Quarter Opened/Disposed |  | Square Feet |  | Number of Outlet Centers |  | Square Feet |  | Number of Outlet Centers
As of January 1, 2017 |  |  |  | 12,710 |  |  | 36 |  |  | 2,348 |  |  | 8 |
New Developments: |  |  |  |  |  |  |  |  |  |
Fort Worth |  | Fourth Quarter |  | 352 |  |  | 1 |  |  | — |  |  | — |
Expansion: |  |  |  |  |  |  |  |  |  |
Ottawa |  | First & Second Quarter |  | — |  |  | — |  |  | 39 |  |  | — |
Lancaster |  | Third Quarter |  | 148 |  |  | — |  |  | — |  |  | — |
Dispositions: |  |  |  |  |  |  |  |  |  |
Westbrook |  | Second Quarter |  | (290 | ) |  | (1 | ) |  | — |  |  | — |
Other |  |  |  | 10 |  |  | — |  |  | (17 | ) |  | — |
As of December 31, 2017 |  |  |  | 12,930 |  |  | 36 |  |  | 2,370 |  |  | 8 |
Other |  |  |  | (7 | ) |  | — |  |  | — |  |  | — |
As of September 30, 2018 |  |  |  | 12,923 |  |  | 36 |  |  | 2,370 |  |  | 8 |

40

The following table summarizes certain information for our existing outlet centers in which we have an ownership interest as of September 30, 2018. Except as noted, all properties are fee owned.

Consolidated Outlet Centers |  | Legal |  | Square |  | %
Location |  | Ownership % |  | Feet |  | Occupied
Deer Park, New York |  | 100 |  | 739,109 |  |  | 97 |
Riverhead, New York (1) |  | 100 |  | 729,778 |  |  | 95 |
Rehoboth Beach, Delaware (1) |  | 100 |  | 557,353 |  |  | 97 |
Foley, Alabama |  | 100 |  | 556,673 |  |  | 94 |
Atlantic City, New Jersey (1) (4) |  | 100 |  | 489,706 |  |  | 86 |
San Marcos, Texas |  | 100 |  | 471,816 |  |  | 97 |
Sevierville, Tennessee (1) |  | 100 |  | 448,150 |  |  | 100 |
Savannah, Georgia |  | 100 |  | 429,089 |  |  | 97 |
Myrtle Beach Hwy 501, South Carolina |  | 100 |  | 426,523 |  |  | 99 |
Jeffersonville, Ohio |  | 100 |  | 411,859 |  |  | 97 |
Glendale, Arizona (Westgate) |  | 100 |  | 410,734 |  |  | 99 |
Myrtle Beach Hwy 17, South Carolina (1) |  | 100 |  | 403,425 |  |  | 99 |
Charleston, South Carolina |  | 100 |  | 382,180 |  |  | 98 |
Lancaster, Pennsylvania |  | 100 |  | 376,997 |  |  | 92 |
Pittsburgh, Pennsylvania |  | 100 |  | 372,944 |  |  | 99 |
Commerce, Georgia |  | 100 |  | 371,408 |  |  | 99 |
Grand Rapids, Michigan |  | 100 |  | 357,105 |  |  | 95 |
Fort Worth, Texas |  | 100 |  | 351,741 |  |  | 98 |
Daytona Beach, Florida |  | 100 |  | 351,721 |  |  | 100 |
Branson, Missouri |  | 100 |  | 329,861 |  |  | 100 |
Locust Grove, Georgia |  | 100 |  | 321,082 |  |  | 99 |
Gonzales, Louisiana |  | 100 |  | 321,066 |  |  | 96 |
Southaven, Mississippi (2) (4) |  | 50 |  | 320,348 |  |  | 93 |
Park City, Utah |  | 100 |  | 319,661 |  |  | 98 |
Mebane, North Carolina |  | 100 |  | 318,886 |  |  | 99 |
Howell, Michigan |  | 100 |  | 314,438 |  |  | 95 |
Mashantucket, Connecticut (Foxwoods) (1) |  | 100 |  | 311,593 |  |  | 95 |
Williamsburg, Iowa |  | 100 |  | 276,331 |  |  | 93 |
Tilton, New Hampshire |  | 100 |  | 250,107 |  |  | 94 |
Hershey, Pennsylvania |  | 100 |  | 249,696 |  |  | 99 |
Hilton Head II, South Carolina |  | 100 |  | 206,564 |  |  | 92 |
Ocean City, Maryland (1) |  | 100 |  | 199,425 |  |  | 96 |
Hilton Head I, South Carolina |  | 100 |  | 181,670 |  |  | 97 |
Terrell, Texas |  | 100 |  | 177,800 |  |  | 95 |
Blowing Rock, North Carolina |  | 100 |  | 104,009 |  |  | 96 |
Nags Head, North Carolina |  | 100 |  | 82,161 |  |  | 98 |
Totals |  |  |  | 12,923,009 |  |  | 96 | (3)

(1) | These properties or a portion thereof are subject to a ground lease.

(2) | Based on capital contribution and distribution provisions in the joint venture agreement, we expect our economic interest in the venture's cash flow to be greater than our legal ownership percentage. We currently receive substantially all the economic interest of the property.

(3) | Excludes the occupancy rate at our Fort Worth center which opened during the fourth quarter of 2017 and has not yet stabilized.

(4) | Property encumbered by mortgage. See notes 5 and 6 to the consolidated financial statements for further details of our debt obligations.

41

Unconsolidated joint venture properties |  | Legal |  | Square |  | % |
Location |  | Ownership % |  | Feet |  | Occupied |
Charlotte, North Carolina (1) |  | 50 |  | 397,857 |  |  | 99 |
Columbus, Ohio (1) |  | 50 |  | 355,245 |  |  | 96 |
Ottawa, Ontario |  | 50 |  | 355,003 |  |  | 94 |
Texas City, Texas (Galveston/Houston) (1) |  | 50 |  | 352,705 |  |  | 95 |
National Harbor, Maryland (1) |  | 50 |  | 341,156 |  |  | 95 |
Cookstown, Ontario |  | 50 |  | 307,779 |  |  | 100 |
Bromont, Quebec |  | 50 |  | 161,307 |  |  | 80 |
Saint-Sauveur, Quebec (1) |  | 50 |  | 99,405 |  |  | 96 |
Total |  |  |  | 2,370,457 |  |  | 95 |

(1) | Property encumbered by mortgage. See note 4 to the consolidated financial statements for further details of the joint venture debt obligations.

Leasing Activity
The tables below show changes in rent (base rent and common area maintenance ("CAM")) for leases for new stores that opened or renewals that started during the respective trailing twelve month periods ended September 30, 2018 and 2017:

| Trailing twelve months ended September 30, 2018(1)
| # of Leases | Square Feet (in 000's) | Average Annual Straight-line Rent (psf) | Average Tenant Allowance (psf) | Average Initial Term (in years) | Net Average Annual Straight-line Rent (psf) (2)
Re-tenant | 99 |  | 478 |  | $ | 32.92 |  | $ | 63.74 |  | 7.86 |  | $ | 24.81 |
Renewal | 265 |  | 1,343 |  | $ | 29.79 |  | $ | 0.26 |  | 3.79 |  | $ | 29.72 |
| Trailing twelve months ended September 30, 2017(1)
| # of Leases | Square Feet (in 000's) | Average Annual Straight-line Rent (psf) | Average Tenant Allowance (psf) | Average Initial Term (in years) | Net Average Annual Straight-line Rent (psf) (2)
Re-tenant | 87 |  | 380 |  | $ | 34.76 |  | $ | 55.47 |  | 8.94 |  | $ | 28.56 |
Renewal | 253 |  | 1,126 |  | $ | 32.56 |  | $ | 0.24 |  | 4.50 |  | $ | 32.51 |

(1) | Excludes license agreements, seasonal tenants, and month-to-month leases.

(2) | Net average straight-line base rent is calculated by dividing the average tenant allowance costs per square foot by the average initial term and subtracting this calculated number from the average straight-line base rent per year amount. The average annual straight-line base rent disclosed in the table above includes all concessions, abatements and reimbursements of rent to tenants. The average tenant allowance disclosed in the table above includes landlord costs.

