United
      StatesSECURITIES
      AND EXCHANGE COMMISSIONWashington,
      D.C.  20549FORM
      10-K





[X]ANNUAL
      REPORT PURSUANT TO SECTION 13 OR 15(d) OF THESECURITIES
      EXCHANGE ACT OF 1934For
      the fiscal year ended December 31, 2008OR[  ]TRANSITION
      REPORT PURSUANT TO SECTION 13 OR 15(d) OF THESECURITIES
      EXCHANGE ACT OF 1934For
      the transition period from _________ to _________Commission
      file number No.333-3526-01TANGER
      PROPERTIES LIMITED PARTNERSHIP(Exact
      name of Registrant as specified in its charter)North
      Carolina
            56-1822494(State
      or other jurisdiction of incorporation or organization)
            (I.R.S.
      Employer Identification No.)3200
      Northline Avenue, Suite 360
            (336)
      292-3010Greensboro,
      NC 27408
            (Registrant’s
      telephone number)(Address
      of principal executive offices)Securities
      registered pursuant to Section 12(b) of the Act: NoneSecurities
      registered pursuant to Section 12(g) of the
      Act:  None


Indicate
by check mark if the registrant is well-known seasoned issuer, as defined in
Rule 405 of the Securities Act.


Yes  o No ý





Indicate
by check mark if the registrant is not required to file reports pursuant to
Section 13 or Section 15(d) of the Act.


Yes o  No ý





Indicate
by check mark whether the Registrant (1) has filed all reports required to be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the Registrant was required
to file such reports), and (2) has been subject to such filing requirements for
the past 90 days. Yes ý   No
o





Indicate
by check mark if disclosure of delinquent filers pursuant to Item 405 of
Regulation S-K is not contained herein, and will not be contained, to the best
of Registrant’s knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. o





Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer or a smaller reporting company. See
the definitions of “large accelerated filer”, “accelerated filer: and “smaller
reporting company” (as defined in Rule 12b-2 of the Securities and Exchange Act
of 1934). o Large
accelerated filer  o Accelerated filer ý Non-accelerated filer
o Smaller reporting
company





Indicate
by check mark whether the registrant is a shell company (as defined by Rule
12b-2 of the Act).   Yes o  No ý





Documents
Incorporated By Reference


Part III
incorporates certain information by reference from the definitive proxy
statement of Tanger Factory Outlet Centers, Inc. to be filed with respect to the
Annual Meeting of Shareholders to be held May 8, 2009.





PART
I





Item
1.   Business





The
Company





Tanger
Properties Limited Partnership and subsidiaries, a North Carolina limited
partnership, focuses exclusively on developing, acquiring, owning, operating and
managing factory outlet shopping centers.  We are one of the largest
owners and operators of factory outlet centers in the United
States.  As of December 31, 2008, we owned and operated 30 outlet
centers, with a total gross leasable area of approximately 8.8 million square
feet.  These factory outlet centers were 97% occupied and contained
over 1,900 stores, representing approximately 370 store brands.  We
also operated and had partial ownership interests in three outlet centers
totaling approximately 1.4 million square feet.





We are
controlled by Tanger Factory Outlet Centers, Inc. and subsidiaries, a
fully-integrated, self-administered and self-managed real estate investment
trust, or REIT.  The Company owns the majority of the partnership
interests issued by the Operating Partnership, which we refer to as units,
through its two wholly-owned subsidiaries, the Tanger GP Trust and the Tanger LP
Trust.  The Tanger GP Trust controls the Operating Partnership as its
sole general partner.  The Tanger LP Trust holds a limited partnership
interest.  The remaining units are held by the Tanger family through
ownership of the Tanger Family Limited Partnership.  Stanley K.
Tanger, the Company’s Chairman of the Board, is the sole general partner of the
Tanger Family Limited Partnership.  Unless the context indicates
otherwise, the term “Operating Partnership” refers to Tanger Properties Limited
Partnership and subsidiaries and the term “Company” refers to Tanger Factory
Outlet Centers, Inc. and subsidiaries.  The terms “we”, “our” and “us”
refer to the Operating Partnership or the Operating Partnership and the Company
together, as the text requires.





As of
December 31, 2008, Tanger GP Trust owned 150,000 units of the Operating
Partnership, Tanger LP Trust owned 15,683,751 units of the Operating Partnership
and the Tanger Family Limited Partnership owned the remaining 3,033,305
units.  Each Tanger Family Limited Partnership unit is exchangeable
for two of the Company’s common shares, subject to certain limitations to
preserve the Company’s status as a REIT.  In addition, Tanger LP Trust
owned 3,000,000 preferred units which were issued by the Operating Partnership
in exchange for the proceeds from the Company’s issuance of 3.0 million 7.5%
Class C Cumulative Preferred Shares, or Class C Preferred Shares.  If
the Company redeems any Class C Preferred Shares, the Operating Partnership will
redeem an equivalent number of preferred units for the liquidation preference
value of the Company’s Class C Preferred Shares.





As of
February 1, 2009, the Company’s management beneficially owned approximately 19%
of all outstanding Company common shares (assuming the Tanger Family Limited
Partnership’s common units are exchanged for Company common shares but without
giving effect to the exercise of any outstanding share and partnership unit
options or the conversion of the exchangeable notes).





Ownership
of the Company’s common shares is restricted to preserve the Company’s status as
a REIT for federal income tax purposes. Subject to certain exceptions, a person
may not actually or constructively own more than 4% of the Company’s common
shares or 9.8% of the Company’s Class C Preferred Shares. The Company also
operates in a manner intended to enable it to preserve its status as a REIT,
including, among other things, making distributions with respect to its
outstanding common shares equal to at least 90% of its taxable income each
year.





We are a
North Carolina limited partnership that was formed in May 1993.  Our
executive offices are currently located at 3200 Northline Avenue, Suite 360,
Greensboro, North Carolina, 27408 and our telephone number is (336)
292-3010.  Our website can be accessed at
www.tangeroutlet.com.  A copy of our 10-K’s, 10-Q’s, 8-K’s and any
amendments thereto can be obtained, free of charge, on our website as soon as
reasonably practicable after we file such material with, or furnish it to, the
Securities and Exchange Commission, or the Commission.








Recent
Developments





Washington,
Pennsylvania and Deer Park (Long Island), New York





On August
29, 2008, we held the grand opening of our 371,000 square foot outlet center
located south of Pittsburgh in Washington, Pennsylvania.  Tenants
include Nike, Gap, Old Navy, Banana Republic, Coach and others. At December 31,
2008, the outlet center was 85% leased.  Based upon the response
by customers at this center’s grand opening events, we believe there is tenant
interest in the remaining available space and additional signed leases will be
completed over time.





On
October 23, 2008, we held the grand opening of the initial phase of the Deer
Park, New York project.  The project contains approximately 685,000
square feet including a 32,000 square foot Neiman Marcus Last Call store, which
is the first and only one on Long Island. Other tenants include Anne Klein,
Banana Republic, BCBG, Christmas Tree Shops, Eddie Bauer, Reebok, New York
Sports Club and others.  Regal Cinemas has also leased 67,000 square
feet for a 16-screen Cineplex, one of the few state of the art cineplexes on
Long Island.  The project also includes approximately 29,000 square
feet of warehouse space that is utilized to support the operations of our
tenants. The project was 78% occupied as of December 31, 2008.





Acquisition
of Interest in Myrtle Beach Highway 17 Joint Venture





On
January 5, 2009, we purchased the remaining 50% interest in the Myrtle Beach Hwy
17 joint venture for a cash price of $32.0 million which was net of the
assumption of the existing mortgage loan of $35.8 million.  The
acquisition was funded by amounts available under our unsecured lines of
credit.





Potential
Future Developments





We
currently have an option for a new development site located in Mebane, North
Carolina on the highly traveled Interstate 40/85 corridor, which sees over
83,000 cars daily.  The site is located halfway between the Research
Triangle Park area of Raleigh, Durham, and Chapel Hill, and the Triad area of
Greensboro, High Point and Winston-Salem.  During the option period,
we are analyzing the viability of the site and determining whether to proceed
with the development of a center at this location.





We
currently have an option for a new development site located in Irving, Texas,
which would be our third in the state. The site is strategically located west of
Dallas at the North West quadrant of busy State Highway 114 and Loop 12 and will
be the first major project planned for the Texas Stadium Redevelopment
Area.  It is also adjacent to the upcoming DART light rail line (and
station stop) connecting downtown Dallas to the Las Colinas Urban Center, the
Irving Convention Center and the Dallas/Fort Worth Airport.





At this
time, we are in the initial study period on these potential new
locations.  As such, there can be no assurance that either of these
sites will ultimately be developed.  These projects, if realized,
would be primarily funded by amounts available under our unsecured lines of
credit but could also be funded by other sources of capital such as
collateralized construction loans, public debt or equity offerings as necessary
or available.  In the fourth quarter of 2008, we made the decision to
terminate our purchase options in Port St. Lucie, Florida and Phoenix,
Arizona.  As a result, we recorded a $3.9 million charge relating to
our predevelopment costs on these and other projects deemed no longer
probable.





Store
Closings Related to Current Economic Environment





Our
country and the world are facing some of the most difficult financial times in
recent history.  This uncertainty has affected all sectors of business
and the retail outlet sector is no exception.  Following is a listing
of significant tenants that had store closings in 2008 and those that have
informed us of their intention to close in the coming year:


Tenants
            Time
      period
              of
      closing
            Square
      feet
            Square
      feet
              re-leased
            %
      increase
              in
      base rent upon re-leaseMikasa,
      Borders, Springmaid, Bombay, WestPoint Stevens, Little Me
            1st
      half 2008
            236,000
            60%
            64%Geoffrey
      Beene, Big Dog, Pepperidge Farms
            2nd
      half 2008
            93,000
            31%
            63%Pfaltzgraff,
      S&K Menswear, Koret, Sag Harbor, KB Toys
            2009
            171,000
            ---
            ---








Much of
this space is being re-leased with substantial increases in base rental
rates.  However, given current economic conditions it may take longer
to re-lease the remaining space and more difficult to achieve similar increases
in base rental rates.  Also, there may be additional tenants that have
not informed us of their intentions and which may close stores in the coming
year.  There can be no assurances that we will be able to re-lease
such space.  While the timing of an economic recovery is unclear and
these conditions may not improve quickly, we believe in our business and our
long-term strategy.





Financing
Transactions





On
February 15, 2008, our $100.0 million, 9.125% unsecured senior notes
matured.  We repaid these notes with amounts available under our
unsecured lines of credit.





During
the first quarter of 2008, we increased the maximum availability under our
existing unsecured lines of credit by $125.0 million, bringing our total
availability to $325.0 million.  The terms of the increases were
identical to those included within the existing unsecured lines of
credit.  Five of our six lines of credit, representing $300.0 million,
have maturity dates of June 2011 or later.  One line of credit,
representing $25.0 million and for which no amounts were outstanding on December
31, 2008 is scheduled to expire in June 2009.





During
the second quarter of 2008, we closed on a $235.0 million unsecured three year
syndicated term loan facility.  Based on our current debt ratings, the
facility bears interest of LIBOR plus 160 basis points.  Depending on
our investment grade debt ratings, the interest rate can vary from LIBOR plus
125 basis points to LIBOR plus 195 basis points.





In June
2008, proceeds from the term loan were used to pay off our mortgage loan with a
principal balance of approximately $170.7 million.  A prepayment
premium, representing interest through the July payment date, of approximately
$406,000 was paid at closing.  The remaining proceeds of approximately
$62.8 million, net of closing costs, were applied against amounts outstanding on
our unsecured lines of credit and to settle two interest rate lock protection
agreements.





In July
2008 and September 2008, we entered into interest rate swap agreements with
Wells Fargo Bank, N.A. and Branch Banking and Trust Company, or BB&T, for
notional amounts of $118.0 million and $117.0 million,
respectively.  The purpose of these swaps was to fix the interest rate
on the $235.0 million outstanding under the term loan facility completed in June
2008.  The swaps fixed the one month LIBOR rate at 3.605% and 3.70%,
respectively.  When combined with the current spread of 160 basis
points which can vary based on changes in our debt ratings, these swap
agreements fix our interest rate on the $235.0 million of variable rate debt at
5.25% until April 1, 2011.





In
October 2008, our debt rating was upgraded by the Standard and Poor’s Ratings
Services from BBB- to BBB, making the Company one of only two REITs to receive a
ratings upgrade in 2008.  We currently have an investment grade rating
with Moody’s Investors Service of Baa3.  Because of this upgrade, one
of our line of credit borrowing rates decreased to LIBOR plus 60 basis
points.  Of the $161.5 million outstanding on our unsecured lines of
credit as of December 31, 2008, the borrowing rates range from LIBOR plus 60
basis points to LIBOR plus 75 basis points.





We
believe our current balance sheet position is financially sound; however, due to
the current weakness in and unpredictability of the capital and credit markets,
we can give no assurance that affordable access to capital will exist between
now and 2011 when our next debt maturities occur.  As a result, our
current primary focus is to strengthen our capital and liquidity position by
controlling and reducing construction and overhead costs, generating positive
cash flows from operations to cover our distributions and reducing outstanding
debt.





The
Factory Outlet Concept





Factory
outlets are manufacturer-operated retail stores that sell primarily first
quality, branded products at significant discounts from regular retail prices
charged by department stores and specialty stores. Factory outlet centers offer
numerous advantages to both consumers and
manufacturers.  Manufacturers selling in factory outlet stores are
often able to charge customers lower prices for brand name and designer products
by eliminating the third party retailer.  Factory outlet centers also
typically have lower operating costs than other retailing formats, which enhance
the manufacturer’s profit potential.  Factory outlet centers enable
manufacturers to optimize the size of production runs while continuing to
maintain control of their distribution channels.  In addition, factory
outlet centers benefit manufacturers by permitting them to sell out-of-season,
overstocked or discontinued merchandise without alienating department stores or
hampering the manufacturer’s brand name, as is often the case when merchandise
is distributed via discount chains.





We
believe that factory outlet centers will continue to present attractive
opportunities for capital investment in the long-term. We further believe, based
upon our contacts with present and prospective tenants that many companies will
continue to utilize the factory outlet concept as a profitable distribution
vehicle.  However, due to present economic conditions and illiquidity
in the financial and credit markets, new development or expansion may not
provide the attractive investment returns historically
achieved.








Our
Factory Outlet Centers





Each of
our factory outlet centers carries the Tanger brand name.  We believe
that national manufacturers and consumers recognize the Tanger brand as one that
provides factory outlet shopping centers where consumers can trust the brand,
quality and price of the merchandise they purchase directly from the
manufacturers.





As one of
the original participants in this industry, we have developed long-standing
relationships with many national and regional manufacturers.  Because
of our established relationships with many manufacturers, we believe we are well
positioned for the long-term.





Our
factory outlet centers range in size from 24,619 to 729,315 square feet and are
typically located at least 10 miles from major department stores and
manufacturer-owned, full-price retail stores.  Manufacturers prefer
these locations so that they do not compete directly with their major customers
and their own stores. Many of our factory outlet centers are located near
tourist destinations to attract tourists who consider shopping to be a
recreational activity.  Our centers are typically situated in close
proximity to interstate highways that provide accessibility and visibility to
potential customers.





As of
February 1, 2009, we had a diverse tenant base comprised of approximately 370
different well-known, upscale, national designer or brand name concepts, such as
Polo Ralph Lauren, Off Saks Fifth Avenue, Neiman Marcus, GAP, Banana Republic,
Old Navy, Liz Claiborne, Juicy, Kate Spade, Lucky Brand Jeans, Reebok, Tommy
Hilfiger, Abercrombie & Fitch, Hollister, Eddie Bauer, Coach Leatherware,
Brooks Brothers, BCGB, Michael Kors, Nike and others.  Most of the
factory outlet stores are directly operated by the respective
manufacturer.





No single
tenant (including affiliates) accounted for 10% or more of combined base and
percentage rental revenues during 2008, 2007 and 2006.  As of February
1, 2009, our largest tenant, The Gap Inc., including all of its store concepts,
accounted for approximately 8.4% of our leasable square feet.  Because
our typical tenant is a large, national manufacturer, we have not experienced
any significant problems with respect to rent collections or lease
defaults.





Revenues
from fixed rents and operating expense reimbursements accounted for
approximately 91% of our total revenues in 2008.  Revenues from
contingent sources, such as percentage rents, vending income and miscellaneous
income, accounted for approximately 9% of 2008 revenues.  In
conclusion, only small portions of our revenues are dependent on contingent
revenue sources.





Business
History





Stanley
K. Tanger, the Company’s founder and Chairman of the Board of Directors, entered
the factory outlet center business in 1981.  Prior to founding our
company, Stanley K. Tanger and his son, Steven B. Tanger, our President and
Chief Executive Officer, built and managed a successful family owned apparel
manufacturing business, Tanger/Creighton Inc., or Tanger/Creighton, which
business included the operation of five factory outlet stores.  Based
on their knowledge of the apparel and retail industries, as well as their
experience operating Tanger/Creighton’s factory outlet stores, they recognized
that there would be a demand for factory outlet centers where a number of
manufacturers could operate in a single location and attract a large number of
shoppers.





In 1981,
Stanley K. Tanger began developing successful factory outlet
centers.  Steven B. Tanger joined the Company in 1986.  By
June 1993, the Tangers had developed 17 centers totaling approximately 1.5
million square feet. In June 1993, we completed our initial public offering,
making Tanger Factory Outlet Centers, Inc. the first publicly traded outlet
center company.  Since our initial public offering, we have grown our
portfolio through the strategic development, expansion and acquisition of outlet
centers and are now one of the largest owner operators of factory outlet centers
in the country.





Business
Strategy





The
Operating Partnership has been built on a firm foundation of strong and enduring
business relationships coupled with conservative business
practices.  We partner with many of the world’s best known and most
respected retailers and manufacturers.  By fostering and maintaining
strong tenant relationships with these successful, high volume companies, we
have been able to solidify our position as a leader in the outlet industry for
more than a quarter century.  The confidence and trust that we have
developed with our retail partners from the very beginning has allowed us to
forge the impressive retail alliances that we enjoy today with approximately 370
brand name manufacturers.





Nothing
takes the place of experience.  We have had a solid track record of
success in the outlet industry for the past 28 years.  In 1993, Tanger
led the way by becoming the industry’s first outlet center company to be
publicly traded.  Our seasoned team of real estate professionals
utilizes the knowledge and experience that we have gained to give us a
competitive advantage and a history of accomplishments in the manufacturers’
outlet business.








We are
proud to report that as of December 31, 2008, our wholly- owned outlet centers
were 97% occupied with average tenant sales of $328 per square
foot.  Our properties have had an average occupancy rate of 95% or
greater on December 31st of each year since 1981. The ability to achieve this
level of performance is a testament to our long-standing relationships, industry
experience and our expertise in the development and operation of manufacturers'
outlet centers.





Growth
Strategy





Growth
doesn’t happen by chance.  Our goal is to build shareholder value
through a comprehensive, conservative plan for sustained, long-term
growth.  We focus our efforts on increasing rents in our existing
centers, renovation and expansion of our mature centers and reaching new markets
through the ground-up development or acquisition of new outlet
centers.





Increasing
Rents at Existing Centers





Our
leasing team implements an ongoing strategy designed to positively impact our
bottom line.  This is accomplished through the aggressive marketing of
available space to maintain our standard for high occupancy
levels.  Leases are negotiated to provide for inflation-based
contractual rent increases or periodic fixed contractual rent increases and
percentage rents.  Due to the overall high performance of our shopping
centers, we have historically been able to renew leases at higher base rents per
square-foot and attract stronger, more popular brands to replace under
performing tenants.





Developing
New Centers and Expanding Existing Centers





We
believe that there continue to be opportunities to introduce the Tanger brand in
untapped or under-served markets across the United States of America in the
long-term.  As we search the country looking for new markets, we do
our homework and determine site viability on a timely and cost-effective
basis.  Our 28 years of outlet industry experience, extensive
development expertise and strong retail relationships give us a distinct
competitive advantage.  Keeping our shopping centers across the nation
vibrant and growing is a key part of our formula for success.  In
order to maintain our reputation as the premiere outlet shopping destination in
the markets that we serve, we have an ongoing program of renovations and
expansions taking place at our outlet centers coast to coast.  We hope
that the current difficult conditions will moderate over time but the timing of
an economic recovery is unclear and these conditions may not improve quickly.
While we expect development to continue to be important to the growth of our
portfolio in the long-term, we expect decreasing levels of development activity
in 2009 as compared to prior years.





We follow
a general set of guidelines when evaluating opportunities for the development or
acquisition of new centers.  This typically includes seeking locations
within markets that have at least 1 million people residing within a 30 to 40
mile radius with an average household income of at least $65,000 per year,
frontage on a major interstate or roadway that has excellent visibility and a
traffic count of at least 55,000 cars per day.  Leading tourist,
vacation and resort markets that receive at least 5 million visitors annually
are also on our development radar and are closely evaluated.  Although
our current goal is to target sites that are large enough to support centers
with approximately 75 stores totaling at least 300,000 square feet, we maintain
the flexibility to vary our minimum requirements based on the unique
characteristics of a site and our prospects for future growth and
success.





In order
to help ensure the viability of proceeding with a project, we gauge the interest
of our retail partners first.  Historically, we required that at least
50% of the space in each center is pre-leased prior to acquiring the site and
beginning construction.  Given the current economic environment, we
are taking a cautionary approach to development in order to insure the success
of our future projects.  Our pre-leasing policy is consistent with our
conservative financing perspective and the discipline we impose upon
ourselves.  Construction of a new factory outlet center has normally
taken us nine to twelve months from groundbreaking to the opening of the first
tenant stores.  Construction for expansion and renovation to existing
properties typically takes less time, usually between six to nine months
depending on the scope of the project.





Acquiring
Centers





As a
means of creating a presence in key markets and to create unitholder value, we
may selectively choose to acquire individual properties or portfolios of
properties that meet our strategic investment criteria.  We believe
that our extensive experience in the outlet center business, access to capital
markets, familiarity with real estate markets and our management experience will
allow us to evaluate and execute our acquisition strategy successfully over
time. Through our tenant relationships, our leasing professionals have the
ability to implement a remerchandising strategy when needed to increase
occupancy rates and value.  We believe that our managerial skills,
marketing expertise and overall outlet industry experience will also allow us to
add long-term value and viability to these centers.








Operating
Strategy





Increasing
cash flow to enhance the value of our properties and operations remains a
primary business objective. Through targeted marketing and operational
efficiencies, we strive to improve sales and profitability for our tenants and
our shopping centers as a whole.  Achieving higher base and percentage
rents and generating additional income from temporary leasing, vending and other
sources also remains an important focus and goal.





Leasing





The
long-standing retailer relationships that we enjoy allow us the ability to
provide our shoppers with a collection of the world’s most popular outlet
stores. Tanger customers shop and save on their favorite brand name merchandise
including men's, women's and children's ready-to-wear, lifestyle apparel,
footwear, jewelry & accessories, tableware, housewares, luggage and domestic
goods.  In order that our centers can perform at a high level, our
leasing professionals continually monitor and evaluate tenant mix, store size,
store location and sales performance.  They also work to assist our
tenants through re-sizing and re-location of retail space within each of our
centers for maximum sales of each retail unit across our portfolio.





Marketing





Our
marketing plans deliver compelling, well-crafted messages or enticing promotions
and events to targeted audiences for tangible, meaningful and measurable
results.  Our plans are based on a basic measure of success – increase
sales and traffic for our retail partners and we will create successful
centers.  Utilizing a strategic mix of print, radio, television,
direct mail, website, internet advertising and public relations, we consistently
reinforce the message that “Tanger is the place to shop for the best brands and
the biggest outlet savings - direct from the manufacturer”.  Our
marketing efforts are also designed to build loyalty with current Tanger
shoppers and create awareness with potential customers.  The majority
of consumer-marketing expenses incurred by us are reimbursable by our
tenants.





Capital
Strategy





We
believe we achieve a strong and flexible financial position by attempting to:
(1) manage our leverage position relative to our portfolio when pursuing new
development and expansion 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 our liquidity by using our lines of
credit in a conservative manner and (5) preserve internally generated sources of
capital by strategically divesting our underperforming assets and maintaining a
conservative distribution payout ratio.





Our goal
is to retain the ability to raise additional capital, including public debt or
equity, to pursue attractive investment opportunities that may arise and to
otherwise act in a manner that we believe to be in our unitholders’ best
interests.  We believe our current balance sheet position is
financially sound; however, due to the current weakness and unpredictability in
the capital and credit markets, we can give no assurance that affordable access
to capital will exist between now and 2011 when our next debt maturities
occur.  As a result, our current primary focus is to strengthen our
capital and liquidity position by controlling and reducing construction and
overhead costs, generating positive cash flows from operations to cover our
distributions and reducing outstanding debt.





At the
Company’s 2007 Annual Shareholders’ Meeting, shareholders approved an increase
in the Company’s authorized common shares from 50.0 million to 150.0 million and
added four additional classes of preferred shares with an authorized number of
four million shares each.  All proceeds from the Company’s common and
preferred share issuances are contributed to the Operating Partnership in
exchange for common and preferred units.  We, together with the
Company, have a joint shelf registration that allows us to register unspecified
amounts of different classes of securities on Form S-3.  We intend to
update our shelf registration during the second quarter of 2009.  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 credit
facilities, ongoing negotiations with certain financial institutions and our
ability to sell debt or equity subject to market conditions, we believe that we
have access to the necessary financing to fund the planned capital expenditures
during 2009.





In
October 2008, our debt rating was upgraded by the Standard and Poor’s Ratings
Services from BBB- to BBB, making the Company one of only two REITs to receive a
ratings upgrade in 2008.  We currently have an investment grade rating
with Moody’s Investors Service of Baa3.  Because of this upgrade, one
of our line of credit borrowing rates decreased to LIBOR plus 60 basis
points.  Of the $161.5 million outstanding on our unsecured lines of
credit as of December 31, 2008, the borrowing rates range from LIBOR plus 60
basis points to LIBOR plus 75 basis points.








Competition





We
carefully consider the degree of existing and planned competition in a proposed
area before deciding to develop, acquire or expand a new center.  Our
centers compete for customers primarily with factory outlet centers built and
operated by different developers, traditional shopping malls and full- and
off-price retailers.  However, we believe that the majority of our
customers visit factory outlet centers because they are intent on buying
name-brand products at discounted prices.  Traditional full- and
off-price retailers are often unable to provide such a variety of name-brand
products at attractive prices.





Tenants
of factory outlet centers typically avoid direct competition with major
retailers and their own specialty stores, and, therefore, generally insist that
the outlet centers be located not less than 10 miles from the nearest major
department store or the tenants’ own specialty stores.  For this
reason, our centers compete only to a very limited extent with traditional malls
in or near metropolitan areas.





We
compete with two large national owners of factory outlet centers and numerous
small owners.  During the last several years, the factory outlet
industry has been consolidating with smaller, less capitalized operators
struggling to compete with, or being acquired by, larger, national factory
outlet operators.  High barriers to entry in the factory outlet
industry, including the need for extensive relationships with premier brand name
manufacturers, have minimized the number of new factory outlet centers. This
consolidation trend and the high barriers to entry, along with our national
presence, access to capital and extensive tenant relationships, have allowed us
to grow our business and improve our market position.





Corporate
and Regional Headquarters





We rent
space in an office building in Greensboro, North Carolina in which our corporate
headquarters are located.  In addition, we rent a regional office in
New York City, New York under a lease agreement and sublease agreement to better
service our principal fashion-related tenants, many of whom are based in and
around that area.





We
maintain offices and employ on-site managers at 31 centers. The managers closely
monitor the operation, marketing and local relationships at each of their
centers.





Insurance





We
believe that as a whole our properties are covered by adequate comprehensive
liability, fire, flood, earthquake and extended loss insurance provided by
reputable companies with commercially reasonable and customary deductibles and
limits.  Northline Indemnity, LLC, or Northline, a wholly-owned
captive insurance subsidiary of the Operating Partnership, is responsible for
losses up to certain levels for property damage (including wind damage from
hurricanes) prior to third-party insurance coverage.  Specified types
and amounts of insurance are required to be carried by each tenant under their
lease agreement with us.  There are however, types of losses, like
those resulting from wars or nuclear radiation, which may either be uninsurable
or not economically insurable in some or all of our locations.  An
uninsured loss could result in a loss to us of both our capital investment and
anticipated profits from the affected property.





Employees





As of
February 1, 2009, we had 207 full-time employees, located at our corporate
headquarters in North Carolina, our regional office in New York and our 31
business offices.  At that date, we also employed 233 part-time
employees at various locations.








Item
1A.                      Risk
Factors





Risks
Related to our Business





We
face competition for the acquisition of factory outlet centers, and we may not
be able to complete acquisitions that we have identified.





One
component of our business strategy is expansion through acquisitions, and we may
not be successful in completing acquisitions that are consistent with our
strategy. We compete with institutional pension funds, private equity investors,
other REITs, small owners of factory outlet centers, specialty stores and others
who are engaged in the acquisition, development or ownership of factory outlet
centers and stores. These competitors may affect the supply/demand dynamics and,
accordingly, increase the price we must pay for factory outlet centers we seek
to acquire.  These competitors may succeed in acquiring those factory
outlet centers themselves. Also, our potential acquisition targets may find our
competitors to be more attractive acquirers because they may have greater
marketing and financial resources, may be willing to pay more, or may have a
more compatible operating philosophy. In addition, the number of entities
competing for factory outlet centers may increase in the future,which would increase demand for
these factory outlet centers and the prices we must pay to acquire them. If we
pay higher prices for factory outlet centers, our profitability may be reduced.
Also, once we have identified potential acquisitions, such acquisitions are
subject to the successful completion of due diligence, the negotiation of
definitive agreements and the satisfaction of customary closing
conditions.  We cannot assure you that we will be able to reach
acceptable terms with the sellers or that these conditions will be
satisfied.





