The discussion of our results of operations reported in the unaudited, consolidated statements of operations compares the three months endedMarch 31, 2022 with the three months endedMarch 31, 2021 . The results of operations discussion is combined forTanger Factory Outlet Centers, Inc. andTanger 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 toTanger Factory Outlet Centers, Inc. and subsidiaries and the term "Operating Partnership" refers toTanger Properties Limited Partnership and subsidiaries. The terms "we", "our" and "us" refer to the Company or the Company and theOperating Partnership together, as the text requires. Cautionary Statements Certain statements made in this Management's Discussion and Analysis of Financial Condition and Results of Operations 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, or the Exchange Act. We intend such forward-looking statements to be covered by the safe harbor provisions for forward-looking statements contained in the Private Securities Reform Act of 1995 and included this statement for purposes of complying with these safe harbor provisions. Forward-looking statements, which are based on certain assumptions and describe our future plans, strategies, 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: the expected impact of the novel coronavirus ("COVID-19") pandemic on our business, financial results and financial condition; our ability to raise additional capital, including via future issuances of equity and debt, and the use of proceeds from such issuances; our results of operations and financial condition; capital expenditure and working capital needs and the funding thereof; the repurchase of the Company's common shares, including the potential use of a 10b5-1 plan to facilitate repurchases; future dividend payments; the possibility of future asset impairments; potential developments, expansions, renovations, acquisitions or dispositions of outlet centers; compliance with debt covenants; renewal and re-lease of leased space; the outlook for the retail environment, potential bankruptcies, and other store closings; consumer shopping trends and preferences; the 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. Other important factors which may cause actual results to differ materially from current expectations include, but are not limited to: risks related to the economic performance and market value of our outlet centers; our inability to develop new outlet centers or expand existing outlet centers successfully; 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, public health crises and threats to public safety; risks related to the COVID-19 pandemic; 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 climate change; investor and regulatory focus on environmental, sustainability and social initiatives; risks related to uninsured losses; 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; the effectiveness of our interest rate hedging arrangements; uncertainty relating to the phasing out of LIBOR; 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; our dependence on distributions from theOperating Partnership to meet our financial obligations, including dividends; the risk of a cyber-attack or an act of cyber-terrorism and other important factors which may cause actual results to differ materially from current expectations include, but are not limited to, those set forth under Item 1A - "Risk Factors" in the Company's and theOperating Partnership's Annual Report on Form 10-K for the year endedDecember 31, 2021 . 36 -------------------------------------------------------------------------------- This Management's Discussion and Analysis of Financial Condition and Results of Operations ("MD&A") is intended to provide a reader of our financial statements with a narrative from the perspective of our management regarding our financial condition and results of operations, liquidity and certain other factors that may affect our future results. Our MD&A is presented in the following sections: •General Overview •Leasing Activity •COVID-19 Pandemic •Results of Operations •Liquidity and Capital Resources of the Company •Liquidity and Capital Resources of theOperating Partnership •Critical Accounting Estimates •Recent Accounting Pronouncements •Non-GAAP Supplemental Measures •Economic Conditions and Outlook
General Overview
As of
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 fromJanuary 1, 2021 toMarch 31, 2022 (square feet in thousands):Consolidated Outlet Centers
Number of Outlet Outlet Center Quarter Opened/Disposed Square Feet Number of Outlet Centers Square Feet Centers As of January 1, 2021 11,873 31 2,212 7 Dispositions: Jeffersonville First Quarter (412) (1) - - Saint-Saveur First Quarter - - (99) (1) Other (8) - - - As of December 31, 2021 11,453 30 2,113 6 No activity - - - - As of March 31, 2022 11,453 30 2,113 6 37