42

RESULTS OF OPERATIONS
Comparison of the three months ended September 30, 2018 to the three months ended September 30, 2017
NET LOSS
Net loss in the 2018 period was $23.0 million as compared to a net loss of $16.0 million for the 2017 period. The 2018 period included a $49.7 million impairment charge related to our Jeffersonville outlet center. The 2017 period included a loss on the early extinguishment of debt of $35.6 million and equity in earnings (losses) includes our share of impairment charges totaling $9.0 million related to the Bromont and Saint-Sauveur outlet centers in Canada.
In the tables below, information set forth for new developments and expansions represent our Fort Worth outlet center, which opened in October 2017 and our Lancaster outlet center, which had an expansion and opened in September 2017. Properties disposed include our Westbrook outlet center sold in May 2017.
BASE RENTALS
Base rentals increased $2.0 million in the 2018 period compared to the 2017 period. The following table sets forth the changes in various components of base rentals (in thousands):

|  | 2018 |  | 2017 |  | Increase/(Decrease)
Base rentals from existing properties |  | $ | 77,218 |  |  | $ | 77,121 |  |  | $ | 97 |
Base rentals from new development and expansion |  | 4,199 |  |  | 1,912 |  |  | 2,287 |
Straight-line rent adjustments |  | 1,451 |  |  | 1,456 |  |  | (5 | )
Lease termination fees |  | 70 |  |  | 162 |  |  | (92 | )
Amortization of above and below market rent adjustments, net |  | (615 | ) |  | (302 | ) |  | (313 | )
|  | $ | 82,323 |  |  | $ | 80,349 |  |  | $ | 1,974 |

PERCENTAGE RENTALS
Percentage rentals increased $72,000 in the 2018 period compared to the 2017 period. The following table sets forth the changes in various components of percentage rentals (in thousands):

|  | 2018 |  | 2017 |  | Increase/(Decrease)
Percentage rentals from existing properties |  | $ | 3,055 |  |  | $ | 3,138 |  |  | $ | (83 | )
Percentage rentals from new development and expansion |  | 155 |  |  | — |  |  | 155 |
|  | $ | 3,210 |  |  | $ | 3,138 |  |  | $ | 72 |

Percentage rentals represents revenues based on a percentage of tenants' sales volume above certain predetermined levels ("contractual breakpoints").
EXPENSE REIMBURSEMENTS
Expense reimbursements increased $1.3 million in the 2018 period compared to the 2017 period. The following table sets forth the changes in various components of expense reimbursements (in thousands):

|  | 2018 |  | 2017 |  | Increase/(Decrease)
Expense reimbursements from existing properties |  | $ | 33,543 |  |  | $ | 33,223 |  |  | $ | 320 |
Expense reimbursements from new development and expansion |  | 1,925 |  |  | 957 |  |  | 968 |
|  | $ | 35,468 |  |  | $ | 34,180 |  |  | $ | 1,288 |

43

Expense reimbursements represent the contractual recovery from tenants of certain CAM, insurance, property tax, promotional, advertising and management expenses. Certain expense reimbursements are based on the tenant's proportionate share of the allocable operating expenses for the property and thus generally fluctuate consistently with the related expenses. Other expense reimbursements, such as promotional, advertising and certain CAM payments, are contractually fixed and may escalate each year. See "Property Operating Expenses" below for a discussion of the decrease in operating expenses from our existing properties.
OTHER INCOME
Other income increased $142,000 in the 2018 period as compared to the 2017 period. The following table sets forth the changes in various components of other income (in thousands):

|  | 2018 |  | 2017 |  | Increase/(Decrease)
Other income from existing properties |  | $ | 2,565 |  |  | $ | 2,455 |  |  | $ | 110 |
Other income from new development and expansion |  | 87 |  |  | 55 |  |  | 32 |
|  | $ | 2,652 |  |  | $ | 2,510 |  |  | $ | 142 |

PROPERTY OPERATING EXPENSES
Property operating expenses increased $2.1 million in the 2018 period compared to the 2017 period. The following table sets forth the changes in various components of property operating expenses (in thousands):

|  | 2018 |  | 2017 |  | Increase/(Decrease)
Property operating expenses from existing properties |  | $ | 36,470 |  |  | $ | 36,226 |  |  | $ | 244 |
Property operating expenses from new development and expansion |  | 1,813 |  |  | 1,002 |  |  | 811 |
Other property operating expenses |  | 1,370 |  |  | 343 |  |  | 1,027 |
|  | $ | 39,653 |  |  | $ | 37,571 |  |  | $ | 2,082 |

Property operating expense from existing properties increased primarily due to higher property tax expense at a few select outlet centers. Other property operating expenses increased primarily due to expenses related to due diligence for potential new developments.
GENERAL AND ADMINISTRATIVE EXPENSES
General and administrative expenses decreased $182,000 in the 2018 period compared to the 2017 period primarily due to lower payroll related expenses and lower expenses related to the allowance for doubtful accounts receivable.
IMPAIRMENT CHARGE
During the third quarter 2018, we determined that the estimated future undiscounted cash flows of our Jeffersonville outlet center did not exceed the property's carrying value due to a decline of operating results at the center likely resulting from increased competition from the Company's center in Columbus, OH and slower than expected improvement from remerchandising activities. Therefore, we recorded a $49.7 million non-cash impairment charge in our consolidated statement of operations which equaled the excess of the property's carrying value over its estimated fair value.
44

DEPRECIATION AND AMORTIZATION
Depreciation and amortization costs increased $1.9 million in the 2018 period compared to the 2017 period. The following table sets forth the changes in various components of depreciation and amortization costs from the 2017 period to the 2018 period (in thousands):

|  | 2018 |  | 2017 |  | Increase/(Decrease)
Depreciation and amortization from existing properties |  | $ | 30,752 |  |  | $ | 30,547 |  |  | $ | 205 |
Depreciation and amortization from new development and expansion |  | 2,098 |  |  | 429 |  |  | 1,669 |
|  | $ | 32,850 |  |  | $ | 30,976 |  |  | $ | 1,874 |

INTEREST EXPENSE AND LOSS ON EARLY EXTINGUISHMENT OF DEBT
Interest expense decreased $122,000 in the 2018 period compared to the 2017 period, primarily as a result of the July 2017 bond refinancing where incremental interest incurred during the redemption notice period when both the 2020 Notes and the 2027 Notes were outstanding. This decrease was partially offset by higher debt levels and higher LIBOR interest rate levels on our outstanding variable rate debt. The approximate average 30 day LIBOR rate for the 2018 period was 2.10% compared to 1.23% for the 2017 period. In addition, the 2018 period had significantly less capitalized interest due to less construction activity compared to the 2017 period.
In July 2017, we completed an underwritten public offering of $300.0 million of 3.875% senior notes due 2027 (the "2027 Notes"). In August 2017, we used the net proceeds from the sale of the 2027 Notes, together with borrowings under our unsecured lines of credit, to redeem all of our 6.125% senior notes due 2020 (the "2020 Notes") (approximately $300.0 million in aggregate principal amount outstanding). The 2020 Notes were redeemed at par plus a make-whole premium of approximately $34.1 million. The loss on early extinguishment of debt includes the make-whole premium and approximately $1.5 million of costs written off related to a debt discount and the remaining net book value of deferred 2020 Notes origination costs.
EQUITY IN EARNINGS (LOSSES) OF UNCONSOLIDATED JOINT VENTURES
Equity in earnings of unconsolidated joint ventures increased approximately $7.7 million in the 2018 period compared to the 2017 period. Equity in earnings (losses) includes our share of impairment charges totaling $9.0 million in the 2017 period related to the Bromont and Saint-Sauveur outlet centers in Canada. The increase in equity in earnings of unconolidated joint ventures was partially offset by higher LIBOR interest rate levels on variable rate mortgages at our unconsolidated joint ventures. The approximate average 30 day LIBOR rate for the 2018 period was 2.10% compared to 1.23% for the 2017 period.
Comparison of the nine months ended September 30, 2018 to the nine months ended September 30, 2017
NET INCOME
Net income decreased $13.5 million in the 2018 period to $24.9 million as compared to $38.4 million for the 2017 period. The 2018 period included a $49.7 million impairment charge related to our Jeffersonville outlet center. The 2017 period included a loss on the early extinguishment of debt of $35.6 million and equity in earnings (losses) includes our share of impairment charges totaling $9.0 million related to the Bromont and Saint-Sauveur outlet centers in Canada.
In the tables below, information set forth for new developments and expansions represent our Fort Worth outlet center, which opened in October 2017 and our Lancaster outlet center, which had an expansion and opened in September 2017. Properties disposed include our Westbrook outlet center sold in May 2017.
45

BASE RENTALS
Base rentals increased $3.3 million in the 2018 period compared to the 2017 period. The following table sets forth the changes in various components of base rentals (in thousands):

|  | 2018 |  | 2017 |  | Increase/(Decrease)
Base rentals from existing properties |  | $ | 228,130 |  |  | $ | 228,810 |  |  | $ | (680 | )
Base rentals from new development and expansion |  | 12,412 |  |  | 5,282 |  |  | 7,130 |
Base rentals from property disposed |  | — |  |  | 1,596 |  |  | (1,596 | )
Straight-line rent adjustments |  | 4,744 |  |  | 4,749 |  |  | (5 | )
Lease termination fees |  | 1,134 |  |  | 2,796 |  |  | (1,662 | )
Amortization of above and below market rent adjustments, net |  | (1,639 | ) |  | (1,766 | ) |  | 127 |
|  | $ | 244,781 |  |  | $ | 241,467 |  |  | $ | 3,314 |