The
economic performance and the market value of our factory outlet centers are
dependent on risks associated with real property investments.





Real
property investments are subject to varying degrees of risk. The economic
performance and values of real estate may be affected by many factors, including
changes in the national, regional and local economic climate, inflation,
unemployment rates, consumer confidence, local conditions such as an oversupply
of space or a reduction in demand for real estate in the area, the
attractiveness of the properties to tenants, competition from other available
space, our ability to provide adequate maintenance and insurance and increased
operating costs.





Real
property investments are relatively illiquid.





Our
factory outlet centers represent a substantial portion of our total consolidated
assets.  These assets are relatively illiquid.  As a result,
our ability to sell one or more of our factory outlet centers in response to any
changes in economic or other conditions is limited.  If we want to
sell a factory outlet center, there can be no assurance that we will be able to
dispose of it in the desired time period or that the sales price will exceed the
cost of our investment.





Our
earnings and therefore our profitability are entirely dependent on rental income
from real property.





Substantially
all of our income is derived from rental income from real property. Our income
and funds for distribution would be adversely affected if a significant number
of our tenants were unable to meet their obligations to us or if we were unable
to lease a significant amount of space in our centers on economically favorable
lease terms. In addition, the terms of factory outlet store tenant leases
traditionally have been significantly shorter than in other retail segments.
There can be no assurance that any tenant whose lease expires in the future will
renew such lease or that we will be able to re-lease space on economically
favorable terms.





We
are subject to the risks associated with debt financing.





We are
subject to the risks associated with debt financing, including the risk that the
cash provided by our operating activities will be insufficient to meet required
payments of principal and interest.  If the national and world-wide
financial crisis continues, disruptions in the capital and credit markets may
adversely affect our operations, including the ability to fund the planned
capital expenditures and potential new developments or
acquisitions.  Further, there is the risk that we will not be able to
repay or refinance existing indebtedness or that the terms of any refinancing
will not be as favorable as the terms of existing indebtedness. If we are unable
to access capital markets to refinance our indebtedness on acceptable terms, we
might be forced to dispose of properties on disadvantageous terms, which might
result in losses.








We
are substantially dependent on the results of operations of our
retailers.





Our
operations are necessarily subject to the results of operations of our retail
tenants. 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' results of operations would reduce the income produced by our
properties. If the sales of our retail tenants decline sufficiently, such
tenants may be unable to pay their existing rents as such rents would represent
a higher percentage of their sales. Any resulting leasing delays, failures to
make payments or tenant bankruptcies could result in the termination of such
tenants' leases.





A number
of companies in the retail industry, including some of our tenants, have
declared bankruptcy or have voluntarily closed certain of their stores in recent
years. The bankruptcy of a major tenant or number of tenants may result in the
closing of certain affected stores, and we may not be able to re-lease the
resulting vacant space for some time or for equal or greater rent. Such
bankruptcy could have a material adverse effect on our results of operations and
could result in a lower level of funds for distribution.





The Company is required by law to
make distributions to its shareholders and therefore we must make distributions
to the Company.





To obtain
the favorable tax treatment associated with its qualification as a REIT,
generally, the Company is required to distribute to its common and preferred
shareholders at least 90.0% of its net taxable income (excluding capital gains)
each year. The Company depends upon distributions or other payments from us to
make distributions to its common and preferred shareholders.





We
may be unable to develop new factory outlet centers or expand existing factory
outlet centers successfully.





We
continue to develop new factory outlet centers and expand factory outlet centers
as opportunities arise. However, there are significant risks associated with our
development activities in addition to those generally associated with the
ownership and operation of established retail properties. While we have policies
in place designed to limit the risks associated with development, these policies
do not mitigate all development risks associated with a project. These risks
include the following:





•      significant
expenditure of money and time on projects that may be delayed or never be
completed;





•      higher than
projected construction costs;





•      shortage
of construction materials and supplies;





•
            failure
      to obtain zoning, occupancy or other governmental approvals or to the
      extent required, tenant approvals;
and





•
            late
      completion because of construction delays, delays in the receipt of
      zoning, occupancy and other approvals or other factors outside of our
      control.





Any or
all of these factors may impede our development strategy and adversely affect
our overall business.





An
uninsured loss or a loss that exceeds our insurance policies on our factory
outlet centers or the insurance policies of our tenants could subject us to lost
capital or revenue on those centers.





Some of
the risks to which our factory outlet centers are subject, including risks of
war and earthquakes, hurricanes and other natural disasters, are not insurable
or may not be insurable in the future. Should a loss occur that is uninsured or
in an amount exceeding the combined aggregate limits for the insurance policies
noted above or in the event of a loss that is subject to a substantial
deductible under an insurance policy, we could lose all or part of our capital
invested in and anticipated revenue from one or more of our factory outlet
centers, which could adversely affect our results of operations and financial
condition, as well as our ability to make distributions to our
unitholders.





Under the
terms and conditions of our leases, tenants generally are required to indemnify
and hold us harmless from liabilities resulting from injury to persons and
contamination of air, water, land or property, on or off the premises, due to
activities conducted in the leased space, except for claims arising from
negligence or intentional misconduct by us or our agents. Additionally, tenants
generally are required, at the tenant's expense, to obtain and keep in full
force during the term of the lease, liability and property damage insurance
policies issued by companies acceptable to us. These policies include liability
coverage for bodily injury and property damage arising out of the ownership,
use, occupancy or maintenance of the leased space. All of these policies may
involve substantial deductibles and certain exclusions.  Therefore, an
uninsured loss or loss that exceeds the insurance policies of our tenants could
also subject us to lost capital or revenue.





We
may be subject to environmental regulation.





Under
various federal, state and local laws, ordinances and regulations, we may be
considered an owner or operator of real property and may be responsible for
paying for the disposal or treatment of hazardous or toxic substances released
on or in our property or disposed of by us, as well as certain other potential
costs which could relate to hazardous or toxic substances (including
governmental fines and injuries to persons and property). This liability may be
imposed whether or not we knew about, or were responsible for, the presence of
hazardous or toxic substances.








Historically
high fuel prices may impact consumer travel and spending habits.





Our
markets recently experienced historically high fuel prices. Most shoppers use
private automobile transportation to travel to our factory outlet centers and
many of our centers are not easily accessible by public transportation.
Increasing fuel costs may reduce the number of trips to our centers thus
reducing the amount spent at our centers. Many of our factory outlet center
locations near tourist destinations may experience an even more acute reduction
of shoppers if there were a reduction of people opting to drive to vacation
destinations. Such reductions in traffic could adversely impact our percentage
rents and ability to renew and release space at current rental
rates.





Increasing
fuel costs may also reduce disposable income and decrease demand for retail
products. Such a decrease could adversely affect the results of operations of
our retail tenants and adversely impact our percentage rents and ability to
renew and release space at current rental rates.





Item
1B.            Unresolved
Staff Comments





There are
no unresolved staff comments from the Commission.





Item
2.              
Properties





As of
February 1, 2009, our wholly-owned portfolio consisted of 31 outlet centers
totaling 9.2 million square feet located in 21 states. We operate and own
interests in two other centers totaling approximately 950,000 square feet
through unconsolidated joint ventures.  Our centers range in size from
24,619 to 729,315 square feet.  The centers are generally located near
tourist destinations or along major interstate highways to provide visibility
and accessibility to potential customers.





We
believe that the centers are well diversified geographically and by tenant and
that we are not dependent upon any single property or tenant.  Our
Foley, Alabama and Riverhead, New York centers are the only properties that
represented more than 10% of our consolidated total assets or consolidated total
revenues as of December 31, 2008. See “Business and Properties - Significant
Property”.





We have
an ongoing strategy of acquiring centers, developing new centers and expanding
existing centers. See “Management’s Discussion and Analysis of Financial
Condition and Results of Operations--Liquidity and Capital Resources” for a
discussion of the cost of such programs and the sources of financing
thereof.





With the
acquisition of the remaining 50% interest in the Myrtle Beach Hwy 17 joint
venture in January 2009, we now have one center which serves as collateral for a
mortgage note payable.  Of the 31 outlet centers in our wholly-owned
portfolio, we own the land underlying twenty-seven and have ground leases on
four. The land on which the Sevierville center is located is subject to
long-term ground leases expiring in 2046.  The land parcel on which
the original Riverhead center is located, approximately 47 acres, is also
subject to a ground lease with an initial term that was automatically renewed
for an additional five years in 2004, with renewal at our option for up to six
more additional terms of five years each.  Terms on the Riverhead
center ground lease are renewed automatically unless we give notice
otherwise.  The land parcel on which the Riverhead center expansion is
located, containing approximately 43 acres, is owned by us.  The 2.7
acre land parcel on which part of the Rehoboth Beach center is located, is also
subject to a ground lease with an initial term expiring in 2044, with renewal at
our option for additional terms of twenty years each.  The
approximately 40 acre land parcel on which the Myrtle Beach Hwy 17 center is
located is subject to a ground lease with an initial term that expires in 2026
and contains provisions for seven successive renewal options of ten years
each.





The
initial term of our typical tenant lease averages approximately five
years.  Generally, leases provide for the payment of fixed monthly
rent in advance.  There are often contractual base rent increases
during the initial term of the lease. In addition, the rental payments are
customarily subject to upward adjustments based upon tenant sales
volume.  Most leases provide for payment by the tenant of real estate
taxes, insurance, common area maintenance, advertising and promotion expenses
incurred by the applicable center.  As a result, the majority of our
operating expenses for the centers are borne by the tenants.








The
following table summarizes certain information with respect to our wholly-owned
outlet centers as of February 1, 2009.





State
            Number
      of
              Centers
            Square
              Feet
            %
              of
      Square FeetSouth
      Carolina
            4
            1,569,268
            17Georgia
            3
            826,643
            9New
      York
            1
            729,315
            8Pennsylvania
            2
            625,678
            7Texas
            2
            619,806
            7Delaware
            1
            568,869
            6Alabama
            1
            557,185
            6Michigan
            2
            436,751
            5Tennessee
            1
            419,038
            4Missouri
            1
            302,992
            3Utah
            1
            298,379
            3Connecticut
            1
            291,051
            3Louisiana
            1
            282,403
            3Iowa
            1
            277,230
            3Oregon
            1
            270,280
            3Illinois
            1
            256,514
            3New
      Hampshire
            1
            245,563
            3Florida
            1
            198,950
            2North
      Carolina
            2
            186,413
            2California
            1
            171,300
            2Maine
            2
            84,313
            1Total
            31
            9,217,941
            100








The
following table summarizes certain information with respect to our existing
outlet centers in which we have an ownership interest as of February 1,
2009.  Except as noted, all properties are fee owned.





Location
            Square
              Feet
            
            %
              OccupiedWholly-Owned
      Outlet CentersRiverhead,
      New York (1)
            729,315
            
            97Rehoboth,
      Delaware (1)
            568,869
            
            98Foley, Alabama
            557,185
            
            92San
      Marcos, Texas
            442,006
            
            98Myrtle
      Beach Hwy 501, South Carolina
            426,417
            
            88Sevierville,
      Tennessee (1)
            419,038
            
            98Myrtle
      Beach Hwy 17, South Carolina (1)
            402,442
            
            100Hilton
      Head, South Carolina
            388,094
            
            89Washington,
      Pennsylvania
            370,526
            
            83Charleston,
      South Carolina
            352,315
            
            94Commerce
      II, Georgia
            347,025
            
            94Howell,
      Michigan
            324,631
            
            98Branson,
      Missouri
            302,992
            
            96Park
      City, Utah
            298,379
            
            100Locust
      Grove, Georgia
            293,868
            
            97Westbrook,
      Connecticut
            291,051
            
            96Gonzales,
      Louisiana
            282,403
            
            100Williamsburg,
      Iowa
            277,230
            
            99Lincoln
      City, Oregon
            270,280
            
            95Tuscola,
      Illinois
            256,514
            
            80Lancaster,
      Pennsylvania
            255,152
            
            100Tilton,
      New Hampshire
            245,563
            
            98Fort
      Meyers, Florida
            198,950
            
            96Commerce
      I, Georgia
            185,750
            
            72Terrell,
      Texas
            177,800
            
            97Barstow,
      California
            171,300
            
            100West
      Branch, Michigan
            112,120
            
            98Blowing
      Rock, North Carolina
            104,235
            
            100Nags
      Head, North Carolina
            82,178
            
            97Kittery
      I, Maine
            59,694
            
            100Kittery
      II, Maine
            24,619
            
            1009,217,941
            
            95
      (2)Unconsolidated
      Joint VenturesWisconsin
      Dells, Wisconsin (50% owned)
            264,929
            
            97Deer
      Park, New York (33.3% owned) (3)
            684,952
            
            78





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


(2)
            Excludes
      the occupancy rate at our Washington, Pennsylvania outlet center which
      opened during the third quarter of 2008 and has not yet
      stabilized.


(3)
            Includes
      a 29,253 square foot warehouse adjacent to the property utilized to
      support the operations of the retail
tenants.











Lease
Expirations





The
following table sets forth, as of February 1, 2009, scheduled lease expirations
for our wholly-owned outlet centers, assuming none of the tenants exercise
renewal options.






Year
            No.
      of
              Leases
              Expiring
            Approx.
              Square
              Feet(1)
            
            Average
              Annualized
              Base
      Rent
              per
      sq. ft
            
            Annualized
              Base
      Rent (2)
            %
      of Gross
              Annualized
              Base
      Rent
              Representedby
              Expiring
      Leases2009
            178
            689,000
            
            $
      17.09
            
            $
      11,777,000
            82010
            318
            1,315,000
            
            17.98
            
            23,642,000
            162011
            324
            1,503,000
            
            16.75
            
            25,168,000
            162012
            313
            1,491,000
            
            16.90
            
            25,191,000
            162013
            330
            1,488,000
            
            19.39
            
            28,859,000
            192014
            126
            643,000
            
            16.82
            
            10,815,000
            72015
            40
            179,000
            
            18.50
            
            3,311,000
            22016
            45
            194,000
            
            20.61
            
            3,999,000
            32017
            63
            269,000
            
            20.93
            
            5,630,000
            42018
            63
            286,000
            
            27.77
            
            7,942,000
            52019
      & thereafter
            48
            271,000
            
            23.63
            
            6,404,000
            41,848
            8,328,000
            
            $18.34
            
            $152,738,000
            100





(1)
            Excludes
      leases that have been entered into but which tenant has not yet taken
      possession, vacant suites, space under construction, temporary leases and
      month-to-month leases totaling in the aggregate approximately 890,000
      square feet.(2)
            Annualized
      base rent is defined as the minimum monthly payments due as of February 1,
      2009 annualized, excluding periodic contractual fixed increases and rents
      calculated based on a percentage of tenants’
  sales.








Rental
and Occupancy Rates





The
following table sets forth information regarding the expiring leases for our
wholly-owned outlet centers during each of the last five calendar
years.





Total
      Expiring
            
            Renewed
      by Existing
              TenantsYear
            
            Square
      Feet
            
            %
      of
              Total
      Center Square Feet
            
            Square
      Feet
            
            %
      of
              Expiring
      Square Feet2008
            
            1,350,000
            
            16
            
            1,103,000
            
            822007
            
            1,572,000
            
            19
            
            1,246,000
            
            792006
            
            1,760,000
            
            21
            
            1,466,000
            
            832005
            
            1,812,000
            
            22
            
            1,525,000
            
            842004
            
            1,790,000
            
            20
            
            1,571,000
            
            88





The
following tables set forth the weighted average base rental rate increases per
square foot on both a cash and straight-line basis for our wholly-owned outlet
centers upon re-leasing stores that were turned over or renewed during each of
the last five calendar years.





Cash Basis (excludes periodic,
contractual fixed rent increases)





Renewals
      of Existing Leases
            
            Stores
      Re-leased to New Tenants (1)Average
      Annualized Base Rents
            
            
            
            Average
      Annualized Base Rents($
      per sq. ft.)
            
            
            
            ($
      per sq. ft.)Year
            Square
      Feet
            Expiring
            New
            %
              Increase
            
            Square
      Feet
            
            Expiring
            
            New
            %
              Increase2008
            1,103,000
            $
      17.33
            $
      19.69
            14
            492,000
            
            $
      18.39
            $
      24.48
            332007
            1,246,000
            $
      16.11
            $
      17.85
            11
            610,000
            
            $
      17.07
            $
      22.26
            302006
            1,466,000
            $
      15.91
            $
      17.22
            8
            465,000
            
            $
      16.43
            $
      19.16
            172005
            1,525,000
            $
      15.44
            $
      16.37
            6
            419,000
            
            $
      16.56
            $
      17.74
            72004
            1,571,000
            $
      13.63
            $
      14.40
            6
            427,000
            
            $
      16.43
            $
      17.27
            5





Straight-line Basis (includes
periodic, contractual fixed rent increases)(2)





Renewals
      of Existing Leases
            
            Stores
      Re-leased to New Tenants (1)Average
      Annualized Base Rents
            
            
            
            Average
      Annualized Base Rents($
      per sq. ft.)
            
            
            
            ($
      per sq. ft.)Year
            Square
      Feet
            Expiring
            New
            %
              Increase
            
            Square
      Feet
            
            Expiring
            
            New
            %
              Increase2008
            1,103,000
            $
      17.29
            $
      20.31
            17
            492,000
            
            $
      18.03
            $
      25.97
            442007
            1,246,000
            $
      15.94
            $
      18.15
            14
            610,000
            
            $
      16.75
            $
      23.41
            402006
            1,466,000
            $
      15.65
            $
      17.43
            11
            465,000
            
            $
      16.19
            $
      19.90
            23





(1)
            The
      square footage released to new tenants for 2008, 2007, 2006, 2005 and 2004
      contains 139,000, 164,000, 129,000, 112,000 and 94,000 square feet,
      respectively, that was released to new tenants upon expiration of an
      existing lease during the current year.(2)
            Information
      not available prior to 2006.




Occupancy
Costs





We
believe that our ratio of average tenant occupancy cost (which includes base
rent, common area maintenance, real estate taxes, insurance, advertising and
promotions) to average sales per square foot is low relative to other forms of
retail distribution.  The following table sets forth for tenants that
report sales, for each of the last five years, tenant occupancy costs per square
foot as a percentage of reported tenant sales per square foot for our
wholly-owned centers.





Year
            Occupancy
      Costs as a
              %
      of Tenant Sales2008
            8.22007
            7.72006
            7.42005
            7.52004
            7.3








Tenants


The
following table sets forth certain information for our wholly-owned centers with
respect to our ten largest tenants and their store concepts as of February 1,
2009.




Tenant
                                                        Number
                                                          of
      Stores
                                                        Square
      Feet
                                                        %
      of Total
                                                          Square
      FeetThe
      Gap, Inc.:Old
      Navy
                                                        22
                                                        331,512
                                                        3.6GAP
                                                        25
                                                        242,128
                                                        2.6Banana
      Republic
                                                        20
                                                        167,542
                                                        1.8Gap
      Kids
                                                        6
                                                        35,349
                                                        0.473
                                                        776,531
                                                        8.4Phillips-Van
      Heusen Corporation:Bass
      Shoe
                                                        29
                                                        186,518
                                                        2.0Van
      Heusen
                                                        28
                                                        113,357
                                                        1.2Calvin
      Klein, Inc.
                                                        14
                                                        76,891
                                                        0.9Izod
                                                        18
                                                        48,952
                                                        0.5Geoffrey
      Beene Co. Store
                                                        3
                                                        13,380
                                                        0.292
                                                        439,098
                                                        4.8VF
      Outlet Inc.:VF
      Outlet
                                                        8
                                                        199,541
                                                        2.2Nautica
      Factory Stores
                                                        20
                                                        95,916
                                                        1.0Vans
                                                        4
                                                        12,000
                                                        0.1Nautica
      Kids
                                                        2
                                                        5,841
                                                        *34
                                                        313,298
                                                        3.3Nike:Nike
                                                        21
                                                        295,724
                                                        3.2Cole-Haan
                                                        3
                                                        9,223
                                                        0.1Converse
                                                        1
                                                        3,158
                                                        *25
                                                        308,105
                                                        3.3Adidas:Reebok
                                                        22
                                                        208,058
                                                        2.3Adidas
                                                        8
                                                        74,030
                                                        0.8Rockport
                                                        4
                                                        12,046
                                                        0.134
                                                        294,134
                                                        3.2Liz
      Claiborne:Liz
      Claiborne
                                                        23
                                                        240,409
                                                        2.6Lucky
      Brand Jeans
                                                        4
                                                        12,106
                                                        0.1DKNY
      Jeans
                                                        2
                                                        5,820
                                                        0.1Juicy
                                                        2
                                                        5,275
                                                        0.1Liz
      Claiborne Women
                                                        1
                                                        3,100
                                                        0.1Liz
      Golf
                                                        1
                                                        2,884
                                                        *Kate
      Spade
                                                        1
                                                        2,500
                                                        *34
                                                        272,094
                                                        3.0Dress
      Barn, Inc.:Dress
      Barn
                                                        25
                                                        199,553
                                                        2.2Maurice’s
                                                        9
                                                        36,027
                                                        0.4Dress
      Barn Woman
                                                        3
                                                        18,572
                                                        0.2Dress
      Barn Petite
                                                        2
                                                        9,570
                                                        0.139
                                                        263,722
                                                        2.9Carter’s:OshKosh
      B”Gosh
                                                        24
                                                        122,282
                                                        1.3Carter’s
                                                        23
                                                        107,223
                                                        1.247
                                                        229,505
                                                        2.5Jones
      Retail Corporation:Nine
      West
                                                        21
                                                        53,827
                                                        0.6Jones
      Retail Corporation
                                                        16
                                                        56,020
                                                        0.6Easy
      Spirit
                                                        18
                                                        48,675
                                                        0.5Kasper
                                                        12
                                                        29,803
                                                        0.3Anne
      Klein
                                                        8
                                                        19,605
                                                        0.275
                                                        207,930
                                                        2.2Polo
      Ralph Lauren:Polo
      Ralph Lauren
                                                        21
                                                        189,669
                                                        2.1Polo
      Jeans Outlet
                                                        1
                                                        5,000
                                                        0.1Polo
      Ralph Lauren Children
                                                        1
                                                        3,000
                                                        *23
                                                        197,669
                                                        2.2Total
      of all tenants listed in table
                                                        476
                                                        3,302,086
                                                        35.8





* Less
than 0.1%.








Significant
Property





The
Foley, Alabama and Riverhead, New York centers are the only properties that
comprise more than 10% of our consolidated gross revenues or consolidated total
assets.  The Foley outlet center, acquired in December 2003,
represented 10% of our consolidated total assets as of December 31,
2008.  The Foley outlet center is 557,185 square feet and underwent a
major reconfiguration and renovation in 2007 and 2008.  The Riverhead
center, originally constructed in 1994, represented 12% of our consolidated
total revenues for the year ended December 31, 2008.  The Riverhead
center is 729,315 square feet.





Tenants
at the Foley and Riverhead outlet centers principally conduct retail sales
operations.  The following table shows occupancy and certain base
rental information related to these properties as of December 31, 2008, 2007 and
2006:





Center
      Occupancy
            2008
            2007
            2006Foley,
      AL
            93%
            97%
            98%Riverhead,
      NY
            98%
            100%
            100%Average
      base rental rates per weighted average square foot
            2008
            2007
            2006Foley,
      AL
            $
      19.18
            $
      19.13
            $
      18.23Riverhead,
      NY
            $
      25.36
            $
      23.59
            $
      23.09





Depreciation
on the outlet centers is computed on the straight-line basis over the estimated
useful lives of the assets.  We generally use estimated lives ranging
from 25 to 33 years for buildings, 15 years for land improvements and seven
years for equipment.  Expenditures for ordinary maintenance and
repairs are charged to operations as incurred while significant renovations and
improvements, including tenant finishing allowances, which improve and/or extend
the useful life of the asset are capitalized and depreciated over their
estimated useful life.  At December 31, 2008, the net federal tax
basis of the Foley and Riverhead centers was approximately $123.0 million and
$69.8 million, respectively.  Real estate taxes assessed on these
centers during 2008 amounted to $4.1 million.  Real estate taxes for
2009 are estimated to be approximately $4.2 million.





The
following table sets forth, as of February 1, 2009, combined, scheduled lease
expirations at the Foley and Riverhead outlet centers assuming that none of the
tenants exercise renewal options:


Year
              No.
      of
                Leases
                Expiring
      (1)
              Square
      Feet (1)
              Annualized
                Base
      Rent
                per
      Square Foot
              Annualized
                Base
      Rent  (2)
              %
      of Gross
                Annualized
                Base
      Rent
                Represented
                by
      Expiring
                Leases2009
              28
              100,000
              $  23.86
              $   2,386,000
              92010
              42
              171,000
              23.25
              3,975,000
              152011
              32
              156,000
              19.57
              3,053,000
              112012
              55
              249,000
              22.76
              5,667,000
              212013
              38
              205,000
              23.13
              4,741,000
              172014
              19
              103,000
              19.06
              1,963,000
              72015
              8
              36,000
              25.67
              924,000
              32016
              8
              25,000
              28.88
              722,000
              32017
              11
              47,000
              30.36
              1,427,000
              52018
              11
              43,000
              31.79
              1,367,000
              52019
      and thereafter
              6
              34,000
              31.38
              1,067,000
              4Total
              258
              1,169,000
              $  23.35
              $
      27,292,000
              100


(1)  Excludes
      leases that have been entered into but which tenant has not taken
      possession, vacant suites, temporary leases and month-to-month leases
      totaling in the aggregate approximately 117,000 square
    feet.


(2)  Annualized
      base rent is defined as the minimum monthly payments due as of February 1,
      2009, excluding periodic contractual fixed increases and rents calculated
      based on a percentage of tenants’
sales.




Item
      3.
            Legal
      Proceedings





We are
subject to legal proceedings and claims that have arisen in the ordinary course
of our business and have not been finally adjudicated.  In our
opinion, the ultimate resolution of these matters will have no material effect
on our results of operations or financial condition.





Item
      4.
            Submission
      of Matters to a Vote of Security
Holders





There
were no matters submitted to a vote of security holders, through solicitation of
proxies or otherwise, during the fourth quarter of the fiscal year ended
December 31, 2008.







EXECUTIVE
OFFICERS OF THE COMPANY





The
Operating Partnership does not have any officers.  The following table
sets forth certain information concerning the executive officers of the Company
which controls the Operating Partnership through its ownership of the general
partner, Tanger GP Trust:





NAME
            AGE
            POSITIONStanley
      K. Tanger
            85
            Founder
      and Chairman of the Board of DirectorsSteven
      B Tanger
            60
            Director,
      President and Chief Executive OfficerFrank
      C. Marchisello, Jr.
            50
            Executive
      Vice President – Chief Financial Officer and SecretaryJoseph
      N. Nehmen
            60
            Senior
      Vice President – OperationsCarrie
      A. Warren
            46
            Senior
      Vice President – MarketingKevin
      M. Dillon
            50
            Senior
      Vice President – Construction and DevelopmentLisa
      J. Morrison
            49
            Senior
      Vice President – LeasingJames
      F. Williams
            44
            Senior
      Vice President – ControllerVirginia
      R. Summerell
            50
            Vice
      President – Treasurer and Assistant
Secretary





The
following is a biographical summary of the experience of the executive officers
of the Company:





Stanley K.
Tanger.  Mr. Tanger is the
founder and Chairman of the Board of Directors of the Company.  He
also served as Chief Executive Officer from inception of the Company to December
2008 and President from inception to December 1994.  Mr. Tanger opened
one of the country’s first outlet shopping centers in Burlington, North Carolina
in 1981.  Before entering the factory outlet center business, Mr.
Tanger was President and Chief Executive Officer of his family’s apparel
manufacturing business, Tanger/Creighton, Inc., for 30 years.





Steven B.
Tanger.  Mr. Tanger is a
director of the Company and was named President and Chief Executive Officer
effective January 1, 2009.  Mr. Tanger served as President and Chief
Operating Officer from January 1, 1995 to December 2008.  Previously,
Mr. Tanger served as Executive Vice President from 1986 to December
1994.  He has been with Tanger-related companies for most of his
professional career, having served as Executive Vice President of
Tanger/Creighton for 10 years. He is responsible for all phases of project
development, including site selection, land acquisition and development,
leasing, marketing and overall management of existing outlet
centers.  Mr. Tanger is a graduate of the University of North Carolina
at Chapel Hill and the Stanford University School of Business Executive Program.
Mr. Tanger is the son of Stanley K. Tanger.





Frank
C. Marchisello, Jr.  Mr. Marchisello was named Executive Vice
President and Chief Financial Officer in April 2003 and was additionally named
Secretary in May 2005.  Previously he was named Senior Vice President
and Chief Financial Officer in January 1999 after being named Vice President and
Chief Financial Officer in November 1994.  Previously, he served as
Chief Accounting Officer from January 1993 to November 1994.  He was
employed by Gilliam, Coble & Moser, certified public accountants, from 1981
to 1992, the last six years of which he was a partner of the firm in charge of
various real estate clients.  Mr. Marchisello is a graduate of the
University of North Carolina at Chapel Hill and is a certified public
accountant.





Joseph H.
Nehmen.  Mr. Nehmen was
named Senior Vice President - Operations in January 1999.  He joined
the Company in September 1995 and was named Vice President of Operations in
October 1995.  Mr. Nehmen has over 20 years experience in private
business.  Prior to joining Tanger, Mr. Nehmen was owner of Merchants
Wholesaler, a privately held distribution company in St. Louis,
Missouri.  He is a graduate of Washington University.  Mr.
Nehmen is the son-in-law of Stanley K. Tanger and brother-in-law of Steven B.
Tanger.