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The following table summarizes certain information for our existing outlet
centers in which we have an ownership interest as of
Consolidated Outlet Centers Legal Square % Location Ownership % Feet
Occupied
Deer Park, New York 100 739,148 95.3 Riverhead, New York (1) 100 729,281 92.2 Foley, Alabama 100 554,649 92.1 Rehoboth Beach, Delaware (1) 100 549,890 93.2 Atlantic City, New Jersey (1) (3) 100 487,718 80.1 San Marcos, Texas 100 471,816 93.5 Sevierville, Tennessee (1) 100 447,810 98.3 Savannah, Georgia 100 429,089 99.3 Myrtle Beach Hwy 501, South Carolina 100 426,523 96.0 Glendale, Arizona (Westgate) 100 410,753 97.8 Myrtle Beach Hwy 17, South Carolina (1) 100 404,710 98.8 Charleston, South Carolina 100 386,328 97.6 Lancaster, Pennsylvania 100 375,883 98.9 Pittsburgh, Pennsylvania 100 373,863 92.9 Commerce, Georgia 100 371,408 97.4 Grand Rapids, Michigan 100 357,133 87.3 Fort Worth, Texas 100 351,741 97.8 Daytona Beach, Florida 100 351,721 99.1 Branson, Missouri 100 329,861 98.1 Southaven, Mississippi (2) (3) 50 324,801 100.0 Locust Grove, Georgia 100 321,082 98.0 Gonzales, Louisiana 100 321,066 94.1 Mebane, North Carolina 100 318,886 100.0 Howell, Michigan 100 314,438 78.3 Mashantucket, Connecticut (Foxwoods) (1) 100 311,229 78.7 Tilton, New Hampshire 100 250,558 86.1 Hershey, Pennsylvania 100 249,696 96.2 Hilton Head II, South Carolina 100 206,564 100.0 Hilton Head I, South Carolina 100 181,687 99.4 Blowing Rock, North Carolina 100 104,009 89.8 Totals 11,453,341 94.1
(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)Property encumbered by mortgage. See Notes 5 and 6 to the consolidated financial statements for further details of our debt obligations.
38 -------------------------------------------------------------------------------- Unconsolidated joint venture properties Legal Square % Location Ownership %
Feet Occupied
Charlotte, North Carolina (1) 50 398,698 98.9 Ottawa, Ontario 50 357,209 95.4 Columbus, Ohio (1) 50 355,245 95.8 Texas City, Texas (Galveston/Houston) (1) 50 352,705 96.1 National Harbor, Maryland (1) 50 341,156 99.3 Cookstown, Ontario 50 307,883 90.3 Total 2,112,896 96.1
(1)Property encumbered by mortgage. See Note 4 to the consolidated financial statements for further details of the joint venture debt obligations.
Leasing Activity
In the fourth quarter of 2021, we revised our rent spread presentation from a commenced basis to an executed basis and we are presenting it for comparable and non-comparable space. Comparable space excludes leases for space that was vacant for more than 12 months (non-comparable space). We believe that this presentation provides additional information and improves comparability to other retail REITs. Prior period results have been revised to conform with the current period presentation. The following table provides information for our consolidated outlet centers related to leases for new stores that opened or renewals that were executed during the respective trailing twelve month periods endedMarch 31, 2022 and 2021: Comparable Space
for Executed Leases (1) (2)
New Rent Tenant Average Square Feet Initial Rent Spread Allowance Initial Term Leasing Transactions (in 000's) (psf) (3) % (4) (psf) (5) (in years) Total space 2022 297 1,498$ 30.73 1.1 %$ 4.18 3.57 2021 228 1,170$ 23.53 (7.9) %$ 3.72 2.47 Comparable and Non-Comparable
Space for Executed Leases (1) (2)
New Tenant Average Square Feet Initial Rent Allowance Initial Term Leasing Transactions (in 000's) (psf) (3) (psf) (5) (in years) Total space 2022 353 1,713$ 31.15 $ 11.73 4.02 2021 246 1,230$ 23.50 $ 3.86 2.52 (1)For consolidated properties owned as of the period-end date. Represents leases for new stores or renewals that were executed during the respective trailing 12-month periods and excludes license agreements, seasonal tenants, month-to-month leases and new developments. (2)Comparable space excludes leases for space that was vacant for more than 12 months (non-comparable space). (3)Represents average initial cash rent (base rent and common area maintenance ("CAM")). (4)Represents change in average initial and expiring cash rent (base rent and CAM). (5)Includes other landlord costs. 39 --------------------------------------------------------------------------------
COVID-19 Pandemic