Base rentals from existing properties decreased primarily due to a slight decrease in average portfolio occupancy and lease modifications for certain tenants. The decrease in lease termination fees is due to fewer store closings prior to natural expiration of the lease.
PERCENTAGE RENTALS
Percentage rentals decreased $132,000 in the 2018 period compared to the 2017 period. The following table sets forth the changes in various components of percentage rentals (in thousands):

|  | 2018 |  | 2017 |  | Increase/(Decrease)
Percentage rentals from existing properties |  | $ | 6,386 |  |  | $ | 6,731 |  |  | $ | (345 | )
Percentage rentals from new development and expansion |  | 280 |  |  | 2 |  |  | 278 |
Percentage rentals from property disposed |  | — |  |  | 65 |  |  | (65 | )
|  | $ | 6,666 |  |  | $ | 6,798 |  |  | $ | (132 | )

Percentage rentals represents revenues based on a percentage of tenants' sales volume above their contractual breakpoints. The decrease in percentage rentals is primarily due to annual increases in contractual breakpoints in certain leases without corresponding increases in sales volume.
EXPENSE REIMBURSEMENTS
Expense reimbursements increased $3.1 million in the 2018 period compared to the 2017 period. The following table sets forth the changes in various components of expense reimbursements (in thousands):

|  | 2018 |  | 2017 |  | Increase/(Decrease)
Expense reimbursements from existing properties |  | $ | 101,546 |  |  | $ | 101,773 |  |  | $ | (227 | )
Expense reimbursements from new development and expansions |  | 6,330 |  |  | 2,276 |  |  | 4,054 |
Expense reimbursements from properties disposed |  | — |  |  | 752 |  |  | (752 | )
|  | $ | 107,876 |  |  | $ | 104,801 |  |  | $ | 3,075 |

Expense reimbursements represent the contractual recovery from tenants of certain CAM, insurance, property tax, promotional, advertising and management expenses. Certain expense reimbursements are based on the tenant's proportionate share of the allocable operating expenses for the property and thus generally fluctuate consistently with the related expenses. Other expense reimbursements, such as promotional, advertising and certain CAM payments, are contractually fixed and may escalate each year. See "Property Operating Expenses" below for a discussion of the decrease in operating expenses from our existing properties.
46

OTHER INCOME
Other income decreased 572,000 in the 2018 period as compared to the 2017 period. The following table sets forth the changes in various components of other income (in thousands):

|  | 2018 |  | 2017 |  | Increase/(Decrease)
Other income from existing properties |  | $ | 6,115 |  |  | $ | 6,724 |  |  | $ | (609 | )
Other income from new development and expansions |  | 218 |  |  | 126 |  |  | 92 |
Other income from property disposed |  | — |  |  | 55 |  |  | (55 | )
|  | $ | 6,333 |  |  | $ | 6,905 |  |  | $ | (572 | )

The decrease in other income from existing properties was primarily related to the expiration in July 2017 of a certain national sponsorship program that was not renewed.
PROPERTY OPERATING EXPENSES
Property operating expenses increased $4.7 million in the 2018 period as compared to the 2017 period. The following table sets forth the changes in various components of property operating expenses (in thousands):

|  | 2018 |  | 2017 |  | Increase/(Decrease)
Property operating expenses from existing properties |  | $ | 109,742 |  |  | $ | 109,382 |  |  | $ | 360 |
Property operating expenses from new development and expansion |  | 6,308 |  |  | 2,298 |  |  | 4,010 |
Property operating expenses from property disposed |  | — |  |  | 1,061 |  |  | (1,061 | )
Other property operating expense |  | 3,767 |  |  | 2,333 |  |  | 1,434 |
|  | $ | 119,817 |  |  | $ | 115,074 |  |  | $ | 4,743 |

Property operating expense from existing properties increased primarily due to higher snow removal costs partially offset by lower marketing expense in the 2018 period compared to the 2017 period. Other property operating expenses increased primarily due to expenses related to due diligence for potential new developments.
GENERAL AND ADMINISTRATIVE EXPENSES
General and administrative expenses decreased $985,000 in the 2018 period compared to the 2017 period, primarily due to lower payroll related expenses and lower expenses related to the allowance for doubtful accounts receivable.
ABANDONED PRE-DEVELOPMENT COSTS
During the 2017 period, we decided to terminate a purchase option for a pre-development stage project near Detroit, Michigan and as a result, recorded a $528,000 charge, representing the cumulative related pre-development costs.
IMPAIRMENT CHARGE
During the third quarter 2018, we determined that the estimated future undiscounted cash flows of our Jeffersonville outlet center did not exceed the property's carrying value due to a decline of operating results at the center likely resulting from increased competition from the Company's center in Columbus, OH and slower than expected improvement from remerchandising activities. Therefore, we recorded a $49.7 million non-cash impairment charge in our consolidated statement of operations which equaled the excess of the property's carrying value over its estimated fair value.
47

DEPRECIATION AND AMORTIZATION
Depreciation and amortization costs increased $3.5 million in the 2018 period compared to the 2017 period. The following table sets forth the changes in various components of depreciation and amortization costs from the 2018 period to the 2017 period (in thousands):

|  | 2018 |  | 2017 |  | Increase/(Decrease)
Depreciation and amortization expenses from existing properties |  | $ | 92,387 |  |  | $ | 93,472 |  |  | $ | (1,085 | )
Depreciation and amortization expenses from new development and expansion |  | 6,280 |  |  | 1,026 |  |  | 5,254 |
Depreciation and amortization from property disposed |  | — |  |  | 677 |  |  | (677 | )
|  | $ | 98,667 |  |  | $ | 95,175 |  |  | $ | 3,492 |

Depreciation and amortization decreased at our existing properties due to the accelerated amortization of lease related intangibles upon store closures and also due to demolition activities at one of our centers in the 2017 period.
INTEREST EXPENSE AND LOSS ON EARLY EXTINGUISHMENT OF DEBT
Interest expense decreased $1.1 million in the 2018 period compared to the 2017 period, primarily as a result of the July 2017 bond refinancing, which effectively lowered the interest rate from 6.125% to 3.875% on $300.0 million of senior notes. This savings was partially offset by higher debt levels and higher LIBOR interest rate levels on our outstanding variable rate debt. The approximate average 30 day LIBOR rate for the 2018 period was 1.91% compared to 1.04% for the 2017 period.
In July 2017, we completed an underwritten public offering of $300.0 million of 3.875% senior notes due 2027 (the "2027 Notes"). In August 2017, we used the net proceeds from the sale of the 2027 Notes, together with borrowings under our unsecured lines of credit, to redeem all of our 6.125% senior notes due 2020 (the "2020 Notes") (approximately $300.0 million in aggregate principal amount outstanding). The 2020 Notes were redeemed at par plus a make-whole premium of approximately $34.1 million. The loss on early extinguishment of debt includes the make-whole premium and approximately $1.5 million of costs written off related to a debt discount and the remaining net book value of deferred 2020 Notes origination costs.
GAIN ON SALE OF ASSETS
In May 2017, we sold our Westbrook outlet center for approximately $40.0 million, which resulted in a gain of $6.9 million.
EQUITY IN EARNINGS (LOSSES) OF UNCONSOLIDATED JOINT VENTURES
Equity in earnings of unconsolidated joint ventures increased approximately $7.4 million in the 2018 period compared to the 2017 period. Equity in earnings (losses) includes our share of impairment charges totaling $9.0 million in the 2017 period related to the Bromont and Saint-Sauveur outlet centers in Canada. The increase in equity in earnings of unconsolidated joint ventures was partially offset by higher LIBOR interest rate levels on variable rate mortgages at our unconsolidated joint ventures. The approximate average 30 day LIBOR rate for the 2018 period was 1.91% compared to 1.04% for the 2017 period.
48