Carrie
A. Warren.  Ms. Warren was named Senior Vice President -
Marketing in May 2000.  Previously, she held the position of Vice
President – Marketing from September 1996 to May 2000 and Assistant Vice
President - Marketing from December 1995 to September 1996.  Prior to
joining Tanger, Ms. Warren was with Prime Retail, L.P. for 4 years where she
served as Regional Marketing Director responsible for coordinating and directing
marketing for five outlet centers in the southeast region.  Prior to
joining Prime Retail, L.P., Ms. Warren was Marketing Manager for North Hills,
Inc. for five years and also served in the same role for the Edward J. DeBartolo
Corp. for two years.  Ms. Warren is a graduate of East Carolina
University.








Kevin M.
Dillon.  Mr. Dillon was named Senior Vice President –
Construction and Development in August 2004.  Previously, he held the
positions of Vice President – Construction and Development from May 2002 to
August 2004, Vice President – Construction from October 1997 to May 2002,
Director of Construction from September 1996 to October 1997 and Construction
Manager from November 1993, the month he joined the Company, to September
1996.  Prior to joining the Company, Mr. Dillon was employed by New
Market Development Company for six years where he served as Senior Project
Manager.  Prior to joining New Market, Mr. Dillon was the Development
Director of Western Development Company where he spent 6 years.





Lisa J.
Morrison.  Ms. Morrison was named Senior Vice President –
Leasing in August 2004.  Previously, she held the positions of Vice
President – Leasing from May 2001 to August 2004, Assistant Vice President of
Leasing from August 2000 to May 2001 and Director of Leasing from April 1999
until August 2000.  Prior to joining the Company, Ms. Morrison was
employed by the Taubman Company and Trizec Properties, Inc. where she served as
a leasing agent.  Her major responsibilities include managing the
leasing strategies for our operating properties, as well as expansions and new
development.  She also oversees the leasing personnel and the
merchandising and occupancy for Tanger properties.




James
F. Williams.Mr. Williams was
named Senior Vice President and Controller in February 2006.  Mr.
Williams joined the Company in September 1993, was named Controller in January
1995 and was also named Assistant Vice President in January 1997 and Vice
President in April 2004. Prior to joining the Company Mr. Williams was the
Financial Reporting Manager of Guilford Mills, Inc. from April 1991 to September
1993 and was employed by Arthur Andersen for 5 years from 1987 to 1991. Mr.
Williams graduated from the University of North Carolina at Chapel Hill in
December 1986 and is a certified public accountant.




Virginia R.
Summerell.  Ms. Summerell was
named Vice President, Treasurer and Assistant Secretary of the Company in May
2005.  Since joining the Company in August 1992, she has held various
positions including Treasurer, Assistant Secretary and Director of
Finance.  Her major responsibilities include developing and
maintaining banking relationships, oversight of all project and corporate
finance transactions and management of treasury systems.  Previously
she served as a Vice President and in other capacities at Bank of America and
its predecessors in Real Estate and Corporate Lending for nine
years.  Ms. Summerell is a graduate of Davidson College and holds an
MBA from the Babcock School at Wake Forest University.





PART II





Item
      5.
            Market
      For Registrant’s Common Equity, Related Shareholder Matters and Issuer
      Purchases of Equity Securities





Market
Information





There is
no established public trading market for our common or preferred
units.  As of December 31, 2008, the Company’s wholly-owned
subsidiaries, Tanger GP Trust and Tanger LP Trust, owned 15,833,751 common units
and Tanger Family Limited Partnership owned 3,033,305 common units as a limited
partner.  We made distributions per common unit during 2008 and 2007
as follows:





2008
              2007First
      Quarter
              
              $
      .72
              $   .68Second
      Quarter
              
              .76
              .72Third
      Quarter
              
              .76
              .72Fourth
      Quarter
              
              .76
              .72$
      3.00
              $
      2.84








Distributions





The
Company operates in a manner intended to enable it to qualify as a REIT under
the Internal Revenue Code, or the Code.  A REIT is required to
distribute at least 90% of its taxable income to its shareholders each
year.  The Company depends upon distributions or payments from us to
make distributions to its common and preferred shareholders.  The
Company intends to continue to qualify as a REIT and to distribute substantially
all of its taxable income to its shareholders through the payment of regular
quarterly dividends.  Certain of our debt agreements limit the payment
of distributions such that distributions shall not exceed funds from operations,
or FFO, as defined in the agreements, for the prior fiscal year on an annual
basis or 95% of FFO on a cumulative basis.





Securities
Authorized for Issuance under Equity Compensation Plans





The
information required by this Item is set forth in Part III Item 12 of this
document.





Purchases
of Equity Securities by the Issuer and Affiliated Purchasers





During
1998, the Company’s Board of Directors authorized the repurchase of up to $6
million of the Company’s common shares. The timing and amount of the repurchases
is at the discretion of management.  The Company has not made any
repurchases since 1999 and the amount authorized for future repurchases
remaining at December 31, 2007 totaled $4.8 million.  Any amounts
required to repurchase the Company’s common shares will be funded by us by
redeeming one unit for every two common shares repurchased.





Item
6.         Selected Financial
Data





2008
                    2007
                    
                    2006
                    2005
                    2004(in
      thousands, except per unit and center data)OPERATING
      DATATotal
      revenues
                    $    245,391
                    $    228,765
                    $    210,962
                    $    197,949
                    $   189,651Operating
      income
                    78,904
                    71,565
                    68,942
                    73,769
                    68,961Income
      from continuing operations
                    32,403
                    32,972
                    29,435
                    7,678
                    7,742Net
      income
                    32,403
                    33,090
                    43,633
                    6,077
                    8,626SHARE
      DATABasic:Income
      from continuing operations
                    $           1.44
                    $           1.48
                    $            1.31
                    $           .14
                    $           .47Net
      income available to commonunitholders
                    $           1.44
                    $           1.49
                    $          2.08
                    $            .32
                    $           .52Weighted
      average common units
                    18,575
                    18,444
                    18,333
                    17,223
                    16,555Diluted:Income
      from continuing operations
                    $           1.43
                    $           1.45
                    $            1.29
                    $            .14
                    $           .47Net
      income available to commonunitholders
                    $           1.43
                    $           1.46
                    $          2.06
                    $            .32
                    $           .52Weighted
      average common units
                    18,715
                    18,868
                    18,574
                    17,341
                    16,650Common
      distributions paid
                    $    
            3.00
                    $          2.84
                    $         2.69
                    $          2.56
                    $         2.49BALANCE
      SHEET DATAReal
      estate assets, before depreciation
                    $
      1,399,529
                    $
      1,287,137
                    $
      1,216,847
                    $
      1,152,866
                    $1,077,393Total
      assets
                    1,121,569
                    1,059,978
                    1,040,635
                    1,000,363
                    936,105Debt
                    795,319
                    706,345
                    678,579
                    663,607
                    488,007Partners’
      equity
                    257,377
                    282,937
                    313,700
                    299,581
                    196,754OTHER
      DATACash
      flows provided by (used in):Operating
      activities
                    $     96,964
                    $
      98,609
                    $  88,354
                    $     83,912
                    $    84,774Investing
      activities
                    $
      (133,483)
                    $
      (84,803)
                    $
      (63,336)
                    $
      (336,563)
                    $      2,607Financing
      activities
                    $     39,078
                    $
      (19,826)
                    $
      (19,531)
                    $   251,488
                    $  (93,156)Gross
      Leasable Area Open:Wholly-owned
                    8,820
                    8,398
                    8,388
                    8,261
                    5,066Partially-owned
      (consolidated)
                    ---
                    ---
                    ---
                    ---
                    3,271Partially-owned
      (unconsolidated)
                    1,352
                    667
                    667
                    402
                    402Managed
                    ---
                    ---
                    293
                    64
                    105Number
      of outlet centers:Wholly-owned
                    30
                    29
                    30
                    31
                    23Partially-owned
      (consolidated)
                    ---
                    ---
                    ---
                    ---
                    9Partially-owned
      (unconsolidated)
                    3
                    2
                    2
                    1
                    1Managed
                    ---
                    ---
                    3
                    1
                    3


In
      December 2003, COROC Holdings, LLC, or COROC, a joint venture in which we
      initially had a one-third ownership interest and consolidated for
      financial reporting purposes under the provisions of FIN 46R, purchased
      the 3.3 million square foot Charter Oak portfolio of outlet center
      properties for $491.0 million.  In November 2005, we purchased
      for $286.0 million (including acquisition costs) the remaining two-thirds
      interest in this joint venture.  The transaction was funded with
      a combination of Company common and preferred shares and senior unsecured
      notes.








Item
      7.
            Management’s
      Discussion and Analysis of Financial Condition and Results of
      Operations





Cautionary
Statements





Certain
statements made below are forward-looking statements within the meaning of
Section 27A of the Securities Act and Section 21E of 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 and
expectations, are generally identifiable by use of the words ‘believe’,
‘expect’, ‘intend’, ‘anticipate’, ‘estimate’, ‘project’, or similar
expressions.  You should not rely on forward-looking statements since
they involve known and unknown risks, uncertainties and other factors which are,
in some cases, beyond our control and which could materially affect our actual
results, performance or achievements.  Factors which may cause actual
results to differ materially from current expectations include, but are not
limited to, those set forth under Item 1A – Risk Factors.





The
following discussion should be read in conjunction with the consolidated
financial statements appearing elsewhere in this report.  Historical
results and percentage relationships set forth in the consolidated statements of
operations, including trends which might appear, are not necessarily indicative
of future operations.





General
Overview





At
December 31, 2008, we had 30 wholly-owned centers in 21 states totaling 8.8
million square feet compared to 29 centers in 21 states totaling 8.4 million
square feet as of December 31, 2007.  The changes in the number of
centers, square feet and states are due to the following events:





No.
      of
              Centers
            Square
      feet
              (000’s)
            StatesAs
      of December 31, 2007
            
            29
            8,398
            21Center
      expansion:Barstow,
      California
            
            ---
            55
            ---New
      development:Washington,
      Pennsylvania
            
            1
            371
            ---Other
            
            ---
            (4)
            ---As
      of December 31, 2008
            
            30
            8,820
            21








Results
of Operations





2008
Compared to 2007





Base
rentals increased $12.2 million, or 8%, in the 2008 period compared to the 2007
period.  Our base rental income increase was due mainly to increases
in rental rates on lease renewals and incremental rents from re-tenanting vacant
space.  During the 2008 period, we executed 377 leases totaling
approximately 1.6 million square feet at an average increase of 26% in base
rental rates.  This compares to our execution of 460 leases totaling
approximately 1.9 million square feet at an average increase of 23% in base
rental rates during the 2007 period. Base rentals also increased approximately
$2.1 million due to the August 2008 opening of our new outlet center in
Washington, Pennsylvania located south of Pittsburgh,
Pennsylvania.  In addition, during the fourth quarter of 2007 and
first quarter of 2008, we added approximately 144,000 square feet of expansion
space at existing outlet centers.  The 2008 period includes a full
year effect of additional base rent from these expansions.





In
addition, the amount of termination fees recognized in the 2008 period was
approximately $1.5 million higher when compared to the 2007 period due to
several tenants terminating leases early.  Payments received from the
early termination of leases are recognized as revenue from the time the payment
is receivable until the tenant vacates the space.





The
values of the above and below market leases recorded as a result of our property
acquisitions are amortized and recorded as either an increase (in the case of
below market leases) or a decrease (in the case of above market leases) to
rental income over the remaining term of the associated lease.  For
the 2008 period, we recorded $356,000 to rental income for the net amortization
of market lease values compared with $1.1 million for the 2007
period.  If a tenant vacates its space prior to the contractual
termination of the lease and no rental payments are being made on the lease, any
unamortized balance of the related above or below market lease value will be
written off and could materially impact our net income positively or
negatively.  At December 31, 2008, the net liability representing the
amount of unrecognized below market lease values totaled approximately
$560,000.





Percentage
rentals, which represent revenues based on a percentage of tenants' sales volume
above predetermined levels (the "breakpoint"), decreased $1.7 million or
19%.  Sales were negatively impacted by the general weakness in the
U.S. economy during the 2008 period.  Reported same-space sales per
square foot for the twelve months ended December 31, 2008, excluding our center
in Foley, Alabama and on Highway 501 in Myrtle Beach, South Carolina, both of
which have been going through major renovations, were $336 per square foot, a
1.6% decrease over the prior year.  Same-space sales is defined as the
weighted average sales per square foot reported in space open for the full
duration of each comparison period.  In addition, percentage rentals
were negatively impacted by a significant number of tenants that renewed their
leases at much higher base rental rates and, accordingly, had increases to their
contractual breakpoint levels used in determining their percentage
rentals.  This essentially transformed a variable rent component into
a fixed rent component.





Expense
reimbursements represent the contractual recovery from tenants of certain common
area maintenance, insurance, property tax, promotional, advertising and
management expenses.  Accordingly, these reimbursements generally
fluctuate consistently with the related reimbursable property operating expenses
to which they relate.  Expense reimbursements increased $6.0 million,
or 9%, in the 2008 period compared to the 2007 period.  The 2008
period includes an increase in termination fees related to recoverable expenses
of $738,000 compared to 2007.  Excluding termination fees related to
recoverable expenses and abandoned due diligence costs included in property
operating expenses, expense reimbursements, expressed as a percentage of
property operating expenses were 91% and 89% in the 2008 and 2007 periods,
respectively.  This increase is due to higher caps on recoveries of
reimbursable expenses negotiated upon the renewal of leases by
tenants.





Property
operating expenses increased by $7.5 million, or 10%, in the 2008 period as
compared to the 2007 period.  Of this increase, $2.2 million relates
incrementally to our Washington, PA outlet center which opened in August
2008.  We also incurred a $3.9 million charge relating to due
diligence costs associated with potential development and acquisition
opportunities that we no longer deemed probable as compared to $646,000 in the
2007 period.  Our common area maintenance costs increased as a result
of higher snow removal costs and higher costs related to operating our mall
offices at our outlet centers.  Also, property taxes were higher at
several centers where expansions completed during the fourth quarter of 2007
were included in the 2008 period valuation.  Finally, our Charleston,
SC outlet center, which opened in August 2006, was reassessed during 2008 for
the first time at its completed value.





General
and administrative expenses increased $3.3 million, or 17%, in the 2008 period
as compared to the 2007 period.  As a percentage of total revenues,
general and administrative expenses were 9% and 8% in the 2008 and 2007 periods,
respectively.  The increase is primarily due to the amortization of
share based compensation from restricted shares issued in late February 2008. In
addition, the bonus compensation for the 2008 period was higher compared to the
2007 period based on an increase in the eligible bonus percentage for
executives.





Depreciation
and amortization decreased $1.5 million in the 2008 period compared to the 2007
period.  Depreciation expense was unusually high during 2007, due to
the reconfiguration of our center in Foley, Alabama.  As a part of
this plan, approximately 42,000 square feet of gross leasable area was relocated
within the property.  The depreciable useful lives of the buildings
demolished were shortened to coincide with their demolition dates throughout the
first three quarters of 2007 and this was accounted for as a change in
accounting estimate.  Accelerated depreciation recognized related to
the reconfiguration was $6.0 million for the year ended December 31,
2007.  The expected decrease in expense from the 2007 period from the
acceleration was partially offset by additional depreciation from expansion
assets placed in service during the fourth quarter of 2007 at several existing
outlet centers and from the Washington, PA outlet center, which opened during
August 2008.





Interest
expense decreased $1.6 million, or 4%, in the 2008 period compared to the 2007
period.  During June of 2008, we entered into a $235.0 million
unsecured three year term loan facility.  After entering into interest
rate swap protection agreements, the facility bears a weighted average interest
rate of 5.25%.  The proceeds from this transaction were used to repay
a $170.7 million secured mortgage bearing an effective interest rate of 5.18%
and amounts outstanding under our unsecured lines of credit.  We
utilized unsecured lines of credit in February 2008 to repay our $100.0 million,
9.125% unsecured senior notes.  Due to the above transactions and the
decline in LIBOR rates during the year, we incurred a lower weighted average
borrowing rate on a comparable basis between the 2008 and 2007 periods, which
more than offset the increase in average debt outstanding from our expansion and
development activities.





During
the second quarter of 2008, we settled two interest rate lock protection
agreements which were intended to fix the U.S. Treasury index at an average rate
of 4.62% for 10 years for an aggregate $200 million of new public debt which was
expected to be issued in July 2008.  We originally entered into these
agreements in 2005.  Upon the closing of the LIBOR based unsecured
term loan facility, we determined that we were unlikely to execute such a U.S.
Treasury based debt offering.  The settlement of the interest rate
lock protection agreements, at a total cost of $8.9 million, was reflected as a
loss on settlement of U.S. treasury rate locks in our consolidated statements of
operations.





Equity in
earnings of unconsolidated joint ventures decreased $621,000, or 42%, in the
2008 period as compared to the 2007 period.  During the fourth quarter
of 2008, the Tanger outlet center developed and operated by the joint venture,
Deer Park, in which we have a 33.3% ownership interest, opened.  The
outlet center was approximately 78% occupied as of December 31,
2008.  We recorded an equity loss of approximately $1.6 million
related to Deer Park due to start up costs of operations and grand opening
expenses.  This loss was offset by increases in equity in earnings
over the 2007 period from Myrtle Beach Hwy 17 and Wisconsin
Dells.  These increases were due to higher rental rates on lease
renewals at Myrtle Beach Hwy 17 as well as lower interest rates and higher
termination fees at Wisconsin Dells.  The Myrtle Beach Hwy 17 and
Wisconsin Dells outlet centers were both 100% occupied at December 31,
2008.





Discontinued
operations includes the results of operations and gains on sale of real estate
of our Boaz, Alabama outlet center which was sold in 2007.





2007
Compared to 2006





Base
rentals increased $8.7 million, or 6%, in the 2007 period compared to the 2006
period.  Our base rental income increased $5.5 million due to
increases in rental rates on lease renewals and incremental rents from
re-tenanting vacant space.  During 2007, we executed 460 leases
totaling 1.9 million square feet at an average increase of 23%.  This
compares to our execution of 479 leases totaling 1.9 million square feet at an
average increase of 14% during 2006.  Base rentals also increased
approximately $3.7 million related to a full year of operations for our outlet
center in Charleston, South Carolina, which opened in August
2006.  However, decreases were recognized in the net amortization of
above or below market leases totaling $317,000.





The
values of the above and below market leases are amortized and recorded as either
an increase (in the case of below market leases) or a decrease (in the case of
above market leases) to rental income over the remaining term of the associated
lease.  For the 2007 period, we recorded $1.1 million to rental income
for the net amortization of market lease values compared with $1.5 million for
the 2006 period.  If a tenant vacates its space prior to the
contractual termination of the lease and no rental payments are being made on
the lease, any unamortized balance of the related above or below market lease
value will be written off and could materially impact our net income positively
or negatively.  At December 31, 2007, the net liability representing
the amount of unrecognized below market lease values totaled
$916,000.





Percentage
rentals, which represent revenues based on a percentage of tenants' sales volume
above predetermined levels (the "breakpoint"), increased $1.6 million or
22%.  The increase is due partially to the addition of high volume
tenants during the last twelve months that have exceeded their
breakpoints.  Reported same-space sales per square foot for the twelve
months ended December 31, 2007 were $342 per square foot, a 1.2% increase over
the prior year ended December 31, 2006.  Same-space sales is defined
as the weighted average sales per square foot reported in space open for the
full duration of each comparison period.  Our ability to attract high
volume tenants to many of our outlet centers continues to improve the average
sales per square foot throughout our portfolio.








Expense
reimbursements, which represent the contractual recovery from tenants of certain
common area maintenance, insurance, property tax, promotional, advertising and
management expenses generally fluctuate consistently with the related
reimbursable property operating expenses to which they
relate.  Expense reimbursements increased $7.6 million, or 13%, in the
2007 period versus the 2006 period.  During 2006, we incurred a $1.5
million charge when we wrote off due diligence costs related to an abandoned
potential acquisition.  These costs were included in other property
operating expenses.  The acquisition due diligence costs were incurred
in connection with structuring, performing due diligence and submitting a
proposal to acquire a significant portfolio from a public REIT that was
exploring its strategic alternatives.  The bid was requested, but
ultimately not accepted, by the public REIT.  Excluding these
abandoned acquisition costs, expense reimbursements, expressed as a percentage
of property operating expenses, were 88% and 87% respectively, in the 2007 and
2006 periods.  The reimbursement percentage increase is due to
decreases during 2007 in miscellaneous non-reimbursable expenses such as state
franchise and excise taxes.





Property
operating expenses increased by $7.6 million, or 11%, in the 2007 period as
compared to the 2006 period, excluding the $1.5 million charge mentioned in the
previous paragraph.  Of this increase, $2.2 million relates
incrementally to our Charleston, South Carolina outlet center which opened in
August 2006.  In addition, our common area maintenance costs increased
as a result of higher snow removal costs and higher costs related to operating
our mall offices at the outlet centers in our portfolio.  Further, our
fiscal 2007 property insurance premiums increased significantly upon renewal and
remained at that level for the fiscal 2008 renewal.  Also, several
high performing centers experienced significant property tax increases upon
revaluation.





General
and administrative expenses increased $2.3 million, or 14%, in the 2007 period
as compared to the 2006 period.  The increase is primarily due to
compensation expense related to restricted shares issued during the 2007 period
as well as an increase in bonus compensation for senior executives in the 2007
period. As a percentage of total revenues, general and administrative expenses
were 8% in both the 2007 and 2006 periods.





Depreciation
and amortization increased from $57.0 million in the 2006 period to $63.8
million in the 2007 period.  A full year of depreciation and
amortization related to the assets at our outlet center in Charleston, South
Carolina which opened in August 2006 accounted for $2.0 million of the
increase.  Also, during the first quarter of 2007, our Board of
Directors formally approved a plan to reconfigure our center in Foley,
Alabama.  As a part of this plan, approximately 42,000 square feet was
relocated within the property by September 2007.  The depreciable
useful lives of the buildings demolished were shortened to coincide with their
demolition dates throughout the first three quarters of 2007 and the change in
estimated useful life was accounted for as a change in accounting
estimate.  Accelerated depreciation recognized related to the
reconfiguration was $6.0 million for the year ended December 31, 2007. These
increases were offset by a decrease in lease cost amortization of approximately
$2.0 million, primarily related to the amortization of the intangibles from the
COROC acquisitions in 2003 and 2005.





Equity in
earnings of unconsolidated joint ventures increased $205,000, or 16%, in the
2007 period as compared to the 2006 period.  During August 2006, we
opened a 264,900 square foot center in Wisconsin Dells, Wisconsin, which is
owned by Tanger Wisconsin Dells, in which we have a 50% ownership interest and
account for as an unconsolidated joint venture under the equity
method.  This center was open for all of 2007 which resulted in the
increase in our equity in earnings of unconsolidated joint
ventures.





Discontinued
operations includes the results of operations and gains on sale of real estate
of our Boaz, Alabama;  Pigeon Forge, Tennessee and North Branch,
Minnesota centers, which were sold in 2007 and 2006,
respectively.  The following table summarizes the results of
operations and gains on sale of real estate for the 2007 and 2006
periods:





Summary
      of discontinued operations
            
            2007
            
            2006Operating
      income from discontinued operations
            
            $      112
            
            $       365Gain
      on sale of real estate
            
            6
            
            13,833Discontinued
      operations
            
            $        118
            
            $  14,198








Liquidity
and Capital Resources





Operating
Activities





Net cash
provided by operating activities was $97.0 million, $98.6 million and $88.4
million for the years ended December 31, 2008, 2007 and 2006,
respectively.  Property rental income represents our primary source of
net cash provided by operating activities.  Rental and occupancy rates
are the primary factors that influence property rental income
levels.  During the past years we have experienced a consistent
overall portfolio occupancy level between 95% and 98% with strong base rental
rate growth.  Cash from operations in 2008 decreased due to the cash
settlement of the interest rate lock protection agreements, at a total cost of
$8.9 million.  Excluding this cash settlement, net cash provided by
operating activities would have increased $7.3 million in the 2008 period
compared to the 2007 period.





Investing
Activities





During
the 2008 period, we completed construction of our outlet center in Washington,
PA near Pittsburgh and had several existing center reconfigurations and
renovations underway.  During the 2007 period, we completed
approximately 89,000 square feet of expansion space at existing centers and
incurred significant initial construction costs at the Washington, PA
site.  During the 2006 period, we completed our outlet center in
Charleston, SC and sold of our centers in Pigeon Forge, TN and North Branch,
MN.  These development activities have caused net cash used in
investing activities to increase from $63.3 million in 2006, to $84.8 million in
2007 and $133.5 million in 2008.  In addition in 2008, we made capital
contributions of $1.6 million to the Deer Park joint venture to complete the
development of the project which opened in October 2008.  Each of the
ventures partners made equal contributions.





Financing
Activities





Long-term
debt is our primary method of financing the projects mentioned in the investing
activities section as we derive the majority of our operating cash flows from
our operating leases over an average of five years.  During 2008, we
were successful in closing a $235.0 million, three year unsecured term loan
facility.  We also extended and increased our unsecured lines of
credit with several major financial institutions. We now have a borrowing
capacity under our unsecured lines of credit of $325.0 million.  We
repaid $100.0 million of 9.125% senior unsecured bonds and a $170.7 million
mortgage loan during 2008.  The combination of these transactions
enabled us to provide $39.1 million of net cash from financing activities in the
2008 period for funding of the aforementioned development compared to using
$19.8 million in the 2007 period and $19.5 million in the 2006
period.  See “Financing Arrangements” for further discussion of the
above transactions.





Current
Developments and Dispositions





We intend
to continue to grow our portfolio by developing, expanding or acquiring
additional outlet centers.  In the section below, we describe the new
developments that are either currently planned, underway or recently
completed.  However, you should note that any developments or
expansions that we, or a joint venture that we are involved in, have planned or
anticipated may not be started or completed as scheduled, or may not result in
accretive net income or funds from operations.  In addition, we
regularly evaluate acquisition or disposition proposals and engage from time to
time in negotiations for acquisitions or dispositions of
properties.  We may also enter into letters of intent for the purchase
or sale of properties.  Any prospective acquisition or disposition
that is being evaluated or which is subject to a letter of intent may not be
consummated, or if consummated, may not result in an increase in net income or
funds from operations.





WHOLLY-OWNED
CURRENT DEVELOPMENTS





Washington,
Pennsylvania





On August
29, 2008, we held the grand opening of our 371,000 square foot outlet center
located south of Pittsburgh in Washington, Pennsylvania.  Tenants
include Nike, Gap, Old Navy, Banana Republic, Coach and others. At December 31,
2008 the outlet center was 85% leased.  Based upon the  response
by customers at this center’s grand opening events, we believe there is tenant
interest in the remaining available space and additional signed leases will be
completed over time.  Tax incremental financing bonds have been issued
related to the Washington project of which we have received approximately $16.4
million.  We receive proceeds from the tax increment financing bonds
as we incur qualifying expenditures during construction of the
center.











Expansions
at Existing Centers





During
the second quarter of 2008, we completed a 62,000 square foot expansion at our
center located in Barstow, California.  As of December 31, 2008, the
center contained a total of approximately 171,000 square feet, including the
newly opened expansion space.  The outlet center is 100%
occupied.





During
the fourth quarter of 2008, we began an expansion of approximately 23,000 square
feet at our Commerce II, Georgia center.  This expansion is projected
to be open during the second quarter of 2009.





Commitments
to complete construction of the Washington, PA development, the expansion in
Commerce II, GA, along with renovations at centers in Myrtle Beach Hwy 501,
South Carolina; Lincoln City, Oregon; Park City, Utah and Foley, Alabama and
other capital expenditure requirements amounted to approximately $11.3 million
at December 31, 2008.  Commitments for construction represent only
those costs contractually required to be paid by us.  These projects
will be primarily funded by amounts available under our unsecured lines of
credit but could also be funded by other sources of capital such as
collateralized construction loans, public debt or equity offerings as necessary
or available.





Potential
Future Developments





We
currently have an option for a new development site located in Mebane, North
Carolina on the highly traveled Interstate 40/85 corridor, which sees over
83,000 cars daily.  The site is located halfway between the Research
Triangle Park area of Raleigh, Durham, and Chapel Hill, and the Triad area of
Greensboro, High Point and Winston-Salem.  During the option period we
will be analyzing the viability of the site and determining whether to proceed
with the development of a center at this location.





We
currently have an option for a new development site located in Irving, Texas,
which would be our third in the state. The site is strategically located west of
Dallas at the North West quadrant of busy State Highway 114 and Loop 12 and will
be the first major project planned for the Texas Stadium Redevelopment
Area.  It is also adjacent to the upcoming DART light rail line (and
station stop) connecting downtown Dallas to the Las Colinas Urban Center, the
Irving Convention Center and the Dallas/Fort Worth Airport.





At this
time, we are in the initial study period on these potential new
locations.  As such, there can be no assurance that either of these
sites will ultimately be developed.  These projects, if realized,
would be primarily funded by amounts available under our unsecured lines of
credit but could also be funded by other sources of capital such as
collateralized construction loans, public debt or equity offerings as necessary
or available.  In the fourth quarter of 2008, we made the decision to
terminate our purchase options in Port St. Lucie, Florida and Phoenix,
Arizona.  As a result, we recorded a $3.9 million charge relating to
our predevelopment costs on these and other projects deemed no longer
probable.