The current novel COVID-19 pandemic ("COVID-19") has had, and will continue to have, repercussions across local, national and global economies and financial markets. Our financial results for 2020 were significantly adversely impacted by COVID-19, however, during 2021 and 2022, our business and financial results improved, and metrics such as average overall occupancy rates, traffic to our centers, sales reported by our tenants, and collections of rental revenues returned to near, at, or in some cases above, pre-pandemic levels. Nevertheless, the full extent of the adverse impact on, among other things, our results of operations and liquidity (including our ability to access capital markets), is unknown and will depend on future developments, which are highly uncertain and cannot be predicted. Our results of operations, liquidity and cash flows have been and may continue to be in the future materially affected. Due to the COVID-19 pandemic, a number of our tenants requested rent deferrals, rent abatements or other types of rent relief during this pandemic. As a response, in lateMarch 2020 , we offered all tenants in our consolidated portfolio the option to defer 100% of April and May rents interest free, payable in equal installments due in January and February of 2021. As ofDecember 31, 2020 , approximately$10.3 million in deferred rents was outstanding in the consolidated portfolio. We collected approximately 99% of the 2020 deferred rents by the end of 2021. The extent of future tenant requests for rent relief and the impact on our results of operations and cash flows is uncertain and cannot be predicted at this time. If store closures were to occur again in our domestic markets, this could have a material adverse impact on our financial position and results of operations. 40 --------------------------------------------------------------------------------
RESULTS OF OPERATIONS
Comparison of the three months ended
NET INCOME Net income increased$17.1 million in the 2022 period to$21.5 million as compared to net income of$4.3 million for the 2021 period. Significant items impacting the comparability for the two periods include the following: •the current period includes a higher occupancy rate, higher variable revenues, and an increase in lease termination fees, •the 2021 period included a foreign currency loss of approximately$3.6 million in other income (expense), which had been previously recorded in other comprehensive income associated with the sale of ourRioCan joint venture outlet center inSaint-Sauveur , •the 2021 period included$2.4 million of compensation cost related to a voluntary retirement plan offer which required eligible participants to give notice of acceptance byDecember 1, 2020 for an effective retirement date ofMarch 31, 2021 and other executive severance, and •we sold one operating property in the first quarter of last year, as discussed below.
In the tables below, information set forth for properties disposed includes the
RENTAL REVENUES Rental revenues increased$7.1 million in the 2022 period compared to the 2021 period. The following table sets forth the changes in various components of rental revenues (in thousands): 2022 2021 Increase/(Decrease) Rental revenues from existing properties$ 103,490 $ 97,073 $ 6,417 Rental revenues from properties disposed (56) 459 (515) Straight-line rent adjustments (1,337) (1,043) (294) Lease termination fees 2,595 673 1,922 Amortization of above and below market rent adjustments, net (83) 305 (388)$ 104,609 $ 97,467 $ 7,142 Rental revenues increased primarily due to an increase in occupancy rate for the consolidated portfolio to 94.1% as ofMarch 31, 2022 compared to 91.7% as ofMarch 31, 2021 , and increased variable rents, which are derived from tenant sales, which were higher in the 2022 period. Additionally, rental revenues were also impacted by the reversal of revenue reserves in the 2022 period of approximately$3.0 million , compared to$1.6 million in the same period of the prior year. MANAGEMENT, LEASING AND OTHER SERVICES Management, leasing and other services increased$155,000 in the 2022 period compared to the 2021 period. The following table sets forth the changes in various components of management, leasing and other services (in thousands): 2022 2021 Increase/(Decrease) Management and marketing$ 536 $ 509 $ 27 Leasing and other fees 35 56 (21) Expense reimbursements from unconsolidated joint ventures 956 807 149 Total Fees$ 1,527 $ 1,372 $ 155 41
-------------------------------------------------------------------------------- OTHER REVENUES Other revenues increased$877,000 in the 2022 period as compared to the 2021 period. The following table sets forth the changes in other revenues (in thousands): 2022 2021
Increase/(Decrease)
Other revenues from existing properties
890 Other revenues from property disposed - 13 (13)$ 2,732 $ 1,855 $ 877 Other revenues from existing properties increased in the 2022 period due to an increase in other revenue streams, such as paid media, sponsorships and on-site signage, on a local and national level.