LIQUIDITY AND CAPITAL RESOURCES OF THE COMPANY
In this "Liquidity and Capital Resources of the Company" section, the term "the Company" refers only to Tanger Factory Outlet Centers, Inc. on an unconsolidated basis, excluding the Operating Partnership.
The Company's business is operated primarily through the Operating Partnership. The Company issues public equity from time to time, but does not otherwise generate any capital itself or conduct any business itself, other than incurring certain expenses in operating as a public company, which are fully reimbursed by the Operating Partnership. The Company does not hold any indebtedness, and its only material asset is its ownership of partnership interests of the Operating Partnership. The Company's principal funding requirement is the payment of dividends on its common shares. The Company's principal source of funding for its dividend payments is distributions it receives from the Operating Partnership.
Through its ownership of the sole general partner of the Operating Partnership, the Company has the full, exclusive and complete responsibility for the Operating Partnership's day-to-day management and control. The Company causes the Operating Partnership to distribute all, or such portion as the Company may in its discretion determine, of its available cash in the manner provided in the Operating Partnership's partnership agreement. The Company receives proceeds from equity issuances from time to time, but is required by the Operating Partnership's partnership agreement to contribute the proceeds from its equity issuances to the Operating Partnership in exchange for partnership units of the Operating Partnership.
We are a well-known seasoned issuer with a shelf registration that expires in March 2021 that allows the Company to register unspecified various classes of equity securities and the Operating Partnership to register unspecified, various classes of debt securities. As circumstances warrant, the Company may issue equity from time to time on an opportunistic basis, dependent upon market conditions and available pricing. The Operating Partnership may use the proceeds to repay debt, including borrowings under its lines of credit, to develop new or existing properties, to make acquisitions of properties or portfolios of properties, to invest in existing or newly created joint ventures or for general corporate purposes.
The liquidity of the Company is dependent on the Operating Partnership's ability to make sufficient distributions to the Company. The Operating Partnership is a party to loan agreements with various bank lenders that require the Operating Partnership to comply with various financial and other covenants before it may make distributions to the Company. The Company also guarantees some of the Operating Partnership's debt. If the Operating Partnership fails to fulfill its debt requirements, which trigger the Company's guarantee obligations, then the Company may be required to fulfill its cash payment commitments under such guarantees. However, the Company's only material asset is its investment in the Operating Partnership.
The Company believes the Operating Partnership's sources of working capital, specifically its cash flow from operations, and borrowings available under its unsecured lines of credit, are adequate for it to make its distribution payments to the Company and, in turn, for the Company to make its dividend payments to its shareholders and to finance its continued operations, growth strategy and additional expenses we expect to incur for at least the next twelve months. However, there can be no assurance that the Operating Partnership's sources of capital will continue to be available at all or in amounts sufficient to meet its needs, including its ability to make distribution payments to the Company. The unavailability of capital could adversely affect the Operating Partnership's ability to pay its distributions to the Company which will, in turn, adversely affect the Company's ability to pay cash dividends to its shareholders.
For the Company to maintain its qualification as a REIT, it must pay dividends to its shareholders aggregating annually at least 90% of its taxable income (excluding capital gains). While historically the Company has satisfied this distribution requirement by making cash distributions to its shareholders, it may choose to satisfy this requirement by making distributions of cash or other property, including, in limited circumstances, the Company's own shares.
As a result of this distribution requirement, the Operating Partnership cannot rely on retained earnings to fund its on-going operations to the same extent that other companies whose parent companies are not real estate investment trusts can. The Company may need to continue to raise capital in the equity markets to fund the Operating Partnership's working capital needs, as well as potential new developments, expansions and renovations of existing properties, acquisitions, or investments in existing or newly created joint ventures.
49

The Company currently consolidates the Operating Partnership because it has (1) the power to direct the activities of the Operating Partnership that most significantly impact the Operating Partnership’s economic performance and (2) the obligation to absorb losses and the right to receive the residual returns of the Operating Partnership that could be potentially significant. The Company does not have significant assets other than its investment in the Operating Partnership. Therefore, the assets and liabilities and the revenues and expenses of the Company and the Operating Partnership are the same on their respective financial statements, except for immaterial differences related to cash, other assets and accrued liabilities that arise from public company expenses paid by the Company. However, all debt is held directly or indirectly at the Operating Partnership level, and the Company has guaranteed some of the Operating Partnership's unsecured debt as discussed below. Because the Company consolidates the Operating Partnership, the section entitled "Liquidity and Capital Resources of the Operating Partnership" should be read in conjunction with this section to understand the liquidity and capital resources of the Company on a consolidated basis and how the Company is operated as a whole.
In May 2017, we announced that our Board of Directors authorized the repurchase of up to $125.0 million of our outstanding common shares as market conditions warrant over a period commencing on May 19, 2017 and expiring on May 18, 2019. Repurchases may be made from time to time through open market, privately-negotiated, structured or derivative transactions (including accelerated share repurchase transactions), or other methods of acquiring shares. The Company intends to structure open market purchases to occur within pricing and volume requirements of Rule 10b-18. The Company may, from time to time, enter into Rule 10b5-1 plans to facilitate the repurchase of its shares under this authorization.
Shares repurchased for the three and nine months ended September 30, 2018 were as follows:

|  | Three months ended September 30, |  | Nine months ended September 30,
|  | 2018 |  | 2018
Total number of shares purchased |  | — |  |  | 919,249 |
Average price paid per share |  | $ | — |  |  | $ | 21.74 |
Total price paid exclusive of commissions and related fees (in thousands) |  | $ | — |  |  | $ | 19,980 |

The remaining amount authorized to be repurchased under the program as of September 30, 2018 was approximately $55.7 million. For more information, see “Item 2. Unregistered Sales of Equity Securities and Use of Proceeds” in Part II of this Quarterly Report on Form 10-Q.
In October 2018, the Company's Board of Directors declared a $0.35 cash dividend per common share payable on November 15, 2018 to each shareholder of record on October 31, 2018, and the Trustees of Tanger GP Trust declared a $0.35 cash distribution per Operating Partnership unit to the Operating Partnership's unitholders.
LIQUIDITY AND CAPITAL RESOURCES OF THE OPERATING PARTNERSHIP
General Overview
In this "Liquidity and Capital Resources of the Operating Partnership" section, the terms "we", "our" and "us" refer to the Operating Partnership or the Operating Partnership and the Company together, as the text requires.
Property rental income represents our primary source to pay property operating expenses, debt service, distributions and capital expenditures needed to maintain our properties. To the extent that our cash flow from operating activities is insufficient to cover our capital needs, including new developments, expansions of existing outlet centers, acquisitions and investments in unconsolidated joint ventures, we finance such activities from borrowings under our unsecured lines of credit or from the proceeds from the Operating Partnership's debt offerings and the Company's equity offerings.
50

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

|  | Nine months ended September 30, |  |
|  | 2018 |  | 2017 |  | Change
Net cash provided by operating activities |  | $ | 179,968 |  |  | $ | 181,530 |  |  | $ | (1,562 | )
Net cash used in investing activities |  | (36,815 | ) |  | (89,052 | ) |  | 52,237 |
Net cash used in financing activities |  | (144,782 | ) |  | (95,954 | ) |  | (48,828 | )
Effect of foreign currency rate changes on cash and equivalents |  | (60 | ) |  | (54 | ) |  | (6 | )
Net decrease in cash and cash equivalents |  | $ | (1,689 | ) |  | $ | (3,530 | ) |  | $ | 1,841 |

Operating Activities
The decrease in net cash provided by operating activities in the 2018 period is primarily due to the increase in bond interest payments due to the change in the timing of the payments partially offset by the incremental cash flow provided by the addition of the Fort Worth outlet center and the expansion of the Lancaster outlet center during the second half of 2017.
Investing Activities
The primary cause for the decrease in net cash used in investing activities was due to lower levels of development activity in the 2018 period compared to the 2017 period. In 2017, we had construction expenditures for our Fort Worth and Lancaster outlet centers. In the 2018 period, we had no new developments under construction. Partially offsetting the decrease in net cash used in investing activities was the net proceeds from the sale of our Westbrook center in May 2017.
Financing Activities
Given the lower development activity in the 2018 period as discussed above, we borrowed less in the 2018 period compared to the 2017 period. In the 2017 period, we used cash to repurchase $49.4 million of the Company's common shares, compared to $20.0 million in the 2018 period. Also in 2017, we used cash to fund the payment of a make-whole premium totaling $34.1 million related to early extinguishment of debt.
51

Capital Expenditures
The following table details our capital expenditures (in thousands):

|  | Nine months ended September 30, |  |
|  | 2018 |  | 2017 |  | Change
Capital expenditures analysis: |  |  |  |  |  |
New outlet center developments and expansions |  | $ | 6,398 |  |  | $ | 87,486 |  |  | $ | (81,088 | )
Major outlet center renovations |  | 1,973 |  |  | 13,813 |  |  | (11,840 | )
Second generation tenant allowances |  | 11,588 |  |  | 15,815 |  |  | (4,227 | )
Other capital expenditures |  | 15,929 |  |  | 20,056 |  |  | (4,127 | )
|  | 35,888 |  |  | 137,170 |  |  | (101,282 | )
Conversion from accrual to cash basis |  | 17,461 |  |  | (4,558 | ) |  | 22,019 |
Additions to rental property-cash basis |  | $ | 53,349 |  |  | $ | 132,612 |  |  | $ | (79,263 | )

• | The decrease in new outlet center developments and expansions expenditures was primarily due to construction expenditures, including first generation tenant allowances, that occurred in the 2017 period for our Fort Worth and Lancaster outlet centers.