WHOLLY-OWNED
DISPOSITIONS





In
October 2007, we completed the sale of our property in Boaz, AL.  Net
proceeds received from the sale of the property were approximately $2.0
million.  We recorded a gain on sale of real estate of approximately
$6,000.





During
the first quarter of 2006, we completed the sale of two outlet centers located
in Pigeon Forge, TN and North Branch, MN. Net proceeds received from the sales
of the centers were approximately $20.2 million.  We recorded gains on
sales of real estate of $13.8 million associated with these sales during the
first quarter of 2006.





Financing
Arrangements





On
February 15, 2008, our $100.0 million, 9.125% unsecured senior notes
matured.  We repaid these notes with amounts available under our
unsecured lines of credit.





During
the first quarter of 2008, we increased the maximum availability under our
existing unsecured lines of credit by $125.0 million, bringing our total
availability to $325.0 million.  The terms of the increases were
identical to those included within the existing unsecured lines of credit. Five
of our six lines of credit, representing $300.0 million, have maturity dates of
June 2011 or later.  One line of credit, representing $25.0 million
and for which no amounts were outstanding on December 31, 2008, expires in June
2009.





During
the second quarter of 2008, we closed on a $235.0 million unsecured three year
syndicated term loan facility.  Based on our current debt ratings, the
facility bears interest of LIBOR plus 160 basis points.  Depending on
our investment grade debt ratings, the interest rate can vary from LIBOR plus
125 basis points to LIBOR plus 195 basis points.








In June
2008, proceeds from the term loan were used to pay off our mortgage loan with a
principal balance of approximately $170.7 million.  A prepayment
premium, representing interest through the July payment date, of approximately
$406,000 was paid at closing.  The remaining proceeds of approximately
$62.8 million, net of closing costs, were applied against amounts outstanding on
our unsecured lines of credit and to settle two interest rate lock protection
agreements.





In July
2008 and September 2008, we entered into interest rate swap agreements with
Wells Fargo Bank, N.A. and BB&T for notional amounts of $118.0 million and
$117.0 million, respectively.  The purpose of these swaps was to fix
the interest rate on the $235.0 million outstanding under the term loan facility
completed in June 2008.  The swaps fixed the one month LIBOR rate at
3.605% and 3.70%, respectively.  When combined with the current spread
of 160 basis points which can vary based on changes in our debt ratings, these
swap agreements fix our interest rate on the $235.0 million of variable rate
debt at 5.25% until April 1, 2011.





In
October 2008, we were upgraded by the Standard and Poor’s Ratings Services from
BBB- to BBB, making us one of only two REITs to receive a ratings upgrade in
2008.  We currently have an investment grade rating with Moody’s
Investors Service of Baa3.  Because of this upgrade, one of our line
of credit borrowing rates decreased to LIBOR plus 60 basis points.  Of
the $161.5 million outstanding on our unsecured lines of credit as of December
31, 2008, the borrowing rates range from LIBOR plus 60 basis points to LIBOR
plus 75 basis points.





In
February 2006, the Company completed the sale of an additional 800,000 Class C
Preferred Shares with net proceeds of approximately $19.4
million.  The proceeds, which were contributed to us in exchange for
800,000 preferred units, were used to repay amounts outstanding on our unsecured
lines of credit.  After the offering, there were 3,000,000 Company
Class C Preferred Shares (and Operating Partnership preferred units)
outstanding.





In August
2006, the Operating Partnership issued $149.5 million of exchangeable senior
unsecured notes that mature on August 15, 2026.  The notes bear
interest at a fixed coupon rate of 3.75%.  The notes are exchangeable
into the Company’s common shares, at the option of the holder, at a current
exchange ratio, subject to adjustment if the Company changes its dividend rate
in the future, of 27.6856 shares per $1,000 principal amount of notes (or a
current exchange price of $36.1198 per common share).  The notes are
senior unsecured obligations of the Operating Partnership and are guaranteed by
the Company on a senior unsecured basis.  On and after August 18,
2011, holders may exchange their notes for cash in an amount equal to the lesser
of the exchange value and the aggregate principal amount of the notes to be
exchanged, and, at our option, Company common shares, cash or a combination
thereof for any excess.  Note holders may exchange their notes prior
to August 18, 2011 only upon the occurrence of specified events.  In
addition, on August 18, 2011, August 15, 2016 or August 15, 2021, note holders
may require us to repurchase the notes for an amount equal to the principal
amount of the notes plus any accrued and unpaid interest up to, but excluding,
the repurchase date.  In no event will the total number of Company
common shares issuable upon exchange exceed 4.9 million, subject to adjustments
for dividend rate changes.  Accordingly, the Company has reserved
those shares.





We intend
to retain the ability to raise additional capital, including public debt or
equity, to pursue attractive investment opportunities that may arise and to
otherwise act in a manner that we believe to be in our shareholders’ best
interests.  We have no significant maturities of debt until
2011.  During the third quarter of 2006, we, together with the
Company, updated our joint shelf registration where we will be able to register
unspecified amounts of different classes of securities on Form
S-3.  We intend to update our shelf registration during the second
quarter of 2009.  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 credit facilities, ongoing negotiations with certain financial
institutions and our ability to sell debt or equity subject to market
conditions, we believe that we have access to the necessary financing to fund
the planned capital expenditures during 2009.





We
anticipate that adequate cash will be available to fund our operating and
administrative expenses, regular debt service obligations, and the payment of
distributions in order for the Company to maintain its status as a REIT for both
the short and long-term.  Although we receive most of our rental
payments on a monthly basis, distributions to 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 any outstanding borrowings under the existing 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 current weakness in and unpredictability of the capital and credit markets,
we can give no assurance that affordable access to capital will exist between
now and 2011 when our next debt maturities occur.  As a result, our
current primary focus is to strengthen our capital and liquidity position by
controlling and reducing construction and overhead costs, generating positive
cash flows from operations to cover our dividend and reducing outstanding
debt.












Contractual Obligations and
Commercial Commitments




The
following table details our contractual obligations over the next five years and
thereafter as of December 31, 2008 (in thousands):





ContractualObligations
              2009
              2010
              2011
              2012
              2013
              Thereafter
              TotalDebt
      (1)
              $       ---
              $       ---
              $
      396,500
              $       ---
              $        ---
              $
      399,500
              $    796,000Operating
      leases
              4,372
              4,206
              3,703
              3,044
              2,760
              76,312
              94,397Preferred
      unitdistributions
      (2)
              5,625
              80,625
              ---
              ---
              ---
              ---
              86,250Interest
      payments (3)
              35,205
              35,205
              25,939
              20,981
              20,981
              103,631
              241,942$
      45,202
              $
      120,036
              $
      426,142
              $24,025
              $
      23,741
              $
      579,443
              $
      1,218,589


(1)
            These
      amounts represent total future cash payments related to debt obligations
      outstanding as of December 31,
2008.


(2)
            Preferred
      unit distributions reflect distributions on our preferred units on which
      we pay an annual distribution of $1.875 per unit on 3,000,000 outstanding
      preferred units as of December 31, 2007.  The preferred units
      will be redeemed from the Company to the extent that the Company redeems
      its Class C Preferred Shares for $25.00 per share after the respective
      optional redemption date. The future obligations include future
      distributions on preferred shares/units through the optional redemption
      date and the redemption amount is included on the optional redemption
      date.


(3)
            These
      amounts represent future interest payments related to our debt obligations
      based on the fixed and variable interest rates specified in the associated
      debt agreements.  All of our variable rate debt agreements are
      based on the one month LIBOR rate.  For purposes of calculating
      future interest amounts on variable interest rate debt, the one month
      LIBOR rate as of December 31, 2008 was
used.





In
addition to the contractual payment obligations shown in the table above, should
we decide to exercise our purchase option in 2009 related to the Mebane, NC
property, described previously in the “Potential Future Developments” section,
we expect to spend approximately $62.9 million in 2009 and beyond on the
project.  We also expect to spend approximately $3.2 million in 2009
to complete an expansion of 23,000 square feet at our Commerce II, GA center and
an additional $10.2 million to complete various renovation projects throughout
our portfolio.  The timing of these expenditures may vary due to
delays in construction or acceleration of the opening date of a particular
project.  These amounts would be primarily funded by amounts available
under our unsecured lines of credit but could also be funded by other sources of
capital such as collateralized construction loans, public debt or equity
offerings as necessary or available.





Our debt
agreements require the maintenance of certain ratios, including debt service
coverage and leverage, and limit the payment of dividends such that dividends
and distributions will not exceed funds from operations, as defined in the
agreements, for the prior fiscal year on an annual basis or 95% on a cumulative
basis.  We have historically been and currently are in compliance with
all of our debt covenants.  We expect to remain in compliance with all
our existing debt covenants; however, should circumstances arise that would
cause us to be in default, the various lenders would have the ability to
accelerate the maturity on our outstanding debt.











Off-Balance
Sheet Arrangements





The
following table details certain information as of December 31, 2008 about
various unconsolidated real estate joint ventures in which we have an ownership
interest:





Joint
      Venture
            Center
      Location
            Opening
              Date
            Ownership
              %
            Square
              Feet
            Carrying
      Value of Investment
              (in
      millions) (1)
            Total
      Joint
              Venture
      Debt
              (in
      millions)Myrtle
      Beach Hwy 17
            Myrtle
      Beach, South Carolina
            2002
            50%
            402,442
            $(0.4)
            $35.8Wisconsin
      Dells
            Wisconsin
      Dells, Wisconsin
            2006
            50%
            264,929
            $5.6
            $25.3Deer
      Park
            Deer
      Park, Long Island NY
            2008
            33.3%
            684,952
            $4.3
            $242.4


(1)The carrying value
      of our investment in Myrtle Beach Hwy 17 as of December 31, 2008 was
      reduced by approximately $823,000 which represented our portion of the
      fair value of the interest rate swap derivative held by this joint
      venture.





We may
issue guarantees for the debt of a joint venture in order for the joint venture
to obtain funding or to obtain funding at a lower cost than could be obtained
otherwise.  We are party to a joint and several guarantee with respect
to the construction loan obtained by the Wisconsin Dells joint venture during
the first quarter of 2006, which currently has a balance of $25.3
million.  We are also party to a joint and several guarantee with
respect to the loans obtained by the Deer Park joint venture which currently
have a balance of $242.4 million.  As of December 31, 2008, our
pro-rata portion of the Myrtle Beach Hwy 17 mortgage secured by the center is
$17.9 million.  There is no guarantee provided for the Myrtle Beach
Hwy 17 mortgage by us.





Each of
the above ventures contains provisions where a venture partner can trigger
certain provisions and force the other partners to either buy or sell their
investment in the joint venture.  Should this occur, we may be
required to sell the property to the venture partner or incur a significant cash
outflow in order to maintain ownership of these outlet centers.





Myrtle
Beach Hwy 17





The
Myrtle Beach Hwy 17 joint venture, in which we had a 50% ownership interest, has
owned a Tanger Outlet Center located on Highway 17 in Myrtle Beach, South
Carolina since June 2002.  The Myrtle Beach center now consists of
approximately 402,000 square feet and has over 90 name brand
tenants.





During
March 2005, Myrtle Beach Hwy 17 entered into an interest rate swap agreement
with Bank of America with a notional amount of $35 million for five
years.  Under this agreement, the joint venture receives a floating
interest rate based on the 30 day LIBOR index and pays a fixed interest rate of
4.59%.  This swap effectively changes the rate of interest on $35
million of variable rate mortgage debt to a fixed rate of 5.99% for the contract
period.





In April
2005, the joint venture obtained non-recourse, permanent financing to replace
the construction loan debt that was utilized to build the outlet
center.  The new mortgage amount is $35.8 million with a rate of LIBOR
+ 1.40%.  The note is for a term of five years with payments of
interest only. In April 2010, the joint venture has the option to extend the
maturity date of the loan two more years until 2012. All debt incurred by this
unconsolidated joint venture is collateralized by its property.





On
January 5, 2009, we purchased the remaining 50% interest in the Myrtle Beach Hwy
17 joint venture for a cash price of $32.0 million which was net of the
assumption of the existing mortgage loan of $35.8 million.  The
acquisition was funded by amounts available under our unsecured lines of
credit.  See Note 19, Subsequent Events, for more information
regarding the acquisition.








Wisconsin
Dells





In March
2005, we established the Wisconsin Dells joint venture to construct and operate
a Tanger Outlet center in Wisconsin Dells, Wisconsin. The 264,900 square foot
center opened in August 2006.  In February 2006, in conjunction with
the construction of the center, Wisconsin Dells entered into a three-year,
interest-only mortgage agreement with a one-year maturity extension
option.  In November 2008, the joint venture exercised its option to
extend the maturity of the mortgage to February 24, 2010.  The option
to extend became effective February 24, 2009. As of December 31, 2008 the loan
had a balance of $25.3 million with a floating interest rate based on the one
month LIBOR index plus 1.30%.  The construction loan incurred by this
unconsolidated joint venture is collateralized by its property as well as joint
and several guarantees by us and designated guarantors of our venture
partner.





Deer
Park





In
October 2003, we, and two other members each having a 33.3% ownership interest,
established a joint venture to develop and own a shopping center in Deer Park,
New York.  On October 23, 2008, we held the grand opening of the
initial phase of the project.  The shopping center contains
approximately 656,000 square feet including a 32,000 square foot Neiman Marcus
Last Call store, which is the first and only one on Long Island. Other tenants
include Anne Klein, Banana Republic, BCBG, Christmas Tree Shops, Eddie Bauer,
Reebok, New York Sports Club and others.  Regal Cinemas has also
leased 67,000 square feet for a 16-screen Cineplex, one of the few state of the
art cineplexes on Long Island.





In May
2007, the joint venture closed on the project financing which is structured in
two parts.  The first is a $269.0 million loan collateralized by the
property as well as limited joint and several guarantees by all three venture
partners.  The second is a $15.0 million mezzanine loan secured by the
pledge of the partners’ equity interests. The weighted average interest rate on
the financing is one month LIBOR plus 1.49%.  Over the life of the
loans, if certain criteria are met, the weighted average interest rate can
decrease to one month LIBOR plus 1.23%.  The loans had a combined
balance of $240.0 million as of December 31, 2008 and are scheduled to mature in
May 2011 with a one year extension option at that date. The joint venture
entered into two interest rate swap agreements during June 2007.  The
first swap is for a notional amount of $49.0 million and the second was a
forward starting interest rate swap agreement with escalating notional amounts
that totaled $121.0 million as of December 31, 2008.  The agreements
expire on June 1, 2009.  These swaps effectively change the rate of
interest on up to $170.0 million of variable rate construction debt to a fixed
rate of 6.75%.





In June
2008, we, and our two other partners in the Deer Park joint venture, each having
a 33.3% ownership interest, formed a separate joint venture to acquire a 29,000
square foot warehouse adjacent to the shopping center to support the operations
of the shopping center’s tenants.  This joint venture acquired the
warehouse for a purchase price of $3.3 million.  The venture also
closed on a construction loan of for $2.3 million with a variable interest rate
of LIBOR plus 1.85% and a maturity of May 2011.





The table
above combines the operational and financial information of both ventures.
During 2008, we made additional capital contributions of $1.6 million to the
Deer Park joint ventures. Both of the other venture partners made equity
contributions equal to ours.  After making the above contribution, the
total amount of equity contributed by each venture partner to the projects was
approximately $4.8 million.





The
original purchase of the property in 2003 was in the form of a sale-leaseback
transaction, which consisted of the sale of the property to Deer Park for $29
million, including a 900,000 square foot industrial building, which was then
leased back to the seller under an operating lease agreement.  At the
end of the lease in May 2005, the tenant vacated the building. However, the
tenant had not satisfied all of the conditions necessary to terminate the
lease.  Deer Park is currently in litigation to recover from the
tenant approximately $5.9 million for fourteen months of lease payments and
additional rent reimbursements related to property taxes.  In
addition, Deer Park is seeking other damages and will continue to do so until
recovered.





The
following table details our share of the debt maturities of the unconsolidated
joint ventures as of December 31, 2008 (in thousands):





Joint
      Venture
            Our
      Portion of Joint Venture Debt
            Maturity
      Date
            Interest
      RateMyrtle
      Beach Hwy 17
            $17,900
            4/7/2010
            LIBOR
      + 1.40%Wisconsin
      Dells
            $12,625
            2/24/2010
            LIBOR
      + 1.30%Deer
      Park
            $80,790
            5/17/2011
            LIBOR
      + 1.375-3.50%








Related
Party Transactions





As noted
above in “Off-Balance Sheet Arrangements”, we are 50% owners of the Myrtle Beach
Hwy 17 and Wisconsin Dells joint ventures and a 33.3% owner in the Deer Park
joint venture.  These joint ventures pay us management, leasing,
marketing and development fees, which we believe approximate current market
rates, for services provided to the joint ventures.  During 2008, 2007
and 2006, we recognized the following fees (in thousands):





Year
      Ended
              December
      31,2008
            2007
            2006Fee:Management
            
            $  1,516
            $  534
            $   410Leasing
            
            60
            26
            188Marketing
            
            185
            108
            86Development
            
            ---
            ---
            304Total
      Fees
            
            $  1,761
            $  668
            $   988





Tanger
Family Limited Partnership is a related party which holds a limited partnership
interest in and is the minority owner of the Operating
Partnership.  Stanley K. Tanger, the Company’s Chairman of the Board,
is the sole general partner of the Tanger Family Limited
Partnership.  The only material related party transaction with the
Tanger Family Limited Partnership is the payment of quarterly distributions of
earnings which aggregated $9.1 million, $8.6 million and $8.1 million for the
years ended December 31, 2008, 2007 and 2006, respectively.





Critical
Accounting Policies





We
believe the following critical accounting policies affect our more significant
judgments and estimates used in the preparation of our consolidated financial
statements.





Principles
of Consolidation





The
consolidated financial statements include our accounts, our wholly-owned
subsidiaries, as well as the Operating Partnership and its
subsidiaries.  Intercompany balances and transactions have been
eliminated in consolidation.  Investments in real estate joint
ventures that represent non-controlling ownership interests are accounted for
using the equity method of accounting.





In 2003,
the Financial Accounting Standards Board, or FASB, issued FASB Interpretation
46R, “Consolidation of Variable Interest Entities (revised December 2003)—an
interpretation of ARB No. 51”, or FIN 46R, which clarifies the application of
existing accounting pronouncements to certain entities in which equity investors
do not have the characteristics of a controlling financial interest or do not
have sufficient equity at risk for the entity to finance its activities without
additional subordinated financial support from other parties. The provisions of
FIN 46R were effective for all variable interests in variable interest entities
in 2004 and thereafter.





Acquisition
of Real Estate





In
accordance with Statement of Financial Accounting Standards No. 141
“Business Combinations”, or FAS 141, we allocate the purchase price of
acquisitions based on the fair value of land, building, tenant improvements,
debt and deferred lease costs and other intangibles, such as the value of leases
with above or below market rents, origination costs associated with the in-place
leases, and the value of in-place leases and tenant relationships, if
any.  We depreciate the amount allocated to building, deferred lease
costs and other intangible assets over their estimated useful lives, which
generally range from three to 33 years.  The values of the above
and below market leases are amortized and recorded as either an increase (in the
case of below market leases) or a decrease (in the case of above market leases)
to rental income over the remaining term of the associated lease.  The
values of below market leases that are considered to have renewal periods with
below market rents are amortized over the remaining term of the associated lease
plus the renewal periods.  The value associated with in-place leases
is amortized over the remaining lease term and tenant relationships is amortized
over the expected term, which includes an estimated probability of the lease
renewal.  If a tenant vacates its space prior to the contractual
termination of the lease and no rental payments are being made on the lease, any
unamortized balance of the related deferred lease costs is written
off.  The tenant improvements and origination costs are amortized as
an expense over the remaining life of the lease (or charged against earnings if
the lease is terminated prior to its contractual expiration date).  We
assess fair value based on estimated cash flow projections that utilize
appropriate discount and capitalization rates and available market
information.








If we do
not allocate appropriately to the separate components of rental property,
deferred lease costs and other intangibles or if we do not estimate correctly
the total value of the property or the useful lives of the assets, our
computation of depreciation and amortization expense may be significantly
understated or overstated.





Cost
Capitalization





In
accordance with SFAS No. 91 “Accounting for Nonrefundable Fees and Costs
Associated with Originating or Acquiring Loans and Initial Direct Costs of
Leases—an amendment of FASB Statements No. 13, 60, and 65 and a rescission of
FASB Statement No. 17”, we capitalize all incremental, direct fees and costs
incurred to originate operating leases, including certain general and overhead
costs, as deferred charges.  The amount of general and overhead costs
we capitalize is based on our estimate of the amount of costs directly related
to executing these leases.  We amortize these costs to expense over
the estimated average minimum lease term of five years.





We
capitalize all costs incurred for the construction and development of
properties, including certain general and overhead costs and interest
costs.  The amount of general and overhead costs we capitalize is
based on our estimate of the amount of costs directly related to the
construction or development of these assets.  Direct costs to acquire
assets are capitalized once the acquisition becomes probable.





If we
incorrectly estimate the amount of costs to capitalize, we could significantly
overstate or understate our financial condition and results of
operations.





Impairment
of Long-Lived Assets





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.  If we do not recognize impairments at appropriate
times and in appropriate amounts, our consolidated balance sheet may overstate
the value of our long-lived assets.  We believe that no impairment
existed at December 31, 2008.





On a
periodic basis, we assess whether there are any indicators that the value of our
investments in unconsolidated joint ventures may be impaired.  An
investment is impaired only if management’s estimate of the value of the
investment is less than the carrying value of the investments, and such decline
in value is deemed to be other than temporary.  To the extent
impairment has occurred, the loss shall be measured as the excess of the
carrying amount of the investment over the value of the
investment.  Our estimates of value for each joint venture investment
are based on a number of assumptions that are subject to economic and market
uncertainties including, among others, demand for space, competition for
tenants, changes in market rental rates and operating costs of the
property.  As these factors are difficult to predict and are subject
to future events that may alter our assumptions, the values estimated by us in
our impairment analysis may not be realized.





Revenue
Recognition





Base
rentals are recognized on a straight-line basis over the term of the
lease.  Substantially all leases contain provisions which provide
additional rents based on each tenants’ sales volume (“percentage rentals”) and
reimbursement of the tenants’ share of advertising and promotion, common area
maintenance, insurance and real estate tax expenses. Percentage rentals are
recognized when specified targets that trigger the contingent rent are
met.  Expense reimbursements are recognized in the period the
applicable expenses are incurred.  Payments received from the early
termination of leases are recognized as revenue from the time payment is
receivable until the tenant vacates the space.





New
Accounting Pronouncements





In
December 2007, the FASB issued Statement of Financial Accounting Standards No.
141 (revised 2007) “Business Combinations”, or FAS 141R.  FAS 141R is
effective for fiscal years beginning on or after December 15, 2008, which means
that we will adopt FAS 141R on January 1, 2009.  FAS 141R replaces FAS
141 “Business Combinations” and requires that the acquisition method of
accounting (which FAS 141 called the purchase method) be used for all business
combinations for which the acquisition date is on or after January 1, 2009, as
well as for an acquirer to be identified for each business
combination.  FAS 141R establishes principles and requirements for how
the acquirer: (i) recognizes and measures in its financial statements the
identifiable assets acquired, the liabilities assumed, and any non-controlling
interest in the acquiree; (ii) recognizes and measures the goodwill acquired in
the business combination or a gain from a bargain purchase; and (iii) determines
what information to disclose to enable users of financial statements to evaluate
the nature and financial affects of the business
combination.   On January 5, 2009, we acquired the remaining 50%
interest in the Myrtle Beach Hwy 17 joint venture for a cash purchase price of
$32.0 million, which was net of the assumption of the existing mortgage loan of
$35.8 million.  The accounting for this acquisition of interest in a
joint venture is covered by the guidance for FAS 141R.  See Note 18,
Subsequent Events, for further explanation and details of the
transaction.








In
December 2007, the FASB issued Statement of Financial Accounting Standards No.
160 “Non-controlling Interests in Consolidated Financial Statements, an
amendment of ARB No. 51”, or FAS 160.  FAS 160 is effective for fiscal
years beginning on or after December 15, 2008, which means that we will adopt
FAS 160 on January 1, 2009.  This statement amends ARB 51 to establish
accounting and reporting standards for the non-controlling interest in a
subsidiary and for the deconsolidation of a subsidiary.  FAS 160
clarifies that a noncontrolling interest in a subsidiary should be reported as
equity in the consolidated balance sheet and the minority interest's share of
earnings is included in consolidated net income. The calculation of earnings per
share will continue to be based on income amounts attributable to the
controlling interest.  FAS 160 requires retroactive adoption of the
presentation and disclosure requirements for existing minority
interests.  All other requirements of FAS 160 shall be applied
prospectively.  The adoption of FAS 160 will not have a material
effect on our consolidated financial statements.





In March
2008, the FASB issued Statement No. 161, “Disclosures about Derivative
Instruments and Hedging Activities—an amendment of FASB Statement No. 133”, or
FAS 161.  FAS 161 requires entities that utilize derivative
instruments to provide qualitative disclosures about their objectives and
strategies for using such instruments, as well as any details of
credit-risk-related contingent features contained within
derivatives.  FAS 161 also requires entities to disclose additional
information about the amounts and location of derivatives located within the
financial statements, how the provisions of FAS 133 have been applied, and the
impact that hedging activities have on an entity’s financial position, financial
performance, and cash flows.  FAS 161 is effective for fiscal years
and interim periods beginning after November 15, 2008, with early application
encouraged.  We currently provide many of the disclosures required by
FAS 161 in our financial statements and therefore, we believe that upon adoption
the only impact on our financial statements will be further enhancement of our
disclosures.





In
April 2008, the FASB issued Staff Position No. FAS 142-3, “Determination of
the Useful Life of Intangible Assets”, or FSP 142-3.  FSP 142-3 amends
the factors to be considered in developing renewal or extension assumptions used
to determine the useful life of an identified intangible asset under FASB
Statement No. 142, “Goodwill and Other Intangible Assets”, and requires
expanded disclosure related to the determination of intangible asset useful
lives.  FSP 142-3 is effective for fiscal years beginning after
December 15, 2008.  We are currently evaluating the impact of adoption
of FSP 142-3 on our consolidated financial position, results of operations and
cash flows.





In May
2008, the FASB issued Staff Position No. APB 14-1,”Accounting for Convertible
Debt Instruments that May be Settled in Cash Upon Conversion”, or FSP APB 14-1.
FSP APB 14-1 requires that the liability and equity components of convertible
debt instruments that may be settled in cash upon conversion (including partial
cash settlement) be separately accounted for in a manner that reflects an
issuer's nonconvertible debt borrowing rate. Under FSP APB 14-1 the value
assigned to the debt component must be the estimated fair value of a similar
nonconvertible debt.  FSP APB 14-1 is effective for financial
statements issued for fiscal years beginning after December 15, 2008, and
interim periods within those fiscal years.  Early adoption is not
permitted. Retrospective application to all periods presented is required except
for instruments that were not outstanding during any of the periods that will be
presented in the annual financial statements for the period of adoption but were
outstanding during an earlier period. The resulting debt discount is amortized
over the period during which the debt is expected to be outstanding (i.e.,
through the first optional redemption date) as additional non-cash interest
expense.  The adoption of FSP APB 14-1 in the first quarter of 2009
will result in approximately $.14 per unit (net of incremental capitalized
interest) of additional non-cash interest expense for the year ended 2008
related to our $149.5 million in convertible debt which was issued during the
third quarter of 2006.




Funds
from Operations





Funds
from Operations, or FFO, represents income before extraordinary items and gains
(losses) on sale or disposal of depreciable operating properties, plus
depreciation and amortization uniquely significant to real estate and after
adjustments for unconsolidated partnerships and joint ventures.





FFO is
intended to exclude historical cost depreciation of real estate as required by
Generally Accepted Accounting Principles, or 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 unique
to real estate, 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 and believe it 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 widely used by us
and others in our industry to evaluate and price potential acquisition
candidates.  The National Association of Real Estate Investment
Trusts, Inc., of which we are a member, has encouraged its member companies to
report their FFO as a supplemental, industry-wide standard measure of REIT
operating performance.  In addition, a percentage of bonus
compensation to certain members of management is based on our FFO
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 distribution
paying capacity.  We compensate for these limitations by relying
primarily on our GAAP results and using FFO only supplementally.





Below is
a reconciliation of net income to FFO for the years ended December 31, 2008,
2007 and 2006 as well as other data for those respective periods (in
thousands):


2008
            2007
            2006Funds
      from Operations:Net
      income
            $   32,403
            $   33,090
            $    43,633Adjusted
      for:Depreciation
      and amortizationattributable
      to discontinued operations
            ---
            145
            307Depreciation
      and amortization uniquely significantto
      real estate – consolidated
            61,962
            63,506
            56,747Depreciation
      and amortization uniquely significantto
      real estate – unconsolidated joint ventures
            3,165
            2,611
            1,825(Gain)
      loss on sale of real estate
            ---
            (6)
            (13,833)Funds
      from operations (1)
            97,530
            99,346
            88,679Preferred
      share distributions
            (5,625)
            (5,625)
            (5,433)Funds
      from operations available to common unitholders
            $   91,905
            $  93,721
            $  83,246Weighted
      average units outstanding (2)
            18,715
            18,868
            18,574


(1) The year ended December 31,
2006 includes gains on sales of outparcels of land of $402.


(2)
Includes the dilutive effect of options, restricted unit awards and exchangeable
notes.