PROPERTY OPERATING EXPENSES
Property operating expenses increased
2022 2021 Increase/(Decrease) Property operating expenses from existing properties$ 35,134 $ 33,944 $ 1,190 Property operating expenses from property disposed - 571 (571) Expenses related to unconsolidated joint ventures 957 808 149 Other property operating expense 667 (12) 679$ 36,758 $ 35,311 $ 1,447 Property operating expenses at existing properties increased in the 2022 period compared to the 2021 period, primarily due to the timing of certain advertising and promotional costs, and higher CAM and insurance costs. These items were partially offset by lower real estate taxes. GENERAL AND ADMINISTRATIVE EXPENSES General and administrative expenses decreased$1.3 million in the 2022 period compared to the 2021 period. The 2021 period includes$2.4 million of compensation cost related to employees that accepted a voluntary retirement plan with an effective retirement date ofMarch 31, 2021 and other executive severance. This decrease was partially offset by the hiring of certain executives and other key employees throughout 2021 to drive operational and growth initiatives. DEPRECIATION AND AMORTIZATION Depreciation and amortization costs decreased$1.9 million in the 2022 period compared to the 2021 period. The following table sets forth the changes in various components of depreciation and amortization costs from the 2021 period to the 2022 period (in thousands): 2022 2021 Increase/(Decrease)
Depreciation and amortization expenses from existing properties
$ 26,243 $ 28,112 $ (1,869) Depreciation and amortization from property disposed - 38 (38)$ 26,243 $ 28,150 $ (1,907) Depreciation and amortization costs decreased at existing properties as certain construction and development related assets, as well as lease related intangibles recorded as part of the acquisition price of acquired properties, which are amortized over shorter lives, became fully depreciated during the reporting periods. 42
-------------------------------------------------------------------------------- INTEREST EXPENSE Interest expense decreased$2.7 million in the 2022 period compared to the 2021 period for the following reasons:
•During August and
•During 2021, we paid down approximately
OTHER INCOME (EXPENSE) Other income (expense) increased approximately$3.7 million in the 2022 period compared to the 2021 period. InMarch 2021 , theRioCan joint venture closed on the sale of its outlet center inSaint-Sauveur , for net proceeds of approximately$9.4 million . Our share of the proceeds was approximately$4.7 million . As a result of this transaction, we recorded a foreign currency loss of approximately$3.6 million in other income (expense), which had been previously recorded in other comprehensive income. EQUITY IN EARNINGS OF UNCONSOLIDATED JOINT VENTURES Equity in earnings of unconsolidated joint ventures increased approximately$744,000 in the 2022 period compared to the 2021 period. In the table below, information set forth for properties disposed includes theSaint-Sauveur, Quebec outlet center in our Canadian joint venture, which was sold inMarch 2021 . 2022 2021
Increase/(Decrease)
Equity in earnings from existing properties
1,000 Equity in earnings from property disposed - 256 (256)$ 2,513 $ 1,769 $ 744 The increase in equity in earnings from existing properties is primarily due to increase in variable rental revenues at our joint ventures and a refund received from a property tax appeal at one of the centers.
LIQUIDITY AND CAPITAL RESOURCES OF THE COMPANY
In this "Liquidity and Capital Resources of the Company" section, the term "the Company" refers only toTanger Factory Outlet Centers, Inc. on an unconsolidated basis, excluding theOperating Partnership . The Company's business is operated primarily through theOperating 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 theOperating Partnership . The Company does not hold any indebtedness, and its only material asset is its ownership of partnership interests of theOperating 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 theOperating Partnership . Through its status as the sole general partner of theOperating Partnership , the Company has the full, exclusive and complete responsibility for theOperating Partnership's day-to-day management and control. The Company causes theOperating Partnership to distribute all, or such portion as the Company may in its discretion determine, of its available cash in the manner provided in theOperating Partnership's partnership agreement. The Company receives proceeds from equity issuances from time to time, but is required by theOperating Partnership's partnership agreement to contribute the proceeds from its equity issuances to theOperating Partnership in exchange for partnership units of theOperating Partnership . We are a well-known seasoned issuer with a shelf registration that expires inFebruary 2024 that allows the Company to register unspecified various classes of equity securities and theOperating 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. 