• | The decrease in major outlet center renovations in the 2018 period was primarily due to construction activities at our Myrtle Beach Hwy 17, Riverhead and Rehoboth Beach outlet centers that occurred in 2017.

• | The decrease in second generation tenant allowances was due to the re-merchandising efforts that occurred in the 2017 period to bring high volume tenants to 5 outlet centers.

• | The decrease in other capital expenditures in the 2018 period is primarily due to tenant interior build outs and the installation of solar panels at several of our outlet centers that occurred in 2017.

Current Developments
We intend to continue to grow our portfolio by developing, expanding or acquiring additional outlet centers. However, you should note that any developments or expansions that we, or a joint venture that we have an ownership interest in, have planned or anticipated may not be started or completed as scheduled, or may not result in accretive net income or funds from operations ("FFO"). See the section "Non-GAAP Supplemental Earnings Measures" - "Funds From Operations" below for further discussion of FFO.
In addition, we regularly evaluate acquisition or disposition proposals and engage from time to time in negotiations for acquisitions or dispositions of properties. We may also enter into letters of intent for the purchase or sale of properties. Any prospective acquisition or disposition that is being evaluated or which is subject to a letter of intent may not be consummated, or if consummated, may not result in an increase in earnings or liquidity.
Potential Future Developments
As of the date of this filing, we are in the initial study period for potential new developments. We may also use joint venture arrangements to develop other potential sites. There can be no assurance, however, that these potential future projects will ultimately be developed.
In the case of projects to be wholly-owned by us, we expect to fund these projects from amounts available under our unsecured lines of credit, but may also fund them with capital from additional public debt and equity offerings. For projects to be developed through joint venture arrangements, we may use collateralized construction loans to fund a portion of the project, with our share of the equity requirements funded from sources described above. See “Off-Balance Sheet Arrangements” for a discussion of unconsolidated joint venture development activities.
52

Financing Arrangements
As of September 30, 2018, unsecured borrowings represented 95% of our outstanding debt and 93% of the gross book value of our real estate portfolio was unencumbered. The Company guarantees the Operating Partnership's obligations under our lines of credit. As of September 30, 2018, we had $390.9 million available under our unsecured lines of credit after taking into account outstanding letters of credit of $6.0 million.
Increased Borrowing Capacity and Extension of Unsecured Lines of Credit
In January 2018, we closed on amendments to our unsecured lines of credit, which increased the borrowing capacity from $520.0 million to $600.0 million and extended the maturity date from October 2019 to October 2021, with a one-year extension option. We also reduced the interest rate spread over LIBOR from 0.90% to 0.875% and increased the incremental borrowing availability through an accordion feature on the syndicated line from $1.0 billion to $1.2 billion. Loan origination costs associated with the amendments totaled approximately $2.3 million.
Southaven Mortgage
In February 2018, the consolidated joint venture that owns the Tanger outlet center in Southaven, Mississippi amended and restated the $60.0 million mortgage loan secured by the property that was scheduled to mature in April 2018. The amended and restated loan reduced the principal balance to $51.4 million, increased the interest rate from LIBOR + 1.75% to LIBOR + 1.80% and extended the maturity to April 2021, with a two-year extension option. In March 2018, the consolidated joint venture entered into an interest rate swap, effective March 1, 2018, which fixed the base LIBOR rate at 2.47% on a notional amount of $40.0 million through January 31, 2021.
Unsecured Term Loan
In October 2018, we amended and restated our unsecured term loan, increasing the size of the loan from $325.0 million to $350.0 million, extending maturity from April 2021 to April 2024, and reducing the interest rate spread over LIBOR from 0.95% to 0.90%. The $25.0 million of proceeds were used to pay down the balances outstanding under our unsecured lines of credit.
We intend to retain the ability to raise additional capital, including public debt or equity, to pursue attractive investment opportunities that may arise and to otherwise act in a manner that we believe to be in the best interests of our shareholders and unitholders. The Company is a well-known seasoned issuer with a joint shelf registration with the Operating Partnership, expiring in March 2021, that allows us to register unspecified amounts of different classes of securities on Form S-3. To generate capital to reinvest into other attractive investment opportunities, we may also consider the use of additional operational and developmental joint ventures, the sale or lease of outparcels on our existing properties and the sale of certain properties that do not meet our long-term investment criteria. Based on cash provided by operations, existing lines of credit, ongoing relationships with certain financial institutions and our ability to sell debt or issue equity subject to market conditions, we believe that we have access to the necessary financing to fund the planned capital expenditures for at least the next twelve months.
We anticipate that adequate cash will be available to fund our operating and administrative expenses, regular debt service obligations, and the payment of dividends in accordance with REIT requirements in both the short and long-term. Although we receive most of our rental payments on a monthly basis, distributions to shareholders and unitholders are made quarterly and interest payments on the senior, unsecured notes are made semi-annually. Amounts accumulated for such payments will be used in the interim to reduce the outstanding borrowings under our existing unsecured lines of credit or invested in short-term money market or other suitable instruments.
We believe our current balance sheet position is financially sound; however, due to the uncertainty and unpredictability of the capital and credit markets, we can give no assurance that affordable access to capital will exist between now and when our next significant debt matures, which is our unsecured lines of credit. The unsecured lines of credit expire in 2021, with a one-year extension option that may extend the maturity to 2022.
The interest rate spreads associated with our unsecured lines of credit and our unsecured term loan are based on our current investment grade credit rating. If our credit rating is downgraded or upgraded, our interest rate spread would adjust accordingly.
53

The Operating Partnership's debt agreements require the maintenance of certain ratios, including debt service coverage and leverage, and limit the payment of dividends such that dividends and distributions will not exceed funds from operations, as defined in the agreements, for the prior fiscal year on an annual basis or 95% on a cumulative basis. We have historically been and currently are in compliance with all of our debt covenants. We expect to remain in compliance with all of our existing debt covenants; however, should circumstances arise that would cause us to be in default, the various lenders would have the ability to accelerate the maturity on our outstanding debt.
We believe our most restrictive covenants are contained in our senior, unsecured notes. Key financial covenants and their covenant levels, which are calculated based on contractual terms, include the following:

Senior unsecured notes financial covenants | Required | Actual |
Total consolidated debt to adjusted total assets | <60% | 51 | %
Total secured debt to adjusted total assets | <40% | 3 | %
Total unencumbered assets to unsecured debt | >150% | 184 | %

OFF-BALANCE SHEET ARRANGEMENTS
The following table details certain information as of September 30, 2018 about various unconsolidated real estate joint ventures in which we have an ownership interest:

Joint Venture |  | Outlet Center Location |  | Ownership % |  | Square Feet (in 000's) |  | Carrying Value of Investment (in millions)
Investments included in investments in unconsolidated joint ventures: |  |  |  |
National Harbor |  | National Harbor, MD |  | 50.0 | % |  | 341 |  |  | $ | 0.6 |
RioCan Canada |  | Various |  | 50.0 | % |  | 923 |  |  | 110.7 |
|  |  |  |  |  | $ | 111.3 |
Investments included in other liabilities: |  |  |  |  |  |
Columbus (1) |  | Columbus, OH |  | 50.0 | % |  | 355 |  |  | $ | (1.1 | )
Charlotte(1) |  | Charlotte, NC |  | 50.0 | % |  | 398 |  |  | (10.3 | )
Galveston/Houston(1) |  | Texas City, TX |  | 50.0 | % |  | 353 |  |  | (15.3 | )
|  |  |  |  |  | $ | (26.7 | )

(1) | The negative carrying value is due to distributions exceeding contributions and increases or decreases from the equity in earnings of the joint venture.

