SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                    FORM 10-K

[X]           ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
                         SECURITIES EXCHANGE ACT OF 1934
                   For the fiscal year ended December 31, 1997

                                       OR

[ ]         TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
                         SECURITIES EXCHANGE ACT OF 1934
              For the transition period from _________ to _________

                      Commission file numbers:  33-99736-01
                                                333-3526-01
                                                333-39365-01

                      TANGER PROPERTIES LIMITED PARTNERSHIP
             (Exact name of Registrant as specified in its charter)

                                 North Carolina
                         (State or other jurisdiction of
                         incorporation or organization)

                           1400 West Northwood Street
                              Greensboro, NC 27408
                    (Address of principal executive offices)

                                   56-1822494
                                (I.R.S. Employer
                               Identification No.)


                                 (336) 274-1666
                         (Registrant's telephone number)

               Securities registered pursuant to Section 12(b) of
                    the Act and listed on the New York Stock
                                    Exchange:

                                      None

           Securities registered pursuant to Section 12(g) of the Act:

                                      None

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

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

                       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, 1998.


<PAGE>


PART I

Item 1.   Business

The Operating Partnership

Tanger Properties Limited Partnership, a North Carolina limited partnership (the
"Operating Partnership"),  focuses exclusively on developing,  acquiring, owning
and operating factory outlet centers, and provides all development,  leasing and
management services for its centers.  The Operating  Partnership is the majority
owned  subsidiary of Tanger  Factory Outlet  Centers,  Inc. (the  "Company"),  a
fully-integrated,  self-administered  and  self-managed  real estate  investment
trust  ("REIT").  According to Value Retail News, an industry  publication,  the
Operating  Partnership  is one of the largest  owners and  operators  of factory
outlet  centers in the United  States.  As of December 31, 1997,  the  Operating
Partnership  owned and operated 30 factory outlet centers (the "Centers") with a
total gross  leasable  area ("GLA") of  approximately  4.6 million  square feet.
These centers were  approximately  98% leased,  contained  over 1,210 stores and
represented over 250 brand name companies as of such date.

The Company is the sole managing  general  partner of the Operating  Partnership
and The Tanger Family Limited Partnership  ("TFLP") is the sole limited partner.
As of December 31, 1997,  the ownership  interests in the Operating  Partnership
(the  "Units")  consisted of 7,853,936  partnership  Units and 90,689  preferred
partnership  Units (which are  convertible  into  approximately  817,107 general
partnership  Units) held by the Company and 3,033,305  partnership Units held by
the limited  partner.  The Units held by the limited  partner are  exchangeable,
subject to certain  limitations to preserve the Company's status as a REIT, into
Common Shares. See "Business-The Company".

Each preferred  partnership  Unit entitles the Company to receive  distributions
from the Operating  Partnership,  in an amount equal to the distribution payable
with  respect to a share of Series A Preferred  Shares,  prior to the payment by
the  Operating   Partnership  of  distributions  with  respect  to  the  general
partnership Units.  Preferred partnership Units will be automatically  converted
by  holders  into  general  partnership  Units to the  extent  that the Series A
Preferred  Shares are  converted  into Common Shares and will be redeemed by the
Operating  Partnership  to the  extent  that the Series A  Preferred  Shares are
redeemed by the Company.

The Operating Partnership's executive offices are located at 1400 West Northwood
Street,  Greensboro,  North  Carolina,  27408 and its telephone  number is (336)
274-1666. The Operating Partnership is a North Carolina limited partnership that
was formed in May 1993.

Recent Developments

During 1997,  the Operating  Partnership  acquired three centers in resort areas
totaling  302,554 square feet. Five Oaks Factory Stores, a factory outlet center
in Sevierville,  Tennessee, was acquired in February 1997 at a purchase price of
$18 million.  Shoppes on the Parkway,  a factory  outlet center in Blowing Rock,
North Carolina,  and Soundings  Factory Stores,  a factory outlet center in Nags
Head, North Carolina,  were acquired in September 1997 for an aggregate purchase
price of $19.5 million.

In addition, the Operating Partnership has completed,  or has under construction
to be completed by the end of the first  quarter of 1998,  the expansion of five
existing  centers  totaling  538,979 square feet. A summary of the 1997 acquired
centers and expansions is recapped below:

                                        2

<PAGE>


     1997 Development                             Aggregate          Open at
     ----------------                               Size             12/31/97
                                                  (sq. ft.)          sq. ft.)
                                                  ---------          --------
      Acquisitions
         Sevierville, TN                           122,684           122,684
         Blowing Rock, NC                           97,408            97,408
         Nags Head, NC                              82,462            82,462
                                                   -------           -------
                                                   302,554           302,554
                                                   -------           -------
      Expansions
         Riverhead, NY                             345,164           284,745
         Commerce, GA                               94,247            58,455
         Sevierville, TN                            50,357            25,060
         Lancaster, PA                              26,111            23,434
         San Marcos, TX                             23,100            11,000
                                                   -------           -------
                                                   538,979           402,694
                                                   -------           -------
                                                   841,533           705,248
                                                   =======           =======

The  Operating  Partnership  also is in the  process  of  developing  plans  for
additional  expansions  and new  centers  for  completion  in 1998  and  beyond.
Currently,  the Operating  Partnership  is in the  preleasing  stages for future
centers at two potential  sites located in Concord,  North Carolina  (Charlotte)
and Romulus,  Michigan  (Detroit)  and for further  expansions  of four existing
centers.  However,  there can be no assurance  that any of these  anticipated or
planned developments or expansions will be started or completed as scheduled, or
that  any   development  or  expansion  will  result  in  accretive  funds  from
operations.   In  addition,   the  Operating   Partnership  regularly  evaluates
acquisition   proposals,   engages  from  time  to  time  in  negotiations   for
acquisitions  and may from time to time  enter  into  letters  of intent for the
purchase of  properties.  No assurance can be given that any of the  prospective
acquisitions that are being evaluated or which are subject to a letter of intent
will be  consummated,  or if  consummated,  will result in accretive  funds from
operations.

During  September and October 1997, the Company  completed a public  offering of
1,080,000 Common Shares at a price of $29.0625 per share, receiving net proceeds
of approximately $29.2 million. The net proceeds,  which were contributed to the
Operating  Partnership in exchange for 1,080,000 partnership Units, were used to
acquire,  expand and develop  factory outlet  centers and for general  corporate
purposes.  On October 24, the Operating Partnership issued $75 million of 7.875%
senior,  unsecured notes,  maturing October 24, 2004. The net proceeds were used
to repay substantially all amounts outstanding under the Operating Partnership's
existing  lines of credit.  On November 3, 1997,  the Company and the  Operating
Partnership  filed a new  registration  statement  with  the SEC to  provide  an
issuance capacity under shelf registration  statements back to the original $100
million in equity securities and $100 million in debt securities.

In anticipation of offering the senior,  unsecured notes due 2004, the Operating
Partnership  entered into an interest  rate  protection  agreement on October 3,
1997,  which  fixed the index on the 10 year US  Treasury  rate at 5.995% for 30
days on a notional amount of $70 million. The transaction settled on October 21,
1997, the trade date of the $75 million senior, unsecured note issuance, and, as
a result of an increase  in the US  Treasury  rate,  the  Operating  Partnership
received $714,000 in proceeds.  Such amount is being amortized as a reduction to
interest  expense  over the life of the  notes  and will  result  in an  overall
effective interest rate on the notes of 7.75%.

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,
and because  factory outlet centers  typically have lower  operating  costs than
other retailing formats. Factory outlet centers enable manufacturers to optimize
the size of  production  runs  while  continuing  to  maintain  control of their
distribution channels. In addition, factory outlet centers benefit manufacturers
by  permitting   them  to  sell   out-of-season,   overstocked  or  discontinued
merchandise without alienating department stores or hampering the manufacturer's
brand name, as is

                                        3

<PAGE>


often the case when merchandise is distributed via discount chains.

The Operating  Partnership's  factory outlet centers range in size from 8,000 to
631,359  square  feet of GLA and are  typically  located  at least 10 miles from
downtown areas, where major department stores and manufacturer-owned  full-price
retail stores are usually located.  Manufacturers prefer these locations so that
they do not compete  directly  with their major  customers and their own stores.
Many of the  Operating  Partnership's  factory  outlet  centers are located near
tourist  destinations  to  attract  tourists  who  consider  shopping  to  be  a
recreational   activity  and  are  typically  situated  in  close  proximity  to
interstate  highways  to  provide  accessibility  and  visibility  to  potential
customers.

Management  believes that factory outlet centers continue to present  attractive
opportunities for capital investment by the Operating Partnership,  particularly
with respect to strategic  expansions of existing centers.  Management  believes
that under present conditions such development or expansion costs,  coupled with
current market lease rates,  permit attractive  investment  returns.  Management
further believes,  based upon its contacts with present and prospective tenants,
that many companies,  including prospective new entrants into the factory outlet
business,  desire  to open a number  of new  factory  outlet  stores in the next
several years, particularly where there are successful factory outlet centers in
which such  companies do not have a significant  presence or where there are few
factory  outlet  centers.  Thus,  the  Operating  Partnership  believes that its
commitment to developing  and expanding  factory  outlet centers is justified by
the potential financial returns on such centers.

The Operating Partnership's Factory Outlet Centers

The  Operating  Partnership's  factory  outlet  centers are  designed to attract
national  brand  name  tenants.  As one of the  original  participants  in  this
industry,  the Operating Partnership has developed  long-standing  relationships
with many  national  and  regional  manufacturers.  Because  of its  established
relationships with many manufacturers,  the Operating Partnership believes it is
well positioned to capitalize on industry growth.

As of December 31, 1997,  the Operating  Partnership  had a diverse  tenant base
comprised of over 250 different well-known,  upscale, national designer or brand
name  companies,  such  as Liz  Claiborne,  Reebok  International,  Ltd.,  Tommy
Hilfiger,  Polo Ralph Lauren,  Off 5th- SAKS Fifth Avenue Outlet Store, The Gap,
Nautica  and  Nike.  A  majority  of the  factory  outlet  stores  leased by the
Operating  Partnership  are directly  operated by the  respective  manufacturer.
During 1997,  the  Operating  Partnership  added  approximately  55 new national
designers and brand name companies to its tenant base.

No single tenant  (including  affiliates)  accounted for 10% or more of combined
base and  percentage  rental  revenues  during 1997 and 1996.  During 1995,  one
tenant (including  affiliates)  accounted for approximately 10% of combined base
and  percentage  rental  revenues.   As  of  February  1,  1998,  the  Operating
Partnership's  largest  tenant  accounted  for  approximately  6.8% of its  GLA.
Because the typical  tenant of the Operating  Partnership  is a large,  national
manufacturer,  the  Operating  Partnership  has  not  experienced  any  material
problems with respect to rent collections or lease defaults.

Minimum base rental revenues and operating expense reimbursements  accounted for
approximately  96%  of the  Operating  Partnership's  total  revenues  in  1997.
Percentage rental revenues accounted for approximately 3% of 1997 revenues. As a
result,  only a  small  portion  of the  Operating  Partnership's  revenues  are
dependent  on  contingent  revenue  sources,  such as  percentage  rents,  which
fluctuate depending on tenant's sales performance.

Business History

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


                                        4

<PAGE>


From 1981 to June of 1993, the Tangers  developed 17 Centers with a total GLA of
approximately  1.5 million square feet. In June of 1993,  the Company  completed
its initial public offering ("IPO"),  making Tanger Factory Outlet Centers, Inc.
the first publicly  traded outlet center  company.  Since the Company's IPO, the
Operating  Partnership has developed nine Centers and acquired four Centers and,
together with expansions of existing  Centers,  added  approximately 3.1 million
square feet of GLA to its portfolio,  bringing its portfolio of properties as of
December 31, 1997 to 30 Centers totaling  approximately  4.6 million square feet
of GLA.

Business and Operating Strategy

The Operating Partnership intends to increase its cash flow and the value of its
portfolio over the long-term by continuing to own, manage, acquire, develop, and
expand  factory  outlet  centers.  The  Operating  Partnership's  strategy is to
increase revenues through new development, selective acquisitions and expansions
of factory outlet centers while  minimizing its operating  expenses by designing
low maintenance  properties and achieving economies of scale. In connection with
the ownership and management of its properties, the Operating Partnership places
an emphasis on regular  maintenance and intends to make periodic  renovations as
necessary.  In addition,  the Operating  Partnership  will seek to maintain high
occupancy rates and increasing  rental revenues with a tenant base of nationally
recognized brand name tenants.

The Operating  Partnership  typically  seeks  locations for its new centers that
have at least 3.5 million  people  residing  within an hour's drive,  an average
household income within a 50 mile radius of at least $35,000 per year and access
to a highway with a traffic count of at least 35,000 cars per day. The Operating
Partnership   will  vary  its  minimum   conditions   based  on  the  particular
characteristics  of a  site,  especially  if the  site is  located  near or at a
tourist destination. The Operating Partnership's current goal is to target sites
that are large enough to construct centers with approximately 75 stores totaling
at least 300,000 square feet of GLA. Generally,  the Operating  Partnership will
build such centers in phases, with the first phase containing 150,000 to 200,000
square feet of GLA. Future phases have historically been less expensive to build
than the first phase because the  Operating  Partnership  generally  consummates
land  acquisition  and finishes most of the site work,  including  parking lots,
utilities, zoning and other developmental work, in the first phase.

The Operating  Partnership generally preleases at least 50% of the space in each
center prior to acquiring the site and beginning construction. Historically, the
Operating  Partnership  has not  begun  construction  until  it has  obtained  a
significant  amount of signed leases.  Typically,  construction of a new factory
outlet  center  has taken the  Operating  Partnership  four to six  months  from
groundbreaking  to the  opening  of the  first  tenant  store.  Construction  of
expansions to existing  properties  typically  takes less time,  usually between
three to four months.

Capital Strategy

The  Operating  Partnership's  capital  strategy  is to  maintain  a strong  and
flexible  financial  position by: (1) maintaining a low level of leverage,  (ii)
extending  and  sequencing  debt  maturity  dates,  (iii)  managing its floating
interest rate exposure,  (iv)  maintaining  its liquidity and (v)  reinvesting a
significant  portion of its cash flow by maintaining a low  distribution  payout
ratio  (defined as annual  distributions  as a percent of funds from  operations
("FFO" - See discussion of FFO below) for such year).

FFO and  EBITDA  are  widely  accepted  financial  indicators  used  by  certain
investors  and  analysts to analyze and compare one equity REIT with  another on
the basis of  operating  performance.  FFO is  generally  defined  as net income
(loss),  computed in accordance with generally accepted  accounting  principles,
before  extraordinary  items  and gains  (losses)  on sale of  properties,  plus
depreciation and  amortization  uniquely  significant to real estate.  EBITDA is
generally   defined  as  earnings   before  interest   expense,   income  taxes,
depreciation  and  amortization.  The  Operating  Partnership  cautions that the
calculations  of FFO and EBITDA  may vary from  entity to entity and as such the
presentation  of  FFO  and  EBITDA  by  the  Operating  Partnership  may  not be
comparable to other  similarly  titled  measures of other  reporting  companies.
Neither  FFO nor EBITDA  represent  net income or cash flow from  operations  as
defined by  generally  accepted  accounting  principles  and  neither  should be
considered  an   alternative  to  net  income  as  an  indication  of  operating
performance or to cash from operations as a measure of liquidity. FFO and EBITDA
are not necessarily  indicative of cash flows available to fund distributions to
unitholders and other cash needs.

The Operating  Partnership has successfully  increased its distribution  each of
its first four years in existence.  At the same time, the Operating  Partnership
has reduced its payout ratio in each of those  years.  The  distribution  payout
ratio for the year ended  December 31, 1997 was 67%. As a result,  the Operating
Partnership  retained   approximately  $11  million  of  its  1997  FFO.  A  low
distribution  payout ratio policy  allows the  Operating  Partnership  to retain
capital to maintain the quality of its portfolio as well as to develop,  acquire
and expand properties.

