tfoc 8k

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

 

WASHINGTON, D.C. 20549

 

___________

 

FORM 8-K

 

Current Report Pursuant to Section 13 or 15(d) of

The Securities Exchange Act of 1934

 

 

(Date of earliest event reported):  August 30, 2005

 

 

TANGER FACTORY OUTLET CENTERS, INC.

_________________________________________

(Exact name of registrant as specified in its charter)

 

 

 North Carolina

(State or other jurisdiction of Incorporation)

 1-11986

(Commission File Number)

56-1815473

(I.R.S. Employer Identification Number)

 

 

3200 Northline Avenue, Greensboro, North Carolina 27408

(Address of principal executive offices) (Zip Code)

(336) 292-3010

(Registrants’ telephone number, including area code)

 

N/A

(former name or former address, if changed since last report)

 

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

 

[ ] Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

 

[ ] Soliciting material pursuant to Rule 14a-12 under the Exchange

 

[ ] Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

 

[ ] Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

 

 


TANGER FACTORY OUTLET CENTERS, INC.

 

CURRENT REPORT

 

ON

 

FORM 8-K

                                              

 

Section 9.  Financial Statements and Exhibits

 

Item 9.01 Financial Statements and Exhibits

 

Tanger Factory Outlet Centers, Inc., (the “Company”), filed a Form 8-K dated August 22, 2005 to announce that it had agreed to acquire for $282.5 million the remaining two-thirds interest in the portfolio on nine factory outlet centers with approximately 3.3 million square feet, (the “Charter Oak Portfolio”) owned by an affiliate of Blackstone Real Estate Advisors (“Blackstone”).  The Company and Blackstone originally acquired the Charter Oak Portfolio in December 2003 through a joint venture, COROC Holdings LLC (“COROC”), whereby the Company owned a one-third interest and Blackstone owned a two-thirds interest.

 

Our factory outlet centers and other assets are held by, and all of our operations are conducted by, our majority owned subsidiary, Tanger Properties Limited Partnership (the “Operating Partnership”).  The terms “we”, “our” and “us” refer to the Company and the Operating Partnership together, as the context requires.

 

Separate financial statements for the Charter Oak Portfolio are not required since the results of its operations have been included in our audited consolidated financial statements since December 2003.  Unaudited pro forma financial information filed herewith to give effect to the proposed acquisition are as set forth below:

 

(b)  Pro Forma Financial Information                                                                       Page

 

      (1)  Unaudited Pro Forma Consolidated Statements of Operations

                        for the six months ended June 30, 2005 and notes thereto                          5

                              for the year ended December 31, 2004 and notes thereto                    7

 

(2)  Unaudited Pro Forma Consolidated Balance Sheet    

                        as of June 30, 2005 and notes thereto                                                    9

 

 

 

2


 TANGER FACTORY OUTLET CENTERS, INC.

UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS

 

 

The accompanying unaudited Pro Forma Consolidated Financial Statements have been derived from the historical statements of the Company and give effect to the proposed acquisition of the remaining two-thirds interest in the Charter Oak Portfolio owned by Blackstone. The unaudited Pro Forma Consolidated Statements of Operations for the six months ended June 30, 2005 and the year ended December 31, 2004 assume the acquisition had occurred as of January 1, 2004.  The unaudited Pro forma Consolidated Balance Sheet assumes the acquisition had occurred on June 30, 2005.

 

The purchase price of $282.5 million involves an all-cash payment, which we expect to finance in the public markets through a mixture of long-term unsecured debt and equity.  Closing of the transaction is subject to certain conditions including those contained within an existing GMAC loan currently collateralizing the properties. We anticipate the transaction will close by October 2005.

 

The unaudited Pro Forma Consolidated Financial Statements reflect our assumption that we will finance the purchase price and the related estimated closing costs of $3.3 million, collectively estimated to be approximately $285.8 million, by (1) issuing 3.0 million common shares with net proceeds of approximately $81.0 million (2) issuing 3.5 million preferred shares with net proceeds of approximately $84.5 million and (3) issuing long-term unsecured public debt for the remaining $120.3 million.  There can be no assurance that closing on the transaction will actually occur or that we will be able to issue these securities in the form and for the amounts stated above to fund our transaction.  Changes in the form of securities issued or in the amount of common shares, preferred shares and debt actually issued would result in an increase or decrease in pro forma income from continuing operations and related pro forma earnings per share.