Our joint ventures are generally subject to buy-sell provisions which are customary for joint venture agreements in the real estate industry. Either partner may initiate these provisions (subject to any applicable lock up period), which could result in either the sale of our interest or the use of available cash or additional borrowings to acquire the other party's interest. Under these provisions, one partner sets a price for the property, then the other partner has the option to either (1) purchase their partner's interest based on that price or (2) sell its interest to the other partner based on that price. Since the partner other than the partner who triggers the provision has the option to be the buyer or seller, we do not consider this arrangement to be a mandatory redeemable obligation.
We provide guarantees to lenders for our joint ventures which include standard non-recourse carve out indemnifications for losses arising from items such as but not limited to fraud, physical waste, payment of taxes, environmental indemnities, misapplication of insurance proceeds or security deposits and failure to maintain required insurance. For construction and term loans, we may include a guaranty of completion as well as a principal guaranty ranging from 5% to 100% of principal. The principal guarantees include terms for release based upon satisfactory completion of construction and achievement of performance targets including occupancy thresholds and minimum debt service coverage tests. Our joint ventures may contain make-whole provisions in the event that demands are made on any existing guarantees.
54

Charlotte
In June 2018, the Charlotte joint venture closed on a $100.0 million mortgage loan with a fixed interest rate of 4.3% and a maturity date of July 2028. The proceeds from the loan were used to pay off the $90.0 million mortgage loan with an interest rate of LIBOR + 1.45%, which had an original maturity date of November 2018. The joint venture distributed the incremental net loan proceeds of $9.3 million equally to the partners.
Debt of unconsolidated joint ventures
The following table details information regarding the outstanding debt of the unconsolidated joint ventures and guarantees of such debt provided by us as of September 30, 2018 (dollars in millions):

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

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

|  | Three months ended |  | Nine months ended
|  | September 30, |  | September 30,
|  | 2018 |  | 2017 |  | 2018 |  | 2017
Fee: |  |  |  |  |  |  |  |  |  |
Management and marketing |  | $ | 571 |  |  | $ | 564 |  |  | $ | 1,704 |  |  | $ | 1,676 |
Leasing and other fees |  | 12 |  |  | 24 |  |  | 122 |  |  | 100 |
Total Fees |  | $ | 583 |  |  | $ | 588 |  |  | $ | 1,826 |  |  | $ | 1,776 |

55

CRITICAL ACCOUNTING POLICIES AND ESTIMATES
Refer to our 2017 Annual Report on Form 10-K of the Company and the Operating Partnership for a discussion of our critical accounting policies which include principles of consolidation, acquisition of real estate, cost capitalization, impairment of long-lived assets and revenue recognition. There have been no material changes to these policies in 2018.
NON-GAAP SUPPLEMENTAL MEASURES
Funds From Operations
Funds From Operations ("FFO") is a widely used measure of the operating performance for real estate companies that supplements net income (loss) determined in accordance with GAAP. We determine FFO based on the definition set forth by the National Association of Real Estate Investment Trusts ("NAREIT"), of which we are a member. FFO represents net income (loss) (computed in accordance with GAAP) before extraordinary items and gains (losses) on sale or disposal of depreciable operating properties, plus depreciation and amortization of real estate assets, impairment charges on depreciable real estate of consolidated real estate and after adjustments for unconsolidated partnerships and joint ventures, including depreciation and amortization, and impairment losses on investments in unconsolidated joint ventures driven by a measurable decrease in the fair value of depreciable real estate held by the unconsolidated joint ventures.
FFO is intended to exclude historical cost depreciation of real estate as required by GAAP which assumes that the value of real estate assets diminishes ratably over time. Historically, however, real estate values have risen or fallen with market conditions. Because FFO excludes depreciation and amortization of real estate assets, gains and losses from property dispositions and extraordinary items, it provides a performance measure that, when compared year over year, reflects the impact to operations from trends in occupancy rates, rental rates, operating costs, development activities and interest costs, providing perspective not immediately apparent from net income.
We present FFO because we consider it an important supplemental measure of our operating performance. In addition, a portion of cash bonus compensation to certain members of management is based on our FFO or Adjusted Funds From Operations ("AFFO"), which is described in the section below. We believe it is useful for investors to have enhanced transparency into how we evaluate our performance and that of our management. In addition, FFO is frequently used by securities analysts, investors and other interested parties in the evaluation of REITs, many of which present FFO when reporting their results. FFO is also widely used by us and others in our industry to evaluate and price potential acquisition candidates. NAREIT has encouraged its member companies to report their FFO as a supplemental, industry-wide standard measure of REIT operating performance.
FFO has significant limitations as an analytical tool, and you should not consider it in isolation, or as a substitute for analysis of our results as reported under GAAP. Some of these limitations are:

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

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

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

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

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

Because of these limitations, FFO should not be considered as a measure of discretionary cash available to us to invest in the growth of our business or our dividend paying capacity. We compensate for these limitations by relying primarily on our GAAP results and using FFO only as a supplemental measure.
56

Adjusted Funds From Operations
We present AFFO as a supplemental measure of our performance. We define AFFO as FFO further adjusted to eliminate the impact of certain items that we do not consider indicative of our ongoing operating performance. These further adjustments are itemized in the table below. You are encouraged to evaluate these adjustments and the reasons we consider them appropriate for supplemental analysis. In evaluating AFFO you should be aware that in the future we may incur expenses that are the same as or similar to some of the adjustments in this presentation. Our presentation of AFFO should not be construed as an inference that our future results will be unaffected by unusual or non-recurring items.
We present AFFO because we believe it assists investors and analysts in comparing our performance across reporting periods on a consistent basis by excluding items that we do not believe are indicative of our core operating performance. In addition, we believe it is useful for investors to have enhanced transparency into how we evaluate management’s performance and the effectiveness of our business strategies. We use AFFO when certain material, unplanned transactions occur as a factor in evaluating management's performance and to evaluate the effectiveness of our business strategies, and may use AFFO when determining incentive compensation.
AFFO has limitations as an analytical tool. Some of these limitations are:

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

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

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

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

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

Because of these limitations, AFFO should not be considered in isolation or as a substitute for performance measures calculated in accordance with GAAP. We compensate for these limitations by relying primarily on our GAAP results and using AFFO only as a supplemental measure.
57

Below is a reconciliation of net income to FFO available to common shareholders and AFFO available to common shareholders (in thousands, except per share amounts):

|  | Three months ended |  | Nine months ended
|  | September 30, |  | September 30,
|  | 2018 |  | 2017 |  | 2018 |  | 2017
Net income (loss) |  | $ | (23,031 | ) |  | $ | (16,034 | ) |  | $ | 24,944 |  |  | $ | 38,427 |
Adjusted for: |  |  |  |  |  |  |  |
Depreciation and amortization of real estate assets - consolidated |  | 32,237 |  |  | 30,396 |  |  | 96,841 |  |  | 93,634 |
Depreciation and amortization of real estate assets - unconsolidated joint ventures |  | 3,466 |  |  | 3,583 |  |  | 10,020 |  |  | 10,971 |
Impairment charge - consolidated |  | 49,739 |  |  | — |  |  | 49,739 |  |  | — |
Impairment charges - unconsolidated joint ventures |  | — |  |  | 9,021 |  |  | — |  |  | 9,021 |
Gain on sale of assets |  | — |  |  | — |  |  | — |  |  | (6,943 | )
FFO |  | 62,411 |  |  | 26,966 |  |  | 181,544 |  |  | 145,110 |
FFO attributable to noncontrolling interests in other consolidated partnerships |  | — |  |  | — |  |  | 278 |  |  | — |
Allocation of earnings to participating securities |  | (560 | ) |  | (306 | ) |  | (1,571 | ) |  | (1,346 | )
FFO available to common shareholders (1) |  | $ | 61,851 |  |  | $ | 26,660 |  |  | $ | 180,251 |  |  | $ | 143,764 |
As further adjusted for: |  |  |  |  |  |  |  |
Abandoned pre-development costs |  | — |  |  | (99 | ) |  | — |  |  | 528 |
Make-whole premium due to early extinguishment of debt |  | — |  |  | 34,143 |  |  | — |  |  | 34,143 |
Write-off of debt discount and debt origination costs due to early extinguishment of debt |  | — |  |  | 1,483 |  |  | — |  |  | 1,483 |
Impact of above adjustments to the allocation of earnings to participating securities |  | — |  |  | (249 | ) |  | — |  |  | (254 | )
AFFO available to common shareholders (1) |  | $ | 61,851 |  |  | $ | 61,938 |  |  | $ | 180,251 |  |  | $ | 179,664 |
FFO available to common shareholders per share - diluted (1) |  | $ | 0.63 |  |  | $ | 0.27 |  |  | $ | 1.83 |  |  | $ | 1.44 |
AFFO available to common shareholders per share - diluted (1) |  | $ | 0.63 |  |  | $ | 0.63 |  |  | $ | 1.83 |  |  | $ | 1.80 |
Weighted Average Shares: |  |  |  |  |  |  |  |
Basic weighted average common shares |  | 93,109 |  |  | 93,923 |  |  | 93,349 |  |  | 94,781 |
Effect of outstanding options and restricted common shares |  | — |  |  | — |  |  | — |  |  | 23 |
Diluted weighted average common shares (for earnings per share computations) |  | 93,109 |  |  | 93,923 |  |  | 93,349 |  |  | 94,804 |
Exchangeable operating partnership units |  | 4,995 |  |  | 5,028 |  |  | 4,995 |  |  | 5,028 |
Diluted weighted average common shares (for FFO and AFFO per share computations) (1) |  | 98,104 |  |  | 98,951 |  |  | 98,344 |  |  | 99,832 |

(1) | Assumes the Class A common limited partnership units of the Operating Partnership held by the noncontrolling interests are exchanged for common shares of the Company. Each Class A common limited partnership unit is exchangeable for one of the Company's common shares, subject to certain limitations to preserve the Company's REIT status.