                                        5

<PAGE>


The Operating Partnership's ratio of EBITDA to Annual Service Charge (defined as
the amount  which is expensed or  capitalized  for  interest on debt,  excluding
amortization  of deferred  finance  charges) was a strong 3.0 for the year ended
December 31, 1997.  The  Operating  Partnership's  ratio of debt to total market
capitalization  (defined as the value of the outstanding  Units plus total debt)
at December 31, 1997 was  approximately 39% (assuming that each type of Unit has
the same value as the equivalent Common Shares of the Company, which at December
31, 1997 had a market value of $30.5625 per share).

During  September and October 1997, the Company  completed a public  offering of
1,080,000  Common Shares at a price of $29.0625 per share,  and  contributed the
net proceeds of  approximately  $29.2  million to the Operating  Partnership  in
exchange for 1,080,000 partnership Units. The net proceeds were used to acquire,
expand and develop factory outlet centers and for general corporate purposes. On
October  24, the  Operating  Partnership  issued $75  million of 7.875%  senior,
unsecured notes,  maturing October 24, 2004. The net proceeds were used to repay
substantially all amounts outstanding under the Operating Partnership's existing
lines of credit. On November 3, 1997, the Company and the Operating  Partnership
filed  a new  registration  statement  with  the  SEC to  provide,  under  shelf
registration  statements,  for the issuance of up to $100 million in  additional
equity securities and $100 million in additional debt securities.

At December 31, 1997, the Operating  Partnership  had revolving  lines of credit
with a  borrowing  capacity  of up to $125  million,  of which $120  million was
available for  additional  borrowings.  Based on the $5 million in variable rate
debt  outstanding  at  December  31,  1997,  the  Operating  Partnership  had an
insignificant  amount of exposure to interest rate risk at year end. Also,  with
additional unsecured  borrowings during the year, the Operating  Partnership had
effectively  unencumbered  approximately  64% of its real  estate  assets  as of
December 31, 1997. In February  1998, the Operating  Partnership  amended two of
its revolving lines to increase the amounts  available by $20 million,  bringing
the total borrowing capacity under the lines to $145 million.

The  Operating  Partnership  intends to retain the  ability to raise  additional
capital,   including   additional   debt,   to  pursue   attractive   investment
opportunities  that may arise and to otherwise  act in a manner that it believes
to be in the best interests of the Operating Partnership and its unitholders.

The Company

The Company is a fully integrated real estate company,  focusing  exclusively on
factory   outlet   centers.   Management  of  the  Company   beneficially   owns
approximately  27% of all  outstanding  Common  Shares  (assuming  the  Series A
Preferred Shares and the limited partner's Units are exchanged for Common Shares
but  without  giving  effect  to the  exercise  of  any  outstanding  stock  and
partnership  Unit options).  The Company owned, as of February 1, 1998, 74.1% of
the Operating  Partnership  (assuming  conversion  of the preferred  partnership
Units), and is the sole general partner.

Ownership of the Company's capital stock 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  (including  Common  Shares  which  may be  issued as a result of
conversion of Series A Preferred  Shares) or more than 29,400 Series A Preferred
Shares (or a lesser  number in certain  cases).  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 capital stock
equal to at least 95% of its taxable  income each year.  Dividends  on preferred
shares  are  included  as  distributions  for this  purpose.  Historically,  the
Company's  distributions  have  exceeded,  and  the  Company  expects  that  its
distribution will continue to exceed,  taxable income in each year. As a result,
and because a portion of the  distributions  may constitute a return of capital,
the consolidated net worth of the Company may decline. However, the Company does
not believe that  consolidated net worth is a meaningful  reflection of net real
estate values.

The  Company's  executive  offices  are located at 1400 West  Northwood  Street,
Greensboro,  North Carolina,  27408 and its telephone  number is (336) 274-1666.
The Company is a North Carolina corporation that was formed on March 3, 1993.

Competition

The Operating Partnership carefully considers the degree of existing and planned
competition in a proposed area before  deciding to develop,  acquire or expand a
new center. The Operating  Partnership's 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,
management believes that the majority of the Operating  Partnership's  customers
visit

                                        6

<PAGE>


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 to 20 miles from the  nearest
major  department store or the tenants' own specialty  stores.  For this reason,
the Operating  Partnership's  centers compete only to a very limited extent with
traditional malls in or near metropolitan areas.

Management  believes that the Operating  Partnership  competes favorably with as
many as four large  national  developers of factory  outlet centers and numerous
small developers.  Competition with other factory outlet centers for new tenants
is generally based on cost,  location,  quality and mix of the centers' existing
tenants,  and the  degree and  quality of the  support  and  marketing  services
provided by the property manager.  The Operating  Partnership  believes that its
centers have an attractive  tenant mix as a result of the strong brand  identity
of the Operating Partnership's major tenants.

Corporate and Regional Headquarters

The Operating  Partnership  owns a small office  building in  Greensboro,  North
Carolina in which its  corporate  headquarters  is  located.  In  addition,  the
Operating Partnership rents a regional office in New York City, New York under a
lease  agreement  and sublease  agreement,  respectively  to better  service its
principal  fashion-related  tenants,  many of whom are based in and around  that
area.

The Operating  Partnership  maintains on-site managers and offices at 25 Centers
and one off-site manager and office in Portsmouth,  New Hampshire to service the
remaining 5 Centers in the New England area.  The managers  closely  monitor the
development of those Centers from construction through opening and operation and
also provide effective and efficient management and marketing services.

Insurance

Management  believes  that the Centers are covered by adequate  fire,  flood and
property  insurance  provided  by  reputable  companies  and  with  commercially
reasonable deductibles and limits.

Employees

As of February 1, 1998, the Operating  Partnership had 110 full-time  employees,
located at the Operating Partnership's corporate headquarters in North Carolina,
its regional office in New York and its 26 business offices.


                                        7

<PAGE>


Item 2. Business and Properties

As of February 1, 1998, the Operating  Partnership's  portfolio  consisted of 30
Centers located in 23 states. The Operating  Partnership's Centers range in size
from 8,000 to 631,359  square feet of GLA.  These  Centers are  typically  strip
shopping  centers  which  enable  customers  to view all of the  shops  from the
parking  lot,  minimizing  the time needed to shop.  The  Centers are  generally
located near tourist  destinations or along major interstate highways to provide
visibility and accessibility to potential customers.

The  Operating  Partnership  believes  that the  Centers  are  well  diversified
geographically and by tenant and that it is not dependent upon any single Center
or  tenant.  The only  Center  that  represents  more than 10% of the  Operating
Partnership's  total  assets  or gross  revenues  as of and for the  year  ended
December 31, 1997 is the property in Riverhead, NY. See "Business and Properties
-  Significant  Property".  No other  Center  represented  more  than 10% of the
Operating Partnership's total assets or gross revenues as of December 31, 1997.

Location of Centers (as of February 1, 1998)

                                        Number of        GLA                 %
State                                   Centers       (sq. ft.)           of GLA
--------------------------------------------------------------------------------
Georgia                                     3          713,371               16%
New York                                    1          631,359               14
Texas                                       2          419,750                9
Iowa                                        1          275,706                6
Tennessee                                   2          267,791                6
Missouri                                    1          255,073                6
Louisiana                                   1          245,325                5
Pennsylvania                                1          230,063                5
Oklahoma                                    1          197,878                4
Arizona                                     1          186,018                4
North Carolina                              2          179,870                4
Indiana                                     1          141,051                3
Minnesota                                   1          134,480                3
Michigan                                    1          112,120                2
California                                  1          108,950                2
Oregon                                      1           97,749                2
Kansas                                      1           88,200                2
Maine                                       2           84,897                2
Alabama                                     1           80,730                2
New Hampshire                               2           61,915                1
West Virginia                               1           49,252                1
Massachusetts                               1           23,417                1
Vermont                                     1            8,000               --
                                        ----------------------------------------
     Total                                 30        4,592,965              100%
                                        ========================================


                                        8

<PAGE>


The table set forth below  summarizes  certain  information  with respect to the
Operating Partnership's existing centers as of February 1, 1998.

Property Portfolio

<TABLE>
<CAPTION>
                                                                                                   Mortgage
                                                                                                     Debt        Fee or
                                                               GLA                                Outstanding    Ground
 Date Opened            Location                            (sq. ft.)             % Leased         (000's) (4)    Lease
------------------------------------------------------------------------------------------------------------------------
<S>               <C>                                        <C>                      <C>             <C>       <C>
Jun. 1986         Kittery I, ME                               56,312                  100%            $5,970      Fee
Aug. 1993         Expansion                                    3,882
                                                            --------
                                                              60,194

Mar. 1987         Clover, North Conway, NH                    11,000                   100                --      Fee

Nov. 1987         Martinsburg, WV                             42,346                    89                --      Fee
Sep. 1994         Expansion                                    6,906
                                                            --------
                                                              49,252

Apr. 1988         LL Bean, North Conway, NH                   50,915                   100                --      Fee

Jul. 1988         Pigeon Forge, TN                            94,480                   100                --    Ground
Jul. 1994         Expansion                                      270                                             Lease
                                                            --------
                                                              94,750                                            (2086)

Aug. 1988         Boaz, AL                                    78,550                   100                --      Fee
May  1993         Expansion                                    2,180
                                                            --------
                                                              80,730

Oct. 1988         Manchester, VT                               8,000                   100                --      Fee

Jun. 1989         Kittery II, ME                              23,119                   100                --      Fee
Nov. 1993         Expansion                                    1,584
                                                            --------
                                                              24,703

Jul. 1989         Commerce, GA                               100,100                    97            10,121      Fee
Mar. 1990         Expansion                                   58,650
May 1992          Expansion                                    4,500
May 1993          Expansion                                   12,500
Sep. 1994         Expansion                                   10,000
                                                            --------
                                                             185,750

Oct. 1989         Bourne, MA                                  23,417                   100                --      Fee

Feb. 1991         West Branch, MI                             75,120                    98             6,836      Fee
Oct. 1992         Expansion                                   25,000
May  1994         Expansion                                   12,000
                                                            --------
                                                             112,120

May  1991         Williamsburg, IA                           121,444                    94            16,946      Fee
Nov. 1991         Expansion                                   50,675
Nov. 1992         Expansion                                   34,000 (1)
Dec. 1993         Expansion                                   43,400
Apr. 1996         Expansion                                   26,187
                                                            --------
                                                             275,706

Feb. 1992         Casa Grande, AZ                             94,223                    89                --      Fee
Dec. 1992         Expansion                                   91,795
                                                            --------
                                                             186,018
</TABLE>


                                        9

<PAGE>

<TABLE>
<CAPTION>
                                                                                                   Mortgage
                                                                                                     Debt        Fee or
                                                               GLA                                Outstanding    Ground
 Date Opened            Location                            (sq. ft.)             % Leased         (000's) (4)    Lease
------------------------------------------------------------------------------------------------------------------------
<S>               <C>                                        <C>                      <C>             <C>       <C>
Aug. 1992         Stroud, OK                                  96,378                    93                --      Fee
Nov. 1992         Expansion                                   37,500
Aug. 1993         Expansion                                   64,000                                              Fee
                                                            --------
                                                             197,878

Dec. 1992         North Branch, MN                           106,280                    96                --      Fee
Aug. 1993         Expansion                                   28,200
                                                            --------
                                                             134,480

Feb. 1993         Gonzales, LA                               105,985                    98                --      Fee
Aug. 1993         Expansion                                  109,450
Feb. 1996         Expansion                                   29,890
                                                            --------
                                                             245,325

May  1993         San Marcos, TX                              98,820                   100            10,206      Fee
Oct. 1993         Expansion                                   40,200
Nov. 1994         Expansion                                   17,500 (2)
April 1995        Expansion                                   32,750
July 1996         Expansion                                   29,945
Dec. 1997         Expansion                                   23,100 (6)
                                                            --------
                                                             242,315

Dec. 1993         Lawrence, KS                                88,200                    87                --      Fee

Dec. 1993         McMinnville, OR                             97,749                    72               ---      Fee

Aug. 1994         Riverhead, NY                              286,195                    99               ---    Ground
Aug. 1997         Expansion                                  241,820                                             Lease
Dec. 1997         Expansion                                  103,344 (6)                                       (2004)(3)
                                                            --------
                                                             631,359

Aug. 1994         Terrell, TX                                126,185                    98                --      Fee
Oct. 1995         Expansion                                   51,250
                                                            --------
                                                             177,435

Sep. 1994         Seymour, IN                                141,051                    95             8,184      Fee

Oct.  1994 (5)    Lancaster, PA                              191,152                    99            15,787      Fee
Nov. 1995         Expansion                                   12,800
Sep. 1997         Expansion                                   26,111 (6)
                                                            --------
                                                             230,063

Nov. 1994         Branson, MO                                230,073                    95                --      Fee
Jun. 1996         Expansion                                   25,000
                                                            --------
                                                             255,073

Nov. 1994         Locust Grove, GA                           168,700                    97                --      Fee
Dec. 1995         Expansion                                   45,964
Aug. 1996         Expansion                                   34,190
                                                            --------
                                                             248,854

Jan. 1995         Barstow, CA                                108,950                   100                --      Fee

Dec. 1995         Commerce II, GA                            148,520                    98                --      Fee
Aug. 1996         Expansion                                   36,000
Dec. 1997         Expansion                                   94,247 (6)
                                                            --------
                                                             278,767
</TABLE>


                                       10

<PAGE>

<TABLE>
                                                                                                   Mortgage
                                                                                                     Debt        Fee or
                                                               GLA                                Outstanding    Ground
 Date Opened            Location                            (sq. ft.)             % Leased         (000's) (4)    Lease
------------------------------------------------------------------------------------------------------------------------
<S>               <C>                                      <C>                          <C>          <C>        <C>
Feb. 1997 (5)     Sevierville, TN                            122,684                    92                --    Ground
Dec. 1997         Expansion                                   50,357 (6)                                         Lease
                                                            --------
                                                             173,041                                            (2046)

Sep. 1997 (5)     Blowing Rock, NC                            97,408                    95                --      Fee
Sep. 1997 (5)     Nags Head, NC                               82,462                    93                --      Fee
----------------------------------------------------------------------------------------------------------------------
     Total                                                 4,592,965                    96%          $74,050
======================================================================================================================
</TABLE>

(1)  GLA excludes  21,781 square foot land lease on outparcel  occupied by Pizza
     Hut.

(2)  GLA  excludes  17,400  square  foot land  lease on  outparcel  occupied  by
     Wendy's.

(3)  The  original  Riverhead  Center is subject to a ground  lease which may be
     renewed  at  the  option  of the  Operating  Partnership  for  up to  seven
     additional terms of five years each. The land on which the Riverhead Center
     expansion is located is owned by the Operating Partnership.

(4)  As of December  31,  1997.  The  weighted  average  interest  rate for debt
     outstanding at December 31, 1997 was 8.5% and the weighted average maturity
     date was October 2002.

(5)  Represents date acquired by the Operating Partnership.

(6)  GLA includes square feet of new space not yet open as of December 31, 1997,
     which totaled 136,285 square feet (San Marcos - 12,100; Riverhead - 60,419;
     Lancaster   -  2,677;   Commerce  II  -  35,792;   Sevierville   -  25,297)

--------------------------------

Management has an ongoing program for acquiring Centers,  developing new Centers
and expanding  existing Centers.  See  "Management's  Discussion and Analysis of
Financial Condition and Results of Operations--Liquidity  and Capital Resources"
for a  discussion  of the cost of such  programs  and the  sources of  financing
thereof.

Certain of the Operating  Partnership's Centers serve as collateral for mortgage
notes payable and the secured revolving line of credit.  Of the 30 Centers,  the
Operating  Partnership  owns the land  underlying  27 and has  ground  leases on
three.  The land on which the Pigeon Forge and  Sevierville  Centers are located
are subject to long-term ground leases expiring in 2086 and 2046,  respectively.
The land on which the original  Riverhead  Center is located,  approximately  47
acres,  is also subject to a ground lease with an initial term expiring in 2004,
with  renewal  at  the  option  of the  Operating  Partnership  for up to  seven
additional  terms of five years  each.  The land on which the  Riverhead  Center
expansion  is  located,  approximately  43  acres,  is  owned  by the  Operating
Partnership.

The term of the Operating Partnership's typical tenant lease ranges from five to
ten years.  Generally,  leases  provide for the payment of fixed monthly rent in
advance. There are often contractual base rent increases during the initial term
of the lease. In addition, the rental payments are customarily subject to upward
adjustments  based upon tenant sales volume.  Most leases provide for payment by
the tenant of real estate taxes, insurance, common area maintenance, advertising
and  promotion  expenses  incurred  by  the  applicable  Center.  As  a  result,
substantially all operating expenses for the Centers are borne by the tenants.