Economic
Conditions and Outlook





The
majority of our leases contain provisions designed to mitigate the impact of
inflation. Such provisions include clauses for the escalation of base rent and
clauses enabling us to receive percentage rentals based on tenants’ gross sales
(above predetermined levels, which we believe often are lower than traditional
retail industry standards) which generally increase as prices
rise.   Most of the leases require the tenant to pay their share
of property operating expenses, including common area maintenance, real estate
taxes, insurance and advertising and promotion, thereby reducing exposure to
increases in costs and operating expenses resulting from inflation.





While we
believe factory 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 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.





We
renewed 82% of the 1,350,000 square feet that came up for renewal in 2008 with
the existing tenants at a 17% increase in the average base rental rate compared
to the expiring rate.  We also re-tenanted 492,000 square feet during
2008 at a 44% increase in the average base rental rate.





During
2009, we have approximately 1,498,000 square feet, or 16%, of our wholly-owned
portfolio coming up for renewal.  If we were unable to successfully
renew or release a significant amount of this space on favorable economic terms,
the loss in rent could have a material adverse effect on our results of
operations.








Existing
tenants’ sales have remained stable and renewals by existing tenants have
remained strong.  As of February 1, 2009, the existing tenants have
already renewed approximately 648,000, or 43%, of the square feet scheduled to
expire in 2009.  In addition, we continue to attract and retain
additional tenants.  Our factory outlet centers typically include
well-known, national, brand name companies.  By maintaining a broad
base of creditworthy tenants and a geographically diverse portfolio of
properties located across the United States, we reduce our operating and leasing
risks. No one tenant (including affiliates) accounts for more than 6% of our
combined base and percentage rental revenues.  Accordingly, we do not
expect any material adverse impact on our results of operations and financial
condition as a result of leases to be renewed or stores to be
released.





However,
in the first quarter of 2008, thirty-eight stores were vacated that were
occupied by six tenants, representing a gross leasable area of approximately
236,000 square feet.  Sales for these tenants averaged only $165 per
square foot, with an average base rental rate of $16 per square
foot.  Approximately 60% of this space has now been released at base
rental rates averaging 64% higher than the average rent being paid by the
previous tenants.





During
the second quarter of 2008 we had three tenants (Geoffrey Beene, Big Dog and
Pepperidge Farms) announce plans to close stores throughout their outlet
portfolios for various reasons.  Within our portfolio, this represents
thirty-two stores containing approximately 93,000 square feet.  These
stores represent some of the least productive stores in terms of sales per
square foot in our portfolio and have average base rental rates of approximately
$18.00 per square foot.  Slightly less than half of these stores
closed before the end of 2008, and the remaining stores closed in January
2009.  Approximately 31% of this space has been released at base
rental rates averaging 63% higher than the $18.00 average rent being paid by the
previous tenants.





As a
result of the current poor economic environment, we have received notice from a
number of additional tenants of their plans to close stores.  These
tenants include Pfaltzgraff, S&K Menswear, Koret, Sag Harbor and KB
Toys.  The combined space occupied by these tenants represents
forty-one stores totaling approximately 171,000 square feet, which representing
approximately 2.0% of our wholly-owned portfolio.





Much of
this space is being re-leased with substantial increases in base rental
rates.  However, given current economic conditions it may take longer
to re-lease the remaining space and more difficult to achieve similar increases
in base rental rates.  Also, there may be additional tenants that have not
informed us of their intentions and which may close stores in the coming
year.  There can be no assurances that we will be able to re-lease
such space.  While the timing of an economic recovery is unclear and
these conditions may not improve quickly, we believe in our business and our
long-term strategy.





As of
both December 31, 2008 and 2007, occupancy at our wholly-owned centers was 97%
and 98%, respectively.  Consistent with our long-term strategy of
re-merchandising centers, we will continue to hold space off the market until an
appropriate tenant is identified.  While we believe this strategy will
add value to our centers in the long-term, it may reduce our average occupancy
rates in the near term.





Item
7A. Quantitative and Qualitative Disclosures About Market Risk





Market
Risk





We are
exposed to various market risks, including changes in interest
rates.  Market risk is the potential loss arising from adverse changes
in market rates and prices, such as interest rates.  We may
periodically enter into certain interest rate protection and interest rate swap
agreements to effectively convert floating rate debt to a fixed rate basis and
to hedge anticipated future financings.  We do not enter into
derivatives or other financial instruments for trading or speculative
purposes.





In July
2008 and September 2008, we entered into LIBOR based interest rate swap
agreements with Wells Fargo Bank, N.A. and BB&T for notional amounts of
$118.0 million and $117.0 million, respectively.  The purpose of these
swaps was to fix the interest rate on the $235.0 million outstanding under the
term loan facility completed in June 2008.  The swaps fixed the one
month LIBOR rate at 3.605% and 3.70%, respectively.  When combined
with the current spread of 160 basis points which can vary based on changes in
our debt ratings, these swap agreements fix our interest rate on the $235.0
million of variable rate debt at 5.25% until April 1, 2011. The fair value of
the interest rate swap agreements represents the estimated receipts or payments
that would be made to terminate the agreement.  At December 31, 2008,
the fair value of these contracts was $11.8 million.  If the one month
LIBOR rate decreased 1%, the fair value would be approximately $17.2
million.  The fair value is based on dealer quotes, considering
current interest rates, remaining term to maturity and our credit
standing.





As of
December 31, 2008, 20% of our outstanding debt had variable interest rates that
were not covered by an interest rate derivative agreement and was therefore
subject to market fluctuations.  A change in the LIBOR rate of
100 basis points would result in an increase or decrease of approximately
$1.6 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 of our debt, consisting of senior unsecured notes,
exchangeable notes, unsecured term credit facilities and unsecured lines of
credit, at December 31, 2008 and 2007 was $711.8 million and $723.3 million,
respectively, and its recorded value was $795.3 million and $706.3 million,
respectively.  A 1% increase from prevailing interest rates at
December 31, 2008 and 2007 would result in a decrease in fair value of total
debt of approximately $37.4 million and $38.2 million,
respectively.  Fair values were determined, based on level 2 inputs as
defined by FAS 157, using discounted cash flow analyses with an interest rate or
credit spread similar to that of current market borrowing
arrangements.





Item
8.       Financial Statements and
Supplementary Data





The
information required by this Item is set forth on the pages indicated in Item
15(a) below.





Item
      9.
            Changes
      in and Disagreements With Accountants on Accounting and Financial
      Disclosure





Not
applicable.





Item
9A.     Controls and Procedures





(a)
            Evaluation
      of disclosure control procedures.





The
      Chief Executive Officer, Steven B. Tanger (Principal Executive Officer),
      and Vice President, Treasurer and Assistant Secretary, Frank C.
      Marchisello Jr. (Principal Financial and Accounting Officer) of Tanger GP
      Trust, sole general partner of the Registrant, evaluated the effectiveness
      of the registrant’s disclosure controls and procedures on December 31,
      2008 and concluded that, as of that date, the registrant’s disclosure
      controls and procedures were effective to ensure that the information the
      registrant is required to disclose in its filings with the Commission
      under the Exchange Act is recorded, processed, summarized and reported,
      within the time periods specified in the Commission’s rules and forms, and
      to ensure that information required to be disclosed by the registrant in
      the reports that it files under the Exchange Act is accumulated and
      communicated to the registrant’s management, including its principal
      executive officer and principal financial officer, as appropriate to allow
      timely decisions regarding required
disclosure.





(b)
            Management’s
      report on internal control over financial
  reporting.





Internal
control over financial reporting, as such term is defined in
Rules 13a-15(f) and 15d-15(f) under the Exchange Act, is a process designed
by, or under the supervision of, the principal executive officer and principal
financial officer, or persons performing similar functions, and effected by the
board of trustees, management and other personnel, to provide reasonable
assurance regarding the reliability of financial reporting and the preparation
of financial statements for external purposes in accordance with generally
accepted accounting principles.  The Operating Partnership’s
management, with the participation of the principal executive officer and
principal financial officer, has established and maintained policies and
procedures designed to maintain the adequacy of the Operating Partnership’s
internal control over financial reporting, and includes those policies and
procedures that:





(1)
            Pertain
      to the maintenance of records that in reasonable detail accurately and
      fairly reflect the transactions and dispositions of the assets of the
      Operating Partnership;




(2)
            Provide
      reasonable assurance that transactions are recorded as necessary to permit
      preparation of financial statements in accordance with generally accepted
      accounting principles, and that receipts and expenditures of the Operating
      Partnership are being made only in accordance with authorizations of
      management and trustees of the Operating Partnership;
  and





(3)
            Provide
      reasonable assurance regarding prevention or timely detection of
      unauthorized acquisition, use or disposition of the Operating
      Partnership’s assets that could have a material effect on the financial
      statements.





Management
of the Operating Partnership’s general partner has evaluated the effectiveness
of the Operating Partnership’s internal control over financial reporting as of
December 31, 2008 based on the criteria established in a report entitled
Internal Control—Integrated Framework, issued by the Committee of Sponsoring
Organizations of the Treadway Commission (COSO).  Based on our
assessment and those criteria, the Operating Partnership’s management has
concluded that the Operating Partnership’s internal control over financial
reporting was effective as of December 31, 2008.





Because
of its inherent limitations, internal control over financial reporting may not
prevent or detect misstatements. Also, projections of any evaluation of
effectiveness to future periods are subject to the risk that controls may become
inadequate because of changes in conditions, or that the degree or compliance
with the policies or procedures may deteriorate.








The
effectiveness of the Operating Partnership’s internal control over financial
reporting as of December 31, 2008 has been audited by PricewaterhouseCoopers
LLP, an independent registered public accounting firm, as stated in their report
which appears herein.




(c)
            There
      were no changes in our internal control over financial reporting
      identified in connection with the evaluation required by paragraph (d) of
      Exchange Act Rules 13a-15 or 15d-15 that occurred during our last fiscal
      quarter ended December 31, 2008 that have materially affected, or are
      reasonably likely to materially affect, our internal control over
      financial reporting.




Item
9B.    Other Information





All
information required to be disclosed in a report on Form 8-K during the fourth
quarter of 2008 was reported.





PART III





Certain
information required by Part III is omitted from this Report in that the
registrant’s majority owner, the Company, will file a definitive proxy statement
pursuant to Regulation 14A, or the Proxy Statement, not later than 120 days
after the end of the fiscal year covered by this Report, and certain information
included therein is incorporated herein by reference.  Only those
sections of the Proxy Statement which specifically address the items set forth
herein are incorporated by reference.





Item
      10.
            Directors,
      Executive Officers and Corporate
Governance





The
Operating Partnership does not have any directors or officers.  The
information concerning the Company’s directors required by this Item is
incorporated herein by reference to the Company’s Proxy Statement to be filed
with respect to the Company’s Annual Meeting of Shareholders which is expected
to be held on May 8, 2009.





The
information concerning the Company’s executive officers required by this Item is
incorporated herein by reference to the section in Part I, Item 4, entitled
“Executive Officers of the Company”.





The
information regarding compliance with Section 16 of the Exchange Act is
incorporated herein by reference to the Company’s Proxy Statement to be filed
with respect to the Company’s Annual Meeting of Shareholders which is expected
to be held on May 8, 2009.





The
information concerning the Company’s Code of Ethics required by this Item is
incorporated herein by reference to the Company’s Proxy Statement to be filed
with respect to the Company’s Annual Meeting of Shareholders which is expected
to be held on May 8, 2009.





The
information concerning the Company’s corporate governance required by this Item
is incorporated herein by reference to the Company’s Proxy Statement to be filed
with respect to the Company’s Annual Meeting of Shareholders which is expected
to be held on May 8, 2009





Item
11.    Executive Compensation





The
information required by this Item is incorporated herein by reference to the
Company’s Proxy Statement to be filed with respect to the Company’s Annual
Meeting of Shareholders which is expected to be held on May 8,
2009.








Item
      12.
            Security
      Ownership of Certain Beneficial Owners and Management and Related
      Shareholder Matters.





The
information required by this Item is incorporated by reference herein to the
Company’s Proxy Statement to be filed with respect to the Company’s Annual
Meeting of Shareholders which is expected to be held on May 8,
2009.





The
following table provides information as of December 31, 2008 with respect to
compensation plans under which the Operating Partnership’s equity securities are
authorized for issuance:





Plan
      Category
            (a)
              Number
      of Securities to be
              Issued
      Upon Exercise
              of
      Outstanding Options,
              Warrants
      and Rights
            (b)
              Weighted
      Average
              Exercise
      Price ofOutstanding
      Options, Warrants and Rights
            (c)
              Number
      of Securities
              Remaining
      Available forFuture
              Issuance
      Under Equity
              Compensation
      Plans
              (Excluding
      Securities
              Reflected
      in Column (a))Equity
      compensation plans approved by security holders
            109,228
            $37.36
            771,025Equity
      compensation plans not approved by security holders
            ---
            ---
            ---Total
            109,228
            $37.36
            771,025





Item
      13.
            Certain
      Relationships, Related Transactions and Director
    Independence





The
information required by this Item is incorporated herein by reference to the
Company’s Proxy Statement to be filed with respect to the Company’s Annual
Meeting of Shareholders which is expected to be held on May 8,
2009.





Item
14.    Principal Accounting Fees and Services





The
information required by Item 9(e) of Schedule 14A is incorporated herein by
reference to the Company’s Proxy Statement to be filed with respect to the
Company’s Annual Meeting of Shareholders which is expected to be held on May 8,
2009.








PART IV





Item
15.      Exhibits and Financial Statement
Schedules





(a)           Documents
filed as a part of this report:





1.
            Financial
      Statements


Report
      of Independent Registered Public Accounting Firm
            F-1Consolidated
      Balance Sheets-December 31, 2008 and 2007
            F-2Consolidated
      Statements of Operations-Years Ended December 31, 2008,
      2007 and 2006
            F-3Consolidated
      Statements of Partners’ Equity-Years Ended December 31, 2008,
      2007 and 2006
            F-4Consolidated
      Statements of Cash Flows-Years Ended December 31, 2008,
      2007 and 2006
            F-5Notes
      to Consolidated Financial Statements
            F-6
      to F-23





2.        Financial
Statement Schedule


Schedule
      IIIReal Estate and Accumulated
      Depreciation
            F-24
      to F-25





All other
schedules have been omitted because of the absence of conditions under which
they are required or because the required information is given in the
above-listed financial statements or notes thereto.





3.       Exhibits




Exhibit
No.                                                      Description





3.3
            Amended
      and Restated Agreement of Limited Partnership for Tanger Properties
      Limited Partnership dated November 11, 2005. (Incorporated by reference to
      the exhibits to the Company’s Current Report on Form 8-K dated November
      21, 2005.)4.1
            Form
      of Senior Indenture. (Incorporated by reference to the exhibits to the
      Company’s Current Report on Form 8-K dated March 6,
  1996.)4.1A
            Form
      of First Supplemental Indenture (to Senior Indenture). (Incorporated by
      reference to the exhibits to the Company’s Current Report on Form 8-K
      dated March 6, 1996.)4.1B
            Form
      of Second Supplemental Indenture (to Senior Indenture) dated October 24,
      1997 among Tanger Properties Limited Partnership, Tanger Factory Outlet
      Centers, Inc. and State Street Bank & Trust Company. (Incorporated by
      reference to the exhibits to the Company’s Current Report on Form 8-K
      dated October 24, 1997.)4.1C
            Form
      of Third Supplemental Indenture (to Senior Indenture) dated February 15,
      2001. (Incorporated by reference to the exhibits to the Company’s Current
      Report on Form 8-K dated February 16, 2001.)4.1D
            Form
      of Fourth Supplemental Indenture (to Senior Indenture) dated November 5,
      2005. (Incorporated by reference to the exhibits to the Company’s Annual
      Report on Form 10-K for the year ended December 31,
  2006.)4.1E
            Form
      of Fifth Supplemental Indenture (to Senior Indenture) dated August 16,
      2006. (Incorporated by reference to the exhibits to the Company’s Annual
      Report on Form 10-K for the year ended December 31,
  2006.)10.1
            Amended
      and Restated Incentive Award Plan of Tanger Factory Outlet Centers, Inc.
      and Tanger Properties Limited Partnership, effective May 14, 2004.
      (Incorporated by reference to the Appendix A of the Company’s definitive
      proxy statement filed on Schedule 14A dated April 12,
    2004.)10.4
            Form
      of Unit Option Agreement between the Operating Partnership and certain
      employees. (Incorporated by reference to the exhibits to the Company’s
      Annual Report on Form 10-K for the year ended December 31,
      1993.)10.5
            Amended
      and Restated Employment Agreement for Stanley K. Tanger, as of December
      29, 2008. (Incorporated by reference to the exhibits to the Operating
      Partnership’s Current Report on Form 8-K dated January 5,
      2009.)10.6
            Amended
      and Restated Employment Agreement for Steven B. Tanger, as of December 29,
      2008. (Incorporated by reference to the exhibits to the Operating
      Partnership’s Current Report on Form 8-K dated January 5,
      2009.)10.7
            Amended
      and Restated Employment Agreement for Frank C. Marchisello, Jr., as of
      December 29, 2008. (Incorporated by reference to the exhibits to the
      Operating Partnership’s Current Report on Form 8-K dated January 5,
      2009.)10.8
            Amended
      and Restated Employment Agreement for Lisa J. Morrison, as of December 29,
      2008. (Incorporated by reference to the exhibits to the Operating
      Partnership’s Current Report on Form 8-K dated January 5,
      2009.)10.9
            Amended
      and Restated Employment Agreement for Joe Nehmen, as of December 29,
      2008.  (Incorporated by reference to the exhibits to the
      Operating Partnership’s Current Report on Form 8-K dated January 5,
      2009.)10.11
            Registration
      Rights Agreement among the Company, the Tanger Family Limited Partnership
      and Stanley K. Tanger. (Incorporated by reference to the exhibits to the
      Company’s Registration Statement on Form S-11 filed May 27, 1993, as
      amended.)10.11A
            Amendment
      to Registration Rights Agreement among the Company, the Tanger Family
      Limited Partnership and Stanley K. Tanger. (Incorporated by reference to
      the exhibits to the Company’s Annual Report on Form 10-K for the year
      ended December 31, 1995.)








10.11B
            Second
      Amendment to Registration Rights Agreement among the Company, the Tanger
      Family Limited Partnership and Stanley K. Tanger dated September 4, 2002.
      (Incorporated by reference to the exhibits to the Company’s Annual Report
      on Form 10-K for the year ended December 31, 2003.)10.11C
            Third
      Amendment to Registration Rights Agreement among the Company, the Tanger
      Family Limited Partnership and Stanley K. Tanger dated December 5, 2003.
      (Incorporated by reference to the exhibits to the Company’s Annual Report
      on Form 10-K for the year ended December 31, 2003.)10.11D
            Fourth
      Amendment to Registration Rights Agreement among the Company, the Tanger
      Family Limited Partnership and Stanley K. Tanger dated August 8, 2006.
      (Incorporated by reference to the exhibits to the Company’s Registration
      Statement on Form S-3, dated August 9, 2006.)10.12
            Agreement
      Pursuant to Item 601(b)(4)(iii)(A) of Regulation S-K. (Incorporated by
      reference to the exhibits to the Company’s Registration Statement on Form
      S-11 filed May 27, 1993, as amended.)10.13
            Assignment
      and Assumption Agreement among Stanley K. Tanger, Stanley K. Tanger &
      Company, the Tanger Family Limited Partnership, the Operating Partnership
      and the Company. (Incorporated by reference to the exhibits to the
      Company’s Registration Statement on Form S-11 filed May 27, 1993, as
      amended.)10.15
            COROC
      Holdings, LLC Limited Liability Company Agreement dated October 3, 2003.
      (Incorporated by reference to the exhibits to the Company’s Current Report
      on Form 8-K dated December 8, 2003.)10.16
            Form
      of Shopping Center Management Agreement between owners of COROC Holdings,
      LLC and Tanger Properties Limited Partnership. (Incorporated by reference
      to the exhibits to the Company’s Current Report on Form 8-K dated December
      8, 2003.)10.17
            Form
      of Restricted Share Agreement between the Company and certain Officers.
      (Incorporated by reference to the exhibits to the Company’s Annual Report
      on Form 10-K for the year ended December 31, 2008.)10.18
            Form
      of Restricted Share Agreement between the Company and certain Officers
      with certain performance criteria vesting. (Incorporated by reference to
      the exhibits to the Company’s Quarterly Report on Form 10-Q for the
      quarter ended March 31, 2005.)10.18A
            Form
      of Amendment to Restricted Share Agreement between the Company and certain
      Officers with certain performance criteria vesting. (Incorporated by
      reference to the exhibits to the Company’s Annual Report on Form 10-K for
      the year ended December 31, 2008.)10.19
            Form
      of Restricted Share Agreement between the Company and certain Directors.
      (Incorporated by reference to the exhibits to the Company’s Quarterly
      Report on Form 10-Q for the quarter ended March 31,
  2005.)10.20
            Purchase
      Agreement between Tanger Factory Outlet Centers, Inc. and Cohen &
      Steers Capital Management, Inc. relating to a registered direct offering
      of 3,000,000 of the Company’s common shares dated August 30, 2005.
      (Incorporated by reference to the exhibits to the Company’s Current Report
      on Form 8-K dated August 30, 2005.)10.21
            Term
      loan credit agreement dated June 10, 2008 between Tanger Properties
      Limited Partnership and Banc of America Securities LLC and Wells Fargo
      Bank, N.A. with Bank of America, N.A. serving as Administrative Agent and
      Wells Fargo Bank, N.A. serving as Syndication Agent (Incorporated by
      reference to the exhibits of the Company’s current report on Form 8-K
      dated June 11, 2008.)21.1
            List
      of Subsidiaries.23.1
            Consent
      of PricewaterhouseCoopers LLP.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
      2002.31.2
            Principal
      Financial Officer Certification Pursuant to 18 U.S.C. Section 1350, as
      Adopted Pursuant to Section 302 of the Sarbanes - Oxley Act of
      2002.32.1
            Principal
      Executive Officer Certification Pursuant to 18 U.S.C. Section 1350, as
      Adopted Pursuant to Section 906 of the Sarbanes - Oxley Act of
      2002.32.2
            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.











SIGNATURES





Pursuant
to the requirements of Section 13 or 15(d) of the Securities Exchange Act of
1934, the Registrant has duly caused this report to be signed on its behalf by
the undersigned, thereunto duly authorized.





TANGER
PROPERTIES LIMITED PARTNERSHIP





By:
Tanger GP Trust, its sole general partner





By:/s/ Steven B.
Tanger


Steven
B. Tanger


President
and Chief Executive Officer





February
27, 2009





Pursuant
to the requirements of the Securities Exchange Act of 1934, this report has been
signed below by the following persons on behalf of the Registrant and in the
capacities and on the dates indicated:








Signature
                Title
                Date/s/ Stanley K.
      Tanger
                  Stanley
      K. Tanger
                Chairman
      of the Board of Trustees
                February
      27, 2009/s/ Steven B.
      Tanger
                  Steven
      B. Tanger
                Trustee,
      President and
                  Chief
      Executive Officer (Principal Executive Officer)
                February
      27, 2009/s/ Frank C. Marchisello, Jr.
                  Frank
      C. Marchisello Jr.
                Vice
      President, Treasurer and Assistant
                  Secretary
                  (Principal
      Financial and Accounting Officer)
                February
      27, 2009/s/ Jack
      Africk
                  Jack
      Africk
                Trustee
                February
      27, 2009/s/ Williams G.
      Benton
                  William
      G. Benton
                Trustee
                February
      27, 2009/s/ Bridget Ryan
      Berman
                  Bridget
      Ryan Berman
                Trustee
                February
      27, 2009/s/ Thomas E.
      Robinson
                  Thomas
      E. Robinson
                Trustee
                February
      27, 2009/s/ Allan
      L. Schuman
                  Allan
      L. Schuman
                Trustee
                February
      27, 2009














Report
of Independent Registered Public Accounting Firm





To the
Partners of Tanger Properties Limited Partnership:





In our
opinion, the consolidated financial statements listed in the index appearing
under Item 15(a)(1) present fairly, in all material respects, the financial
position of Tanger Properties Limited Partnership and its subsidiaries at
December 31, 2008 and 2007, and the results of their operations and their cash
flows for each of the three years in the period ended December 31, 2008 in
conformity with accounting principles generally accepted in the United States of
America.  In addition, in our opinion, the financial statement
schedule listed in the index appearing under Item 15(a)(2) presents fairly, in
all material respects, the information set forth therein when read in
conjunction with the related consolidated financial statements.  Also
in our opinion, the Operating Partnership maintained, in all material respects,
effective internal control over financial reporting as of December 31, 2008,
based on criteria established in Internal Control - Integrated Framework issued
by the Committee of Sponsoring Organizations of the Treadway Commission
(COSO).  The Operating Partnership's management is responsible for
these financial statements and financial statement schedule, for maintaining
effective internal control over financial reporting and for its assessment of
the effectiveness of internal control over financial reporting, included in
Management's Report on Internal Control Over Financial Reporting included under
Item 9A(b).  Our responsibility is to express opinions on these
financial statements, on the financial statement schedule, and on the Operating
Partnership's internal control over financial reporting based on our
integrated audits.  We conducted our audits in accordance with the
standards of the Public Company Accounting Oversight Board (United
States).  Those standards require that we plan and perform the audits
to obtain reasonable assurance about whether the financial statements are free
of material misstatement and whether effective internal control over financial
reporting was maintained in all material respects.  Our audits of the
financial statements included examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation.  Our audit of
internal control over financial reporting included obtaining an understanding of
internal control over financial reporting, assessing the risk that a material
weakness exists, and testing and evaluating the design and operating
effectiveness of internal control based on the assessed risk.  Our
audits also included performing such other procedures as we considered necessary
in the circumstances. We believe that our audits provide a reasonable basis for
our opinions.





A
company’s internal control over financial reporting is a process designed to
provide reasonable assurance regarding the reliability of financial reporting
and the preparation of financial statements for external purposes in accordance
with generally accepted accounting principles.  A company’s internal
control over financial reporting includes those policies and procedures that
(i) pertain to the maintenance of records that, in reasonable detail,
accurately and fairly reflect the transactions and dispositions of the assets of
the company; (ii) provide reasonable assurance that transactions are
recorded as necessary to permit preparation of financial statements in
accordance with generally accepted accounting principles, and that receipts and
expenditures of the company are being made only in accordance with
authorizations of management and directors of the company; and
(iii) provide reasonable assurance regarding prevention or timely detection
of unauthorized acquisition, use, or disposition of the company’s assets that
could have a material effect on the financial statements.





Because
of its inherent limitations, internal control over financial reporting may not
prevent or detect misstatements.  Also, projections of any evaluation
of effectiveness to future periods are subject to the risk that controls may
become inadequate because of changes in conditions, or that the degree of
compliance with the policies or procedures may deteriorate.