 

The accompanying unaudited Pro Forma Consolidated Financial Statements reflect a preliminary allocation of the purchase price under Statement of Financial Accounting Standards No. 141, “Business Combinations” (“FAS 141”).  This allocation is subject to final adjustment following the acquisition.  The Company expects to finalize the valuation following the consummation of the transaction.  Changes in the allocation of the purchase price and/or estimated useful lives from those used in the unaudited Pro Forma Consolidated Financial Statements would result in an increase or decrease in pro forma income from continuing operations and related pro forma earnings per share. The following table summarizes our preliminary allocation of purchase price plus closing costs and the estimated useful lives used for the pro forma calculations.

 

 

  

Amount

(in thousands)

  

Average estimated useful life (in years)

  

Land

  

$

4,832 

      

Buildings, improvements and fixtures

    

42,216 

   

27.7

  

Deferred lease and other intangibles:

          

     Below market leases

    

     (973)

  

3.2

  
         Lease in place value and other lease              

       related intangibles

    

14,229

   

5.7

  

Debt premium

    

353

   

3.0

  

Minority interest    

   

225,103

     

      Net assets acquired

    $

285,760

     

 

 

3

The unaudited Pro Forma Consolidated Financial Statements have been prepared by the Company's management.  These pro forma statements may not be indicative of the results that would have actually occurred if the acquisition had been in effect on the dates indicated, nor do they purport to represent the results of operations for future periods.  The unaudited Pro Forma Consolidated Financial Statements should be read in conjunction with the Company's unaudited financial statements and notes thereto as of June 30, 2005 and for the six months then ended (which are contained in the Company's Form 10-Q for the period ended June 30, 2005), and the Company’s audited financial statements and notes thereto as of December 31, 2004 and for the year then ended (which are contained in the Company's Annual Report on Form 10-K for the year ended December 31, 2004).

 



 

4
TANGER FACTORY OUTLET CENTERS, INC. AND SUBSIDIARIES
PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS
For the Six Months Ended June 30, 2005
(Unaudited)
(In thousands, except per share data)
                           
                           
 
 
 
      
Pro forma 
          
Pro forma
  
 
    
Historical 
    
Adjustments
          
Consolidated
  
                
    
(a) 
                    
REVENUES
                          
  Base rentals
  
$
65,389
  
$
150
    
(b
)
$
65,539
  
  Percentage rentals
    
2,153
               
2,153
 
  Expense reimbursements
    
26,917
               
26,917
 
  Other income
    
2,152
               
2,152
 
    Total revenues
    
96,611
   
150
         
96,761
 
EXPENSES
                          
  Property operating
    
30,851
               
30,851
 
  General and administrative
    
6,755
               
6,755
  
  Depreciation and amortization
    
24,350
   
2,090
   
(c
)
  
26,440
 
    Total expenses
    
61,956
   
2,090
         
64,046
 
  Operating income
    
34,655
   
(1,940
)
        
32,715
 
  Interest expense
    
16,395
   
3,637
   
(d
)
  
20,032
 
Income before equity in earnings of unconsolidated joint
                          
  ventures, minority interest, discontinued operations
                          
  and loss on sale of real estate
    
18,260
   
(5,577
)
        
12,683
 
Equity in earnings of unconsolidated joint ventures
    
459
               
459
 
Minority interests:
                          
   Consolidated joint venture
    
(13,351
)
  
13,351
   
(e
)
  
-
 
   Operating partnership
    
(974
)
  
(670
)
  
(e
)
  
(1,644
)
Income from continuing operations
  
$
4,394
  
$
7,104
        
$
11,498
  
                           
Basic earnings per common share:
                          
   Income from continuing operations
  
$
.02
          
 
 
$
.27
  (g)
   Weighted average shares
    
27,330
   
3,000
   
(f
)
  
30,330
 
                           
Diluted earnings per common share:
                          
   Income from continuing operations
  
$
.02
          
 
 
$
.27
  (g)
   Weighted average shares
    
27,546
   
3,000
   
(f
)
  
30,546
 
                           
The accompanying notes are an integral part of these unaudited pro forma consolidated financial statements.
                          
                           

 

5

TANGER FACTORY OUTLET CENTERS, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS

For the Six Months Ended June 30, 2005

 

a)      As reported in the unaudited consolidated statement of operations of Tanger Factory Outlet Centers, Inc.and Subsidiaries for the six months ended June 30,  2005. 

b)      To reflect amortization of the portion of the purchase price assigned to above and below market leases in accordance with FAS 141.

c)      To reflect depreciation and amortization on the partial step-up of assets to fair value based on an acquisition price of $282.5 million, plus closing costs of   $3.3 million.  

d)      To reflect interest expense from issuance of $121.3 million in long-term unsecured public bonds with a coupon rate of 6.01% (effective rate of 6.05% after underwriting discount). A 1% increase or decrease in the coupon rate would equal $1.21 million on an annual basis.  Also includes amortization of debt issuance costs ($1.0 million amortized over ten years) and change in debt premium ($.4 million amortized over three years).   