                                       11

<PAGE>


Lease Expirations

The  following  table  sets  forth,  as of  February  1, 1998,  scheduled  lease
expirations,  assuming none of the tenants exercise renewal options. Most leases
are renewable for five year terms at the tenant's option.

<TABLE>
<CAPTION>
                                                                                             % of Gross
                                                                                             Annualized
                                                               Average                        Base Rent
                               No. of         Approx.        Annualized       Annualized     Represented
                               Leases          GLA            Base Rent       Base Rent      by Expiring
          Year               Expiring(1)   (sq. ft.)(1)       per sq. ft.     (000's)(2)       Leases
---------------------------------------------------------------------------------------------------------
<S>                            <C>          <C>                 <C>             <C>            <C> 
          1998                    75          306,000           $12.78           $3,910          7%
          1999                   190          695,000            14.24            9,895         17
          2000                   168          581,000            14.39            8,363         14
          2001                   140          549,000            13.81            7,581         13
          2002                   242          904,000            15.14           13,684         24
          2003                    73          353,000            13.56            4,786          8
          2004                    61          314,000            14.32            4,497          8
          2005                   132          102,000            11.23            1,145          2
          2006                     4           58,000            10.91              633          1
          2007                    10           64,000            14.59              934          2
     2008 & thereafter            36          255,000             8.76            2,235          4
     ----------------------------------------------------------------------------------------------
          Total                1,131        4,181,000           $13.79          $57,663        100%
=======================================================================================================
</TABLE>

(1)  Excludes  leases that have been  entered  into but which tenant has not yet
     taken  possession,   vacant  suites  and  month-to-month   leases  totaling
     approximately 412,000 square feet.

(2)  Base rent is  defined  as the  minimum  payments  due,  excluding  periodic
     contractual fixed increases.

Rental and Occupancy Rates

The following table sets forth information  regarding the expiring leases during
each of the last five calendar years.


<TABLE>
<CAPTION>
                                                    Renewed by Existing                     Re-leased to
                    Total Expiring                       Tenants                             New Tenants
              ---------------------------       ----------------------------         ----------------------------
                                   % of   
                                   Total                              % of                                % of 
               GLA                 Center         GLA               Expiring          GLA               Expiring 
Year         (sq. ft.)              GLA         (sq. ft.)              GLA          (sq. ft.)             GLA
-----------------------------------------------------------------------------------------------------------------
<S>           <C>                    <C>         <C>                   <C>           <C>                  <C>
1997          238,250                5%          195,380               82%           18,600                8%
1996          149,689                4           134,639               90            15,050               10
1995           93,650                3            91,250               97             2,400                3
1994          115,697                3           105,697               91            10,000                9
1993          129,069                4           123,569               96             5,500                4
</TABLE>


                                       12

<PAGE>



The following table sets forth the average base rental rate increases per square
foot upon re-leasing  stores that were turned over or renewed during each of the
last five calendar years.

<TABLE>
<CAPTION>
                          Renewals of Existing Leases                                 Stores Re-leased to New Tenants (1)
             -------------------------------------------------------        -------------------------------------------------------
                                  Average Annualized Base Rents                                 Average Annualized Base Rents
                                         ($ per sq. ft.)                                               ($ per sq. ft.)
                             ---------------------------------------                       ----------------------------------------
                                                                                                                              %
               GLA                                              %             GLA                                          Increase
Year         (sq. ft.)       Expiring          New          Increase        (sq. ft.)      Expiring        New            (Decrease)
----         ---------       --------        ------         --------        ---------      --------      ------           ---------
<S>           <C>             <C>            <C>               <C>            <C>           <C>          <C>                 <C> 
1997          195,380         $14.21         $14.41             1%            171,421       $14.59       $13.42              (8)%
1996          134,639          12.44          14.02            13              78,268        14.40        14.99               4
1995           91,250          11.54          13.03            13              59,445        13.64        14.80               9
1994          105,697          14.26          16.56            16              71,350        12.54        14.30              14
1993          123,569          12.83          13.94             9              29,000        10.81        14.86              38
</TABLE>
----------
(1)  The square footage  released to new tenants for 1997,  1996, 1995, 1994 and
     1993  contain  18,600,   15,050,  2,400,  10,000  and  5,500  square  feet,
     respectively,  that was  released  to new  tenants  upon  expiration  of an
     existing  lease.  The  remaining  space was  retenanted  prior to any lease
     expiration.



The following  table shows certain  information on rents and occupancy rates for
the Centers during each of the last five calendar years.


<TABLE>
<CAPTION>
                                                                                                              Aggregate
                                         Average              GLA Open at                                     Percentage
                   %                 Anualized Base           End of Each              Number of                Rents
Year             Leased             Rent per sq.ft. (1)           Year                  Centers                (000's)
----             ------             -------------------       -----------              ---------              ----------
<S>               <C>                     <C>                  <C>                        <C>                   <C>   
1997              98%                     $14.04               4,458,000                  30                    $2,637
1996              99%                      13.89               3,739,000                  27                     2,017
1995              99%                      13.92               3,507,000                  27                     2,068
1994              99%                      13.43               3,115,000                  25                     1,658
1993              98%                      13.03               1,980,000                  19                     1,323
</TABLE>                                                                    
----------
(1)  Represents total base rental revenue divided by Weighted Average GLA of the
     portfolio,  which amount does not take into  consideration  fluctuations in
     occupancy throughout the year.

Occupancy Costs

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


                                               Occupancy Costs as a
                             Year               % of Tenant Sales
                             ----              --------------------
                             1997                     8.2%
                             1996                     8.7
                             1995                     8.5
                             1994                     7.4
                             1993                     6.5


                                       13
<PAGE>


Tenants

The following table sets forth certain information with respect to the Operating
Partnership's  ten largest  tenants  and their store  concepts as of February 1,
1998.


                                           Number          GLA       % of Total
Tenant                                    of Stores     (sq. ft.)     GLA open
-------------------------------------------------------------------------------
Phillips-Van Heusen Corporation (1):
      Bass Shoes                              18          121,342        2.6%
      Bass Apparel                             1            3,300        0.1
      Bass Company Store                       1            6,500        0.1
      Van Heusen                              19           81,556        1.8
      Geoffrey Beene Co. Store                12           48,640        1.1
      Izod                                    15           35,567        0.8
      Gant                                     5           13,000        0.3
                                          -------------------------------------
                                              71          309,905        6.8
Liz Claiborne, Inc.:
      Liz Claiborne                           25          285,041        6.2
      Elizabeth                                5           20,700        0.5
                                          -------------------------------------
                                              30          305,741        6.7

Reebok International, Ltd.                    22          158,400        3.5

Sara Lee Corporation:
      L'eggs, Hanes, Bali                     23          107,192        2.3
      Champion                                 2            6,500        0.2
      Coach                                    6           13,815        0.3
      Socks Galore                             7            8,680        0.2
                                          -------------------------------------
                                              38          136,187        3.0
County Seat Stores, Inc. (2):
      County Seat                              3           15,000        0.3
      Levi's by County Seat                    8           91,700        2.0
                                          -------------------------------------
                                              11          106,700        2.3
American Commercial, Inc.:                                             
      Mikasa Factory Store                    13          105,500        2.3
                                                                       
Brown Group Retail, Inc.:                                              
      Famous Footwear                          6           33,150        0.7
      Naturalizer                              7           17,200        0.4
      Brown Shoes                              2           10,500        0.2
      Factory Brand Shoes                      6           29,050        0.6
      Air Step/Buster Brown                    1            3,000        0.1
                                          -------------------------------------
                                              22           92,900        2.0
                                                                       
VF Factory Outlet, Inc.                        3           78,697        1.7
                                                                       
Oshkosh B"Gosh, Inc.                          15           76,790        1.6
                                                                       
Samsonite Corporation:                                                 
      American Tourister                      11           31,392        0.7
      Samsonite                               13           43,395        0.9
                                          -------------------------------------
                                              24           74,787        1.6
                                          -------------------------------------
Total of all tenants listed in table         249        1,455,607       31.5%
                                          =====================================
                                                                     

                                       14
<PAGE>


(1)  Phillips-Van  Heusen  Corporation  ("PVH") has  announced  the closing of a
significant  portion of its  underperforming  stores.  Generally,  the Operating
Partnership's  leases  with PVH are  long-term  and do not  permit the tenant to
close the  store  during  the lease  term.  Management  believes  that the rents
derived  from stores that might be  considered  for closing in the future by PVH
would not have a  material  effect on the  Operating  Partnership's  results  of
operations or financial condition.

(2)  County  Seat  Stores,  Inc.  ("County  Seat") is  currently  in  bankruptcy
proceedings.  Management  believes that this bankruptcy will not have a material
effect  on the  Operating  Partnership's  results  of  operations  or  financial
condition.


Significant Property

The Center in  Riverhead,  New York is the Operating  Partnership's  only Center
which comprises more than 10% of total assets or total  revenues.  The Riverhead
Center  was  originally   constructed  in  1994.   During  1997,  the  Operating
Partnership  substantially  completed an expansion  totaling 241,820 square feet
and is  nearing  final  completion  of a  further  expansion  which  will  total
approximately  103,300  square feet.  Upon  completion  of the  expansions,  the
Riverhead Center will total 631,359 square feet.

Tenants at the Riverhead Center principally conduct retail sales operations. The
occupancy rate as of the end of 1997, 1996, 1995 and 1994,  excluding expansions
under construction, was 99%, 100%, 100% and 100%. Average annualized base rental
rates during 1997,  1996, 1995 and 1994 were $18.65,  $17.73,  $17.63 and $18.18
per weighted average GLA.

Depreciation on the Riverhead Center is recognized on a straight-line basis over
33.33 years,  resulting in a  depreciation  rate of 3% per year. At December 31,
1997,  the net federal tax basis of this Center was  approximately  $73,134,000.
Real estate taxes assessed on this Center during 1997 amounted to $826,000. Real
estate taxes for 1998 are estimated to be approximately $1.6 million.

The  following  table  sets  forth,  as of  February  1, 1998,  scheduled  lease
expirations at the Riverhead  Center assuming that none of the tenants  exercise
renewal options:

<TABLE>
<CAPTION>
                                                                                                             % of Gross
                                                                                                             Annualized
                                                                                                              Base Rent
                            No. of                               Annualized           Annualized            Represented
                            Leases             GLA                Base Rent            Base Rent            by Expiring
Year                     Expiring (1)        (sq. ft.) (1)       per sq. ft.           (000) (2)               Leases
------------------------------------------------------------------------------------------------------------------------
<S>                          <C>               <C>                   <C>               <C>                      <C> 
1998                          --                    --               $   --            $    --                   --%
1999                          22                91,000                19.30              1,756                   16
2000                           5                17,000                19.94                339                    3
2001                           8                34,000                20.97                713                    7
2002                          70               240,000                20.77              4,985                   46
2003                           4                23,000                18.65                452                    4
2004                          18                79,000                19.24              1,520                   14
2005                           1                 2,000                17.50                 35                    1
2006                          --                    --                --                    --                   --
2007                           4                24,000                16.83                404                    4
2007 & thereafter              5                57,000                 9.33                532                    5
------------------------------------------------------------------------------------------------------------------------
Total                        137               567,000               $18.93            $10,736                  100%
========================================================================================================================
</TABLE>                                                              

(1)  Excludes  leases that have been entered into but which tenant has not taken
possession and excludes  month-to-month  leases. 

(2) Base  rent is  defined  as the  minimum  payments  due,  excluding  periodic
contractual fixed increases.


                                       15
<PAGE>



Item 3. Legal Proceedings

Except for claims arising in the ordinary course of business,  which are covered
by the Operating Partnership's liability insurance, the Operating Partnership is
not presently involved in any litigation  involving claims against the Operating
Partnership,  nor,  to its  knowledge,  is any  material  litigation  threatened
against the  Operating  Partnership  or its Centers  which would have a material
adverse effect on the Operating Partnership, its Centers or its operations.

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, 1997.


                    EXECUTIVE OFFICERS OF THE GENERAL PARTNER

     The Operating  Partnership does not have any officers.  The following table
sets forth certain information  concerning the executive officers of the general
partner, Tanger Factory Outlet Centers, Inc.:

<TABLE>
<CAPTION>
     NAME                                        AGE                       POSITION
----------------------------------------         ---   -----------------------------------------------
<S>                                               <C>  <C>                                               
Stanley K. Tanger.......................          74   Founder, Chairman of the Board of Directors and
                                                           Chief Executive Officer
Steven B. Tanger........................          49   Director, President and Chief Operating Officer
Rochelle G. Simpson ....................          59   Secretary and Senior Vice President -
                                                           Administration and Finance
Willard A. Chafin, Jr...................          60   Senior Vice President - Leasing, Site Selection,
                                                           Operations and Marketing
Frank C. Marchisello, Jr................          39   Vice President - Chief Financial Officer
Joseph H. Nehmen........................          49   Vice President - Operations
Virginia R. Summerell...................          39   Treasurer and Assistant Secretary
C. Randy Warren, Jr.....................          33   Vice President - Leasing
Richard T. Parker.......................          49   Vice President - Development
Carrie A. Johnson.......................          35   Vice President - Marketing
Kevin M. Dillon.........................          39   Vice President - Construction
</TABLE>
                                                     
     The following is a biographical  summary of the experience of the executive
officers of the Company:

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

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

     Rochelle  G.  Simpson.  Ms.  Simpson  was named  Senior  Vice  President  -
Administration  and  Finance of the  Company in  October  1995.  She is also the
Secretary  of the  Company  and  previously  served as  Treasurer  from May 1993
through May 1995.  She entered the  factory  outlet  center  business in January
1981, in general  management  and as chief  accountant for Stanley K. Tanger and
later  became Vice  President -  Administration  and Finance of the  Predecessor
Company.  Ms. Simpson  oversees the accounting and finance  departments  and has
overall management responsibility for the Company's headquarters.


                                       16
<PAGE>


     Willard  A.  Chafin,  Jr. Mr.  Chafin was named  Senior  Vice  President  -
Leasing,  Site  Selection,  Operations  and  Marketing of the Company in October
1995. He joined the Company in April 1990, and since has held various  executive
positions where his major  responsibilities  included supervising the Marketing,
Leasing and Property  Management  Departments,  and leading the Asset Management
Team.  Prior to  joining  the  Company,  Mr.  Chafin was the  Director  of Store
Development  for the Sara Lee  Corporation,  where  he  spent 21  years.  Before
joining Sara Lee, Mr.  Chafin was employed by Sears Roebuck & Co. for nine years
in advertising/sales promotion, inventory control and merchandising.

     Frank C.  Marchisello,  Jr. Mr.  Marchisello  was named Vice  President and
Chief Financial Officer of the Company in November 1994.  Previously,  he served
as Chief  Accounting  Officer  since  joining  the  Company in January  1993 and
Assistant  Treasurer  since February  1994. He was employed by Gilliam,  Coble &
Moser,  certified public  accountants,  from 1981 to 1992, the last six years of
which he was a partner of the firm in charge of  various  real  estate  clients.
While at  Gilliam,  Coble & Moser,  Mr.  Marchisello  worked  directly  with the
Tangers since 1982.  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 joined the Company in September  1995 and was
elected 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.

     Virginia R. Summerell.  Ms. Summerell was named Treasurer of the Company in
May 1995 and  Assistant  Secretary in November  1994.  Previously,  she held the
position of Director of Finance since joining the Company in August 1992,  after
nine years with NationsBank.  Her major responsibilities include cash management
and oversight of all project and corporate finance  transactions.  Ms. Summerell
is a graduate  of Davidson  College and holds an MBA from the Babcock  School at
Wake Forest University.

     C. Randy  Warren,  Jr. Mr.  Warren is the Vice  President  - Leasing of the
Company and joined the Company in November 1995. He was  previously  director of
anchor leasing at Prime Retail,  L.P.,  where he managed anchor tenant relations
and  negotiation  on a  national  basis.  Prior to that,  he worked as a leasing
executive for the company.  Before entering the outlet industry,  he was founder
of Preston Partners, a development consulting firm in Baltimore,  MD. Mr. Warren
is a graduate of Towson State University and holds an MBA from Loyola College.