/s/
PricewaterhouseCoopers LLP





Greensboro,
North Carolina


February
27, 2009











F-1





TANGER
PROPERTIES LIMITED PARTNERSHIP AND SUBSIDIARIES


CONSOLIDATED
BALANCE SHEETS


(in
thousands)


December
      31,2008
                                      
                                      
                                      2007ASSETSRental
      propertyLand
                                      
                                      $
                                      135,689
                                      
                                      
                                      $
                                      130,075Buildings,
      improvements and fixtures
                                      
                                      
                                      1,260,017
                                      
                                      
                                      
                                      1,104,459Construction
      in progress
                                      
                                      
                                      3,823
                                      
                                      
                                      
                                      52,6031,399,529
                                      
                                      
                                      
                                      1,287,137Accumulated
      depreciation
                                      
                                      
                                      (359,298
                                      )
                                      
                                      
                                      (312,638
                                      )Rental
      property, net
                                      
                                      
                                      1,040,231
                                      
                                      
                                      
                                      974,499Cash
      and cash equivalents
                                      
                                      
                                      4,952
                                      
                                      
                                      
                                      2,393Investments
      in unconsolidated joint ventures
                                      
                                      
                                      9,457
                                      
                                      
                                      
                                      10,695Deferred
      charges, net
                                      
                                      
                                      37,942
                                      
                                      
                                      
                                      44,804Other
      assets
                                      
                                      
                                      28,987
                                      
                                      
                                      
                                      27,587Total
      assets
                                      
                                      $
                                      1,121,569
                                      
                                      
                                      $
                                      1,059,978LIABILITIES AND PARTNERS’
      EQUITYLiabilitiesDebtSenior,
      unsecured notes (net of discount of $681 and $759,
      respectively)
                                      
                                      $
                                      398,819
                                      
                                      
                                      $
                                      498,741Unsecured
      term loan
                                      
                                      
                                      235,000
                                      
                                      
                                      
                                      ---Mortgages
      payable (including premium of $0 and $1,046, respectively)
                                      
                                      
                                      ---
                                      
                                      
                                      
                                      173,724Unsecured
      lines of credit
                                      
                                      
                                      161,500
                                      
                                      
                                      
                                      33,880Total
      debt
                                      
                                      
                                      795,319
                                      
                                      
                                      
                                      706,345Construction
      trade payables
                                      
                                      
                                      11,968
                                      
                                      
                                      
                                      23,813Accounts
      payable and accrued expenses
                                      
                                      
                                      56,905
                                      
                                      
                                      
                                      46,883Total
      liabilities
                                      
                                      
                                      864,192
                                      
                                      
                                      
                                      777,041Commitments
      and contingenciesPartners’
      equityGeneral
      partner
                                      
                                      
                                      (209
                                      )
                                      
                                      
                                      24Limited
      partners
                                      
                                      
                                      269,066
                                      
                                      
                                      
                                      290,430Accumulated
      other comprehensive loss
                                      
                                      
                                      (11,480
                                      )
                                      
                                      
                                      (7,517
                                      )Total
      partners’ equity
                                      
                                      
                                      257,377
                                      
                                      
                                      
                                      282,937Total
      liabilities and partners’ equity
                                      
                                      $
                                      1,121,569
                                      
                                      
                                      $
                                      1,059,978





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























F -
2





TANGER
PROPERTIES LIMITED PARTNERSHIP AND SUBSIDIARIES


CONSOLIDATED
STATEMENTS OF OPERATIONS


(in
thousands, except per unit data)


For the years ended
      December 31,2008
                                                
                                                
                                                2007
                                                
                                                
                                                2006REVENUESBase
      rentals
                                                
                                                $
                                                159,068
                                                
                                                
                                                $
                                                146,824
                                                
                                                
                                                $
                                                138,101Percentage
      rentals
                                                
                                                
                                                7,058
                                                
                                                
                                                
                                                8,757
                                                
                                                
                                                
                                                7,182Expense
      reimbursements
                                                
                                                
                                                72,004
                                                
                                                
                                                
                                                65,978
                                                
                                                
                                                
                                                58,397Other
      income
                                                
                                                
                                                7,261
                                                
                                                
                                                
                                                7,206
                                                
                                                
                                                
                                                7,282Total
      revenues
                                                
                                                
                                                245,391
                                                
                                                
                                                
                                                228,765
                                                
                                                
                                                
                                                210,962EXPENSESProperty
      operating
                                                
                                                
                                                81,897
                                                
                                                
                                                
                                                74,383
                                                
                                                
                                                
                                                68,302General
      and administrative
                                                
                                                
                                                22,264
                                                
                                                
                                                
                                                19,007
                                                
                                                
                                                
                                                16,706Depreciation
      and amortization
                                                
                                                
                                                62,326
                                                
                                                
                                                
                                                63,810
                                                
                                                
                                                
                                                57,012Total
      expenses
                                                
                                                
                                                166,487
                                                
                                                
                                                
                                                157,200
                                                
                                                
                                                
                                                142,020Operating
      income
                                                
                                                78,904
                                                
                                                
                                                71,565
                                                
                                                
                                                68,942Interest
      expense (including prepayment premium and deferred loan cost write off of
      $406 and $917 in 2008 and 2006, respectively)
                                                
                                                
                                                38,443
                                                
                                                
                                                
                                                40,066
                                                
                                                
                                                
                                                40,775Loss
      on settlement of U.S. treasury rate locks
                                                
                                                
                                                8,910
                                                
                                                
                                                
                                                ---
                                                
                                                
                                                
                                                ---Income
      before equity in earnings ofunconsolidated
      joint ventures anddiscontinued
      operations
                                                
                                                
                                                31,551
                                                
                                                
                                                
                                                31,499
                                                
                                                
                                                
                                                28,167Equity
      in earnings of unconsolidated joint ventures
                                                
                                                
                                                852
                                                
                                                
                                                
                                                1,473
                                                
                                                
                                                
                                                1,268Income
      from continuing operations
                                                
                                                
                                                32,403
                                                
                                                
                                                
                                                32,972
                                                
                                                
                                                
                                                29,435Discontinued
      operations
                                                
                                                
                                                ---
                                                
                                                
                                                
                                                118
                                                
                                                
                                                
                                                14,198Net
      income
                                                
                                                
                                                32,403
                                                
                                                
                                                
                                                33,090
                                                
                                                
                                                
                                                43,633Less
      applicable preferred unit distributions
                                                
                                                
                                                (5,625
                                                )
                                                
                                                
                                                (5,625
                                                )
                                                
                                                
                                                (5,433
                                                )Net
      income available to common unitholders
                                                
                                                
                                                26,778
                                                
                                                
                                                
                                                27,465
                                                
                                                
                                                
                                                38,200Income
      allocated to limited partners
                                                
                                                
                                                26,561
                                                
                                                
                                                
                                                27,242
                                                
                                                
                                                
                                                37,887Income
      allocated to general partner
                                                
                                                $
                                                217
                                                
                                                
                                                $
                                                223
                                                
                                                
                                                $
                                                313Basic
      earnings per common unit:Income
      from continuing operations
                                                
                                                $
                                                1.44
                                                
                                                
                                                $
                                                1.48
                                                
                                                
                                                $
                                                1.31Net
      income
                                                
                                                
                                                1.44
                                                
                                                
                                                
                                                1.49
                                                
                                                
                                                
                                                2.08Diluted
      earnings per common unit:Income
      from continuing operations
                                                
                                                $
                                                1.43
                                                
                                                
                                                $
                                                1.45
                                                
                                                
                                                $
                                                1.29Net
      income
                                                
                                                
                                                1.43
                                                
                                                
                                                
                                                1.46
                                                
                                                
                                                
                                                2.06





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





F -
3





TANGER
PROPERTIES LIMITED PARTNERSHIP AND SUBSIDIARIES


CONSOLIDATED
STATEMENTS OF PARTNERS’ EQUITY






General
      partner
            Limited
      partners
            Deferred
              compensation
            Accumulated
      other comprehensive
              income
      (loss)
            Total
      partners’
              equityBalance,
      December 31, 2005
            $  317
            $   301,803
            $     (5,501)
            $     2,962
            $  299,581Comprehensive
      income:Net
      income
            313
            43,320
            -
            -
            43,633Other
      comprehensive income
            -
            -
            -
            924
            924Total comprehensive
      income
            313
            43,320
            -
            924
            44,557Reclassification
      of deferred compensation
            -
            (5,501)
            5,501
            -
            -Compensation
      under Incentive Award Plan
            -
            2,675
            -
            -
            2,675Issuance
      of 65,310 common units uponexercise
      of options
            -
            2,381
            -
            -
            2,381Issuance
      of 800,000 preferred units inin
      exchange for the proceeds from theCompany’s
      preferred share offering
            -
            19,445
            -
            -
            19,445Grant
      of 81,000 restricted unit awards,net
      of forfeitures
            -
            -
            -
            -
            -Preferred
      distributions ($1.8802 per preferred unit)
            -
            (5,262)
            -
            -
            (5,262)Common
      distributions ($2.685 per common unit)
            (403)
            (49,274)
            -
            -
            (49,677)Balance,
      December 31, 2006
            227
            309,587
            -
            3,886
            313,700Comprehensive
      income:Net
      income
            223
            32,867
            -
            -
            33,090Other
      comprehensive (loss)
            -
            -
            -
            (11,403)
            (11,403)Total comprehensive
      income
            223
            32,867
            -
            (11,403)
            21,687Compensation
      under Incentive Award Plan
            -
            4,059
            -
            -
            4,059Issuance
      of 58,953 common units uponexercise
      of options
            -
            2,085
            -
            -
            2,085Grant
      of 85,000 restricted units,net
      of forfeitures
            -
            -
            -
            -
            -Preferred
      distributions ($1.875 per preferred unit)
            -
            (5,625)
            -
            -
            (5,625)Common
      distribution ($2.84 per common unit)
            (426)
            (52,543)
            -
            -
            (52,969)Balance,
      December 31, 2007
            24
            290,430
            -
            (7,517)
            282,937Comprehensive
      income:Net
      income
            217
            32,186
            -
            -
            32,403Other
      comprehensive (loss)
            -
            -
            -
            (3,963)
            (3,963)Total comprehensive
      income
            217
            32,186
            -
            (3,963)
            28,440Compensation
      under Incentive Award Plan
            -
            5,392
            -
            -
            5,392Issuance
      of 74,130 common units uponexercise
      of options
            -
            2,647
            -
            -
            2,647Grant
      of 95,000 restricted units
            -
            -
            -
            -
            -Preferred
      distributions ($1.875 per preferred unit)
            -
            (5,625)
            -
            -
            (5,625)Common
      distributions ($3.00 per common unit)
            (450)
            (55,964)
            -
            -
            (56,414)Balance,
      December 31, 2008
            $(209)
            $   269,066
            $             -
            $   (11,480)
            $  257,377







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


F -
4





TANGER
PROPERTIES LIMITED PARTNERSHIP AND SUBSIDIARIES


CONSOLIDATED
STATEMENTS OF CASH FLOWS


(in
thousands)


For the years ended
      December 31,2008
                              
                              
                              2007
                              
                              
                              2006OPERATING
      ACTIVITIES:Net
      income
                              
                              $
                              32,403
                              
                              
                              $
                              33,090
                              
                              
                              $
                              43,633Adjustments
      to reconcile net income to net cash provided by operating
      activities:Depreciation
      and amortization (including discontinued operations)
                              
                              
                              62,380
                              
                              
                              
                              63,954
                              
                              
                              
                              57,319Amortization
      of deferred financing costs
                              
                              
                              1,705
                              
                              
                              
                              1,738
                              
                              
                              
                              1,702Equity
      in earnings of unconsolidated joint ventures
                              
                              
                              (852
                              )
                              
                              
                              (1,473
                              )
                              
                              
                              (1,268
                              )Distributions
      received from unconsolidated joint ventures
                              
                              
                              3,540
                              
                              
                              
                              3,220
                              
                              
                              
                              2,300Loss
      on settlement of U.S. treasury rate locks
                              
                              
                              8,910
                              
                              
                              
                              ---
                              
                              
                              
                              ---Compensation
      expense related to restricted units and options granted
                              
                              
                              5,392
                              
                              
                              
                              4,059
                              
                              
                              
                              2,675Amortization
      of debt premiums and discounts, net
                              
                              
                              (1,245
                              )
                              
                              
                              (2,584
                              )
                              
                              
                              (2,507
                              )Gain
      on sale of real estate
                              
                              
                              ---
                              
                              
                              
                              (6
                              )
                              
                              
                              (13,833
                              )Gain
      on sale of outparcels of land
                              
                              
                              ---
                              
                              
                              
                              ---
                              
                              
                              
                              (402
                              )Net
      accretion of market rent rate adjustment
                              
                              
                              (356
                              )
                              
                              
                              (1,147
                              )
                              
                              
                              (1,464
                              )Straight-line
      base rent adjustment
                              
                              
                              (3,195
                              )
                              
                              
                              (2,868
                              )
                              
                              
                              (2,219
                              )Increases
      (decreases) due to changes in:Other
      assets
                              
                              
                              (1,082
                              )
                              
                              
                              (4,780
                              )
                              
                              
                              222Accounts
      payable and accrued expenses
                              
                              
                              (10,636
                              )
                              
                              
                              5,406
                              
                              
                              
                              2,196Net cash provided by operating
      activities
                              
                              
                              96,964
                              
                              
                              
                              98,609
                              
                              
                              
                              88,354INVESTING
      ACTIVITIES:Additions
      of rental properties
                              
                              
                              (127,298
                              )
                              
                              
                              (85,030
                              )
                              
                              
                              (79,434
                              )Additions
      to investments in unconsolidated joint ventures
                              
                              
                              (1,577
                              )
                              
                              
                              ---
                              
                              
                              
                              (2,020
                              )Return
      of equity from unconsolidated joint ventures
                              
                              
                              ---
                              
                              
                              
                              1,281
                              
                              
                              
                              ---Additions
      to deferred lease costs
                              
                              
                              (4,608
                              )
                              
                              
                              (3,086
                              )
                              
                              
                              (3,260
                              )Net
      proceeds from sales of real estate
                              
                              
                              ---
                              
                              
                              
                              2,032
                              
                              
                              
                              21,378Net cash used in investing
      activities
                              
                              (133,483
                              )
                              
                              
                              (84,803
                              )
                              
                              
                              (63,336
                              )FINANCING
      ACTIVITIES:Cash
      distributions paid
                              
                              
                              (62,039
                              )
                              
                              
                              (58,594
                              )
                              
                              
                              (54,939
                              )Net
      proceeds from sale of preferred shares
                              
                              
                              ---
                              
                              
                              
                              ---
                              
                              
                              
                              19,445Contributions
      from the sole general partner
                              
                              
                              759,645
                              
                              
                              
                              152,000
                              
                              
                              
                              279,175Repayments
      of debt
                              
                              
                              (669,703
                              )
                              
                              
                              (121,911
                              )
                              
                              
                              (261,942
                              )Additions
      to deferred financing costs
                              
                              
                              (2,166
                              )
                              
                              
                              (534
                              )
                              
                              
                              (4,157
                              )Proceeds
      from tax increment financing
                              
                              
                              10,693
                              
                              
                              
                              7,128
                              
                              
                              
                              505Proceeds
      from exercise of options
                              
                              
                              2,648
                              
                              
                              
                              2,085
                              
                              
                              
                              2,382Net
      cash provided by (used in)  financing activities
                              
                              39,078
                              
                              
                              
                              (19,826
                              )
                              
                              
                              (19,531
                              )Net
      increase (decrease) in cash and cash equivalents
                              
                              
                              2,559
                              
                              
                              
                              (6,020
                              )
                              
                              
                              5,487Cash
      and cash equivalents, beginning of year
                              
                              
                              2,393
                              
                              
                              
                              8,413
                              
                              
                              
                              2,926Cash
      and cash equivalents, end of year
                              
                              $
                              4,952
                              
                              
                              $
                              2,393
                              
                              
                              $
                              8,413


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


F -
5


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS





1.
            Organization
      of the Operating Partnership





Tanger
Properties Limited Partnership and subsidiaries, a North Carolina limited
partnership, focuses exclusively on developing, acquiring, owning, operating and
managing factory outlet shopping centers.  We are one of the largest
owners and operators of factory outlet centers in the United
States.  As of December 31, 2008, we owned and operated 30 outlet
centers, with a total gross leasable area of approximately 8.8 million square
feet.  All references to gross leasable area and square feet contained
in the notes to the consolidated financial statements are
unaudited.  These factory outlet centers were 97% occupied and
contained over 1,900 stores, representing approximately 370 store
brands.  Also, we operated and had partial ownership interests in
three outlet centers totaling approximately 1.4 million square
feet.





We are
controlled by Tanger Factory Outlet Centers, Inc. and subsidiaries, a
fully-integrated, self-administered and self-managed real estate investment
trust, or REIT.  The Company owns the majority of the partnership
interests issued by the Operating Partnership, which we refer to as units,
through its two wholly-owned subsidiaries, the Tanger GP Trust and the Tanger LP
Trust.  The Tanger GP Trust controls the Operating Partnership as its
sole general partner.  The Tanger LP Trust holds a limited partnership
interest.  The remaining units are held by the Tanger family through
ownership of the Tanger Family Limited Partnership.  Stanley K.
Tanger, the Company’s Chairman of the Board, is the sole general partner of the
Tanger Family Limited Partnership.  Unless the context indicates
otherwise, the term “Operating Partnership” refers to Tanger Properties Limited
Partnership and subsidiaries and the term “Company” refers to Tanger Factory
Outlet Centers, Inc. and subsidiaries.  The terms “we”, “our” and “us”
refer to the Operating Partnership or the Operating Partnership and the Company
together, as the text requires.





As of
December 31, 2008, Tanger GP Trust owned 150,000 units of the Operating
Partnership, Tanger LP Trust owned 15,683,751 units of the Operating Partnership
and the Tanger Family Limited Partnership owned the remaining 3,033,305
units.  Each Tanger Family Limited Partnership unit is exchangeable
for two of the Company’s common shares, subject to certain limitations to
preserve the Company’s status as a REIT.  In addition, Tanger LP Trust
owned 3,000,000 preferred units which were issued by the Operating Partnership
in exchange for the proceeds from the Company’s issuance of 3.0 million 7.5%
Class C Cumulative Preferred Shares, or Class C Preferred Shares.  If
the Company redeems any Class C Preferred Shares, the Operating Partnership will
redeem an equivalent number of preferred units for the liquidation preference
value of the Company’s Class C Preferred Shares.





2.   Summary
of Significant Accounting Policies





Principles of Consolidation -
The consolidated financial statements include our accounts and our wholly-owned
subsidiaries.  Intercompany balances and transactions have been
eliminated in consolidation.  Investments in real estate joint
ventures that represent non-controlling ownership interests are accounted for
using the equity method of accounting.





In 2003,
the Financial Accounting Standards Board, or FASB, issued FASB Interpretation
No. 46 (Revised 2003): “Consolidation of Variable Interest Entities: An
Interpretation of ARB No. 51”, or FIN 46R, which clarifies the application of
existing accounting pronouncements to certain entities in which equity investors
do not have the characteristics of a controlling financial interest or do not
have sufficient equity at risk for the entity to finance its activities without
additional subordinated financial support from other parties.  The
provisions of FIN 46R were effective for all variable interests in variable
interest entities in 2004 and thereafter.  We have evaluated the Deer
Park, Wisconsin Dells and Myrtle Beach Hwy 17 joint ventures, Note 4, and have
determined that, under the current facts and circumstances, we are not required
to consolidate these entities under the provisions of FIN 46R.





Related Parties – We account
for related party transactions under the guidance of FASB Statement No. 57
“Related Party Disclosures”.  The Tanger Family Limited Partnership,
see Note 1, is a related party which holds a limited partnership interest in and
is the minority owner of the Operating Partnership.  Stanley K.
Tanger, the Company’s Chairman of the Board, is the sole general partner of the
Tanger Family Limited Partnership.  The only material related party
transaction with the Tanger Family Limited Partnership is the payment of
quarterly distributions of earnings which were approximately $9.1 million, $8.6
million and $8.1 million for the years ended December 31, 2008, 2007 and 2006,
respectively.





The
nature of our relationships and the related party transactions for our
unconsolidated joint ventures are discussed in Note 4.





F -
6


Use of Estimates - The
preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period.  Actual results could differ from those
estimates.





Operating Segments -We
aggregate the financial information of all centers into one reportable operating
segment because the centers all have similar economic characteristics and
provide similar products and services to similar types and classes of
customers.





Rental Property - Rental
properties are recorded at cost less accumulated depreciation.  Costs
incurred for the construction and development of properties, including certain
general and overhead costs, are capitalized.  The amount of general
and overhead costs capitalized is based on our estimate of the amount of costs
directly related to the construction or development of these
assets.  Direct costs to acquire assets are capitalized once the
acquisition becomes probable.  Depreciation is computed on the
straight-line basis over the estimated useful lives of the assets.  We
generally use estimated lives ranging from 25 to 33 years for buildings and
improvements, 15 years for land improvements and seven years for
equipment.  Expenditures for ordinary maintenance and repairs are
charged to operations as incurred while significant renovations and
improvements, including tenant finishing allowances, which improve and/or extend
the useful life of the asset are capitalized and depreciated over their
estimated useful life.  Interest costs are capitalized during periods
of active construction for qualified expenditures based upon interest rates in
place during the construction period until construction is substantially
complete.  Capitalized interest costs are amortized over lives which
are consistent with the constructed assets.





In
accordance with FASB Statement No. 141 “Business Combinations”, or FAS 141,
we allocate the purchase price of acquisitions based on the fair value of land,
building, tenant improvements, debt and deferred lease costs and other
intangibles, such as the value of leases with above or below market rents,
origination costs associated with the in-place leases, the value of in-place
leases and tenant relationships, if any.  We depreciate the amount
allocated to building, deferred lease costs and other intangible assets over
their estimated useful lives, which generally range from three to
33 years.  The values of the above and below market leases are
amortized and recorded as either an increase (in the case of below market
leases) or a decrease (in the case of above market leases) to rental income over
the remaining term of the associated lease.  The values of below
market leases that are considered to have renewal periods with below market
rents are amortized over the remaining term of the associated lease plus the
renewal periods.  The value associated with in-place leases is
amortized over the remaining lease term and tenant relationships is amortized
over the expected term, which includes an estimated probability of the lease
renewal.  If a tenant vacates its space prior to the contractual
termination of the lease and no rental payments are being made on the lease, any
unamortized balance of the related intangibles is written off.  The
tenant improvements and origination costs are amortized as an expense over the
remaining life of the lease (or charged against earnings if the lease is
terminated prior to its contractual expiration date).  We assess fair
value based on estimated cash flow projections that utilize appropriate discount
and capitalization rates and available market information.





Buildings,
improvements and fixtures consist primarily of permanent buildings and
improvements made to land such as landscaping and infrastructure and costs
incurred in providing rental space to tenants.  Interest costs
capitalized during 2008, 2007 and 2006 amounted to $1.6 million, $1.7 million
and $2.2 million, respectively, and internal development costs capitalized
amounted to $1.8 million, $1.4 million and $944,000,
respectively.  Depreciation expense related to rental property
included in income from continuing operations for each of the years ended
December 31, 2008, 2007 and 2006 was $49.8 million, $50.4 million and $40.2
million, respectively.





The
pre-construction stage of project development involves certain costs to secure
land control and zoning and complete other initial tasks essential to the
development of the project.  Direct costs to acquire assets are
capitalized once the acquisition becomes probable.  These costs are
transferred from other assets to construction in progress when the
pre-construction tasks are completed.  Costs of unsuccessful
pre-construction or acquisition efforts are charged to operations when the
project is no longer probable.





Cash and Cash Equivalents -
All highly liquid investments with an original maturity of three months or less
at the date of purchase are considered to be cash equivalents.  Cash
balances at a limited number of banks may periodically exceed insurable
amounts.  We believe that we mitigate our risk by investing in or
through major financial institutions.  Recoverability of investments
is dependent upon the performance of the issuer.  At December 31, 2008
and 2007, respectively, we had cash equivalent investments in highly liquid
money market accounts at major financial institutions of $1.4 million and $1.0
million.





Deferred Charges– Deferred
charges includes deferred lease costs and other intangible assets consisting of
fees and costs incurred, including certain general and overhead costs, to
originate operating leases and are amortized over the average minimum lease term
of 5 years.  Deferred lease costs and other intangible assets also
include the value of leases and origination costs deemed to have been acquired
in real estate acquisitions in accordance with FAS 141.  See “Rental
Property” under this section above for a discussion.  Deferred
financing costs include fees and costs incurred to obtain long-term financing
and are amortized over the terms of the respective loans using the straight line
method which approximates the effective interest method.  Unamortized
deferred financing costs are charged to expense when debt is retired before the
maturity date.





F -
7


Guarantees of Indebtedness -
In November 2002, the FASB issued Interpretation No. 45, “Guarantors Accounting
and Disclosure Requirements for Guarantees, Including Indirect Guarantees of
Indebtedness of Others”, or FIN 45, which addresses the disclosure to be made by
a guarantor in its interim and annual financial statements about its obligations
under guarantees.  FIN 45 applies to all guarantees entered into or
modified after December 31, 2002.  Based on this criterion, the
guarantees of indebtedness by us in Deer Park and Wisconsin Dells, see Note 4,
are accounted for under the provisions of FIN 45.  FIN 45 requires the
guarantor to recognize a liability for the non-contingent component of the
guarantee; this is the obligation to stand ready to perform in the event that
specified triggering events or conditions occur.  The initial
measurement of this liability is the fair value of the guarantee at
inception.  The recognition of the liability is required even if it is
not probable payments will be required under the guarantee or if the guarantee
was issued with a premium payment or as part of a transaction with multiple
elements.  We recorded at inception the fair value of our guarantees
of the Deer Park and Wisconsin Dells joint venture’s debt as debits to our
investments in Deer Park and Wisconsin Dells and credits to a
liability.  We have elected to account for the release from obligation
under the guarantees by the straight-line method over the life of the
guarantees.  The recorded remaining values of the guarantees were $1.5
million and $1.0 million at December 31, 2008 and 2007,
respectively.





Captive Insurance –Our
wholly-owned subsidiary, Northline Indemnity, LLC, is responsible for losses up
to certain levels for property damage (including wind damage from hurricanes)
prior to third-party insurance coverage.  Insurance losses are
reflected in property operating expenses and include estimates of costs
incurred, both reported and unreported.





Impairment of Long-Lived Assets– 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
group may not be recoverable. In such an event, we compare the estimated future
undiscounted cash flows associated with the asset group to the asset group’s
carrying amount, and if less, recognize an impairment loss in an amount by which
the carrying amount exceeds its fair value.  Fair value for purposes
of an impairment test is calculated as the estimated, discounted future cash
flows associated with the asset.  We believe that no impairment
existed at December 31, 2008.





In
February2008, the
FASB issued FASB Staff Position 157-2, “Effective Date of FASB Statement No.
157”, which delays the effective date of FAS 157 to January 1, 2009 for us for
all nonfinancial assets and nonfinancial liabilities, except for items
recognized or disclosed at fair value in the financial statements on a recurring
basis (at least annually).  Rental property is considered a
nonfinancial asset and the testing of it for impairment is considered
nonrecurring in nature.  Effective January 1, 2009, fair value in the
context of an impairment evaluation will be the price that would be received to
sell an asset or paid to transfer a liability in an orderly transaction between
market participants at the measurement date.





Real
estate assets designated as held for sale are stated at the lower of their
carrying value or their fair value less costs to sell.  We classify
real estate as held for sale when it meets the requirements of FASB Statement
No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets”, or
FAS 144, and our Board of Directors approves the sale of the
assets.  Subsequent to this classification, no further depreciation is
recorded on the assets.  The operating results of real estate assets
designated as held for sale and for assets sold are included in discontinued
operations for all periods presented in our results of operations.





Derivatives - We selectively
enter into interest rate protection agreements to mitigate changes in interest
rates on our variable rate borrowings.  The notional amounts of such
agreements are used to measure the interest to be paid or received and do not
represent the amount of exposure to loss.  None of these agreements
are used for speculative or trading purposes.





We
recognize all derivatives as either assets or liabilities in the consolidated
balance sheets and measure those instruments at their fair value in accordance
with FASB Statement No. 133, “Accounting for Derivative Instruments and Hedging
Activities” as amended by FAS 137, FAS 138 and FAS 157, collectively FAS
133.  FAS 133 also requires us to measure the effectiveness, as
defined by FAS 133, of all derivatives.  We formally document our
derivative transactions, including identifying the hedge instruments and hedged
items, as well as our risk management objectives and strategies for entering
into the hedge transaction.  At inception and on a quarterly basis
thereafter, we assess the effectiveness of derivatives used to hedge
transactions. If a cash flow hedge is deemed effective, we record the change in
fair value in other comprehensive income.  If after assessment it is
determined that a portion of the derivative is ineffective, then that portion of
the derivative's change in fair value will be immediately recognized in
earnings.





Income Taxes – As a
partnership, the allocated share of income or loss for the year is included in
the income tax returns for the partners; accordingly, no provision has been made
for Federal income taxes in the accompanying consolidated financial
statements.





F -
8


Revenue Recognition – Base
rentals are recognized on a straight-line basis over the term of the
lease.  Straight-line rent adjustments recorded in other assets were
approximately $12.3 million and $9.3 million, respectively as of December 31,
2008 and 2007.  Substantially all leases contain provisions which
provide additional rents based on tenants’ sales volume (“percentage rentals”)
and reimbursement of the tenants’ share of advertising and promotion, common
area maintenance, insurance and real estate tax expenses.  Percentage
rentals are recognized when specified targets that trigger the contingent rent
are met.  Expense reimbursements are recognized in the period the
applicable expenses are incurred.  Payments received from the early
termination of leases are recognized as revenue from the time the payment is
receivable until the tenant vacates the space.  The values of the
above and below market leases are amortized and recorded as either an increase
(in the case of below market leases) or a decrease (in the case of above market
leases) to rental income over the remaining term of the associated
lease.  If a tenant vacates its space prior to the contractual
termination of the lease and no rental payments are being made on the lease, any
unamortized balance of the related above or below market lease value will be
written off.





We
provide management, leasing and development services for a fee for certain
properties that are not owned by us or that we partially own through a joint
venture.  Fees received for these services are recognized as other
income when earned.





Concentration of Credit Risk- We perform ongoing credit evaluations of our
tenants.  Although the tenants operate principally in the retail
industry, the properties are geographically diverse.  No single tenant
accounted for 10% or more of combined base and percentage rental income or gross
leasable area during 2008, 2007 or 2006.





The
Foley, Alabama and Riverhead, New York centers are the only properties that
comprise more than 10% of our consolidated gross revenues or consolidated total
assets.  The Foley outlet center, acquired in December 2003,
represented 10% of our consolidated total assets as of December 31,
2008.  The Foley outlet center is 557,185 square feet and underwent a
major reconfiguration and renovation in 2007 and 2008.  The Riverhead
center, originally constructed in 1994, represented 12% of our consolidated
total revenues for the year ended December 31, 2008.  The Riverhead
center is 729,315 square feet.





Supplemental Cash Flow Information -We purchase capital equipment and incur costs relating to construction of
new facilities, including tenant finishing allowances.  Expenditures
included in construction trade payables as of December 31, 2008, 2007 and 2006
amounted to $12.0 million, $23.8 million and $23.5 million, respectively.
Interest paid, net of interest capitalized, in 2008, 2007 and 2006 was $40.5
million, $40.5 million and $40.2 million, respectively.  Interest paid
for 2008 includes a prepayment premium for the early extinguishment of the
Capmark mortgage (see Note 7) of approximately $406,000.  Interest
paid for 2006 includes a prepayment premium for the early extinguishment of the
Woodman of the World Life Insurance Society mortgage debt (see Note 7) of
approximately $609,000.





During
the second quarter of 2008, upon the closing of our LIBOR based unsecured term
loan facility, we determined that we were unlikely to enter into a US Treasury
based debt offering.  In accordance with FAS 133, we reclassified to
earnings in the period the amount recorded in other comprehensive income, $17.8
million, related to these derivatives.  This amount had been frozen as
of March 31, 2008 when we determined that the probability of the forecast
transaction was “reasonably possible” instead of
“probable”.  Effective April 1, 2008, we discontinued hedge accounting
and the changes in the fair value of the derivative contracts subsequent to
April 1, 2008 resulted in a gain of $8.9 million.  The accounting
treatment of these derivatives resulted in a net loss on settlement of $8.9
million which has been reflected in the statement of cash flows as a non-cash
operating activity.  The $8.9 million cash settlement of the
derivatives during the second quarter was reflected in the statement of cash
flows as a change in accounts payable and accrued expenses.