43 -------------------------------------------------------------------------------- The liquidity of the Company is dependent on theOperating 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 theOperating Partnership to comply with various financial and other covenants before it may make distributions to the Company. The Company also guarantees some of theOperating Partnership's debt. If theOperating 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 theOperating Partnership . The Company believes theOperating Partnership's sources of working capital, specifically its cash flow from operations and cash on hand, are adequate for it to make its distribution payments to the Company and, in turn, for the Company to make any minimum 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 theOperating 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 theOperating 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. Our ability to access capital on favorable terms as well as to use cash from operations to continue to meet our liquidity needs, all of which are highly uncertain and cannot be predicted, could be affected by various risks and uncertainties, including, but not limited to, the effects of the COVID-19 pandemic and other risks detailed in "Risk Factors" section of our Annual Report on Form 10-K for the year endedDecember 31, 2021 . 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, theOperating 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 theOperating Partnership's working capital needs, as well as potential new developments, expansions and renovations of existing properties, acquisitions, or investments in existing or newly created joint ventures. The Company currently consolidates theOperating Partnership because it has (1) the power to direct the activities of theOperating Partnership that most significantly impact theOperating Partnership's economic performance and (2) the obligation to absorb losses and the right to receive the residual returns of theOperating Partnership that could be potentially significant. The Company does not have significant assets other than its investment in theOperating Partnership . Therefore, the assets and liabilities and the revenues and expenses of the Company and theOperating 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 theOperating Partnership level, and the Company has guaranteed some of theOperating Partnership's unsecured debt as discussed below. Because the Company consolidates theOperating Partnership , the section entitled "Liquidity and Capital Resources of theOperating 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. InFebruary 2021 , we established an at-the-market share offering program ("ATM Offering") under our shelf registration statement on Form S-3. We may offer and sell our common shares,$0.01 par value per share ("Common Shares"), having an aggregate gross sales price of up to$250.0 million (the "Shares"). We may sell the Shares in amounts and at times to be determined by us but we have no obligation to sell any of the Shares. Actual sales, if any, will depend on a variety of factors to be determined by us from time to time, including, among other things, market conditions, the trading price of the Common Shares, capital needs and determinations by us of the appropriate sources of its funding.The Operating Partnership currently intends to use the net proceeds from the sale of shares pursuant to the ATM Offering for working capital and general corporate purposes. 44 -------------------------------------------------------------------------------- The following table sets forth information regarding settlements under our ATM Offering program: Three months ended March 31, 2022 2021 Number of common shares settled during the period - 6,867,078 Average price per share $ -$ 19.02 Aggregate gross proceeds (in thousands) $ -$ 130,638 Aggregate net proceeds after selling commissions and fees (in thousands) $ -$ 128,655 InMay 2021 , the Company's Board of Directors authorized the repurchase of up to$80.0 million of the Company's outstanding shares throughMay 31, 2023 . This authorization replaced a previous repurchase authorization for approximately$80 million that expired inMay 2021 . The Company temporarily suspended share repurchases for the twelve months startingJuly 1, 2020 and ending onJune 30, 2021 in light of a repurchase covenant. OnJuly 1, 2021 , a covenant in the Company's debt agreements (the "repurchase covenant") prohibiting share repurchases expired. 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. The Company did not repurchase any shares for both the three months endedMarch 31, 2022 and 2021. The remaining amount authorized to be repurchased under the program as ofMarch 31, 2022 was approximately$80.0 million . InJanuary 2022 , the Company's Board of Directors declared a$0.1825 cash dividend per common share payable onFebruary 15, 2022 to each shareholder of record onJanuary 31, 2022 , and in its capacity asGeneral Partner of theOperating Partnership , a$0.1825 cash distribution perOperating Partnership unit to theOperating Partnership's unitholders. InApril 2022 , the Company's Board of Directors declared a$0.20 cash dividend per common share payable onMay 13, 2022 to each shareholder of record onApril 29, 2022 , and in its capacity asGeneral Partner of theOperating Partnership a$0.20 cash distribution perOperating Partnership unit to theOperating Partnership's unitholders.