     Richard T.  Parker.  Mr.  Parker is the Vice  President -  Development  and
joined the Company in April 1996.  Prior to joining Tanger,  Mr. Parker was with
The Mills  Corporation  for nine years where he served as Vice President of Land
Development   responsible   for   organizing   and  planning  the   development,
merchandising and sale of peripheral land surrounding 2 million-plus square foot
super regional mall projects. Prior to joining The Mills Corporation, Mr. Parker
was employed by Marriott  International  for 6 years where he served as Director
of Franchise Development. Mr. Parker is a graduate of Golden Gate University and
a veteran of the United States Air Force.

     Carrie A.  Johnson.  Ms.  Johnson was named Vice  President - Marketing  in
September 1996. Previously,  she held the position of Assistant Vice President -
Marketing  since joining the Company in December 1995.  Prior to joining Tanger,
Ms. Johnson 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.
Johnson 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.
Johnson is a graduate of East Carolina University.

     Kevin M. Dillon.  Mr.  Dillon was named Vice  President -  Construction  in
October 1997. Previously,  he held the position of Director of Construction from
September 1996 to October 1997 and Construction Manager since 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.


                                       17
<PAGE>


                                     PART II

Item 5. Market For Registrant's Common Equity and Related Shareholders' Matters

There is no established  public  trading market for the Operating  Partnership's
Units.  As of December  31,  1997,  the  ownership  interests  in the  Operating
Partnership  consisted  of  7,853,936  partnership  Units and  90,689  preferred
partnership  Units (which are  convertible  into  approximately  817,107 general
partnership  Units) held by the Company and 3,033,305  partnership Units held by
the limited partner.

The Operating  Partnership made  distributions  per partnership Unit during 1997
and 1996 as follows:



                                          1997               1996
          -------------------------------------------------------
          First Quarter                  $ .52              $ .50
          Second Quarter                   .55                .52
          Third Quarter                    .55                .52
          Fourth Quarter                   .55                .52
          -------------------------------------------------------
          Year 1997                      $2.17              $2.06
          -------------------------------------------------------


Certain of the  Operating  Partnership's  debt  agreements  limit the payment of
distributions  such that  distributions  shall not exceed FFO, as defined in the
agreements,  on an annual  basis or 95% of FFO on a cumulative  basis.  Based on
continuing  favorable  operations  and  available  funds  from  operations,  the
Operating   Partnership   intends  to   continue   to  pay   regular   quarterly
distributions.


                                       18
<PAGE>


Item 6. Selected Financial Data

<TABLE>
<CAPTION>
                                                 1997         1996         1995         1994         1993
----------------------------------------------------------------------------------------------------------
                                                     (In thousands, except per unit and center data)
<S>                                         <C>          <C>          <C>          <C>          <C>      
OPERATING DATA (1)
  Total revenues                            $  85,271    $  75,500    $  68,604    $  45,988    $  29,204
   Income before extraordinary item            17,583       16,177       15,352       15,147        8,555
   Net income (3)                              17,583       15,346       15,352       15,147        4,012
----------------------------------------------------------------------------------------------------------
UNIT DATA (2) 
  Basic:
     Income before extraordinary item       $    1.57    $    1.46    $    1.36    $    1.32    $     .90
     Net income (3)                         $    1.57    $    1.37    $    1.36    $    1.32    $     .35
     Weighted average partnership units        10,061        9,435        9,128        8,211        7,891
  Diluted:
     Income before extraordinary item       $    1.55    $    1.46    $    1.36    $    1.31    $     .90
     Net income (3)                         $    1.55    $    1.37    $    1.36    $    1.31    $     .35
     Weighted average partnership units        10,171        9,441        9,129        8,244        7,902
 Distributions paid                         $    2.17    $    2.06    $    1.96    $    1.80    $    .535
----------------------------------------------------------------------------------------------------------
BALANCE SHEET DATA
  Real estate assets, before depreciation   $ 454,708    $ 358,361    $ 325,881    $ 292,406    $ 137,666
  Total assets                                415,578      331,954      314,947      294,643      182,322
  Long-term debt                              229,050      178,004      156,749      121,323       20,316
  Partners' equity                            160,525      136,256      142,397      147,462      150,707
----------------------------------------------------------------------------------------------------------
OTHER DATA
  EBITDA (5)                                $  52,857    $  46,633    $  41,058    $  26,089    $  17,519
  Funds from operations (4)                 $  35,840    $  32,313    $  29,597    $  23,189    $  12,008
  Cash flows provided by (used in):
     Operating activities                   $  39,232    $  38,031    $  32,455    $  21,274    $  11,571
     Investing activities                   $ (93,636)   $ (36,401)   $ (44,788)   $(143,683)   $ (49,277)
     Financing activities                   $  55,444    $  (4,176)   $  13,802    $  80,661    $  81,324
  Gross leasable area open at year end          4,458        3,739        3,507        3,115        1,980
  Number of centers                                30           27           27           25           19
</TABLE>
----------
(1)  The  selected   financial   data   reflects  the  financial  and  operating
     information of Tanger Properties Limited Partnership for periods subsequent
     to June 1993 and combined  financial  and operating  information  of Tanger
     Properties, the predecessor business, for the period prior to June 1993.

(2)  In 1997, the Operating Partnership adopted SFAS 128, Earnings Per Share. As
     a result, the Operating  Partnership's reported income per unit amounts for
     prior  years  have  been   restated  to  conform   with  the  current  year
     presentation.

(3)  Pro forma net income and net income per unit, which reflect  adjustments to
     historical information to present income information as if the formation of
     the Operating  Partnership had taken place on January 1, 1993, were $10,519
     and $1.31 per basic and diluted unit during 1993.

(4)  In 1996, the Operating Partnership adopted the National Association of Real
     Estate Investment  Trusts' definition of funds from operations and restated
     1995 and prior year amounts.  See  Management's  Discussion and Analysis of
     Financial Condition and Results of Operations under the caption "Funds from
     Operations" for a complete discussion of funds from operations.

(5)  EBITDA  represents   earnings  before  interest   expense,   income  taxes,
     depreciation and  amortization.  EBITDA is presented because it is a widely
     accepted  financial  indicator  used by certain  investors  and analysts to
     analyze and compare  companies on the basis of operating  performance.  The
     Operating Partnership cautions that the calculation of EBITDA may vary from
     entity to entity and as such the  presentation  of EBITDA by the  Operating
     Partnership  may not be comparable to other  similarly  titled  measures of
     other reporting  companies.  EBITDA is not intended to represent cash flows
     for the period,  nor has it been  presented as an  alternative to operating
     income  as an  indicator  of  operating  performance,  and  should  not  be
     considered  in  isolation or as a  substitute  for measures of  performance
     prepared in accordance with generally accepted accounting principles.


                                       19
<PAGE>


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

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

The discussion of the Operating  Partnership's results of operations reported in
the  statements  of  operations  compares the years ended  December 31, 1997 and
1996,  as well as December 31, 1996 and 1995.  Certain  comparisons  between the
periods are made on a percentage  basis as well as on a weighted  average  gross
leasable area ("GLA") basis, a technique which adjusts for certain  increases or
decreases in the number of centers and corresponding  square feet related to the
development,  expansion or disposition of rental properties.  The computation of
weighted  average GLA,  however,  does not adjust for  fluctuations in occupancy
since GLA is not reduced  when  original  occupied  space  subsequently  becomes
vacant.

Cautionary Statements

Certain  statements  contained  in  the  discussion  below,  including,  without
limitation,   statements   containing  the  words   "believes,"   "anticipates,"
"expects," and words of similar import, constitute "forward-looking  statements"
within the meaning of the Private Securities Litigation Reform Act of 1995. Such
forward-looking  statements  involve known and unknown risks,  uncertainties and
other factors that may cause the actual results,  performance or achievements of
the Operating Partnership,  or industry results, to be materially different from
any future  results,  performance or  achievements  expressed or implied by such
forward-looking  statements.  Such factors include, among others, the following:
the  effects  of  future  events  on  the  Operating   Partnership's   financial
performance;  the risk that the Operating Partnership may not be able to finance
its planned development,  acquisition and expansion activities; risks related to
the retail industry in which the Operating Partnership's outlet centers compete,
including the potential  adverse  impact of external  factors such as inflation,
tenant demand for space,  consumer  confidence,  unemployment rates and consumer
tastes  and  preferences;  risks  associated  with the  Operating  Partnership's
development,  acquisition  and expansion  activities,  such as the potential for
cost overruns,  delays and lack of predictability  with respect to the financial
returns  associated  with these  development  activities;  the risk of potential
increase in market interest rates from current rates; risks associated with real
estate  ownership,  such as the potential adverse impact of changes in the local
economic  climate on the revenues and the value of the  Operating  Partnership's
properties; and the risks that a significant number of tenants may become unable
to meet their lease obligations or that the Operating  Partnership may be unable
to renew or re-lease a  significant  amount of available  space on  economically
favorable terms. Given these  uncertainties,  current and prospective  investors
are cautioned not to place undue  reliance on such  forward-looking  statements.
The Operating Partnership disclaims any obligation to update any such factors or
to publicly  announce the result of any revisions to any of the  forward-looking
statements contained herein to reflect future events or developments.

General Overview

The Operating  Partnership  continues to grow principally through  acquisitions,
new  development  and  expansions of factory  outlet  centers.  During 1997, the
Operating  Partnership  acquired three centers in resort areas totaling  302,554
square feet. Five Oaks Factory  Stores,  a factory outlet center in Sevierville,
Tennessee,  was  acquired in February  1997 at a purchase  price of $18 million.
Shoppes on the Parkway, a factory outlet center in Blowing Rock, North Carolina,
and  Soundings  Factory  Stores,  a factory  outlet  center in Nags Head,  North
Carolina,  were acquired in September  1997 for an aggregate  purchase  price of
$19.5 million.

In addition, the Operating Partnership has completed,  or has under construction
to be completed by the end of the first  quarter of 1998,  the expansion of five
existing  centers  totaling  538,979  square feet.  During 1996,  the  Operating
Partnership  completed six expansions totaling 181,142 square feet. A summary of
the 1997 acquired centers and expansions is recapped below:


                                       20
<PAGE>


           1997 Development                Aggregate          Open at
           ----------------                   Size            12/31/97
                                            (sq. ft.)         (sq. ft.)
                                           ----------         ---------
           Acquisitions
              Sevierville, TN               122,684           122,684
              Blowing Rock, NC               97,408            97,408
              Nags Head, NC                  82,462            82,462
                                            -------           -------
                                            302,554           302,554
                                            -------           -------
           Expansions
              Riverhead, NY                 345,164           284,745
              Commerce, GA                   94,247            58,455
              Sevierville, TN                50,357            25,060
              Lancaster, PA                  26,111            23,434
              San Marcos, TX                 23,100            11,000
                                            -------           -------
                                            538,979           402,694
                                            -------           -------
                                            841,533           705,248
                                            =======           =======

A summary of the operating  results for the years ended December 31, 1997,  1996
and 1995 is presented in the following table, expressed in amounts calculated on
a weighted average GLA basis.


                                                     Year Ended December 31,
                                               ---------------------------------
                                                  1997        1996        1995
                                               ---------------------------------

GLA open at end of period (000's)                  4,458       3,739       3,507
Weighted average GLA (000's) (1)                   4,046       3,642       3,292
Outlet centers in operation                           30          27          27
New centers opened                                    --          --           2
New centers acquired                                   3          --          --
Centers expanded                                       5           6           4
States operated in at end of period                   23          22          22

  Per square foot
Revenues
  Base rentals                                 $   14.04   $   13.89   $   13.92
  Percentage rentals                                 .65         .55         .63
  Expense reimbursements                            6.10        6.04        6.05
  Other income                                       .29         .25         .24
                                               ---------------------------------
    Total revenues                                 21.08       20.73       20.84
                                               ---------------------------------
Expenses
  Property operating                                6.49        6.47        6.83
  General and administrative                        1.52        1.50        1.54
  Interest                                          4.16        3.84        3.44
  Depreciation and amortization                     4.56        4.52        4.37
                                               ---------------------------------
    Total expenses                                 16.73       16.33       16.18
                                               ---------------------------------
Income before gain on sale of land and
  extraordinary item                           $    4.35   $    4.40   $    4.66
                                               =================================
(1) GLA weighted by months of operations.


                                       21
<PAGE>


Results of Operations

1997 Compared to 1996

Base rentals  increased $6.2 million,  or 12%, in 1997 when compared to the same
period in 1996  primarily  as a result of the 11%  increase in weighted  average
GLA. Base rent increased  approximately $1.5 million due to the effect of a full
year's operation of expansions  completed in 1996 and approximately $4.8 million
for new or acquired leases added during 1997.

Percentage rentals increased $620,000, or $.10 per square foot, in 1997 compared
to 1996. The increase is primarily  attributable to leases acquired during 1997,
leases added in 1996  completing  their first full year of operation in 1997 and
due to increases in tenant sales.  Same store sales,  defined as weighed average
sales per square  foot  reported  for tenant  stores  open all of 1997 and 1996,
increased approximately 2.3% to $241 per square foot.

Expense reimbursements, which represent the contractual recovery from tenants of
certain  common area  maintenance,  insurance,  property  tax,  promotional  and
advertising and management expenses generally  fluctuates  consistently with the
reimbursable   property  operating   expenses  to  which  it  relates.   Expense
reimbursements,  expressed  as a  percentage  of  property  operating  expenses,
increased from 93% in the 1996 period to 94% in the 1997 period due primarily to
a reduction in nonreimbursable property operating expenses.

Property  operating  expenses  increased  by $2.7  million,  or 11%,  in 1997 as
compared to the 1996 period. On a weighted average GLA basis, property operating
expenses  increased  to  $6.49  from  $6.47  per  square  foot.  Slightly  lower
promotional,  real estate taxes, and insurance expenses per square foot incurred
in the 1997 period compared to the 1996 period were offset by higher common area
maintenance  expenses  per  square  foot  due  to  additional  customer  service
amenities,  such as trolleys,  customer  service  counters and security and as a
result of expanding the  Riverhead  Center which has a cost per foot higher than
the portfolio average.

General and  administrative  expenses  increased $678,000 in 1997 as compared to
1996. As a percentage of revenues,  general and administrative expenses remained
level at 7.2% in each  year.  On a  weighted  average  GLA  basis,  general  and
administrative expenses increased $.02 to $1.52 in 1997.

Interest  expense  increased  $2.8 million during the 1997 period as compared to
the 1996 period due to higher average borrowings  outstanding during the period.
Average   borrowings   increased   principally  to  finance  the  first  quarter
acquisition of Five Oaks Factory Stores (see "Overview" above) and expansions to
existing centers until the Operating  Partnership received the proceeds from the
Company's  equity offering in October 1997.  Depreciation  and  amortization per
weighted  average GLA  increased  from $4.52 per square foot to $4.56 per square
foot.  The  increase  reflects the effect of  accelerating  the  recognition  of
depreciation  expense on certain tenant finishing  allowances  related to vacant
space.

The  extraordinary  item  in the  1996  period  represents  a  write-off  of the
unamortized  deferred  financing costs related to the lines of credit which were
extinguished  using the proceeds  from the Operating  Partnership's  $75 million
senior unsecured notes issued in March 1996.

1996 Compared to 1995

Base rentals  increased  $4.8 million,  or 10%, for the year ended  December 31,
1996 when  compared  to the same period in 1995  primarily  as a result of a 11%
increase  in  weighted  average  GLA.  Base  rentals  per  weighted  average GLA
decreased  less than 1% from  $13.92 per square  foot to $13.89 per square  foot
reflecting a slightly lower average occupancy rate during 1996 compared to 1995.
The  increase in base rents in 1996  consists of $1.1  million  associated  with
leases added during 1996 and $3.7 million related to the effect of a full year's
operation of centers opened in 1995.

Percentage  rentals  decreased  $51,000,  or 2%,  in 1996  compared  to 1995 and
percentage  rentals per weighted  average GLA declined  $.08 per square foot, or
13%, as a result of the  dilutive  effect of the increase in  additional  square
footage  associated  with the expansions  since tenant sales at centers in their
first year of operation often do not reach the level on which percentage rentals
are required  (the  "breakpoint").  The decrease is also a result of  escalating
breakpoints in certain leases renewing at existing  centers  without  comparable
increases in sales.  Tenant sales per square foot for centers  which were opened
all of 1996 and 1995 increased 2% to approximately $226 per square foot.