Accounting for Stock Based
Compensation – The Company may issue non-qualified share options and
other share-based awards under the Amended and Restated Incentive Award Plan, or
the Plan.  The Operating Partnership will issue one common unit to the
Company for every two common shares issued by the Company.  Effective
January 1, 2006, we adopted FASB Statement No. 123 (revised 2004),
“Share-Based Payment”, or FAS 123R, under the modified prospective method. Since
we had previously accounted for our share-based compensation plan under the fair
value provisions of FAS No. 123, our adoption did not significantly impact our
financial position or our results of operations.  As required by the
statement, deferred compensation as of December 31, 2005, which was set forth
separately in the Partners’ equity section of the consolidated balance sheets,
was reclassified to limited partners’ equity interest during
2006.  Compensation expense recognized in 2006 and for future years is
now recorded as an increase to limited partners’ equity interest.





New Accounting Pronouncements
- In December 2007, the FASB issued Statement of Financial Accounting Standards
No. 141 (revised 2007) “Business Combinations”, or FAS 141R.  FAS 141R
is effective for fiscal years beginning on or after December 15, 2008, which
means that we will adopt FAS 141R on January 1, 2009.  FAS 141R
replaces FAS 141 “Business Combinations” and requires that the acquisition
method of accounting (which FAS 141 called the purchase method) be used for all
business combinations for which the acquisition date is on or after January 1,
2009, as well as for an acquirer to be identified for each business
combination.  FAS 141R establishes principles and requirements for how
the acquirer: (i) recognizes and measures in its financial statements the
identifiable assets acquired, the liabilities assumed, and any non-controlling
interest in the acquiree; (ii) recognizes and measures the goodwill acquired in
the business combination or a gain from a bargain purchase; and (iii) determines
what information to disclose to enable users of financial statements to evaluate
the nature and financial affects of the business
combination.   On January 5, 2009, we acquired the remaining 50%
interest in the Myrtle Beach Hwy 17 joint venture for a cash purchase price of
$32.0 million, which was net of the assumption of the existing mortgage loan of
$35.8 million.  The accounting for this acquisition of interest in a
joint venture is covered by the guidance for FAS 141R.  See Note 18,
Subsequent Events, for further explanation and details of the
transaction.





In
December 2007, the FASB issued Statement of Financial Accounting Standards No.
160 “Non-controlling Interests in Consolidated Financial Statements, an
amendment of ARB No. 51”, or FAS 160.  FAS 160 is effective for fiscal
years beginning on or after December 15, 2008, which means that we will adopt
FAS 160 on January 1, 2009.  This statement amends ARB 51 to establish
accounting and reporting standards for the non-controlling interest in a
subsidiary and for the deconsolidation of a subsidiary.  FAS 160
clarifies that a noncontrolling interest in a subsidiary should be reported as
equity in the consolidated balance sheet and the minority interest's share of
earnings is included in consolidated net income. The calculation of earnings per
share will continue to be based on income amounts attributable to the
controlling interest.  FAS 160 requires retroactive adoption of the
presentation and disclosure requirements for existing minority
interests.  All other requirements of FAS 160 shall be applied
prospectively.  The adoption of FAS 160 will not have a material
effect on our consolidated financial statements.


F -
9





In March
2008, the FASB issued Statement No. 161, “Disclosures about Derivative
Instruments and Hedging Activities—an amendment of FASB Statement No. 133”, or
FAS 161.  FAS 161 requires entities that utilize derivative
instruments to provide qualitative disclosures about their objectives and
strategies for using such instruments, as well as any details of
credit-risk-related contingent features contained within
derivatives.  FAS 161 also requires entities to disclose additional
information about the amounts and location of derivatives located within the
financial statements, how the provisions of FAS 133 have been applied, and the
impact that hedging activities have on an entity’s financial position, financial
performance, and cash flows.  FAS 161 is effective for fiscal years
and interim periods beginning after November 15, 2008, with early application
encouraged.  We currently provide many of the disclosures required by
FAS 161 in our financial statements and therefore, we believe that upon adoption
the only impact on our financial statements will be further enhancement of our
disclosures.





In
April 2008, the FASB issued Staff Position No. FAS 142-3, “Determination of
the Useful Life of Intangible Assets”, or FSP 142-3.  FSP 142-3 amends
the factors to be considered in developing renewal or extension assumptions used
to determine the useful life of an identified intangible asset under FASB
Statement No. 142, “Goodwill and Other Intangible Assets”, and requires
expanded disclosure related to the determination of intangible asset useful
lives.  FSP 142-3 is effective for fiscal years beginning after
December 15, 2008.  We are currently evaluating the impact of adoption
of FSP 142-3 on our consolidated financial position, results of operations and
cash flows.





In May
2008, the FASB issued Staff Position No. APB 14-1,”Accounting for Convertible
Debt Instruments that May be Settled in Cash Upon Conversion”, or FSP APB 14-1.
FSP APB 14-1 requires that the liability and equity components of convertible
debt instruments that may be settled in cash upon conversion (including partial
cash settlement) be separately accounted for in a manner that reflects an
issuer's nonconvertible debt borrowing rate. Under FSP APB 14-1 the value
assigned to the debt component must be the estimated fair value of a similar
nonconvertible debt.  FSP APB 14-1 is effective for financial
statements issued for fiscal years beginning after December 15, 2008, and
interim periods within those fiscal years.  Early adoption is not
permitted. Retrospective application to all periods presented is required except
for instruments that were not outstanding during any of the periods that will be
presented in the annual financial statements for the period of adoption but were
outstanding during an earlier period. The resulting debt discount is amortized
over the period during which the debt is expected to be outstanding (i.e.,
through the first optional redemption date) as additional non-cash interest
expense.  The adoption of FSP APB 14-1 in the first quarter of 2009
will result in approximately $.14 per unit (net of incremental capitalized
interest) of additional non-cash interest expense for the year ended 2008
related to our $149.5 million in convertible debt which was issued during the
third quarter of 2006.





3.  Development
of Rental Properties





Washington,
Pennsylvania





On August
29, 2008, we held the grand opening of our 371,000 square foot outlet center
located south of Pittsburgh in Washington, Pennsylvania.  Tenants
include Nike, Gap, Old Navy, Banana Republic, Coach and others. At December 31
2008, the outlet center was 85% leased.  Tax incremental financing
bonds have been issued related to the Washington project of which we have
received approximately $16.4 million.  We receive proceeds from the
tax increment financing bonds as we incur qualifying expenditures during
construction of the center.





Expansions
at Existing Centers





During
the second quarter of 2008, we completed a 62,000 square foot expansion at our
center located in Barstow, California.  As of December 31, 2008, the
center contained approximately 171,000 square feet, including the newly opened
expansion space.  The outlet center is 100% occupied.





During
the fourth quarter of 2008, we began an expansion of 23,000 square feet at our
existing center in Commerce II, Georgia.  We expected tenants to begin
opening during the second quarter of 2009.





Commitments
to complete construction of the Washington, PA development, the Commerce II, GA
expansion, along with renovations at centers in Myrtle Beach Hwy 501, South
Carolina; Lincoln City, Oregon; Park City, Utah and Foley, Alabama and other
capital expenditure requirements amounted to approximately $11.3 million at
December 31, 2008.  Commitments for construction represent only those
costs contractually required to be paid by us.





F -
10


Change
in Accounting Estimate





During
the first quarter of 2007, the general partners’ Board of Trustees formally
approved a plan to reconfigure our center in Foley, Alabama.  As a
part of this plan, approximately 42,000 square feet was relocated within the
property.  The depreciable useful lives of the buildings demolished
were shortened to coincide with their demolition dates throughout the first
three quarters of 2007 and the change in estimated useful life was accounted for
as a change in accounting estimate.  Accelerated depreciation
recognized related to the reconfiguration reduced income from continuing
operations and net income by approximately $6.0 million for the year ended
December 31, 2007.  The effect on income from continuing operations
per diluted unit and net income per diluted unit was a decrease of $.32 per unit
for the year ended December 31, 2007.





4.
            Investments
      in Unconsolidated Real Estate Joint
Ventures





Our
investments in unconsolidated joint ventures as of December 31, 2008 and 2007
aggregated $9.5 million and $10.7 million, respectively.  We have
evaluated the accounting treatment for each of the joint ventures under the
guidance of FIN 46R and have concluded based on the current facts and
circumstances that the equity method of accounting should be used to account for
the individual joint ventures.  At December 31, 2008, we were members
of the following unconsolidated real estate joint ventures:





Joint
      Venture
            Center
      Location
            Opening
              Date
            Ownership
              %
            Square
              Feet
            Carrying
      Value
              of
      Investment
              (in
      millions)
            Total
      Joint
              Venture
      Debt
              (in
      millions)Myrtle
      Beach Hwy 17
            Myrtle
      Beach, South Carolina
            2002
            50%
            402,442
            $(0.4)
            $35.8Wisconsin
      Dells
            Wisconsin
      Dells, Wisconsin
            2006
            50%
            264,929
            $5.6
            $25.3Deer
      Park
            Deer
      Park, Long Island NY
            2008
            33.3%
            684,952
            $4.3
            $242.4


Our joint
venture related to the shopping center in Deer Park, New York is considered a
variable interest entity because the equity investment at risk is insufficient
to finance that entity’s activities without additional subordinated financial
support.  However, we are not required to consolidate the joint
venture because we are not the primary beneficiary. The primary beneficiary is
the entity that is expected to absorb the majority of the expected losses or
receive a majority of the expected returns.  In determining that we
are not the primary beneficiary, we performed a qualitative analysis of the
financial support provided to Deer Park by each of its members, the financial
condition of each member and potential losses that each member may have to
absorb based on the joint and several guarantees made by affiliates of each
member. We are unable to estimate our maximum exposure to loss at this
time.  Upon completion of the project, the debt is expected to be
approximately $284 million, of which our proportionate share would be
approximately $94.7 million.  See “Deer Park” below for further
discussion of the Deer Park joint venture.  Our joint ventures in
Myrtle Beach Hwy 17, Wisconsin Dells, as well as the warehouse joint venture in
Deer Park are not considered variable interest entities.





These
investments are recorded initially at cost and subsequently adjusted for our
equity in the venture’s net income (loss) and cash contributions and
distributions.  Our investments in real estate joint ventures are
reduced by 50% of the profits earned for leasing and development services we
provided to the Myrtle Beach Hwy 17 and Wisconsin Dells.  Our
investment in Deer Park is reduced by 33.3% of the profits earned for leasing
services we provided to Deer Park.  The following management, leasing
and marketing fees were recognized from services provided to Myrtle Beach Hwy
17, Wisconsin Dells and Deer Park (in thousands):





Year
      Ended
              December
      31,2008
            2007
            2006Fee:Management
            
            $  1,516
            $  534
            $   410Leasing
            
            60
            26
            188Marketing
            
            185
            108
            86Development
            
            ---
            ---
            304Total
      Fees
            
            $  1,761
            $  668
            $   988





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 are amortized over the
various useful lives of the related assets.


On a
periodic basis, we assess whether there are any indicators that the value of our
investments in unconsolidated joint ventures may be impaired.  An
investment is impaired only if management’s estimate of the value of the
investment is less than the carrying value of the investments, and such decline
in value is deemed to be other than temporary.  To the extent
impairment has occurred, the loss shall be measured as the excess of the
carrying amount of the investment over the value of the
investment.  Our estimates of value for each joint venture investment
are based on a number of assumptions that are subject to economic and market
uncertainties including, among others, demand for space, competition for
tenants, changes in market rental rates and operating costs of the
property.  As these factors are difficult to predict and are subject
to future events that may alter our assumptions, the values estimated by us in
our impairment analysis may not be realized.  As of December 31, 2008,
we do not believe that any of our equity investments are impaired.





F -
11


Myrtle
Beach Hwy 17





The
Myrtle Beach Hwy 17 joint venture, in which we have a 50% ownership interest,
has owned a Tanger Outlet Center located on Highway 17 in Myrtle Beach, South
Carolina since June 2002.  The Myrtle Beach center now consists of
approximately 402,000 square feet and has over 90 name brand
tenants.





During
March 2005, Myrtle Beach Hwy 17 entered into an interest rate swap agreement
with Bank of America with a notional amount of $35 million for five
years.  Under this agreement, the joint venture receives a floating
interest rate based on the 30 day LIBOR index and pays a fixed interest rate of
4.59%.  This swap effectively changes the rate of interest on $35
million of variable rate mortgage debt to a fixed rate of 5.99% for the contract
period.





In April
2005, the joint venture obtained non-recourse, permanent financing to replace
the construction loan debt that was utilized to build the outlet
center.  The new mortgage amount is $35.8 million with a rate of LIBOR
+ 1.40%.  The note is for a term of five years with payments of
interest only. In April 2010, the joint venture has the option to extend the
maturity date of the loan two more years until 2012. All debt incurred by this
unconsolidated joint venture is collateralized by its property.





On
January 5, 2009, we purchased the remaining 50% interest in the Myrtle Beach Hwy
17 joint venture for a cash price of $32.0 million which was net of the
assumption of the existing mortgage loan of $35.8 million.  The
acquisition was funded by amounts available under our unsecured lines of
credit.  See Note 19, Subsequent Events, for more information
regarding the acquisition.





Wisconsin
Dells





In March
2005, we established the Wisconsin Dells joint venture to construct and operate
a Tanger Outlet center in Wisconsin Dells, Wisconsin. The 264,900 square foot
center opened in August 2006.  In February 2006, in conjunction with
the construction of the center, Wisconsin Dells entered into a three-year,
interest-only mortgage agreement with a one-year maturity extension
option.  In November 2008, the joint venture exercised its option to
extend the maturity of the mortgage to February 24, 2010.  The option
to extend became effective February 24, 2009. As of December 31, 2008 the loan
had a balance of $25.3 million with a floating interest rate based on the one
month LIBOR index plus 1.30%.  The construction loan incurred by this
unconsolidated joint venture is collateralized by its property as well as joint
and several guarantees by us and designated guarantors of our venture
partner.





Deer
Park





In
October 2003, we, and two other members each having a 33.3% ownership interest,
established a joint venture to develop and own a shopping center in Deer Park,
New York.  On October 23, 2008, we held the grand opening of the
initial phase of the project.  The shopping center contains
approximately 656,000 square feet including a 32,000 square foot Neiman Marcus
Last Call store, which is the first and only one on Long Island. Other tenants
include Anne Klein, Banana Republic, BCBG, Christmas Tree Shops, Eddie Bauer,
Reebok, New York Sports Club and others.  Regal Cinemas has also
leased 67,000 square feet for a 16-screen Cineplex, one of the few state of the
art cineplexes on Long Island.





In May
2007, the joint venture closed on the project financing which is structured in
two parts.  The first is a $269.0 million loan collateralized by the
property as well as limited joint and several guarantees by all three venture
partners.  The second is a $15.0 million mezzanine loan secured by the
pledge of the partners’ equity interests. The weighted average interest rate on
the financing is one month LIBOR plus 1.49%.  Over the life of the
loans, if certain criteria are met, the weighted average interest rate can
decrease to one month LIBOR plus 1.23%.  The loans had a combined
balance $240.0 million as of December 31, 2008 and are scheduled to mature in
May 2011 with a one year extension option at that date. The joint venture
entered into two interest rate swap agreements during June 2007.  The
first swap is for a notional amount of $49.0 million and the second was a
forward starting interest rate swap agreement with escalating notional amounts
that totaled $121.0 million as of December 31, 2008.  The agreements
expire on June 1, 2009.  These swaps effectively change the rate of
interest on up to $170.0 million of variable rate construction debt to a fixed
rate of 6.75%.


F -
12





In June
2008, we, and our two other partners in the shopping center joint venture, each
having a 33.3% ownership interest, formed a separate joint venture to acquire a
29,000 square foot warehouse adjacent to the shopping center to support the
operations of the shopping center’s tenants.  This joint venture
acquired the warehouse for a purchase price of $3.3 million.  The
venture also closed on a construction loan of $2.3 million with a variable
interest rate of LIBOR plus 1.85% and a maturity of May 2011.





The first
table above combines the operational and financial information of both Deer Park
ventures.  During 2008, we made additional capital contributions of
$1.6 million to Deer Park joint ventures. Both of the other venture partners
made equity contributions equal to ours.  After making the above
contribution, the total amount of equity contributed by each venture partner to
the projects was approximately $4.8 million.





The
original purchase of the property in 2003 was in the form of a sale-leaseback
transaction, which consisted of the sale of the property to Deer Park for $29
million, including a 900,000 square foot industrial building, which was then
leased back to the seller under an operating lease agreement.  At the
end of the lease in May 2005, the tenant vacated the building. However, the
tenant had not satisfied all of the conditions necessary to terminate the
lease.  Deer Park is currently in litigation to recover from the
tenant approximately $5.9 million for fourteen months of lease payments and
additional rent reimbursements related to property taxes.  In
addition, Deer Park is seeking other damages and will continue to do so until
recovered.





Condensed
combined summary financial information of joint ventures accounted for using the
equity method is as follows (in thousands):





Summary
      Balance Sheets– Unconsolidated Joint Ventures2008
              2007AssetsInvestment
      properties at cost, net
              $    323,546
              $ 
       71,022Construction
      in progress
              ---
              103,568Cash
      and cash equivalents
              5,359
              2,282Deferred
      charges, net
              7,025
              2,092Other
      assets
              6,324
              8,425Total
      assets
              $ 
        342,254
              $  187,389Liabilities
      and Owners’ EquityMortgage
      payable
              $
         303,419
              $  148,321Construction
      trade payables
              13,641
              13,052Accounts
      payable and other liabilities (1)
              9,479
              6,377Total
      liabilities
              326,539
              167,750Owners’
      equity (1)
              15,715
              19,639Total
      liabilities and owners’ equity
              $   
      342,254
              $  187,389


(1) Includes the fair
      value of interest rate swap agreements at Deer Park and Myrtle Beach Hwy
      17 totaling $5.6 million and $4.0 million as of December 31, 2008 and
      December 31, 2007, respectively, recorded as an increase in accounts
      payable and other liabilities and a reduction of owners’
      equity.





Summary
      Statements of Operations– Unconsolidated Joint Ventures:2008
            2007
            2006Revenues
            $  25,943
            $  19,414
            $
      14,703Expenses:Property
      operating
            12,329
            6,894
            5,415General
      and administrative
            591
            248
            213Depreciation
      and amortization
            7,013
            5,473
            3,781Total
      expenses
            19,933
            12,615
            9,409Operating
      income
            6,010
            6,799
            5,294Interest
      expense
            6,006
            4,129
            2,907Net
      income
            $         4
            $   2,670
            $  2,387Tanger
      Properties Limited Partnership share of:Net
      income
            $      852
            $      1,473
            $  1,268Depreciation
      (real estate related)
            $   3,165
            $    
       2,611
            $  1,825





F -
13





5.       Disposition
of Properties and Properties Held for Sale





2007
Transactions





In
October 2007, we completed the sale of our property in Boaz,
Alabama.  Net proceeds received from the sale of the property were
approximately $2.0 million.  We recorded a gain on sale of real estate
of approximately $6,000.  The results of operations and gain on sale
of real estate for the property are included in discontinued operations under
the provisions of FAS 144.  We were not retained for any management or
leasing responsibilities related to this center after the sale was
completed.





2006
Transactions





In
January 2006, we completed the sale of our property in Pigeon Forge,
Tennessee.  Net proceeds received from the sale of the property were
approximately $6.0 million.  We recorded a gain on sale of real estate
of approximately $3.6 million.  We continued to manage and lease the
property for a fee until December 31, 2007.  Based on the nature and
amounts of the fees received, we determined that our management relationship did
not constitute a significant continuing involvement, and therefore the results
of operations and gain on sale of real estate for the property are included in
discontinued operations under the provisions of FAS 144.





In March
2006, we completed the sale of our property located in North Branch,
Minnesota.  Net proceeds received from the sale of the property were
approximately $14.2 million.  We recorded a gain on sale of real
estate of approximately $10.3 million.  We continued to manage and
lease this property for a fee until December 31, 2007.  Based on the
nature and amount of the fees received, we determined that our management
relationship did not constitute a significant continuing involvement and
therefore the results of operations and gain on sale of real estate for the
property are included in discontinued operations under the provisions of FAS
144.





Below is
a summary of the results of operations of the disposed properties through their
respective disposition dates and properties held for sale as presented in
discontinued operations for the respective periods (in thousands):


Summary
      Statements of Operations – Disposed Properties:
            2008
            2007
            2006Revenues:Base
      rentals
            $  ---
            $   417
            $   1,043Percentage
      rentals
            ---
            1
            12Expense
      reimbursements
            ---
            138
            354Other
      income
            ---
            18
            37Total
      revenues
            ---
            574
            1,446Expenses:Property
      operating
            ---
            317
            774Depreciation
      and amortization
            ---
            145
            307Total
      expenses
            ---
            462
            1,081Discontinued
      operations beforegain
      on sale of real estate
            ---
            112
            365Gain
      on sale of real estate included indiscontinued
      operations
            ---
            6
            13,833Discontinued
      operations
            $  ---
            $   118
            $  14,198





Outparcel
Sales





Gains on
sale of outparcels are included in other income in the consolidated statements
of operations to the extent the outlet center at which it is located has not
been sold.  Cost is allocated to the outparcels based on the relative
market value method.  Below is a summary of outparcel sales that we
completed during the years ended December 31, 2008, 2007 and 2006 (in thousands,
except number of outparcels):


2008
            2007
            2006Number
      of outparcels
            ---
            ---
            4Net
      proceeds
            $     ---
            $     ---
            $
      1,150Gain
      on sale included in other income
            $     ---
            $     ---
            $    402





F -
14


6.        Deferred
Charges





Deferred
charges as of December 31, 2008 and 2007 consist of the following (in
thousands):





2008
              2007Deferred
      lease costs
              $  31,292
              $  26,751Net
      below market leases
              (5,418)
              (5,014)Other
      intangibles
              69,528
              73,684Deferred
      financing costs
              9,024
              11,105104,426
              106,526Accumulated
      amortization
              (66,484)
              (61,722)$  37,942
              $  44,804





Amortization
of deferred lease costs and other intangibles included in income from continuing
operations for the years ended December 31, 2008, 2007 and 2006 was $12.5
million, $12.0 million and $15.1 million, respectively. Amortization of deferred
financing costs included in interest expense for the years ended December 31,
2008, 2007 and 2006 was $1.7 million in each year, respectively.  The
amortization amounts for the year ended December 31, 2006 includes the write off
of deferred loan costs of approximately $308,000 related to the early
extinguishment of debt.





Estimated
aggregate amortization expense of net below market leases and other intangibles
for each of the five succeeding years is as follows (in thousands):





Year
            Amount2009
            $    6,5232010
            5,7842011
            4,0222012
            2,4232013
            1,401Total
            $  20,153





7.    
Debt





Debt as
of December 31, 2008 and 2007 consists of the following (in
thousands):


2008
              2007Senior,
      unsecured notes:9.125%
      Senior, unsecured notes, maturing February 2008
              $       
         ---
              $   100,0006.15%
      Senior, unsecured notes, maturing November 2015, net ofdiscount
      of $681 and $759, respectively
              249,319
              249,2413.75%
      Senior, unsecured exchangeable notes, maturing August 2026
              149,500
              149,500Unsecured
      term loan facility:LIBOR
      + 1.60% unsecured term loan facility (1)
              235,000
              ---Unsecured
      lines of credit with a weighted average interest rates of 2.18% and 5.67%,
      respectively (2)
              161,500
              33,880Mortgage
      notes with fixed interest:6.59%,
      maturing July 2008, including net premium of $0 and
$1,046,respectively
      (3)
              ---
              173,724$   795,319
              $   706,345


(1)
            The
      effective rate on this facility due to interest rate swap agreements is
      5.25% through April 2011. Depending on our investment grade rating the
      interest rate on this facility can fluctuate between LIBOR + 1.25% and
      LIBOR + 1.95%.


(2)
            For
      our lines of credit being utilized at December 31, 2008 and depending on
      our investment grade rating, the interest rates can vary from either prime
      or from LIBOR + .45% to LIBOR + 1.55% and expire in June 2011 or
      later.  At December 31, 2008, our interest rates ranged from
      LIBOR + .60% to LIBOR + .75%.


(3)
            Because
      this mortgage debt was assumed as part of an acquisition of a portfolio of
      outlet centers, the debt was recorded at its fair value and carried an
      effective interest rate of 5.18%.  In June, 2008, we repaid the
      loan in full.





The
unsecured lines of credit and senior unsecured notes 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
December 31, 2008 we were in compliance with all of our debt
covenants.





F -
15


2008
Transactions





On
February 15, 2008, our $100.0 million, 9.125% unsecured senior notes
matured.  We repaid these notes with amounts available under our
unsecured lines of credit.





During
the first quarter of 2008, we increased the maximum availability under our
existing unsecured lines of credit by $125.0 million, bringing our total
availability to $325.0 million.  The terms of the increases were
identical to those included within the existing unsecured lines of
credit.  Five of our six lines of credit, representing $300.0 million,
have maturity dates of June 2011 or later.  One line of credit,
representing $25.0 million and for which no amounts were outstanding on December
31, 2008, expires in June 2009.





During
the second quarter of 2008, we closed on a $235.0 million unsecured three year
syndicated term loan facility.  Based on our current debt ratings, the
facility bears interest of LIBOR plus 160 basis points.  Depending on
our investment grade debt ratings, the interest rate can vary from LIBOR plus
125 basis points to LIBOR plus 195 basis points.





In June
2008, proceeds from the term loan were used to pay off our mortgage loan with a
principal balance of approximately $170.7 million.  A prepayment
premium, representing interest through the July payment date, of approximately
$406,000 was paid at closing.  The remaining proceeds of approximately
$62.8 million, net of closing costs, were applied against amounts outstanding on
our unsecured lines of credit and to settle two interest rate lock protection
agreements.





In July
2008 and September 2008, we entered into interest rate swap agreements with
Wells Fargo Bank, N.A. and Branch Banking and Trust Company, or BB&T, for
notional amounts of $118.0 million and $117.0 million,
respectively.  The purpose of these swaps was to fix the interest rate
on the $235.0 million outstanding under the term loan facility completed in June
2008.  The swaps fixed the one month LIBOR rate at 3.605% and 3.70%,
respectively.  When combined with the current spread of 160 basis
points which can vary based on changes in our debt ratings, these swap
agreements fix our interest rate on the $235.0 million of variable rate debt at
5.25% until April 1, 2011.





In
October 2008, our debt rating was upgraded by the Standard and Poor’s Ratings
Services from BBB- to BBB, making us one of only two REITs to receive a ratings
upgrade in 2008.  We currently have an investment grade rating with
Moody’s Investors Service of Baa3.  Because of this upgrade, one of
our line of credit borrowing rates decreased to LIBOR plus 60 basis
points.  Of the $161.5 million outstanding on our unsecured lines of
credit as of December 31, 2008, the borrowing rates range from LIBOR plus 60
basis points to LIBOR plus 75 basis points.





2007
Transactions





During
the fourth quarter of 2007, we extended the maturity dates on five of our six
unsecured lines of credit from 2009 to June 2011.





2006
Transactions





In August
2006, the Operating Partnership issued $149.5 million of exchangeable senior
unsecured notes that mature on August 15, 2026.  The notes bear
interest at a fixed coupon rate of 3.75%.  The notes are exchangeable
into the Company’s common shares, at the option of the holder, at a current
exchange ratio, subject to adjustment if the Company changes its dividend rate
in the future, of 27.6856 shares per $1,000 principal amount of notes (or a
current exchange price of $36.1198 per common share).  The notes are
senior unsecured obligations of the Operating Partnership and are guaranteed by
the Company on a senior unsecured basis.  On and after August 18,
2011, holders may exchange their notes for cash in an amount equal to the lesser
of the exchange value and the aggregate principal amount of the notes to be
exchanged, and, at our option, Company common shares, cash or a combination
thereof for any excess.  Note holders may exchange their notes prior
to August 18, 2011 only upon the occurrence of specified events.  In
addition, on August 18, 2011, August 15, 2016 or August 15, 2021, note holders
may require us to repurchase the notes for an amount equal to the principal
amount of the notes plus any accrued and unpaid interest up to, but excluding,
the repurchase date. In no event will the total number of Company common shares
issuable upon exchange exceed 4.9 million, subject to adjustments for dividend
rate changes.  Accordingly, the Company has reserved those
shares.





We used
the net proceeds from the issuance to repay in full our mortgage debt
outstanding with Woodman of the World Life Insurance Society totaling
approximately $15.3 million, with an interest rate of 8.86% and an original
maturity of September 2010.  We also repaid all amounts outstanding
under our unsecured lines of credit and a $53.5 million variable rate unsecured
term loan with Wells Fargo with a weighted average interest rate of
approximately 6.3%.  As a result of the early repayment, we recognized
a charge for the early extinguishment of the mortgages and term loan of
approximately $917,000.  The charge, which is included in interest
expense, consisted of a prepayment premium of approximately $609,000 and the
write-off of deferred loan fees totaling approximately $308,000.





F -
16


Maturities
of the existing long-term debt as of December 31, 2008 are as follows (in
thousands):





Year
            Amount2009
            $   ---2010
            ---2011
            396,5002012
            ---2013
            ---Thereafter
            399,500Subtotal
            796,000Discount
            (681)Total
            $  795,319





8.   Derivatives





In our
March 31, 2008 assessment of the two US treasury rate lock derivatives, we
concluded that as of March 31, 2008, the occurrence of the forecasted
transactions were considered “reasonably possible” instead of
“probable”.  Accordingly, amounts previously deferred in other
comprehensive income remain frozen until the forecasted transaction either
affected earnings or subsequently became not probable of
occurring.  The value of the derivatives as of March 31, 2008 included
in other comprehensive income and liabilities was $17.8
million.  Also, hedge accounting was discontinued going forward and
changes in fair value related to theses two derivatives after April 1, 2008 were
recognized in the statement of operations immediately.