LIQUIDITY AND CAPITAL RESOURCES OF THE OPERATING PARTNERSHIP
In this "Liquidity and Capital Resources of the
Summary of Our Major Sources and Uses of Cash and Cash Equivalents
General Overview Property rental income represents our primary source to pay property operating expenses, debt service, capital expenditures and distributions, excluding non-recurring capital expenditures and acquisitions. To the extent that our cash flow from operating activities is insufficient to cover such non-recurring capital expenditures and acquisitions, we finance such activities from borrowings under our unsecured lines of credit, to the extent available, or from the proceeds from theOperating Partnership's debt offerings and the Company's equity offerings. We believe we achieve a strong and flexible financial position by attempting to: (1) maintain a prudent 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. Our ability to access capital on favorable terms as well as to use cash from operations to continue to meet our liquidity needs, all of which are highly uncertain and cannot be predicted, could be affected by various risks and uncertainties, including, but not limited to, the effects of the COVID-19 pandemic and other risks detailed in the "Risk Factors" section of our Annual Report on Form 10-K for the year endedDecember 31, 2021 . 45 -------------------------------------------------------------------------------- Capital Expenditures The following table details our capital expenditures for consolidated outlet centers for the three months endedMarch 31, 2022 and 2021 (in thousands): Three
months ended
2022 2021 Change Capital expenditures analysis: New outlet center developments and expansions (1)$ 2,439 $ 131 $ 2,308 Renovations - 23 (23) Second generation tenant allowances 1,252 778 474 Other capital expenditures (2) 1,627 2,634 (1,007) 5,318 3,566 1,752 Conversion from accrual to cash basis 549 3,791 (3,242) Additions to rental property-cash basis$ 5,867
(1)The increase in new outlet center developments and expansions is primarily due to pre-development costs at our potential site inNashville, TN and other projects. (2)The decrease in other capital expenditures in 2022 was primarily due to timing of projects and our decision in 2020 to defer all capital projects except essential and life-safety projects to 2021 due to the impact on cash flows caused by the COVID-19 pandemic. Potential Future Developments, Acquisitions and Dispositions As of the date of this filing, we are in the pre-development period for potential new developments, including a site inNashville, TN. We may also use a joint venture arrangement to develop other potential sites. However, there can be no assurance that these potential future projects will ultimately be developed. In the case of projects to be wholly-owned by us, we would 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. 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.Unconsolidated Real Estate Joint Ventures From time to time, we form joint venture arrangements to develop outlet centers. As ofMarch 31, 2022 we have partial ownership interests in six unconsolidated outlet centers totaling approximately 2.1 million square feet, including two outlet centers inCanada . See Note 4 to the consolidated financial statements for details of our individual joint ventures, including, but not limited to, carrying values of our investments, fees we receive for services provided to the joint ventures, recent development and financing transactions and condensed combined summary financial information. 46 -------------------------------------------------------------------------------- We may elect to fund cash needs of a joint venture through equity contributions (generally on a basis proportionate to our ownership interests), advances or partner loans, although such funding is not typically required contractually or otherwise. 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 and intend to provide further financial support to these joint ventures. We believe our joint ventures will be able to fund their operating and capital needs for the next twelve months based on their sources of working capital, specifically cash flow from operations, access to contributions from partners, and ability to refinance debt obligations, including the ability to exercise upcoming extensions of near term maturities. Our joint ventures are typically encumbered by a mortgage on the joint venture property. 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. A default by a joint venture under its debt obligations may expose us to liability under the guaranty. For construction and mortgage loans, we may include a guaranty of completion as well as a principal guaranty ranging from 0% to 17% of principal. The principal guarantees include terms for release based upon satisfactory completion of construction and 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. 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.
Contractual Obligations
There were no material changes in our commitments during the three months endedMarch 31, 2022 under contractual obligations from those disclosed in our Annual Report on Form 10-K for the year endedDecember 31, 2021 , other than the following updates to our contractual obligations for future debt and interest payments over the next five years and thereafter as ofMarch 31, 2022 . Future Debt Obligations As described further in Note 6 of the notes to the consolidated financial statements, as ofMarch 31, 2022 , scheduled maturities of our existing long-term debt for the remainder of 2022, 2023, 2024, 2025 and 2026 are$3.4 million ,$44.9 million ,$305.1 million ,$1.5 million and$355.7 million , respectively. As ofMarch 31, 2022 , scheduled maturities after 2026 aggregate to$700.0 million . Future Interest Payments We are obligated to make periodic interest payments at fixed and variable rates, depending on the terms of the applicable debt agreements. Based on applicable interest rates and scheduled debt maturities as ofMarch 31, 2022 , these interest obligations total approximately$239.0 million and range from approximately$30.2 million to$40.8 million on an annual basis over the next five years. If prevailing interest rates result in higher interest rates, then future interest payments related to our variable debt outstanding would increase. 47 --------------------------------------------------------------------------------
Cash Flows
The following table sets forth our changes in cash flows fromMarch 31, 2022 and 2021 (in thousands): Three months ended March 31, 2022 2021 Change Net cash provided by operating activities$ 18,688 $ 31,201 $ (12,513) Net cash provided by (used in) investing activities (3,340) 2,717 (6,057) Net cash provided by (used in) financing activities (23,914) 82,956 (106,870)
Effect of foreign currency rate changes on cash and equivalents
(8) (60) 52
Net increase (decrease) in cash and cash equivalents
$ 116,814 $ (125,388) Operating Activities In 2022, our net cash provided by operating activities decreased year over year due to changes in accounts payable and accrued expenses. The decrease was partially offset by an increase in rental revenues primarily due an increase in occupancy rates, variable rental revenues and reversals of revenue reserves. Investing Activities The decrease in net cash provided by (used in) investing activities was primarily due to the net proceeds of approximately$8.1 received in 2021 from the sale of ourJeffersonville outlet center, lower distributions in excess of cumulative earnings from unconsolidated joint ventures and lower other investing activities. In addition, we made a$7.0 million contribution to theGalveston /Houston joint venture in 2021 to reduce the principal balance of the mortgage loan. No property sales or contributions to joint ventures occurred in 2022. Financing Activities Net cash used provided by (used in) financing activities decreased during the first three months of 2022 primarily due to proceeds received from our common share offering of$128.7 million inMarch 2021 . Additionally, inMarch 2021 , we paid down a portion of our unsecured term loan with cash on hand. For the three months endedMarch 31, 2022 , there was an increase in dividends paid and an increase in deferred financing costs.