                                       22
<PAGE>


Expense reimbursements, which represent the contractual recovery from tenants of
certain  common area  maintenance,  operating,  property  tax,  promotional  and
management expenses,  increased $2.1 million during 1996 as compared to the same
period in 1995 due principally to the related increase in reimbursable operating
and  maintenance   expenses   associated   with  the  growth  in  GLA.   Expense
reimbursements expressed as a percent of property operating expenses were 93% in
the 1996 period  compared  to 89% in the 1995 period due to certain  contractual
increases and reductions in nonrecoverable operating and maintenance expenses.

Property  operating  expenses  increased  by  $1.1  million,  or 5%,  in 1996 as
compared to 1995. On a weighted average GLA basis,  property  operating expenses
decreased from $6.83 per square foot to $6.47 per square foot primarily due to a
reduction  in  advertising  and  promotion  expenses  reflecting  the  Operating
Partnership's  use of cost  efficient  means in  advertising  and  promoting its
centers.  The decrease was partially offset by increases in real estate taxes as
a result of reassessments  of recently  completed  properties,  particularly the
property in Riverhead, NY.

General and administrative expenses decreased 3% on a weighted average GLA basis
to $1.50 for the year ended  1996.  General  and  administrative  expenses  as a
percent of revenues decreased 3% to 7.2% in 1996 compared to 7.4% in 1995.

Aggregate  interest expense increased $2.7 million and $.40 per weighted average
GLA during  1996  period as  compared  to 1995.  The  increase  is due to higher
average  borrowings  outstanding during the period associated with the growth in
GLA and due to a higher average  interest rate under the senior  unsecured notes
issued  in  March  1996  when  compared  with the  short  term  lines of  credit
previously  utilized.  Depreciation  and  amortization  per weighted average GLA
increased 3% from $4.37 per square foot to $4.52 per square foot  primarily  due
to  increases  in  tenant   finishing   allowances   included  in  building  and
improvements  which are  depreciated  over  shorter  lives  and the  accelerated
depreciation  of certain  tenant  finishing  allowances  related to tenants  who
vacated or terminated their lease prior to the expiration of the lease term.

The extraordinary item represents the write off of previously deferred financing
costs of  $831,000  in  connection  with the early  retirement  of debt with the
proceeds from the senior unsecured notes issued in March 1996.

Liquidity and Capital Resources

Net cash provided by operating  activities was $39.2,  $38.0,  and $32.5 million
for the  years  ended  December  31,  1997,  1996 and  1995,  respectively.  The
increases for all three years were  primarily due to the  incremental  operating
income associated with acquired or developed centers. Net cash used in investing
activities  amounted to $93.6,  $36.4,  and $44.8 million during 1997,  1996 and
1995,  respectively,  and reflects  the levels of  development  and  acquisition
activity over the past three years (841,533 square feet developed or acquired in
1997,  181,142 square feet in 1996,  392,312 square feet in 1995). Cash provided
by (used in) financing  activities  of $55.4,  $(4.2) and $13.8 million in 1997,
1996 and 1995,  respectively,  and has fluctuated  consistently with the capital
needed to fund the current  development and acquisition  activity.  In 1997, the
significant  increase was due to the proceeds received from the Company's equity
offering ($29 million) and additional debt to fund acquisitions and expansions.

Management  believes,  based upon its  discussions  with present and prospective
tenants,  that many tenants,  including  prospective  tenants new to the factory
outlet  business,  desire to open a number of new factory  outlet  stores in the
next several  years,  particularly  where there are  successful  factory  outlet
centers in which such tenants do not have a significant  presence or where there
are few factory outlet centers.  During 1997, the Operating Partnership acquired
three  centers  totaling  302,554  square  feet  and  completed,  or  has  under
construction  to be  completed  by the end of the  first  quarter  of 1998,  the
expansion of five existing  centers  totaling 538,879 square feet. (See "General
Overview"). Commitments for construction of these projects (which represent only
those  costs  contractually  required to be paid by the  Operating  Partnership)
amounted to $862,000 at December 31, 1997.

The  Operating  Partnership  also is in the  process  of  developing  plans  for
additional  expansions  and new  centers  for  completion  in 1998  and  beyond.
Currently,  the Operating  Partnership  is in the  preleasing  stages for future
centers at two potential  sites located in Concord,  North Carolina  (Charlotte)
and Romulus,  Michigan  (Detroit)  and for further  expansions  of four existing
Centers.  However,  there can be no assurance  that any of these  anticipated or
planned developments or expansions will be started or completed as scheduled, or
that  any   development  or  expansion  will  result  in  accretive  funds  from
operations.   In  addition,   the  Operating   Partnership  regularly  evaluates
acquisition   proposals,   engages  from  time  to  time  in  negotiations   for
acquisitions  and may from time to time  enter  into  letters  of intent for the
purchase of  properties.  No assurance can be given that any of the  prospective
acquisitions that are being evaluated or which are subject to a letter of intent
will be  consummated,  or if  consummated,  will result in accretive  funds from
operations.


                                       23
<PAGE>


Management intends to continually have access to the capital resources necessary
to  expand  and  develop  its  business  and,  accordingly,  may seek to  obtain
additional  funds through equity  offerings or debt financing.  During September
and October 1997, the Company  completed a public  offering of 1,080,000  Common
Shares at a price of $29.0625  per share,  and  contributed  the net proceeds of
approximately  $29.2  million  to the  Operating  Partnership  in  exchange  for
1,080,000  partnership Units. The net proceeds were used to acquire,  expand and
develop factory outlet centers and for general  corporate  purposes.  On October
24, the Operating  Partnership  issued $75 million of 7.875%  senior,  unsecured
notes,  maturing  October  24,  2004.  The  net  proceeds  were  used  to  repay
substantially all amounts outstanding under the Operating Partnership's existing
lines of credit. On November 3, 1997, the Company and the Operating  Partnership
filed  a new  registration  statement  with  the  SEC to  provide,  under  shelf
registration  statements,  for the issuance of up to $100 million in  additional
equity securities and $100 million in additional debt securities.

In anticipation of the offering of the senior,  unsecured  notes,  the Operating
Partnership  entered into an interest  rate  protection  agreement on October 3,
1997,  which  fixed the index on the 10 year US  Treasury  rate at 5.995% for 30
days on a notional amount of $70 million. The transaction settled on October 21,
1997,  the  trade  date of the $75  million  offering,  and,  as a result  of an
increase in the US Treasury rate, the Operating Partnership received $714,000 in
proceeds. Such amount is being amortized as a reduction to interest expense over
the life of the notes and will result in an overall  effective  interest rate on
the notes of 7.75%.

At December 31, 1997, the Operating  Partnership  had revolving  lines of credit
with a  borrowing  capacity  of up to $125  million,  of which $120  million was
available for  additional  borrowings.  Based on the $5 million in variable rate
debt  outstanding  at  December  31,  1997,  the  Operating  Partnership  had an
insignificant  amount of exposure to interest rate risk at year end. Also,  with
additional unsecured  borrowings during the year, the Operating  Partnership had
effectively  unencumbered  approximately  64% of its real  estate  assets  as of
December 31, 1997. In February  1998, the Operating  Partnership  amended two of
its revolving lines to increase amounts  available by $20 million,  bringing the
total  borrowing  capacity  under the lines to $145  million.  Based on existing
credit facilities,  ongoing negotiations with certain financial institutions and
funds available under the shelf  registration  statements,  management  believes
that the Operating Partnership has access to the necessary financing to fund the
planned capital expenditures during 1998.

The Operating  Partnership  anticipates  that adequate cash will be available to
fund  its  operating   and   administrative   expenses,   regular  debt  service
obligations,   and  the  payment  of   distributions  in  accordance  with  REIT
requirements in both the short and long term. Although the Operating Partnership
receives most of its rental payments on a monthly basis,  distributions are made
quarterly. Amounts accumulated for distribution are invested in short-term money
market or other  suitable  instruments.  Certain of the Operating  Partnership's
debt agreements limit the payment of distributions  such that distributions will
not exceed funds from operations  ("FFO"),  as defined in the agreements,  on an
annual basis or 95% of FFO on a cumulative basis from the date of the agreement.

New Accounting Pronouncements

In 1997, the Operating  Partnership adopted the Financial  Accounting  Standards
Board's,  SFAS No. 128, Earnings Per Share,  effective for fiscal periods ending
after December 15, 1997. The new standard simplifies the computation of earnings
per unit by replacing  primary  earnings per unit with basic  earnings per unit.
Basic earnings per unit does not include the effect of any potentially  dilutive
securities,  as under the  previous  accounting  standard,  and is  computed  by
dividing  reported  income  available  to general  unitholders  by the  weighted
average units outstanding during the period.  Fully diluted earnings per unit is
now  called  diluted  earnings  per  unit  and  reflects  the  dilution  of  all
potentially  dilutive  securities.  In  adopting  the  standard,  Companies  are
required to restate all prior  period  earnings  per unit data.  The adoption of
this  standard  by the  Operating  Partnership  had no impact on the  historical
reported earnings per unit amounts in 1996 and 1995 as the effect of potentially
dilutive securities were immaterial.

In June 1997,  the  Financial  Accounting  Standards  Board issued SFAS No. 131,
"Disclosures about Segments of an Enterprise and Related  Information." SFAS No.
131 requires  public  business  enterprises  to adopt its provisions for periods
beginning  after  December 15, 1997,  and to report  certain  information  about
operating  segments in complete sets of financial  statements of the  enterprise
and in condensed financial  statements of interim periods issued to unitholders.
The Operating  Partnership is evaluating the provisions of SFAS No. 131, but has
not yet determined if additional disclosures will be required.



                                       24
<PAGE>


Funds from Operations

Management  believes that to facilitate a clear  understanding of the historical
operating  results of the  Operating  Partnership,  FFO should be  considered in
conjunction with net income as presented in the unaudited  financial  statements
included  elsewhere  in this  report.  FFO is  presented  because it is a widely
accepted  financial  indicator used by certain investors and analysts to analyze
and compare one equity real estate investment trust ("REIT") with another on the
basis of operating  performance.  FFO is generally defined as net income (loss),
computed in accordance with generally  accepted  accounting  principles,  before
extraordinary items and gains (losses) on sale of properties,  plus depreciation
and amortization  uniquely significant to real estate. The Operating Partnership
cautions that the  calculation of FFO may vary from entity to entity and as such
the  presentation  of FFO by the Operating  Partnership may not be comparable to
other  similarly  titled  measures of other  reporting  companies.  FFO does not
represent  net  income or cash flow from  operations  as  defined  by  generally
accepted  accounting  principles  and should not be considered an alternative to
net income as an indication of operating  performance or to cash from operations
as a measure  of  liquidity.  FFO is not  necessarily  indicative  of cash flows
available to fund distributions to unitholders and other cash needs.

Below is a calculation of funds from operations for the years ended December 31,
1997,  1996 and  1995 as well as  actual  cash  flow and  other  data for  those
respective years:

<TABLE>
<CAPTION>
                                                                     1997            1996            1995
                                                                  ----------------------------------------
                                                                               (In thousands)
<S>                                                               <C>             <C>             <C>                           
Funds from Operations:
  Income before gain on sale of land and extraordinary item       $ 17,583        $ 16,018        $ 15,352                      
  Adjusted for depreciation and amortization uniquely                                           
      significant to real estate                                    18,257          16,295          14,245
                                                                  ----------------------------------------
  Funds from operations                                           $ 35,840        $ 32,313        $ 29,597
                                                                  ========================================
Cash flows provided by (used in):                                                               
     Operating activities                                         $ 39,232        $ 38,031        $ 32,455
     Investing activities                                         $(93,636)       $(36,401)       $(44,788)
     Financing activities                                         $ 55,444        $ (4,176)       $ 13,802
Weighted average units outstanding (1)                              11,000          10,601          10,596
                                                                  ----------------------------------------
</TABLE>
----------
(1) Assumes the  preferred  partnership  units and unit options are converted to
general partnership Units.

Economic Conditions and Outlook

Substantially  all of the  Operating  Partnership's  leases  contain  provisions
designed to mitigate the impact of inflation.  Such  provisions  include clauses
for the escalation of base rent and clauses  enabling the Operating  Partnership
to receive percentage rentals based on tenants' gross sales (above predetermined
levels,   which  the  Operating   Partnership  believes  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.

Approximately  306,000  square feet of space is up for  renewal  during 1998 and
approximately 695,000 square feet will come up for renewal in 1999. In addition,
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. Also,  management may
grant,  from time to time, a tenant's request for reduction in rent to remain in
operation.  There can be no assurance  that any tenant whose lease  expires will
renew such lease or that  renewals  or  terminated  leases  will be  released on
economically favorable terms.

The Operating Partnership's portfolio is currently 96% leased. Existing tenants'
sales have  remained  stable and  renewals by  existing  tenants  have  remained
strong.  In addition,  the  Operating  Partnership  has continued to attract and
retain additional tenants.  The Operating  Partnership's  factory outlet centers
typically include well known, national,  brand name companies.  By maintaining a
broad  base  of  credit  tenants  and  a  geographically  diverse  portfolio  of
properties located across the United States, the Operating  Partnership  reduces
its operating and leasing risks. No one tenant (including  affiliates)  accounts
for more than 10% of the Operating  Partnership's  combined base and  percentage
rental revenues.


                                       25
<PAGE>


Accordingly, management currently does not expect any material adverse impact on
the Operating  Partnership's  results of operation and financial  condition as a
result of leases to be renewed or stores to be released.

The Operating  Partnership has evaluated its computer  systems and  applications
for potential  software  failures as a result of  recognizing  the year 2000 and
beyond.  Most of the systems are  compliant  with the year 2000, or will be with
normal upgrades currently available to the Operating Partnership. Therefore, the
Operating  Partnership  believes  the costs to bring the  remaining  systems and
applications in compliance will be insignificant.

Contingencies

There are no recorded amounts resulting from environmental  liabilities as there
are no known material loss contingencies with respect thereto. Future claims for
environmental liabilities are not measurable given the uncertainties surrounding
whether  there  exists a basis for any such  claims to be  asserted  and, if so,
whether any claims  will,  in fact,  be asserted.  Furthermore,  no condition is
known to exist that would give rise to a material  environmental  liability  for
site restoration,  post-closure and monitoring commitments,  or other costs that
may be incurred upon the sale or disposal of a property. Management has no plans
to abandon  any of the  properties  and is unaware  of any other  material  loss
contingencies.

Item 8. Financial Statements and Supplementary Data

The  information  required by this Item is set forth at the pages  indicated  in
Item 14(a) below.

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

Not applicable.

                                    PART III

Certain information required by Part III is omitted from this Report in that the
registrant's  sole general  partner,  Tanger Factory Outlet Centers,  Inc., will
file a  definitive  proxy  statement  pursuant  to  Regulation  14A (the  "Proxy
Statement")  not later than 120 days after the end of the fiscal year covered by
this Report, and certain information  included therein is incorporated herein by
reference. Only those sections of the Proxy Statement which specifically address
the items set forth herein are incorporated by reference.

Item 10. Directors and Executive Officers of the Registrant

The  Operating  Partnership  does  not  have  any  directors  or  officers.  The
information  concerning  the directors of the general  partner  required by this
Item is  incorporated  by  reference to the Proxy  Statement  of Tanger  Factory
Outlet Centers, Inc.

The  information  concerning  the  executive  officers  of the  general  partner
required by this Item is incorporated by reference herein to the section in Part
I, Item 4, entitled "Executive Officers of the General Partner".

The  information  regarding  compliance  with Section 16 of the  Securities  and
Exchange Act of 1934 is to be set forth in the Proxy Statement of Tanger Factory
Outlet Centers, Inc. and is hereby incorporated by reference.

Item 11. Executive Compensation

The information  required by this Item is incorporated by reference to the Proxy
Statement of Tanger Factory Outlet Centers, Inc.

Item 12. Security Ownership of Certain Beneficial Owners and Management

The information  required by this Item is incorporated by reference to the Proxy
Statement of Tanger Factory Outlet Centers, Inc.