e)      To reflect the minority interest in the additional income resulting from the pro forma adjustments and to eliminate the minority interest in the consolidated joint venture that is being acquired in this transaction.

f)       To reflect the planned issuance of (1) 3.0 million common shares with net proceeds of approximately $81.0 million and (2) 3.5 million preferred shares at an assumed price of $25 per share and at a coupon rate of 7.5% with net proceeds of approximately $84.5 million, as part of the funding of the acquisition.

g)      Pro forma income per share is computed as follows:  Income from continuing operations less preferred share dividends of $3.3 million (from the issuance of   3.5 million preferred shares at an assumed price of $25 per share and at a coupon rate of 7.5%) divided by pro forma weighted average shares outstanding.  
 

 

 
6

 
TANGER FACTORY OUTLET CENTERS, INC. AND SUBSIDIARIES
PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS
For the Year Ended December 31, 2004
(Unaudited)
(In thousands, except per share data)
                           
                           
 
          
Pro forma 
          
Pro forma
  
 
    
Historical 
    
Adjustments
          
Consolidated
  
 
    
(a) 
                    
REVENUES
                          
  Base rentals
  
$
129,884
  
$
300
    
(b
)
$
130,184
  
  Percentage rentals
    
5,338
               
5,338
 
  Expense reimbursements
    
52,585
               
52,585
 
  Other income
    
6,746
               
6,746
 
    Total revenues
    
194,553
   
300
         
194,853
 
EXPENSES
                          
  Property operating
    
59,759
               
59,759
 
  General and administrative
    
12,820
               
12,820
 
  Depreciation and amortization
    
51,446
   
4,179
   
(c
)
  
55,625
 
    Total expenses
    
124,025
   
4,179
         
128,204
 
Operating income
    
70,528
   
(3,879
)
        
66,649
 
  Interest expense
    
35,117
   
7,274
   
(d
)
  
42,391
 
Income before equity in earnings of unconsolidated joint
    
35,411
   
(11,153
)
        
24,258
 
   ventures, minority interest and discontinued operations
                          
Equity in earnings of unconsolidated joint ventures
    
1,042
               
1,042
 
Minority interests:
                          
   Consolidated joint venture
    
(27,144
)
  
27,144
   
(e
)
  
-
 
   Operating partnership
    
(1,701
)
  
(1,447
)
  
(e
)
  
(3,148
)
Income from continuing operations
  
$
7,608
  
$
14,544
        
$
22,152
  
                           
Basic earnings per common share:
                          
   Income from continuing operations
  
$
.28
          
 
 
$
.52
  (g)
   Weighted average shares
    
27,044
   
3,000
   
(f
)
  
30,044
 
                           
Diluted earnings per common share:
                          
   Income from continuing operations
  
$
.28
          
 
 
$
.52
  (g)
   Weighted average shares
    
27,261
   
3,000
   
(f
)
  
30,261
 
                           
The accompanying notes are an integral part of these unaudited pro forma consolidated financial statements.
                          

 

7

TANGER FACTORY OUTLET CENTERS, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS

For the Year Ended December 31, 2004

 

a)      As reported in the audited consolidated statement of operations of Tanger Factory Outlet Centers, Inc. and Subsidiaries for the year ended December 31, 2004. 

b)      To reflect amortization of the portion of the purchase price assigned to above and below market leases.

c)      To reflect depreciation and amortization on the partial step-up of assets to fair value based on an acquisition price of $282.5 million, plus closing costs  of $3.3 million.  

d)     To reflect interest expense from issuance of $121.3 million in long-term unsecured public bonds with a coupon rate of 6.01% (effective rate of 6.05% after underwriting discount). A 1% increase or decrease in the coupon rate would equal $1.21 million on an annual basis.  Also includes amortization of debt issuance costs ($1.0 million amortized over ten years) and change in debt premium ($.4 million amortized over three years).   

e)      To reflect the minority interest in the additional income resulting from the pro forma adjustments and to eliminate the minority interest in the consolidated   joint venture that is being acquired in this transaction.

f)       To reflect the planned issuance of (1) 3.0 million common shares with net proceeds of approximately $81.0 million and (2) 3.5 million preferred shares at an assumed price of $25 per share and at a coupon rate of 7.5% with net proceeds of approximately $84.5 million, as part of the funding of the acquisition.

g)     Pro forma income per share is computed as follows: Income from continuing operations less preferred share dividends of $6.6 million (from the issuance of 3.5 million preferred shares at an assumed price of $25 per share and at a coupon rate of 7.5%) divided by pro forma weighted average shares outstanding.