58

Portfolio Net Operating Income and Same Center NOI
We present portfolio net operating income ("Portfolio NOI") and same center net operating income ("Same Center NOI") as supplemental measures of our operating performance. Portfolio NOI represents our property level net operating income which is defined as total operating revenues less property operating expenses and excludes termination fees and non-cash adjustments including straight-line rent, net above and below market rent amortization and gains or losses on the sale of outparcels recognized during the periods presented. We define Same Center NOI as Portfolio NOI for the properties that were operational for the entire portion of both comparable reporting periods and which were not acquired or subject to a material expansion or non-recurring event, such as a natural disaster, during the comparable reporting periods.
We believe Portfolio NOI and Same Center NOI are non-GAAP metrics used by industry analysts, investors and management to measure the operating performance of our properties because they provide performance measures directly related to the revenues and expenses involved in owning and operating real estate assets and provide a perspective not immediately apparent from net income, FFO or AFFO. Because Same Center NOI excludes properties developed, redeveloped, acquired and sold; as well as non-cash adjustments, gains or losses on the sale of outparcels and termination rents; it highlights operating trends such as occupancy levels, rental rates and operating costs on properties that were operational for both comparable periods. Other REITs may use different methodologies for calculating Portfolio NOI and Same Center NOI, and accordingly, our Portfolio NOI and Same Center NOI may not be comparable to other REITs.
Portfolio NOI and Same Center NOI should not be considered alternatives to net income (loss) or as an indicator of our financial performance since they do not reflect the entire operations of our portfolio, nor do they reflect the impact of general and administrative expenses, acquisition-related expenses, interest expense, depreciation and amortization costs, other non-property income and losses, the level of capital expenditures and leasing costs necessary to maintain the operating performance of our properties, or trends in development and construction activities which are significant economic costs and activities that could materially impact our results from operations. Because of these limitations, Portfolio NOI and Same Center NOI should not be viewed in isolation or as a substitute for performance measures calculated in accordance with GAAP. We compensate for these limitations by relying primarily on our GAAP results and using Portfolio NOI and Same Center NOI only as supplemental measures.
59

Below is a reconciliation of net income to Portfolio NOI and Same Center NOI for the consolidated portfolio (in thousands):

|  | Three months ended |  | Nine months ended
|  | September 30, |  | September 30,
|  | 2018 |  | 2017 |  | 2018 |  | 2017
Net income (loss) |  | $ | (23,031 | ) |  | $ | (16,034 | ) |  | $ | 24,944 |  |  | $ | 38,427 |
Adjusted to exclude: |  |  |  |  |  |  |  |
Equity in (earnings) losses of unconsolidated joint ventures |  | (1,833 | ) |  | 5,893 |  |  | (6,233 | ) |  | 1,201 |
Interest expense |  | 16,367 |  |  | 16,489 |  |  | 48,348 |  |  | 49,496 |
Gain on sale of assets |  | — |  |  | — |  |  | — |  |  | (6,943 | )
Loss on early extinguishment of debt |  | — |  |  | 35,626 |  |  | — |  |  | 35,626 |
Other non-operating income |  | (261 | ) |  | (591 | ) |  | (661 | ) |  | (683 | )
Impairment charge |  | 49,739 |  |  | — |  |  | 49,739 |  |  | — |
Depreciation and amortization |  | 32,850 |  |  | 30,976 |  |  | 98,667 |  |  | 95,175 |
Other non-property expense |  | 501 |  |  | 371 |  |  | 1,143 |  |  | 993 |
Abandoned pre-development costs |  | — |  |  | (99 | ) |  | — |  |  | 528 |
Corporate general and administrative expenses |  | 10,725 |  |  | 11,020 |  |  | 32,532 |  |  | 33,499 |
Non-cash adjustments(1) |  | (702 | ) |  | (1,020 | ) |  | (2,707 | ) |  | (2,580 | )
Lease termination fees |  | (70 | ) |  | (162 | ) |  | (1,134 | ) |  | (2,796 | )
Portfolio NOI |  | 84,285 |  |  | 82,469 |  |  | 244,638 |  |  | 241,943 |
Non-same center NOI(2) |  | (4,580 | ) |  | (1,972 | ) |  | (13,022 | ) |  | (6,910 | )
Same Center NOI |  | $ | 79,705 |  |  | $ | 80,497 |  |  | $ | 231,616 |  |  | $ | 235,033 |

(1) | Non-cash items include straight-line rent, net above and below market rent amortization and gains or losses on outparcel sales, as applicable.

(2) | Excluded from Same Center NOI:

Outlet centers opened: |  | Outlet centers sold: |  | Outlet center expansions:
Fort Worth | October 2017 |  | Westbrook | May 2017 |  | Lancaster | September 2017

60

ECONOMIC CONDITIONS AND OUTLOOK
The majority of our leases contain provisions designed to mitigate the impact of inflation. Such provisions include clauses for the escalation of base rent and clauses enabling us to receive percentage rentals based on tenants' gross sales (above predetermined levels) which generally increase as prices rise. A component of most leases includes a pro-rata share or escalating fixed contributions by the tenant for property operating expenses, including CAM, real estate taxes, insurance and advertising and promotion, thereby reducing exposure to increases in costs and operating expenses resulting from inflation.
A portion of our rental revenues are derived from percentage rents that directly depend on the sales volume of certain tenants. Accordingly, declines in these tenants' sales would reduce the income produced by our properties. If the sales or profitability of our retail tenants decline sufficiently, whether due to a change in consumer preferences, legislative changes that increase the cost of their operations or otherwise, such tenants may be unable to pay their existing rents as such rents would represent a higher percentage of their sales.
The current challenging retail environment could impact our business in the short-term as our operations are subject to the results of operations of our retail tenants. While we believe outlet stores will continue to be a profitable and fundamental distribution channel for many brand name manufacturers, some retail formats are more successful than others. As is typical in the retail industry, certain tenants have closed, or will close, certain stores by terminating their lease prior to its natural expiration or as a result of filing for protection under bankruptcy laws, or may request modifications to their existing lease terms. During 2017, 13 tenants in our consolidated portfolio filed for bankruptcy protection, as compared to two tenants in 2016, and a number of other retailers engaged in brand wide restructurings during 2017 that resulted in store closings. During the first nine months of 2018, an additional 4 tenants have filed for bankruptcy protection. Largely due to the number of bankruptcy filings, store closings and lease modifications in 2017 and 2018, we currently expect our Same Center NOI for 2018 compared to 2017 to be down by 1.5% to 2.0%. If the level of bankruptcy filings, store closings and lease modifications during 2018 are at similar or greater amounts as those experienced in 2017, our 2018 results of operations and Same Center NOI could be further negatively impacted.
Due to the relatively short-term nature of our tenants' leases, a significant portion of the leases in our portfolio come up for renewal each year. As of January 1, 2018, we had approximately 1.7 million square feet, or 13% of our consolidated portfolio at that time, coming up for renewal during 2018. As of September 30, 2018, we had renewed approximately 73% of this space. In addition, for the rolling twelve months ended September 30, 2018, we completed renewals and re-tenanted space totaling 1.8 million square feet at a blended 6.1% increase in average base rental rates compared to the expiring rates. While we continue to attract and retain additional tenants, there can be no assurance that we can achieve similar base rental rates. In addition, if we were unable to successfully renew or re-lease a significant amount of this space on favorable economic terms, the loss in rent could have a material adverse effect on our results of operations.
Our outlet centers typically include well-known, national, brand name companies. By maintaining a broad base of well-known tenants and a geographically diverse portfolio of properties located across the United States, we believe we reduce our operating and leasing risks. No one tenant (including affiliates) accounts for more than 8% of our square feet or 7% of our combined base and percentage rental revenues. Accordingly, although we can give no assurance, we do not expect any material adverse impact on our results of operations and financial condition as a result of leases to be renewed or stores to be re-leased. Occupancy at our consolidated centers was 96.4% and 96.9% as of September 30, 2018 and 2017, respectively.
61