Item 13. Certain Relationships and Related Transactions

The information  required by this Item is incorporated by reference to the Proxy
Statement of Tanger Factory Outlet Centers, Inc.


                                       26
<PAGE>


                                     PART IV

Item 14.  Exhibits, Financial Statements Schedules, and Reports on Form 8-K

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

     1.   Financial Statements

          Report of Independent Accountants                         F-1
          Balance Sheets-December 31, 1997 and 1996                 F-2
          Statements of Operations-
             Years Ended December 31, 1997, 1996 and 1995           F-3
          Statements of Partners' Equity-
             For the Years Ended December 31, 1997, 1996 and 1995   F-4
          Statements of Cash Flows-
             Years Ended December 31, 1997, 1996 and 1995           F-5
          Notes to Financial Statements                             F-6 to F-13

     2.   Financial Statement Schedule

          Schedule III
             Report of Independent Accountants                      F-14
             Real Estate and Accumulated Depreciation               F-15 to F-17
         
          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  the
          Operating Partnership. (Note 1)

10.1      Unit Option Plan of the Company. (Note 2)

10.1A     First Amendment to the Unit Option Plan. (Note 1)

10.1B     Second Amendment to the Unit Option Plan. (Note 6)

10.1C     Third Amendment to the Unit Option Plan. (Note 10)

10.1D     Fourth Amendment to the Unit Option Plan. (Note 12)

10.4      Form of Unit Option  Agreement  between the Operating  Partnership and
          certain employees. (Note 3)

10.5      Amended and Restated Employment Agreement for Stanley K. Tanger. (Note
          10)

10.6      Amended and Restated Employment  Agreement for Steven B. Tanger. (Note
          10)

10.7      Amended and Restated  Employment  Agreement for Willard Chafin.  (Note
          10)

10.8      Amended and Restated Employment Agreement for Rochelle Simpson.  (Note
          10)

10.9      Employment Agreement for Joseph H. Nehmen. (Note 10)

10.10     Registration  Rights  Agreement  among the Company,  the Tanger Family
          Limited Partnership and Stanley K. Tanger. (Note 2)


                                       27
<PAGE>


10.10A    Amendment to  Registration  Rights  Agreement  among the Company,  the
          Tanger Family Limited Partnership and Stanley K. Tanger. (Note 6)

10.11     Agreement Pursuant to Item  601(b)(4)(iii)(A) of Regulation S-K. (Note
          2)

10.12     Assignment and Assumption  Agreement among Stanley K. Tanger,  Stanley
          K.  Tanger &  Company,  the Tanger  Family  Limited  Partnership,  the
          Operating Partnership and the Company. (Note 2)

10.13     Promissory  Notes by and between the  Operating  Partnership  and John
          Hancock Mutual Life Insurance Company aggregating  $50,000,000,  dated
          as of December 13, 1994. (Note 4)

10.14     Promissory  Note and  Mortgage,  Assignment  of Leases and Rents,  and
          Security  Agreement by and between the Operating  Partnership  and New
          York Life Insurance Company, dated as of March 28, 1995. (Note 5)

10.15     Credit Agreement among Tanger Properties Limited  Partnership,  Tanger
          Factory Outlet Centers, Inc. and National Westminister Bank, Plc dated
          January 15, 1996. (Note 7)

10.15A    Amendment No. 1 to Credit  Agreement among Tanger  Properties  Limited
          Partnership,   Tanger  Factory  Outlet  Centers,   Inc.  and  National
          Westminister Bank, Plc dated February 20, 1996. (Note 9)

10.15B    Amendment No. 2 to Credit  Agreement among Tanger  Properties  Limited
          Partnership,   Tanger  Factory  Outlet  Centers,   Inc.  and  National
          Westminister Bank, Plc dated May 31, 1996. (Note 10)

10.16     Form of Senior Indenture. (Note 8)

10.17     Form of First Supplemental Indenture (to Senior Indenture). (Note 8)

10.17A    Form of Second  Supplemental  Indenture  (to Senior  Indenture)  dated
          October 24, 1997 among Tanger Propeties  Limited  Partnership,  Tanger
          Factory  Outlet  Centers,  Inc. and State Street Bank & Trust Company.
          (Note 11)

10.18     Loan Agreement dated as of October 14, 1996 between Tanger  Properties
          Limited Partnership and First National Bank of Commerce. (Note 10)

10.18A    First Amendment to Loan Agreement  between Tanger  Properties  Limited
          Partnership and First National Bank of Commerce dated as of August 13,
          1997. (Note 12)

10.19     Loan Agreement dated as of November 18, 1996 between Tanger Properties
          Limited   Partnership  and  Southtrust   Bank  of  Alabama,   National
          Association. (Note 10)

10.19A    First Amendment to Loan Agreement  between Tanger  Properties  Limited
          Partnership and Southtrust Bank of Alabama, National Association dated
          as of May 22, 1997. (Note 12)

10.20     Revolving  Credit  Agreement  dated as of December  18,  1997  between
          Tanger Properties  Limited  Partnership and Fleet National Bank. (Note
          12)

21.1      List of Subsidiaries. (Note 2)

23.1      Consent of Coopers & Lybrand L.L.P.



                                       28
<PAGE>


     Notes to Exhibits:

     1.   Incorporated by reference to the exhibits to the Tanger Factory Outlet
          Centers,  Inc.'s Registration  Statement on Form S-11 filed October 6,
          1993, as amended.
     2.   Incorporated by reference to the exhibits to the Tanger Factory Outlet
          Centers,  Inc.'s  Registration  Statement  on Form S-11  filed May 27,
          1993, as amended.
     3.   Incorporated by reference to the exhibits to the Tanger Factory Outlet
          Centers, Inc.'s Annual Report on Form 10-K for the year ended December
          31, 1993.
     4.   Incorporated by reference to the exhibits to the Tanger Factory Outlet
          Centers, Inc.'s Annual Report on Form 10-K for the year ended December
          31, 1994.
     5.   Incorporated by reference to the exhibits to the Tanger Factory Outlet
          Centers,  Inc.'s  Quarterly  Report of Form 10-Q for the period  ended
          March 31, 1995.
     6.   Incorporated by reference to the exhibits to the Tanger Factory Outlet
          Centers, Inc.'s Annual Report on Form 10-K for the year ended December
          31, 1995.
     7.   Incorporated   by  reference   to  the   exhibits  to  the   Operating
          Partnership's Current Report on Form 8-K dated January 23, 1996.
     8.   Incorporated   by  reference   to  the   exhibits  to  the   Operating
          Partnership's Current Report on Form 8-K dated March 6, 1996.
     9.   Incorporated by reference to the exhibits to the Tanger Factory Outlet
          Centers,  Inc.'s  Quarterly  Report of Form 10-Q for the period  ended
          March 31, 1996.
     10.  Incorporated by reference to the exhibits to the Tanger Factory Outlet
          Centers, Inc.'s Annual Report on Form 10-K for the year ended December
          31, 1996.
     11.  Incorporated   by  reference   to  the   exhibits  to  the   Operating
          Partnership's Current Report on Form 8-K dated October 24, 1997.
     12.  Incorporated by reference to the exhibits to the Tanger Factory Outlet
          Centers, Inc.'s Annual Report on Form 10-K for the year ended December
          31, 1997.

(b)  Reports on Form 8-K - The Operating Partnership filed the following reports
     on Form 8-K during the quarter ended December 31, 1997:

     The  Operating  Partnership  filed  a  Current  Report  on Form  8-K  dated
     September  12,  1997 to file  the  Consent  of  Coopers  &  Lybrand  L.L.P,
     independent  public  accountants,  as an exhibit to a  prospectus  filed in
     September 1997.

     The  Operating  Partnership  filed  a  Current  Report  on Form  8-K  dated
     September 24, 1997 to file a supplemental  indenture  agreement  related to
     the issuance of $75 million in 7.875% senior unsecured notes.

     The  Operating  Partnership  filed  a  Current  Report  on Form  8-K  dated
     September  30, 1997 to file  financial  statements  and  related  schedules
     related to the  acquisition of Five Oaks Factory  Stores,  a factory outlet
     center in Sevierville,  Tennessee; Shoppes on the Parkway, a factory outlet
     center in Blowing Rock,  North Carolina;  and Soundings  Factory Stores,  a
     factory outlet center in Nags Head, North Carolina.


                                       29
<PAGE>


                                   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 Factory Outlet Centers, Inc., 
                                           its general partner

                                       By:  /s/ Stanley K. Tanger
                                            ----------------------------- 
                                            Stanley K. Tanger
                                            Chairman of the Board and
                                            Chief Executive Officer

March 11, 1998

     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 as officers or directors of the general partner
and on the dates indicated:

        Signature                           Title                     Date

/s/ Stanley K. Tanger              Chairman of the Board and      March 11, 1998
-----------------------------      Chief Executive Officer       
Stanley K. Tanger                  (Principal Executive Officer) 
                                                                 
                                       
/s/ Steven B. Tanger               Director, President and        March 11, 1998
-----------------------------      Chief Operating Officer       
Steven B. Tanger                                                 
                                       
/s/ Frank C. Marchisello, Jr.      Vice President and             March 11, 1998
-----------------------------      Chief Financial Officer       
Frank C. Marchisello, Jr.          (Principal Financial and      
                                    Accounting Officer)                      
                                                         
                                                                 
/s/ Jack Africk                    Director                       March 11, 1998
-----------------------------                            
Jack Africk                                                      
                                                                 
/s/ William G. Benton              Director                       March 11, 1998
-----------------------------      
William G. Benton

/s/ Thomas E. Robinson             Director                       March 11, 1998
-----------------------------
Thomas E. Robinson
                                                      

                                       30
<PAGE>


                        REPORT OF INDEPENDENT ACCOUNTANTS


To the Partners of
 TANGER PROPERTIES LIMITED PARTNERSHIP:


We have audited the  accompanying  balance sheets of Tanger  Properties  Limited
Partnership  as of December  31, 1997 and 1996,  and the related  statements  of
operations,  partners'  equity and cash flows for each of the three years in the
period  ended   December  31,  1997.   These   financial   statements   are  the
responsibility of the Partnership's management. Our responsibility is to express
an opinion on these financial statements based on our audits.

We  conducted  our  audits  in  accordance  with  generally   accepted  auditing
standards.  Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement.  An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements.  An audit also includes
assessing the  accounting  principles  used and  significant  estimates  made by
management,  as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion,  the financial  statements  referred to above present fairly, in
all material  respects,  the  financial  position of Tanger  Properties  Limited
Partnership  as of  December  31,  1997  and  1996,  and the  results  of  their
operations  and their cash flows for each of the three years in the period ended
December 31, 1997 in conformity with generally accepted accounting principles.



                                             COOPERS & LYBRAND L.L.P.


Greensboro, NC
January 19, 1998


                                       F-1

<PAGE>



                      TANGER PROPERTIES LIMITED PARTNERSHIP
                                 BALANCE SHEETS
                                 (In thousands)


                                                               December 31,
                                                            1997         1996
                                                         ----------------------
ASSETS
   Rental property
        Land                                             $  48,059    $  43,339
        Buildings, improvements and fixtures               379,842      299,534
        Developments under construction                     26,807       15,488
                                                         ----------------------
                                                           454,708      358,361
        Accumulated depreciation                           (64,177)     (46,907)
                                                         ----------------------
        Rental property, net                               390,531      311,454
   Cash and cash equivalents                                 3,607        2,567
   Deferred charges, net                                     8,651        7,846
   Other assets                                             12,789       10,087
                                                         ----------------------
        Total assets                                     $ 415,578    $ 331,954
                                                         ======================

LIABILITIES AND PARTNERS' EQUITY
Liabilities
   Long-term debt
        Senior, unsecured notes                          $ 150,000    $  75,000
        Mortgages payable                                   74,050       75,204
        Lines of credit                                      5,000       27,800
                                                         ----------------------
                                                           229,050      178,004
   Construction trade payables                              12,913        8,320
   Accounts payable and accrued expenses                    13,090        9,374
                                                         ----------------------
        Total liabilities                                  255,053      195,698
                                                         ----------------------
Commitments
Partners' equity
   General partner                                         136,649      110,657
   Limited partner                                          23,876       25,599
                                                         ----------------------
        Total partners' equity                             160,525      136,256
                                                         ----------------------
             Total liabilities and partners' equity      $ 415,578    $ 331,954
                                                         ======================

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


                                       F-2

<PAGE>


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

<TABLE>
<CAPTION>
                                                                 Year Ended December 31,
                                                              1997        1996         1995
                                                            --------------------------------
<S>                                                         <C>         <C>         <C>     
 REVENUES
   Base rentals                                             $ 56,807    $ 50,596    $ 45,818
   Percentage rentals                                          2,637       2,017       2,068
   Expense reimbursements                                     24,665      21,991      19,913
   Other income                                                1,162         896         805
                                                            --------------------------------
        Total revenues                                        85,271      75,500      68,604
                                                            --------------------------------
EXPENSES
   Property operating                                         26,269      23,559      22,467
   General and administrative                                  6,145       5,467       5,079
   Interest                                                   16,835      13,998      11,337
   Depreciation and amortization                              18,439      16,458      14,369
                                                            --------------------------------
        Total expenses                                        67,688      59,482      53,252
                                                            --------------------------------
Income before gain on sale of land and extraordinary item     17,583      16,018      15,352
Gain on sale of land                                              --         159          --
                                                            --------------------------------
Income before extraordinary item                              17,583      16,177      15,352
Extraordinary item - Loss on early extinguishment of debt         --        (831)         --
                                                            --------------------------------
Net income                                                    17,583      15,346      15,352
Income allocated to limited partner                           (4,756)     (4,155)     (4,134)
                                                            --------------------------------
Income allocated to general partner                         $ 12,827    $ 11,191    $ 11,218
                                                            ================================

Basic earnings per unit:
    Income before extraordinary item                        $   1.57    $   1.46    $   1.36
    Extraordinary item                                            --        (.09)         --
                                                            -------------------------------
    Net income                                              $   1.57    $   1.37    $   1.36
                                                            ================================
Diluted earnings per unit:
    Income before extraordinary item                        $   1.55    $   1.46    $   1.36
    Extraordinary item                                            --        (.09)         --
                                                            --------------------------------
    Net income                                              $   1.55    $   1.37    $   1.36
                                                            ================================
</TABLE>

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


                                       F-3

<PAGE>


                      TANGER PROPERTIES LIMITED PARTNERSHIP
                         STATEMENTS OF PARTNERS' EQUITY
              For the Years Ended December 31, 1997, 1996, and 1995
                        (In thousands, except unit data)

<TABLE>
<CAPTION>
                                                                                          Total
                                                              General      Limited      Partners'
                                                              Partner      Partner       Equity 
                                                             ------------------------------------
<S>                                                          <C>          <C>          <C>      
Balance, December 31, 1994                                   $ 118,177    $  29,285    $ 147,462

Conversion of 87,960 preferred Units into 792,506
   partnership Units                                                --           --           --

Issuance of 600 Units upon exercise of unit options                 14           --           14

Compensation under Unit Option Plan                                224          110          334

Net income                                                      11,218        4,134       15,352

Preferred distributions ($17.66 per unit)                       (2,944)          --       (2,944)

Distributions to partners ($1.96 per unit)                     (11,876)      (5,945)     (17,821)
                                                             ------------------------------------
Balance, December 31, 1995                                     114,813       27,584      142,397

Conversion of 35,065 preferred Units into 315,929
   partnership Units                                                --           --           --

Compensation under Unit Option Plan                                229          109          338

Net income                                                      11,191        4,155       15,346

Preferred distributions ($18.56 per unit)                       (2,416)          --       (2,416)

Distributions to partners ($2.06 per unit)                     (13,160)      (6,249)     (19,409)
                                                             ------------------------------------
Balance, December 31, 1996                                     110,657       25,599      136,256

Conversion of 15,730 preferred Units into 141,726
   partnership Units                                                --           --           --

Issuance of 29,700 Units upon exercise of unit options             703           --          703

Issuance of 1,080,000 Units to general partner in exchange
   for the proceeds from an offering of common shares           29,241           --       29,241

Compensation under Unit Option Plan                                234          104          338

Net income                                                      12,827        4,756       17,583

Preferred distributions ($19.55 per unit)                       (1,789)          --       (1,789)