 
8

TANGER FACTORY OUTLET CENTERS, INC. AND SUBSIDIARIES
PRO FORMA CONSOLIDATED BALANCE SHEET
As of June 30, 2005
(Unaudited)
(In thousands)
                           
 
          
Pro forma
          
Pro forma
  
 
    
Historical
    
Adjustments
         
Consolidated
  
                           
ASSETS
    
(a
)
                  
  Rental Property
                          
    Land
  
$
113,284
  
$
4,832
    
(b
)
$
118,116
  
    Buildings, improvements and fixtures
    
956,440
   
42,216
   
(b
)
  
998,656
 
    Construction in progress
    
6,044
               
6,044
 
     
1,075,768
   
47,048
         
1,122,816
 
    Accumulated depreciation
    
(237,688
)
              
(237,688
)
    Rental property, net
    
838,080
   
47,048
         
885,128
 
  Cash and cash equivalents
    
3,543
               
3,543
 
  Deferred charges, net
    
54,818
   
14,289
   
(b
)
  
69,107
 
  Other assets
    
21,785
               
21,785
 
       Total assets
  
$
918,226
  
$
61,337
        
$
979,563
  
                           
LIABILITIES, MINORITY INTERESTS AND SHAREHOLDERS' EQUITY
                          
Liabilities
                          
  Debt
                          
     Senior, unsecured notes
  
$
100,000
  
$
121,279
    
(c
)
$
221,279
   
     Mortgages payable
    
290,197
   
(353
)
  
(b
)
  
289,844
 
     Unsecured note
    
53,500
               
53,500
 
     Lines of credit
    
45,330
               
45,330
 
     
489,027
   
120,926
         
609,953
 
  Construction trade payables
    
9,231
               
9,231
 
  Accounts payable and accrued expenses
    
16,984
               
16,984
 
       Total liabilities
    
515,242
   
120,926
         
636,168
 
Commitments
                          
Minority interests:
                          
  Consolidated joint venture
    
225,103
   
(225,103
)
  
(d
)
  
-
  
  Operating partnership
    
31,963
               
31,963
 
    Total minority interest
    
257,066
   
(225,103
)
        
31,963
 
                           
Shareholders' equity
                          
   Preferred shares
    
-
   
35
   
(e
)
  
35
 
   Common shares
    
277
   
30
   
(e
)
  
307
 
   Paid in capital
    
278,811
   
165,449
   
(e
)
  
444,260
 
   Distributions in excess of net income
    
(126,436
)
              
(126,436
)
   Deferred compensation
    
(6,372
)
              
(6,372
)
   Accumulated other comprehensive loss
    
(362
)
              
(362
)
       Total shareholders' equity
    
145,918
   
165,514
         
311,432
 
         Total liabilities, minority interests and shareholders' equity
  
$
918,226
  
$
61,337
        
$
979,563
  
                           
The accompanying notes are an integral part of these unaudited pro forma consolidated financial statements.
                          

9

TANGER FACTORY OUTLET CENTERS, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET

As of June 30, 2005

 

a)      As reported in the unaudited consolidated balance sheet of Tanger Factory Outlet Centers, Inc. and Subsidiaries as of June 30, 2005. 

b)      To reflect the acquisition of the two-thirds share of the difference between the fair value of the Charter Oak Portfolio and underlying book value of the assets and liabilities.  See table on page 3 for amounts allocated to the assets and liabilities acquired and the average useful lives assigned to each major caption.  Also includes $1.0 million in deferred financing costs from the issuance of long-term unsecured debt.

c)      To reflect the issuance of $121.3 million of long-term unsecured debt generating net proceeds of $120.2 million.

d)      To eliminate the minority interest in the consolidated joint venture that is being acquired in this transaction.

e)      To reflect the planned issuance of (1) 3.0 million common shares with net proceeds of approximately $81.0 million and (2) 3.5 million preferred shares at a coupon rate of 7.5% with net proceeds of approximately $84.5 million, as part of the funding of the acquisition.



 
 
 
 
 

 
10

SIGNATURES

 

Pursuant to the requirements of the Securities and Exchange Act of 1934, the Registrant has duly caused the report to be signed its behalf by the undersigned thereunto duly authorized.

 

 

                                                            TANGER FACTORY OUTLET CENTERS, INC.

 

                                                            By:  /s/ Frank C. Marchisello, Jr.

                                                                    Frank C. Marchisello, Jr.

                                                                    Executive Vice President, Chief Financial Officer

 

 

 

Date: August 30, 2005