Item 3. Quantitative and Qualitative Disclosures about Market Risk
Market Risk
Interest Rate Risk
We are exposed to various market risks, including changes in interest rates. Market risk is the potential loss arising from adverse changes in market rates and prices, such as interest rates. We may periodically enter into certain interest rate protection and interest rate swap agreements to effectively convert existing floating rate debt to a fixed rate basis. We do not enter into derivatives or other financial instruments for trading or speculative purposes.
We may periodically enter into certain interest rate protection and interest rate swap agreements to effectively convert existing floating rate debt to a fixed rate basis. We do not enter into derivatives or other financial instruments for trading or speculative purposes. The following table summarizes the terms and fair values of our derivative financial instruments (notional amounts and fair values in thousands):

|  |  |  |  |  |  |  |  |  | Fair Value
Effective Date |  | Maturity Date |  | Notional Amount |  | Bank Pay Rate |  | Company Fixed Pay Rate |  | September 30, 2018
Assets (Liabilities): |  |  |  |  |  |  |  |  |  |
April 13, 2016 |  | January 1, 2021 |  | 175,000 |  |  | 1 month LIBOR |  | 1.03 | % |  | 6,988 |
March 1, 2018 |  | January 31, 2021 |  | 40,000 |  |  | 1 month LIBOR |  | 2.47 | % |  | 335 |
August 14, 2018 |  | January 1, 2021 |  | 150,000 |  |  | 1 month LIBOR |  | 2.20 | % |  | 2,117 |
Total |  |  |  | $ | 365,000 |  |  |  |  |  |  | $ | 9,440 |

The fair value of the interest rate swap agreements represents the estimated receipts or payments that would be made to terminate the agreement. The fair value is based on dealer quotes, considering current interest rates, remaining term to maturity and our credit standing.
As of September 30, 2018, 12% of our outstanding consolidated debt, excluding variable rate debt with interest rate protection agreements in place, had variable interest rates and therefore were subject to market fluctuations. An increase in the LIBOR index of 100 basis points would result in an increase of approximately $2.1 million in interest expense on an annual basis. The information presented herein is merely an estimate and has limited predictive value. As a result, the ultimate effect upon our operating results of interest rate fluctuations will depend on the interest rate exposures that arise during the period, our hedging strategies at that time and future changes in the level of interest rates.
The estimated fair value and recorded value of our debt consisting of senior unsecured notes, unsecured term loans, secured mortgages and unsecured lines of credit were as follows (in thousands):

|  | September 30, 2018 |  | December 31, 2017
Fair value of debt |  | $ | 1,704,812 |  |  | $ | 1,775,540 |
Recorded value of debt |  | $ | 1,747,660 |  |  | $ | 1,763,651 |

A 100 basis point increase from prevailing interest rates at September 30, 2018 and December 31, 2017 would result in a decrease in fair value of total consolidated debt of approximately $67.7 million and $77.9 million, respectively. Refer to Note 8 to the consolidated financial statements for a description of our methodology in calculating the estimated fair value of debt. Considerable judgment is necessary to develop estimated fair values of financial instruments. Accordingly, the estimates presented herein are not necessarily indicative of the amounts the Company could realize on the disposition of the financial instruments.
62

Foreign Currency Risk
We are also exposed to foreign currency risk on investments in outlet centers that are located in Canada. Our currency exposure is concentrated in the Canadian Dollar. To mitigate some of the risk related to changes in foreign currency, cash flows received from our Canadian joint ventures are either reinvested to fund ongoing Canadian development activities, if applicable, or converted to US dollars and utilized to repay amounts outstanding under our unsecured lines of credit. We generally do not hedge currency translation exposures.
Item 4. Controls and Procedures
Tanger Factory Outlet Centers, Inc. Controls and Procedures
The Company's management carried out an evaluation, with the participation of the Company's Chief Executive Officer and Chief Financial Officer of the effectiveness of the Company's disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) as of September 30, 2018. Based on this evaluation, the Company's Chief Executive Officer and Chief Financial Officer have concluded that the Company's disclosure controls and procedures were effective as of September 30, 2018. There were no changes to the Company's internal controls over financial reporting during the quarter ended September 30, 2018, that materially affected, or are reasonably likely to materially affect, the Company's internal control over financial reporting.
Tanger Properties Limited Partnership Controls and Procedures
The management of the Operating Partnership's general partner carried out an evaluation, with the participation of the Chief Executive Officer and the Vice-President and Treasurer (Principal Financial Officer) of the Operating Partnership's general partner of the effectiveness of the Operating Partnership's disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) as of September 30, 2018. Based on this evaluation, the Chief Executive Officer of the Operating Partnership's general partner, and the Vice-President and Treasurer of the Operating Partnership's general partner, have concluded that the Operating Partnership's disclosure controls and procedures were effective as of September 30, 2018. There were no changes to the Operating Partnership's internal controls over financial reporting during the quarter ended September 30, 2018, that materially affected, or are reasonably likely to materially affect, the Operating Partnership's internal control over financial reporting.
63

PART II. OTHER INFORMATION
Item 1. Legal Proceedings
The Company and the Operating Partnership are, from time to time, engaged in a variety of legal proceedings arising in the normal course of business. Although the results of these legal proceedings cannot be predicted with certainty, management believes that the final outcome of such proceedings will not have a material adverse effect on our results of operations or financial condition.
Item 1A. Risk Factors
There have been no material changes from the risk factors disclosed in the "Risk Factors" section of our Annual Report on Form 10-K for the year ended December 31, 2017.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
(c) Issuer Purchases of Equity Securities
On May 19, 2017, we announced that our Board of Directors authorized the repurchase of up to $125.0 million of our outstanding common shares as market conditions warrant over a period commencing on May 19, 2017 and expiring on May 18, 2019. Repurchases may be made from time to time through open market, privately-negotiated, structured or derivative transactions (including accelerated stock repurchase transactions), or other methods of acquiring shares. The Company intends to structure open market purchases to occur within pricing and volume requirements of Rule 10b-18. The Company may, from time to time, enter into Rule 10b5-1 plans to facilitate the repurchase of its shares under this authorization.
The following table summarizes our common share repurchases for the fiscal quarter ended September 30, 2018:

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

Item 4.Mine Safety Disclosures
Not applicable
64

Item 6. Exhibits

Exhibit Number |  | Exhibit Descriptions
10.1 |  |  | Second Amended and Restated Term Loan Agreement dated as of October 25, 2018, between Tanger Properties Limited Partnership and Wells Fargo Bank, National Association, as Administrative Agent, and the lenders party thereto (incorporated by reference to Exhibit 10.1 of the Company’s and Operating Partnership’s Current Report on Form 8-K dated October 26, 2018).
10.2 |  |  | Second Amended and Restated Continuing Guaranty dated October 25, 2018 by and between Tanger Factory Outlet Centers, Inc. and Wells Fargo Bank, National Association (incorporated by reference to Exhibit 10.2 of the Company’s and Operating Partnership’s Current Report on Form 8-K dated October 26, 2018).
12.1* |  |  | Company's Ratio of Earnings to Fixed Charges.
12.2* |  |  | Operating Partnership's Ratio of Earnings to Fixed Charges.
31.1* |  |  | Principal Executive Officer Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 302 of the Sarbanes - Oxley Act of 2002 for Tanger Factory Outlet Centers, Inc.
31.2* |  |  | Principal Financial Officer Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 302 of the Sarbanes - Oxley Act of 2002 for Tanger Factory Outlet Centers, Inc.
31.3* |  |  | Principal Executive Officer Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 302 of the Sarbanes - Oxley Act of 2002 for Tanger Properties Limited Partnership.
31.4* |  |  | Principal Financial Officer Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 302 of the Sarbanes - Oxley Act of 2002 for Tanger Properties Limited Partnership.
32.1** |  |  | Principal Executive Officer Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes - Oxley Act of 2002 for Tanger Factory Outlet Centers, Inc.
32.2** |  |  | Principal Financial Officer Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes - Oxley Act of 2002 for Tanger Factory Outlet Centers, Inc.
32.3** |  |  | Principal Executive Officer Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes - Oxley Act of 2002 for Tanger Properties Limited Partnership.
32.4** |  |  | Principal Financial Officer Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes - Oxley Act of 2002 for Tanger Properties Limited Partnership.
101*** |  |  | The following financial statements from Tanger Factory Outlet Centers, Inc. and Tanger Properties Limited Partnership's dual Quarterly Report on Form 10-Q for the quarter ended September 30, 2018, formatted in XBRL: (i) Consolidated Balance Sheets (unaudited), (ii) Consolidated Statements of Operations (unaudited), (iii) Consolidated Statements of Other Comprehensive Income (unaudited), (iv) Consolidated Statements of Equity (unaudited), (v) Consolidated Statements of Cash Flows (unaudited), and (vi) Notes to Consolidated Financial Statements (unaudited).
|  | * Filed herewith.
|  | ** Furnished herewith.
|  | *** Submitted herewith.

65

SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934, the Registrant has duly caused this Report to be signed on its behalf by the undersigned thereunto duly authorized.
DATE: November 5, 2018

TANGER FACTORY OUTLET CENTERS, INC.
By: | /s/ James F. Williams
| James F. Williams
| Executive Vice President and Chief Financial Officer
TANGER PROPERTIES LIMITED PARTNERSHIP
By: TANGER GP TRUST, its sole general partner
By: | /s/ James F. Williams
| James F. Williams
| Vice President and Treasurer (Principal Financial Officer)

66