Distributions to partners ($2.17 per unit)                     (15,224)      (6,583)     (21,807)
                                                             ------------------------------------
Balance, December 31, 1997                                   $ 136,649    $  23,876    $ 160,525
                                                             ====================================
</TABLE>

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

                                       F-4

<PAGE>


                      TANGER PROPERTIES LIMITED PARTNERSHIP
                            STATEMENTS OF CASH FLOWS
                                 (In thousands)

<TABLE>
<CAPTION>
                                                                          Year Ended December 31,
                                                                       1997         1996         1995
                                                                    -----------------------------------
<S>                                                                 <C>          <C>          <C>      
OPERATING ACTIVITIES
   Net income                                                       $  17,583    $  15,346    $  15,352
   Adjustments to reconcile net income to net cash provided by
      operating activities:
      Depreciation and amortization                                    18,439       16,458       14,369
      Amortization of deferred financing costs                          1,094          953          955
      Loss on early extinguishment of debt                                 --          831           --
      Gain on sale of land                                                 --         (159)          --
      Straight-line base rent adjustment                                 (347)      (1,192)      (1,316)
      Compensation under Unit Option Plan                                 338          338          334
      Increase (decrease) due to changes in:
         Other assets                                                  (1,591)         578        2,487
         Accounts payable and accrued expenses                          3,716        4,878          274
                                                                    -----------------------------------
              Net cash provided by operating activities                39,232       38,031       32,455
                                                                    -----------------------------------
INVESTING ACTIVITIES
   Additions to rental properties                                     (92,295)     (35,408)     (43,758)
   Additions to deferred lease costs                                   (1,341)      (1,167)      (1,030)
   Proceeds from sale of land                                              --          174           --
                                                                    -----------------------------------
              Net cash used in investing activities                   (93,636)     (36,401)     (44,788)
                                                                    -----------------------------------
FINANCING ACTIVITIES
   Contributions from general partner                                  29,241           --           --
   Cash distributions paid                                            (23,596)     (21,825)     (20,765)
   Proceeds from notes payable                                         75,000       75,000       16,250
   Repayments on notes payable                                         (1,154)      (1,019)        (949)
   Proceeds from revolving lines of credit                            118,450       70,301      113,555
   Repayments on revolving lines of credit                           (141,250)    (123,027)     (93,430)
   Additions to deferred financing costs                               (1,950)      (3,606)        (873)
   Proceeds from exercise of unit options                                 703           --           14
                                                                    -----------------------------------
              Net cash provided by (used in) financing activities      55,444       (4,176)      13,802
                                                                    -----------------------------------
Net increase (decrease) in cash and cash equivalents                    1,040       (2,546)       1,469
Cash and cash equivalents, beginning of period                          2,567        5,113        3,644
                                                                    -----------------------------------
Cash and cash equivalents, end of period                            $   3,607    $   2,567    $   5,113
                                                                    ===================================
</TABLE>

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

                                       F-5

<PAGE>


                          NOTES TO FINANCIAL STATEMENTS
                        (In thousands, except unit data)


1.   Organization and Formation of the Operating Partnership

Tanger  Properties  Limited  Partnership (the "Operating  Partnership"),a  North
Carolina  limited  partnership,  develops,  owns  and  operates  factory  outlet
centers.  The Operating  Partnership  is a majority  owned  subsidiary of Tanger
Factory   Outlet   Centers,    Inc.,   (the   "Company")   a   fully-integrated,
self-administered,   self-managed   real  estate   investment   trust  ("REIT").
Recognized as one of the largest  owners and operators of factory outlet centers
in the United States,  the Operating  Partnership  owned and operated 30 factory
outlet  centers  located  in 23  states  with a  total  gross  leasable  area of
approximately  4.6  million  square  feet  at the  end of  1997.  The  Operating
Partnership  provides all development,  leasing and management  services for its
centers.

The Company is the sole general  partner of the  Operating  Partnership  and the
Tanger Family Limited Partnership ("TFLP") is the sole limited partner.  Stanley
K. Tanger, the Company's  Chairman of the Board and Chief Executive Officer,  is
the general partner of TFLP.

2.   Summary of Significant Accounting Policies

     Basis of presentation - Allocation of net income to the general and limited
partner is based each partner's  respective  ownership of Operating  Partnership
Units (the "Units") (See Note 6).

     Use of Estimates - The  preparation  of financial  statements in conformity
with  generally  accepted  accounting  principles  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.
The more significant  estimates include reserves for  uncollectible  receivables
and reserves for potentially unsuccessful pre-construction costs.

     Rental Properties - Rental properties are recorded at cost less accumulated
depreciation. Costs incurred for the acquisition,  construction, and development
of properties are  capitalized.  Depreciation  is computed on the  straight-line
basis over the estimated useful lives of the assets.  The Operating  Partnership
generally  uses estimated  lives ranging from 25 to 33 years for  buildings,  15
years for land  improvements  and seven years for  equipment.  Expenditures  for
ordinary  maintenance  and repairs are charged to operations  as incurred  while
significant renovations and improvements, including tenant finishing allowances,
that  improve  and/or  extend the useful life of the asset are  capitalized  and
depreciated over their estimated useful life.

     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 1997, 1996 and 1995 amounted to $1,877, $1,044, and $580, and
development   costs   capitalized   amounted  to  $1,637,   $1,321  and  $1,253,
respectively.  Depreciation  expense  for each of the years ended  December  31,
1997, 1996 and 1995 was $17,327, $15,449 and $13,451, respectively.

     The pre-construction stage of project development involves certain costs to
secure land control and zoning and complete other initial tasks essential to the
development  of the project.  These costs are  transferred  from other assets to
developments under construction when the  pre-construction  tasks are completed.
Costs of  potentially  unsuccessful  pre-construction  efforts  are  charged  to
operations.

     Cash and Cash Equivalents - All highly liquid  investments with an original
maturity of three  months or less at the date of purchase are  considered  to be
cash and cash  equivalents.  Cash  balances  at a  limited  number  of banks may
periodically exceed insurable amounts.  The Operating  Partnership believes that
it mitigates its risk by investing in or through major  financial  institutions.
Recoverability of investments is dependent upon the performance of the issuer.

     Deferred  Charges - Deferred lease costs consist of fees and costs incurred
to initiate  operating  leases and are amortized over the average  minimum lease
term.  Deferred  financing  costs  include  fees and  costs  incurred  to obtain
long-term  financing and are being  amortized  over the terms of the  respective
loans.  Unamortized deferred financing costs are charged to expense when debt is
retired before the maturity date.

                                       F-6

<PAGE>


                          NOTES TO FINANCIAL STATEMENTS
                        (In thousands, except unit data)


2.   Summary of Significant Accounting Policies (continued)

     Impairment of Long-Lived  Assets - The  Operating  Partnership  has adopted
Statement of Financial  Accounting  Standards No. 121, Accounting for Impairment
of Long-Lived  Assets and  Long-Lived  Assets to be Disposed of. This  statement
requires that long-lived  assets and certain  intangibles to be held and used by
an entity be 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, the Operating Partnership compares the estimated future undiscounted cash
flows  associated with the asset to the asset's  carrying  amount,  and if less,
recognizes an impairment  loss in an amount by which the carrying amount exceeds
its fair value. The Operating  Partnership  believes that no material impairment
existed at December 31, 1997.

     Derivatives - The Operating  Partnership  selectively  enters into interest
rate protection agreements to mitigate changes in interest rates on its variable
rate borrowings. The notional amounts of such agreements are used to measure the
interest to be paid or received and do not  represent  the amount of exposure to
loss. None of these agreements are used for speculative or trading purposes. The
cost of these agreements are included in deferred  financing costs and are being
amortized on a straight-line basis over the life of the agreements.

     Revenue Recognition - Minimum  rental  income  is recognized on a  straight
line  basis  over  the  term of the  lease.  Substantially  all  leases  contain
provisions  which  provide  additional  rents  based on  tenants'  sales  volume
("percentage  rentals") and  reimbursement  of the tenants' share of advertising
and promotion, common area maintenance,  insurance and real estate tax expenses.
Percentage  rentals are  recognized  when  earned.  Expense  reimbursements  are
recognized in the period the applicable expenses are incurred. Payments received
from the early termination of leases are recognized when the applicable space is
released, or, otherwise are amortized over the remaining lease term.

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

     Concentration  of  Credit  Risk - The  Operating  Partnership's  management
performs  ongoing  credit  evaluations  of their  tenants.  Although the tenants
operate  principally in the retail industry,  the properties are  geographically
diverse.  During 1995, one tenant  accounted for  approximately  10% of combined
base and percentage rental income. No single tenant accounted for 10% or more of
combined base and percentage rental income during 1997 and 1996.

     Supplemental  Cash Flow Information - The Operating  Partnership  purchases
capital  equipment and incurs costs relating to  construction of new facilities,
including tenant  finishing  allowances.  Expenditures  included in construction
trade  payables  as of December  31,  1997,  1996 and 1995  amounted to $12,913,
$8,320, and $11,305,  respectively.  Interest paid, net of interest capitalized,
in 1997, 1996 and 1995 was $12,337, 10,637, and $10,266, respectively.

     Reclassifications  - Certain prior year amounts have been  reclassified  to
conform with the current year presentation.

3.   Deferred Charges

Deferred charges as of December 31, 1997 and 1996 consist of the following:

                                                    1997               1996
                                                  -------------------------
     Deferred lease costs                         $7,658             $6,705
     Deferred financing costs                      6,607              4,657
                                                  -------------------------
                                                  14,265             11,362
     Accumulated amortization                      5,614              3,516
                                                  -------------------------
                                                  $8,651             $7,846
                                                  =========================


                                       F-7

<PAGE>


                          NOTES TO FINANCIAL STATEMENTS
                        (In thousands, except unit data)


Amortization of deferred lease costs for the years ended December 31, 1997, 1996
and 1995 was  $873,  $799  and  $731,  respectively.  Amortization  of  deferred
financing costs, included in interest expense in the accompanying  statements of
operations,  for the years ended  December 31,  1997,  1996 and 1995 was $1,094,
$953 and $955, respectively. During 1996, the Operating Partnership expensed the
remaining unamortized financing costs totaling $831 related to debt extinguished
with other  current year  borrowings.  Such amount is shown as an  extraordinary
item in the accompanying statements of operations.

4.   Long-term Debt

Long-term debt at December 31, 1997 and 1996 consists of the following:

                                                               1997        1996
                                                           --------------------
8.75% Senior, unsecured notes, maturing March 2001          $75,000     $75,000
7.875% Senior, unsecured notes, maturing October 2004        75,000         ---
Mortgage notes with fixed interest at:                                
     8.92%, maturing January 2002                            48,142      48,817
     8.625%, maturing September 2000                         10,121      10,412
     9.77%, maturing April 2005                              15,787      15,975
Revolving lines of credit with variable interest rates                
ranging from either prime less .25% to prime or from                  
LIBOR plus 1.50% to LIBOR plus 1.80%                          5,000      27,800
                                                           --------------------
                                                           $229,050    $178,004
                                                           ====================
                                                                   
The Operating  Partnership maintains revolving lines of credit which provide for
borrowing up to $125,000.  The  agreements  expire at various  times through the
year 2000.  Interest is payable based on alternative  interest rate bases at the
Operating  Partnership's  option.  Amounts  available under these  facilities at
December  31, 1997  totaled  $120,000.  Certain of the  Operating  Partnership's
properties, which had a net book value of approximately $141,221 at December 31,
1997, serve as collateral for the fixed rate mortgages and one revolving line of
credit.

The credit agreements require the maintenance of certain ratios,  including debt
service coverage and leverage,  and limit the payment of distributions such that
distributions  will  not  exceed  funds  from  operations,  as  defined  in  the
agreements,  on an annual basis or 95% of funds from  operations on a cumulative
basis. All three existing fixed rate mortgage notes are with insurance companies
and contain prepayment penalty clauses.

Maturities of the existing long-term debt are as follows:

                                       Amount              %
                                      --------            ---
          1998                        $  1,261              1
          1999                           1,379              1
          2000                          15,566              6
          2001                          76,184             33
          2002                          45,117             20
          Thereafter                    89,543             39
                                      -----------------------
                                      $229,050            100
                                      =======================

                                       F-8



<PAGE>


                          NOTES TO FINANCIAL STATEMENTS
                        (In thousands, except unit data)


5.   Derivatives and Fair Value of Financial Instruments

In October 1995,  the Operating  Partnership  entered into an interest rate swap
effective through October 1998 with a notional amount of $10,000 which fixed the
30 day LIBOR  index at 5.99%.  The impact of this  agreement,  together  with an
interest  rate swap  agreement  which  expired  during  1996,  reduced  mortgage
interest expense by $693 during 1995. The agreements had an insignificant effect
on interest expense during 1997 and 1996.

In anticipation of offering the senior,  unsecured notes due 2004, the Operating
Partnership  entered into an interest  rate  protection  agreement on October 3,
1997 which fixed the index on the 10 year US Treasury rate at 5.995% for 30 days
on a notional amount of $70,000.  The  transaction  settled on October 21, 1997,
the trade date of the $75,000  offering,  and, as a result of an increase in the
US Treasury  rate, the Operating  Partnership  received  proceeds of $714.  Such
amount is being  amortized as a reduction  to interest  expense over the life of
the notes and will result in an overall effective  interest rate on the notes of
7.75%.

The  carrying  amount of cash  equivalents  approximates  fair  value due to the
short-term  maturities  of  these  financial  instruments.  The  fair  value  of
long-term debt at December 31, 1997,  which is estimated as the present value of
future cash flows,  discounted at interest rates available at the reporting date
for new debt of similar type and remaining maturity, was approximately $232,152.
The  estimated  fair value of the interest  rate swap  agreement at December 31,
1997, as determined by the issuing financial institution, was an unrealized loss
of approximately $17.

6.   Partners' Equity

During 1997, the Company  completed an additional  public  offering of 1,080,000
Common  Shares at a price of  $29.0625  per share,  receiving  net  proceeds  of
approximately  $29.2 million.  The net proceeds,  which were  contributed to the
Operating  Partnership in exchange for 1,080,000 partnership units, were used to
acquire,  expand and develop  factory outlet  centers and for general  corporate
purposes.

Series A Cumulative  Convertible  Redeemable  Preferred  Shares (the  "Preferred
Shares") were sold by the general  partner to the public during 1993 in the form
of Depositary Shares, each representing 1/10 of a Preferred Share. Proceeds from
this offering,  net of underwriters  discount and estimated  offering  expenses,
were   contributed  to  the  Operating   Partnership  in  return  for  preferred
partnership  Units.   Preferred   partnership  Units  issued  by  the  Operating
Partnership have the same  characteristics,  with respect to liquidation rights,
distribution and conversion,  as the Preferred Shares. The Preferred Shares have
a liquidation  preference  equivalent to $25 per Depositary  Share and dividends
accumulate per  Depositary  Share equal to the greater of (i) $1.575 per year or
(ii) the  dividends  on the  Common  Shares or  portion  thereof,  into  which a
depositary share is convertible.  The Preferred Shares rank senior to the Common
Shares in respect of dividend and liquidation rights.

The  Preferred  Shares are  convertible  at the option of the holder at any time
into  Common  Shares  at a rate  equivalent  to  .901  Common  Shares  for  each
Depositary  Share.  Preferred  Units are  automatically  converted  into general
partnership  Units to the extent of any conversion of Series A Preferred  Shares
of the Company into Common Shares of the Company.  At December 31, 1997, 817,107
Common  Shares were  reserved  for the  conversion  of  Depositary  Shares.  The
Preferred Shares and the related  Depositary  Shares are not redeemable prior to
December 15, 1998.  On and after  December 15, 1998,  the  Preferred  Shares and
Depositary  Shares may be redeemed at the option of the Company,  in whole or in
part, at a redemption price of $25 per Depositary Share, plus accrued and unpaid
dividends.


                                       F-9

<PAGE>


                          NOTES TO FINANCIAL STATEMENTS
                        (In thousands, except unit data)


At  December  31,  1997 and  1996,  the  ownership  interests  of the  Operating
Partnership consisted of the following:


                                                          1997           1996
                                                       -------------------------

Preferred Units, held by the general partner               90,689        106,419
                                                       =========================
Partnership Units:
     General partner                                    7,853,936      6,602,510
     Limited partner                                    3,033,305      3,033,305
                                                       -------------------------
          Total                                        10,887,241      9,635,815
                                                       =========================

Preferred  Units   outstanding  at  December  31,  1997  were  convertible  into
approximately 817,107 general partnership Units. The limited partner's Units are
exchangeable, subject to certain limitations to preserve the Company's status as
a REIT, on a one-for-one basis for Common Shares of the Company.