Financing Arrangements
As ofMarch 31, 2022 , unsecured borrowings represented 96% of our outstanding debt and 92% of the gross book value of our real estate portfolio was unencumbered. The Company guarantees theOperating Partnership's obligations under our lines of credit. As ofMarch 31, 2022 , we maintained unsecured lines of credit that provided for borrowings of up to$520.0 million . The unsecured lines of credit as ofMarch 31, 2022 included a$20.0 million liquidity line and a$500.0 million syndicated line. The syndicated line may be increased up to$1.2 billion through an accordion feature in certain circumstances. 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 andOperating Partnership are well-known seasoned issuers with a joint shelf registration statement on Form S-3, expiring inFebruary 2024 , that allows us to register unspecified amounts of different classes of securities. 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. 48
-------------------------------------------------------------------------------- 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 typically 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. The extent to which the COVID-19 pandemic continues to impact our financial condition, results of operations and cash flows will depend on future developments which are highly uncertain and cannot be predicted with confidence, including the scope, severity and duration of the pandemic, the actions taken to contain the pandemic or mitigate its impact, the timing or effectiveness of any vaccines or treatments, and the direct and indirect economic effects of the pandemic and containment measures, among others. As ofMarch 31, 2022 , the Company's total liquidity was approximately$672.8 million , including cash and cash equivalents on the Company's balance sheet and the full undrawn capacity under its$520 million unsecured lines of credit. We expect to have sufficient liquidity to meet our obligations for at least the next 12 months. We believe our current balance sheet position is financially sound; however, due to the economic uncertainty caused by the COVID-19 pandemic and the inherent 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 term loan dueApril 2024 . Equity Offerings under the ATM Offering Program InFebruary 2021 , the Company implemented the ATM Offering program whereby it may offer and sell the Company's common shares having an aggregate gross sales price of up to$250.0 million . During 2021, under this program, the Company sold 10.0 million shares at a weighted average price of$18.97 per share, generating net proceeds of$187.1 million and leaving a remaining authorization of$60.1 million . The proceeds were contributed to theOperating Partnership and then used primarily to reduce indebtedness as described in the sections immediately below. There were no shares sold under the ATM program for the three months endedMarch 31, 2022 .
Debt Covenants
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 atMarch 31, 2022 are, in compliance with all of our debt covenants. Our continued compliance with these covenants depends on many factors and could be impacted by current or future economic conditions, including those associated with the COVID-19 pandemic. Failure to comply with these covenants would result in a default which, if we were unable to cure or obtain a waiver from the lenders, could accelerate the repayment obligations. Further, in the event of default, the Company may be restricted from paying dividends to its shareholders in excess of dividends required to maintain its REIT qualification. Accordingly, an event of default could have a material and adverse impact on us. As a result, we have considered our short-term (one year or less from the date of filing these financial statements) liquidity needs and the adequacy of our estimated cash flows from operating activities and other financing sources to meet these needs. These other sources include but are not limited to: existing cash, ongoing relationships with certain financial institutions, our ability to sell debt or issue equity subject to market conditions and proceeds from the potential sale of non-core assets. We believe that we have access to the necessary financing to fund our short-term liquidity needs. 49
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As ofMarch 31, 2022 , 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:
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