In
conjunction with the closing of the unsecured term loan facility discussed
above, we settled two interest rate lock protection agreements which were
intended to fix the US Treasury index at an average rate of 4.62% for an
aggregate amount of $200.0 million of new debt for 10 years from July
2008.  We originally entered into these agreements in 2005 in
anticipation of executing a public debt offering during 2008 that would be based
on the 10 year US Treasury rate.  Upon the closing of the LIBOR based
unsecured term loan facility, we determined that we were unlikely to execute a
US Treasury based debt offering.  The settlement of the interest rate
lock protection agreements, at a total cost of $8.9 million, was reflected as a
loss on settlement of US treasury rate locks in our consolidated statements of
operations.





In July
2008 and September 2008, we entered into LIBOR based interest rate swap
agreements with Wells Fargo Bank, N.A. and BB&T for notional amounts of
$118.0 million and $117.0 million respectively.  The purpose of these
swaps was to fix the interest rate on the $235.0 million outstanding under the
term loan facility completed in June 2008.  The swaps fixed the one
month LIBOR rate at 3.605% and 3.70%, respectively.  When combined
with the current spread of 160 basis points which can vary based on changes in
our debt ratings, these swap agreements fix our interest rate on the $235.0
million of variable rate debt at 5.25% until April 1, 2011.





In
accordance with our derivatives policy, the swaps were assessed for
effectiveness at the time of the transaction and it was determined that there
was no ineffectiveness.  The derivatives have been designated as cash
flow hedges and will be assessed for effectiveness on an on-going basis at the
end of each quarter.  Unrealized gains and losses related to the
effective portion of our derivatives are recognized in other comprehensive
income and gains or losses related to ineffective portions are recognized in the
income statement.





The
remaining net benefit from a derivative settled during 2005 in accumulated other
comprehensive income was an unamortized balance as of December 31, 2008 of $2.4
million.  This balance will amortize into the statement of operations
through October 2015.





The
following table summarizes the notional amounts and fair values of our
derivative financial instruments as of December 31, 2008 (in
thousands).





Financial
      Instrument Type
            Notional
      Amount
            Average
              Rate
            Maturity
            
            Fair
      ValueLIBOR
      based interest rate swaps
            $235,000
            3.65%
            April
      2011
            
            $(11,747)





F -
17





9.   Fair
Value Measurements





In
September 2006, the FASB, issued Statement No. 157, “Fair Value Measurements”,
or FAS 157.  FAS 157 defines fair value, establishes a framework for
measuring fair value in accordance with accounting principles generally accepted
in the United States and expands disclosures about fair value
measurements.  We adopted the provisions of FAS 157 as of January 1,
2008 for financial instruments.  Although the adoption of FAS 157 did
not materially impact our financial condition, results of operations or cash
flow, we are now required to provide additional disclosures as part of our
consolidated financial statements.





In
February 2007, the FASB issued SFAS No. 159, “The Fair Value Option for
Financial Assets and Financial Liabilities, including an amendment of FASB
Statement No. 115”, or FAS 159.  FAS 159 permits companies to choose
to measure many financial instruments and certain other items at fair value that
are not currently required to be measured at fair value under generally accepted
accounting principles and establishes presentation and disclosure requirements
designed to facilitate comparisons between companies that choose different
measurement attributes for similar types of assets and liabilities. The
provisions of FAS 159 became effective for us on January 1, 2008.  As
permitted by FAS 159, we elected not to adopt the fair value
option.





We are
exposed to various market risks, including changes in interest
rates.  We periodically enter into certain interest rate protection
agreements to effectively convert floating rate debt to a fixed rate basis and
to hedge anticipated future financings similar to those described in Note 8,
Derivatives.





FAS 157
established a three-tier fair value hierarchy, which prioritizes the inputs used
in measuring fair value.  These tiers are defined as
follows:





Tier
            DescriptionLevel
      1
            Defined
      as observable inputs such as quoted prices in active
    marketsLevel
      2
            Defined
      as inputs other than quoted prices in active markets that are either
      directly or indirectly observableLevel
      3
            Defined
      as unobservable inputs in which little or no market data exists, therefore
      requiring an entity to develop its own
  assumptions





The
valuation of our financial instruments is determined using widely accepted
valuation techniques including discounted cash flow analysis on the expected
cash flows of each derivative. This analysis reflects the contractual terms of
the derivatives, including the period to maturity, and uses observable
market-based inputs, including interest rate curves.  The valuation
also includes an adjustment for counterparty risk.





For
assets and liabilities measured at fair value on a recurring basis, quantitative
disclosure of the fair value for each major category of assets and liabilities
is presented below:


Fair
      Value Measurements at Reporting Date Using (in
  thousands)Quoted
      pricesin
      active markets
            Significant
      other
            Significantfor
      identical assets
            observable
      inputs
            unobservable
      inputsLevel
      1
            Level
      2
            Level
      3Liabilities:Derivative
      financial instruments (1)
            
            ---
            $(11,747)
            ---(1)Included in “Accounts payable and accrued expenses” in the
      accompanying consolidated balance sheet.


The
estimated fair value of our debt, consisting of senior unsecured notes,
exchangeable notes, unsecured term credit facilities and unsecured lines of
credit, at December 31, 2008 and 2007 was $711.8 million and $723.3 million,
respectively, and its recorded value was $795.3 million and $706.3 million,
respectively.  A 1% increase from prevailing interest rates at
December 31, 2008 and 2007 would result in a decrease in fair value of total
debt by approximately $37.4 million and $38.2 million,
respectively.  Fair values were determined, based on level 2 inputs,
using discounted cash flow analyses with an interest rate or credit spread
similar to that of current market borrowing arrangements.





In
February 2008, the FASB issued FASB Staff Position 157-2, “Effective Date
of FASB Statement No. 157”, which delays the effective date of FAS 157 to
January 1, 2009 for us for all nonfinancial assets and nonfinancial liabilities,
except for items recognized or disclosed at fair value in the financial
statements on a recurring basis (at least annually).  Accordingly, our
adoption of FAS 157 in 2008 was limited to financial assets and liabilities, and
therefore only applied to the valuation of our derivative
contracts.





Effective
September 30, 2008, we adopted FASB Staff Position 157-3, “Determining the Fair
Value of a Financial Asset When the Market for That Asset Is Not Active” or FSP
157-3, which was issued on October 10, 2008.  FSP 157-3 clarifies the
application of FAS 157 in a market that is not active and provides an example to
illustrate key considerations in determining the fair value of a financial asset
when the market for that financial asset is not active.  The adoption
of FSP 157-3 had no impact on our consolidated financial
statements.


F -
18





10.
            Partners’
      Equity





In May
2007, the Company’s shareholders voted to approve an amendment to the Company’s
articles of incorporation to increase the number of Company common shares
authorized for issuance from 50.0 million to 150.0 million.  Company
shareholders also approved by vote the creation of four new classes of preferred
shares, each class having 4.0 million shares authorized for issuance with a par
value of $.01 per share.  No preferred shares from the newly created
classes have been issued as of December 31, 2008.  All proceeds from
common and preferred share issuances by the company are contributed to the
Operating Partnership in exchange for common and preferred units.





In
February 2006, the Company completed the sale of an additional 800,000 Class C
Preferred Shares with net proceeds of approximately $19.4
million.  The proceeds, which were contributed to us in exchange for
800,000 preferred units, were used to repay amounts outstanding on our unsecured
lines of credit.  After the offering, there were 3,000,000 Company
Class C Preferred Shares (and Operating Partnership preferred units)
outstanding.





As
mentioned in Note 7 above, in August 2006 the Operating Partnership issued
$149.5 million of exchangeable senior unsecured notes that mature on August 15,
2026.  The notes are exchangeable into the Company’s common shares, at
the option of the holder, at a current exchange ratio, subject to adjustment if
the Company changes its dividend rate in the future, of 27.6856 shares per
$1,000 principal amount of notes (or a current exchange price of $36.1198 per
common share).  In no event will the total number of common shares
issuable upon exchange exceed 4.9 million, subject to adjustments for dividend
rate changes.  Accordingly, the Company has reserved those
shares.





At
December 31, 2008 and 2007, the ownership interests of the Operating Partnership
consisted of the following:





2008
            
            2007Preferred
      units:Limited
      partner
            3,000,000
            
            3,000,000Common
      units:General
      partner
            150,000
            
            150,000Limited
      partners
            18,717,056
            
            18,547,926Total
      common units
            18,867,056
            
            18,697,926





11.  Earnings
Per Unit





A
reconciliation of the numerators and denominators in computing earnings per
share in accordance with FASB Statement No. 128, “Earnings per Share”, for the
years ended December 31, 2008, 2007 and 2006 is set forth as follows (in
thousands, except per unit amounts):





2008
            
            2007
            
            2006NUMERATORIncome
      from continuing operations
            $  32,403
            
            $32,972
            
            $  29,435Less
      applicable preferred unit distributions
            (5,625)
            
            (5,625)
            
            (5,433)Income
      from continuing operations availableto
      common unitholders
            26,778
            
            27,347
            
            24,002Discontinued
      operations
            ---
            
            118
            
            14,198Net
      income available to common unitholders
            $  26,778
            
            $27,465
            
            $  38,200DENOMINATORBasic
      weighted average common units
            18,575
            
            18,444
            
            18,333Effect
      of exchangeable notes
            ---
            
            239
            
            59Effect
      of outstanding options
            69
            
            107
            
            120Effect
      of unvested restricted unit awards
            71
            
            78
            
            62Diluted
      weighted average common units
            18,715
            
            18,868
            
            18,574Basic
      earnings per common unit:Income
      from continuing operations
            $      1.44
            
            $      1.48
            
            $        1.31Discontinued
      operations
            ---
            
            .01
            
            .77Net
      income
            $      1.44
            
            $    1.49
            
            $      2.08Diluted
      earnings per common unit:Income
      from continuing operations
            $      1.43
            
            $      1.45
            
            $        1.29Discontinued
      operations
            ---
            
            .01
            
            .77Net
      income
            $      1.43
            
            $    1.46
            
            $      2.06





F -
19


Our
$149.5 million of exchangeable notes are included in the diluted earnings per
unit computation, if the effect is dilutive, using the treasury stock method.
 In applying the treasury stock method, the effect will be dilutive if the
average market price of the Company’s common shares for at least 20 trading days
in the 30 consecutive trading days at the end of each quarter is higher than the
exchange rate of $36.1198 per Company common share.





The
computation of diluted earnings per unit excludes options to purchase common
units when the exercise price is greater than the average market price of the
common units for the period.  The market price of a common unit is
considered to be equivalent to twice the market price of a Company common
share.  No options were excluded from the 2008, 2007 or 2006
computations.





Restricted
unit awards are included in the diluted earnings per unit computation if the
effect is dilutive, using the treasury stock method. All restricted units issued
are included in the calculation of diluted weighted average common units
outstanding for all years presented. If the unit based awards were granted
during the period, the units issuable are weighted to reflect the portion of the
period during which the awards were outstanding.





12.         Unit-Based
Compensation





We have
an equity based compensation plan, the Amended and Restated Incentive Award
Plan, or the Plan, approved by the Company’s shareholders, which covers the
Company’s independent directors and our employees.  We may issue up to
3.0 million common units under the Plan.  We have granted 1,792,850
options, net of options forfeited, and 436,125 restricted unit awards, net of
restricted unit awards forfeited, through December 31, 2008.  The
amount and terms of the awards granted under the plan are determined by the
Share and Unit Option Committee of the Company’s Board of
Directors.





All
non-qualified share and unit options granted under the Plan expire 10 years from
the date of grant and 20% of the options become exercisable in each of the first
five years commencing one year from the date of grant.  Options are
generally granted with an exercise price based on the market price of the
Company’s common shares on the day of grant.  Common units issued upon
exercise of unit options are exchangeable for two of the Company’s common
shares.  There were no option grants in 2008, 2007 and
2006.





During
2008, 2007 and 2006, the Company’s Board of Directors approved the grant of
190,000, 170,000 and 164,000 restricted common shares, respectively, to the
Company’s independent directors and all of the Company’s
officers.  The Company receives one common unit from the Operating
Partnership for every two restricted shares issued by the
Company.  The restricted common shares granted to the Company’s
independent directors vest ratably over a three year period.  The
restricted common shares issued to Company officers vest ratably over a five
year period.  For all of the restricted awards described above, the
grant date fair value of the award was determined based upon the market price of
the Company’s common shares on the date of grant and the associated compensation
expense is being recognized in accordance with the vesting schedule of each
grant.





We
recorded unit based compensation expense in general and administrative expenses
in the consolidated statements of operations for the years ended December 31,
2008, 2007 and 2006, respectively, as follows (in thousands):


2008
            2007
            2006Restricted
      unit awards
            
            $     5,181
            $   3,815
            $  2,210Options
            
            211
            244
            465Total
      unit based compensation
            
            $     5,392
            $   4,059
            $  2,675





Unit
based compensation expense capitalized as a part of rental property and deferred
lease costs during the years ended December 31, 2008, 2007 and 2006 was
$143,000, $80,000 and $212,000, respectively.





Options
outstanding at December 31, 2008 had the following weighted average exercise
prices and weighted average remaining contractual lives:





Options
      Outstanding
            Options
      ExercisableWeighted
      averageWeighted
            remaining
            
            WeightedRange
      of
            
            average
            contractual
            
            averageexercise
      prices
            Options
            exercise
      price
            life
      in years
            Options
            exercise
      price$18.625
      to $22.125
            9,400
            $    18.63
            1.18
            9,400
            $    18.63$38.76
      to $38.83
            96,328
            38.82
            5.32
            48,668
            38.81$47.25
      to $47.92
            3,500
            47.35
            5.92
            2,400
            47.25109,228
            $  37.35
            4.98
            60,468
            $  36.01





F -
20


A summary
of option activity under our Amended and Restated Incentive Award Plan as of
December 31, 2008 and changes during the year then ended is presented below
(aggregate intrinsic value amount in thousands):





Weighted-Weighted-
            
            averageaverage
            
            remaining
            
            Aggregateexercise
            
            contractual
            
            intrinsicOptions
            
            Units
            
            price
            
            life
      in years
            
            valueOutstanding
      as of December 31, 2007
            184,078
            
            $  36.70Granted
            
            
            ---
            
            ---Exercised
            
            
            (74,130
            )
            35.72Forfeited
            
            
            (720
            )
            38.83Outstanding
      as of December 31, 2008
            109,228
            
            $  37.35
            
            4.98
            
            $  3,891Vested
      and Expected to Vest as ofDecember
      31, 2008
            108,737
            
            $  37.35
            
            4.98
            
            $  3,875Exercisable
      as of December 31, 2008
            60,468
            
            $  36.01
            
            4.70
            
            $    2,236


The total
intrinsic value of options exercised during the years ended December 31, 2008,
2007 and 2006 was $3.2 million, $2.7 million and $2.1 million,
respectively.





The
following table summarizes information related to unvested restricted units
outstanding as of December 31, 2008:





Weighted
      averageNumber
      of
            
            grant
      dateUnvested
      Restricted Unit Awards
            
            units
            
            fair
      valueUnvested
      at December 31, 2007
            
            192,802
            
            $  67.64Granted
            
            95,000
            
            74.08Vested
            
            (70,200)
            
            58.32Forfeited
            
            ---
            
            ---Unvested
      at December 31, 2008
            
            217,602
            
            $  73.45





The total
value of restricted unit awards vested during the years ended 2008, 2007 and
2006 was $5.1 million, $4.2 million and $2.5 million, respectively.





As of
December 31, 2008, there was $13.0 million of total unrecognized compensation
cost related to unvested unit-based compensation arrangements granted under the
Plan.  That cost is expected to be recognized over a weighted-average
period of 3.3 years.





13.  Employee
Benefit Plans





We have a
qualified retirement plan, with a salary deferral feature designed to qualify
under Section 401 of the Code (the “401(k) Plan”), which covers substantially
all of our officers and employees. The 401(k) Plan permits our employees, in
accordance with the provisions of Section 401(k) of the Code, to defer up to 20%
of their eligible compensation on a pre-tax basis subject to certain maximum
amounts.  Employee contributions are fully vested and receive a
matching contribution equal to 100% of the deferral contributions per pay period
which do not exceed 3% of the compensation per pay period, plus 50% of the
deferral contributions per pay period which exceed 3% but do not exceed 5% of
compensation per pay period. Employees are immediately 100% vested in the
matching contribution. The employer matching contribution expense for the years
ended 2008, 2007 and 2006 were approximately $384,000, $104,000 and $102,000,
respectively.








F -
21


14.           Other
Comprehensive Income (Loss)





Total
comprehensive income for the years ended December 31, 2008, 2007 and 2006 is as
follows (in thousands):





2008
              2007
              2006Net
      income
              $
      32,403
              $   33,090
              $  43,633Other
      comprehensive income (loss):Reclassification
      adjustment for amortization of gain onsettlement
      of US treasury rate lock included in net income
              (276)
              (261)
              (246)Reclassification
      adjustment for termination of US treasuryrate
      locks
              17,760
              ---
              ---Change
      in fair value of treasury rate locks
              (9,006)
              (9,497)
              1,055Change
      in fair value of cash flow hedges
              (11,747)
              ---
              ---Change
      in fair value of our portion of our unconsolidated jointventures’
      cash flow hedges
              (694)
              (1,645)
              115Other
      comprehensive income (loss)
              (3,963)
              (11,403)
              924Total
      comprehensive income
              $
      28,440
              $  21,687
              $  44,557





15.  Supplementary
Income Statement Information





The
following amounts are included in property operating expenses in income from
continuing operations for the years ended December 31, 2008, 2007 and 2006 (in
thousands):





2008
              2007
              2006Advertising
      and promotion
              $  17,678
              $  16,652
              $
      16,419Common
      area maintenance
              35,489
              32,363
              29,216Real
      estate taxes
              14,718
              13,847
              12,574Other
      operating expenses
              14,012
              11,521
              10,093$
      81,897
              $
      74,383
              $
      68,302





16.  Lease
      Agreements





We are
the lessor of over 1,900 stores in our 30 wholly-owned factory outlet centers,
under operating leases with initial terms that expire from 2009 to
2030.  Future minimum lease receipts under non-cancelable operating
leases as of December 31, 2008, excluding the effect of straight-line rent and
percentage rentals, are as follows (in thousands):





2009
              $   147,8392010
              128,8902011
              105,6862012
              81,0492013
              53,572Thereafter
              131,421$   648,457





F -
22


17.
            Commitments
      and Contingencies





Our
non-cancelable operating leases, with initial terms in excess of one year, have
terms that expire from 2009 to 2046.  Annual rental payments for these
leases totaled approximately $3.9 million, $3.9 million and $3.2 million, for
the years ended December 31, 2008, 2007 and 2006,
respectively.  Minimum lease payments for the next five years and
thereafter are as follows (in thousands):





2009
              $   4,3722010
              4,2062011
              3,7032012
              3,0442013
              2,760Thereafter
              76,312$
      94,397





We
are also subject to legal proceedings and claims which have arisen in the
ordinary course of our business and have not been finally
adjudicated.  In our opinion, the ultimate resolution of these matters will have no material effect on our results of
operations, financial condition or cash flows.





18. Subsequent Events





On
January 5, 2009, we purchased the remaining 50% interest in the Myrtle Beach Hwy
17 joint venture for a cash price of $32.0 million which was net of the
assumption of the existing


mortgage
loan of $35.8 million.  The acquisition was funded by amounts
available under our unsecured lines of credit.As discussed previously
in Note 4, we have owned a 50% interest


in
the Myrtle Beach Hwy 17 joint venture since its formation in 2001 and accounted
for it under the equity method.  The joint venture is now 100% owned
by us and will be consolidated


in
2009.





The
following table illustrates the fair value of the total consideration
transferred and the
amounts of the identifiable assets acquired and liabilities assumed at the
acquisition date (in thousands):


Cash
              $  32,000Debt
      assumed
              35,800Fair
      value of total consideration transferred
              67,800Fair
      value of our equity interest in Myrtle Beach Hwy 17held
      before the acquisition
              31,957Total
              $    99,757





The
following table summarizes the allocation of the purchase price to the
identifiable assets acquired and liabilities assumed as of January 5 2009, the
date of acquisition and the weighted average amortization period by major
intangible asset class (in thousands):





Value
            WeightedamortizationperiodBuildings,
      improvements and fixtures
            $
      81,344Deferred
      lease costs and other intangiblesBelow
      market lease value
            (2,358)
            5.8Below
      market land lease value
            4,807
            56Lease
      in place value
            7,998
            4.4Tenant
      relationships
            7,274
            8.8Present
      value of lease & legal costs
            1,145
            4.9Total
      deferred lease costs and other intangibles
            18,866Subtotal
            100,210Debt
      discount
            1,117Fair
      value of interest rate swap assumed
            (1,527)Fair
      value of identifiable assets and liabilities assumed, net
            (43)Net
      assets acquired
            $  99,757





The fair
value of the acquired identifiable intangible assets is provisional pending
receipt of the final valuations of those assets.  There was no
contingent consideration associated with this acquisition.  We
incurred approximately $28,000 in third-party acquisition related costs for the
Myrtle Beach Hwy 17 acquisition which were expensed as incurred. As a result of
acquiring the remaining 50% interest in Myrtle Beach Hwy 17, our previously held
interest was remeasured at fair value, resulting in a gain of approximately
$31.5 million.


F -
23


TANGER
PROPERTIES LIMITED PARTNERSHIP and SUBSIDIARIES


SCHEDULE
III - REAL ESTATE AND ACCUMULATED DEPRECIATION


For the Year Ended December 31, 2008(in thousands)


Description
            
            Initial
      cost to Company
            Costs
      Capitalized
              Subsequent
      to Acquisition
              (Improvements)
            Gross
      Amount Carried at Close of Period
              12/31/08
      (1)Outlet
      Center Name
            Location
            Encum-brances
              (4)
            Land
            Buildings,
              Improve-ments
      & Fixtures
            Land
            Buildings
              Improve-ments
              &
      Fixtures
            Land
            Buildings,
              Improve-ments
      & Fixtures
            Total
            Accumulated
              Depreciation
            Date
      of
              Construction
            Life
      Used to
              Compute
              Depreciation
              in
      Income
              StatementBarstow
            Barstow,
      CA
            $   ---
            $    3,281
            $  12,533
            $     ---
            $  19,615
            $     3,281
            $     32,148
            $      35,429
            $      11,076
            1995
            (2)Blowing
      Rock
            Blowing
      Rock, NC
            ---
            1,963
            9,424
            ---
            4,328
            1,963
            13,752
            15,715
            5,310
            1997
      (3)
            (2)Branson
            Branson,
      MO
            ---
            4,407
            25,040
            395
            12,443
            4,802
            37,483
            42,285
            19,315
            1994
            (2)Charleston
            Charleston,
      SC
            ---
            10,353
            48,877
            ---
            1,143
            10,353
            50,020
            60,373
            6,010
            2006
            (2)Commerce
      I
            Commerce,
      GA
            ---
            755
            3,511
            492
            12,212
            1,247
            15,723
            16,970
            9,721
            1989
            (2)Commerce
      II
            Commerce,
      GA
            ---
            1,262
            14,046
            708
            27,293
            1,970
            41,339
            43,309
            18,106
            1995
            (2)Foley
            Foley,
      AL
            ---
            4,400
            82,410
            693
            36,875
            5,093
            119,285
            124,378
            16,438
            2003
      (3)
            (2)Gonzales
            Gonzales,
      LA
            ---
            679
            15,895
            ---
            19,600
            679
            35,495
            36,174
            15,436
            1992
            (2)Hilton
      Head
            Bluffton,
      SC
            ---
            9,900
            41,504
            469
            5,953
            10,369
            47,457
            57,826
            9,536
            2003
      (3)
            (2)Howell
            Howell,
      MI
            ---
            2,250
            35,250
            ---
            3,972
            2,250
            39,222
            41,472
            8,776
            2002
      (3)
            (2)Kittery-I
            Kittery,
      ME
            ---
            1,242
            2,961
            229
            1,600
            1,471
            4,561
            6,032
            3,741
            1986
            (2)Kittery-II
            Kittery,
      ME
            ---
            1,450
            1,835
            ---
            735
            1,450
            2,570
            4,020
            1,828
            1989
            (2)Lancaster
            Lancaster,
      PA
            ---
            3,691
            19,907
            ---
            14,273
            3,691
            34,180
            37,871
            18,162
            1994
      (3)
            (2)Lincoln
      City
            Lincoln
      City, OR
            ---
            6,500
            28,673
            268
            6,167
            6,768
            34,840
            41,608
            6,378
            2003
      (3)
            (2)Locust
      Grove
            Locust
      Grove, GA
            ---
            2,558
            11,801
            ---
            18,995
            2,558
            30,796
            33,354
            13,539
            1994
            (2)Myrtle
      Beach 501
            Myrtle
      Beach, SC
            ---
            10,236
            57,094
            ---
            27,363
            10,236
            84,457
            94,693
            11,782
            2003
      (3)
            (2)Nags
      Head
            Nags
      Head, NC
            ---
            1,853
            6,679
            ---
            4,207
            1,853
            10,886
            12,739
            4,284
            1997
      (3)
            (2)Park
      City
            Park
      City, UT
            ---
            6,900
            33,597
            343
            15,288
            7,243
            48,885
            56,128
            7,317
            2003
      (3)
            (2)Rehoboth
            Rehoboth
      Beach, DE
            ---
            20,600
            74,209
            1,876
            21,725
            22,476
            95,934
            118,410
            15,069
            2003
      (3)
            (2)Riverhead
            Riverhead,
      NY
            ---
            ---
            36,374
            6,152
            79,934
            6,152
            116,308
            122,460
            51,291
            1993
            (2)San
      Marcos
            San
      Marcos, TX
            ---
            1,801
            9,440
            16
            43,119
            1,817
            52,559
            54,376
            23,517
            1993
            (2)Sanibel
            Sanibel,
      FL
            ---
            4,916
            23,196
            ---
            9,514
            4,916
            32,710
            37,626
            11,446
            1998
      (3)
            (2)Sevierville
            Sevierville,
      TN
            ---
            ---
            18,495
            ---
            35,447
            ---
            53,942
            53,942
            19,682
            1997
      (3)
            (2)Seymour
            Seymour,
      IN
            ---
            1,084
            1,891
            ---
            ---
            1,084
            1,891
            2,975
            1,797
            1994
            (2)Terrell
            Terrell,
      TX
            ---
            523
            13,432
            ---
            8,541
            523
            21,973
            22,496
            12,892
            1994
            (2)Tilton
            Tilton,
      NH
            ---
            1,800
            24,838
            29
            7,840
            1,829
            32,678
            34,507
            5,670
            2003
      (3)
            (2)Tuscola
            Tuscola,
      IL
            ---
            1,600
            15,428
            43
            1,374
            1,643
            16,802
            18,445
            3,375
            2003
      (3)
            (2)Washington
            Washington,
      PA
            ---
            5,612
            91,288
            ---
            ---
            5,612
            91,288
            96,900
            1,461
            2008
            (2)West
      Branch
            West
      Branch, MI
            ---
            319
            3,428
            120
            8,853
            439
            12,281
            12,720
            6,474
            1991
            (2)Westbrook
            Westbrook,
      CT
            ---
            6,264
            26,991
            4,233
            3,541
            10,497
            30,532
            41,029
            5,201
            2003
      (3)
            (2)Williamsburg
            Williamsburg,
      IA
            ---
            706
            6,781
            718
            15,062
            1,424
            21,843
            23,267
            14,668
            1991
            (2)$
      ---
            $
      118,905
            $
      796,828
            $
      16,784
            $
      467,012
            $
      135,689
            $1,263,840
            $
      1,399,529
            $
      359,298


(1)      
Aggregate cost for federal income tax purposes is approximately
$1,464,825.  Building, improvements & fixtures includes amounts
included in construction in progress on the consolidated balance
sheet.


(2)
            The
      Operating Partnership generally uses estimated lives ranging from 25 to 33
      years for buildings and 15 years for land improvements.  Tenant
      finishing allowances are depreciated over the initial lease
      term.


(3)      Represents
year acquired.


F -
24


TANGER
PROPERTIES LIMITED PARTNERSHIP and SUBSIDIARIES


SCHEDULE
III – (Continued)


REAL
ESTATE AND ACCUMULATED DEPRECIATION


For
the Year Ended December 31, 2008


(in
thousands)





The
changes in total real estate for the three years ended December 31, 2008 are as
follows:





2008
                  2007
                  2006Balance,
      beginning of year
                  $
      1,287,137
                  $
      1,216,847
                  $   1,152,866Improvements
                  115,525
                  85,415
                  87,045Dispositions
                  (3,133)
                  (15,125)
                  (23,064)Balance,
      end of year
                  $
      1,399,529
                  $
      1,287,137
                  $  1,216,847








The
changes in accumulated depreciation for the three years ended December 31, 2008
are as follows:





2008
                  2007
                  2006Balance,
      beginning of year
                  $
      312,638
                  $
      275,372
                  $
      253,765Depreciation
      for the period
                  49,793
                  50,508
                  40,440Dispositions
                  (3,133)
                  (13,242)
                  (18,833)Balance,
      end of year
                  $
      359,298
                  $
      312,638
                  $
      275,372








F -
25