7.   Earnings Per Unit

In 1997, the Operating Partnership adopted SFAS No. 128, Earnings Per Share. The
impact of adopting this  statement  had no effect on reported  earnings per unit
for 1996 and 1995.

<TABLE>
<CAPTION>
                                                               Year Ended December 31,
                                                            1997        1996        1995
                                                          --------------------------------
<S>                                                       <C>         <C>         <C>     
Basic earnings per unit
   Income before extraordinary item                       $ 17,583    $ 16,177    $ 15,352
   Less: Preferred Unit distributions                       (1,808)     (2,399)     (2,903)
                                                          --------------------------------
   Income available to the general and limited partners   $ 15,775    $ 13,778    $ 12,449
   Weighted average partnership Units (in thousands)        10,061       9,435       9,128
                                                          --------------------------------
        Basic earnings per unit                           $   1.57    $   1.46    $   1.36
                                                          ================================
Diluted earnings per unit
   Income before extraordinary item                       $ 17,583    $ 16,177    $ 15,352
   Less: preferred unit distributions                       (1,808)     (2,399)     (2,903)
                                                          --------------------------------
   Income available to the general and limited partners   $ 15,775    $ 13,778    $ 12,449
   Units (in thousands):
        Weighted average partnership Units                  10,061       9,435       9,128
        Effect of outstanding unit options                     110           6           1
                                                          --------------------------------
        Weighted average partnership Units plus assumed
           conversions                                      10,171       9,441       9,129
                                                          --------------------------------
        Diluted earnings per unit                         $   1.55    $   1.46    $   1.36
                                                          ================================
</TABLE>

Options to purchase  partnership  Units excluded from the computation of diluted
earnings per unit during 1996 and 1995  because the  exercise  price was greater
than the average market price of the Company's Common Shares totaled 130,172 and
519,708  units.  During  1997,  all  options had  exercise  prices less than the
average market price.  The assumed  conversion of the preferred  units as of the
beginning of each year would have been anti-dilutive.


                                      F-10

<PAGE>


                          NOTES TO FINANCIAL STATEMENTS
                        (In thousands, except unit data)


8.   Employee Benefit Plans

The  Operating  Partnership  has 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 employees of the Operating  Partnership.
The 401(k) Plan permits  employees of the Operating  Partnership,  in accordance
with the  provisions of Section  401(k) of the Code, to defer up to 20% of their
eligible  compensation  on a pre-tax basis subject to certain  maximum  amounts.
Employee  contributions  are  fully  vested  and are  matched  by the  Operating
Partnership at a rate of compensation  deferred to be determined annually at the
Operating  Partnership's  discretion.  The matching  contribution  is subject to
vesting  under a schedule  providing  for 20% annual  vesting  starting with the
third year of employment and 100% vesting after seven years of employment.

The Operating  Partnership has a non-qualified  Unit option plan ("The 1993 Unit
Option Plan"). Units received upon exercise of Unit options are exchangeable for
Common Shares of the Company. The Operating Partnership accounts for these plans
under APB Opinion No. 25, under which no compensation cost has been recognized.

Had compensation  cost for these plans been determined for options granted since
January  1,  1995  consistent   with  SFAS  #123,   Accounting  for  Stock-Based
Compensation, the Operating Partnership's net income and earnings per unit would
have been reduced to the following pro forma amounts:


                                           1997           1996            1995  
                                         --------------------------------------
     Net income:     As reported         $17,583        $15,346         $15,232
                     Pro forma           $17,403        $15,243         $15,339

     Basic EPS:      As reported           $1.57          $1.37           $1.36
                     Pro forma             $1.55          $1.36           $1.36

     Diluted EPS:    As reported           $1.55          $1.37           $1.36
                     Pro forma             $1.54          $1.36           $1.36

Because the Statement  123 method of accounting  has not been applied to options
granted prior to January 1, 1995, the resulting pro forma  compensation cost may
not be  representative of that to be expected in future years. The fair value of
each option  grant is  estimated  on the date of grant  using the  Black-Scholes
option pricing model with the following  weighted-average  assumptions  used for
grants  in 1996 and  1995,  respectively:  expected  distribution  yields of 8%;
expected  lives ranging from 5 years to 7 years;  expected  volatility  20%; and
risk-free  interest  rates  ranging  from 5.6% to 6.75% in 1996 and from 5.8% to
5.9% in 1995.

The Operating  Partnership and the Company may issue up to a combined  1,500,000
shares and units under the  Company's  1993 Stock  Option Plan and The 1993 Unit
Option Plan. The Operating  Partnership  and the Company have granted a total of
904,530 options, net of options forfeited, through December 31, 1997. Under both
plans,  the option  exercise  price is  determined  by the Stock and Unit Option
Committee  of the  Company's  Board of  Directors.  Nonqualified  stock and Unit
options  granted  expire 10 years from the date of grant and are  exercisable in
five equal installments commencing one year from the date of grant.

Options outstanding at December 31, 1997 have exercise prices between $22.50 and
$26.625, with a weighted average exercise price of $23.67 and a weighted average
remaining  contractual  life of 6.9 years.  On January  6, 1998,  the  Operating
Partnership granted to employees options to purchase an additional 242,600 Units
in the Operating  Partnership  (which are exchangeable for 242,600 Common Shares
of the  Company).  The  exercise  price per unit was set at the  previous  day's
market closing price of $30.125.

Unamortized stock compensation, which relates to options that were granted at an
exercise  price below the fair market  value at the time of grant,  was $195 and
$533 at December 31, 1997 and 1996. Compensation expense recognized during 1997,
1996 and 1995 was $338, $338 and $334, respectively.

                                      F-11

<PAGE>


                          NOTES TO FINANCIAL STATEMENTS
                        (In thousands, except unit data)


A summary of the status of the  Operating  Partnership's  plan at  December  31,
1997,  1996 and 1995 and changes during the years then ended is presented in the
table and narrative below:

<TABLE>
<CAPTION>
                                                             1997                         1996                         1995
                                                            ------                       ------                       ------
                                                                   Wtd Avg                       Wtd Avg                     Wtd Avg
                                                      Units        Ex Price        Units        Ex Price        Units       Ex Price
                                                    -------------------------------------------------------------------------------
<S>                                                  <C>            <C>           <C>            <C>           <C>           <C>   
Outstanding at beginning of year                     888,950        $23.69        656,650        $23.47        525,000       $23.53

Granted                                                   --            --        234,700         24.27        145,550        23.48

Exercised                                            (29,700)        23.68             --            --           (600)       22.50

Forfeited                                            (12,020)        24.41         (2,400)        23.59        (13,300)       25.79
                                                    -------------------------------------------------------------------------------
Outstanding at end of year                           847,230        $23.67        888,950        $23.69        656,650       $23.47
                                                    -------------------------------------------------------------------------------
Exercisable at end of year                           456,350        $23.37        310,210        $23.23        180,500       $23.05

Weighted average fair value of
   options granted                                        --                       $ 2.71                       $ 2.17
</TABLE>


9.   Supplementary Income Statement Information

The following amounts are included in property  operating expenses for the years
ended December 31:

                                               1997          1996          1995
                                             -----------------------------------
     Advertising and promotion               $ 8,452       $ 7,691       $ 8,884
     Common area maintenance                  11,113         9,497         8,403
     Real estate taxes                         5,004         4,699         3,483
     Other operating expenses                  1,700         1,672         1,697
                                             -----------------------------------
                                             $26,269       $23,559       $22,467
                                             ===================================

10.  Lease Agreements

The Operating Partnership is the lessor of a total of 1,210 stores in 30 factory
outlet centers,  under operating leases with initial terms that expire from 1998
to 2015. Most leases are renewable for five years at the lessee's option. Future
minimum lease receipts under noncancellable  operating leases as of December 31,
1997 are as follows:


                         1998                   $57,242
                         1999                    51,775
                         2000                    42,204
                         2001                    34,410
                         2002                    25,180
                         Thereafter              41,353
                                               --------
                                               $252,164
                                               ========
                                     


                                      F-12

<PAGE>


                          NOTES TO FINANCIAL STATEMENTS
                        (In thousands, except unit data)


11.  Commitments

At December 31, 1997,  commitments  for  construction  of new  developments  and
additions to existing properties amounted to $862.  Commitments for construction
represent  only those costs  contractually  required to be paid by the Operating
Partnership.

The Operating Partnership purchased the rights to lease land on which two of the
outlet  centers  are  situated  for  $1,520.  These  leasehold  rights are being
amortized  on a  straight-line  basis over 30 and 40 year  periods.  Accumulated
amortization  was $468 and $419 at  December  31,  1997 and 1996,  respectively.
These land leases and other land and equipment  noncancellable operating leases,
with  initial  terms in excess of one year,  have terms that expire from 2000 to
2085. Annual rental payments for these leases aggregated $778, $315 and $312 for
the years ended December 31, 1997,  1996 and 1995,  respectively.  Minimum lease
payments for the next five years and thereafter are as follows:


                         1998                    $1,052
                         1999                     1,069
                         2000                     1,070
                         2001                     1,063
                         2002                     1,015
                         Thereafter              43,121
                                                -------
                                                $48,390
                                                =======


12.  Acquisitions

During 1997,  the  Operating  Partnership  completed  the  acquisition  of three
factory outlet  centers  containing  approximately  303,000 square feet of gross
leasable area for purchase prices which  aggregated  $37,500.  The  acquisitions
were  accounted  for using the purchase  method  whereby the purchase  price was
allocated  to  assets  acquired  based on their  fair  values.  The  results  of
operations  of the  acquired  properties  have been  included  in the results of
operations since the applicable acquisition date.

The following  unaudited  summarized  pro forma  results of  operations  reflect
adjustments to present the historical  information  as if the  acquisitions  had
occurred as of the beginning of the respective period. The pro forma information
is presented for  informational  purposes only and may not be indicative of what
actual results of operations  would have been had the  acquisitions  occurred at
the  beginning of the  respective  period,  nor does it purport to represent the
results of operations for future periods.

                                                         1997             1996
                                                     ---------------------------
                                                              (Unaudited)
                                                     ---------------------------
      Total revenues                                 $   87,314       $   81,006
      Income before extraordinary item                   17,784           16,140
      Net income                                         17,784           15,309
      Basic net income per unit:
          Income before extraordinary item                 1.59             1.46
          Net income                                       1.59             1.37
      Diluted net income per unit:
          Income before extraordinary item                 1.57             1.46
          Net income                                       1.57             1.37
                                                     ===========================


                                      F-13
<PAGE>


                        REPORT OF INDEPENDENT ACCOUNTANTS



     Our  report  on the  financial  statements  of  Tanger  Properties  Limited
Partnership  is included on page F-1 of this Form 10-K. In  connection  with our
audits of such financial statements,  we have also audited the related financial
statement schedule listed in the index on page 27 of this Form 10-K.

     In our opinion,  the financial  statement  schedule referred to above, when
considered  in  relation  to the basic  financial  statements  taken as a whole,
presents  fairly,  in all  material  respects,  the  information  required to be
included therein.




                                                       COOPERS & LYBRAND L.L.P.

Greensboro, North Carolina
January 19, 1998

                                      F-14

<PAGE>


                      TANGER PROPERTIES LIMITED PARTNERSHIP
                                  SCHEDULE III
                    REAL ESTATE AND ACCUMULATED DEPRECIATION
                      For the Year Ended December 31, 1997
                                 (In thousands)

<TABLE>
<CAPTION>
                                                                                                Costs Capitalized  
                                                                                                  Subsequent to    
                                                                                                  Acquisition      
          Description                                       Initial Cost to Company               (Improvements)   
--------------------------------------                     -------------------------       ----------------------------    
                                                                         Buildings,                       Buildings,   
Outlet Center                                                           Improvements                     Improvements  
Name              Location            Encumbrances           Land        & Fixtures           Land        & Fixtures   
-----------------------------------------------------------------------------------------------------------------------
<S>               <C>                      <C>             <C>             <C>             <C>             <C>    
Barstow           Barstow, CA              $    --         $ 3,941         $12,533         $    --         $   863
Blowing Rock      Blowing Rock, NC              --           1,963           9,424              --              -- 
Boaz              Boaz, AL                      --             616           2,195              --           1,048
Bourne            Bourne, MA                    --             899           1,361              --             185
Branch            N. Branch, MN                 --             423           5,644             249           2,321
Branson           Branson, MO                   --           4,557          25,040              --           3,296
Casa Grande       Casa Grande, AZ               --             753           9,091              --           1,196
Clover            North Conway, NH              --             393             672              --              49
Commerce I        Commerce, GA              10,121             755           3,511             492           5,509
Commerce II       Commerce, GA                  --           1,299          14,046             541           9,661
Gonzales          Gonzales, LA                  --             947          15,895              17           3,381
Kittery-I         Kittery, ME                5,970           1,242           2,961             229           1,173
Kittery-II        Kittery, ME                   --             921           1,835             530             222
Lancaster         Lancaster, PA             15,787           3,691          19,907              --           5,416
Lawrence          Lawrence, KS                  --           1,013           5,542             439             443
LL Bean           North Conway, NH              --           1,894           3,351              --             165
Locust Grove      Locust Grove, GA              --           2,609          11,801              --           6,980
Manchester        Manchester, VT                --             500             857              --              66
Martinsburg       Martinsburg, WV               --             800           2,812              --           1,256
McMinnville       McMinnville, OR               --           1,071           8,162               5             518
Nags Head         Nags Head, NC                 --           1,853           6,679              --              -- 
Pigeon Forge      Pigeon Forge, TN              --             299           2,508              --             995
Riverhead         Riverhead, NY                 --              --          36,374           6,152          53,088


<CAPTION>
                                         Gross Amount Carried at Close of Period                                             
          Description                                  12/31/97 (1)                                               Life Used to 
--------------------------------------   ---------------------------------------                                     Compute   
                                                     Buildings,                                                   Depreciation  
Outlet Center                                       Improvements                 Accumulated     Date of            in Income   
Name              Location                Land       & Fixtures       Total      Depreciation  Construction         Statement   
------------------------------------------------------------------------------------------------------------------------------ 
<S>               <C>                    <C>           <C>           <C>           <C>             <C>                <C>
Barstow           Barstow, CA            $ 3,941       $13,396       $17,337       $ 2,132         1995               (2)
Blowing Rock      Blowing Rock, NC         1,963         9,424        11,387            79         1997(3)            (2)
Boaz              Boaz, AL                   616         3,243         3,859         1,232         1988               (2)
Bourne            Bourne, MA                 899         1,546         2,445           623         1989               (2)
Branch            N. Branch, MN              672         7,965         8,637         2,226         1992               (2)
Branson           Branson, MO              4,557        28,336        32,893         4,446         1994               (2)
Casa Grande       Casa Grande, AZ            753        10,287        11,040         3,205         1992               (2)
Clover            North Conway, NH           393           721         1,114           326         1987               (2)
Commerce I        Commerce, GA             1,247         9,020        10,267         2,968         1989               (2)
Commerce II       Commerce, GA             1,840        23,707        25,547         1,691         1995               (2)
Gonzales          Gonzales, LA               964        19,276        20,240         4,494         1992               (2)
Kittery-I         Kittery, ME              1,471         4,134         5,605         1,785         1986               (2)
Kittery-II        Kittery, ME              1,451         2,057         3,508           737         1989               (2)
Lancaster         Lancaster, PA            3,691        25,323        29,014         3,314         1994(3)            (2)
Lawrence          Lawrence, KS             1,452         5,985         7,437         1,287         1993               (2)
LL Bean           North Conway, NH         1,894         3,516         5,410         1,404         1988               (2)
Locust Grove      Locust Grove, GA         2,609        18,781        21,390         2,542         1994               (2)
Manchester        Manchester, VT             500           923         1,423           355         1988               (2)
Martinsburg       Martinsburg, WV            800         4,068         4,868         1,500         1987               (2)
McMinnville       McMinnville, OR          1,076         8,680         9,756         2,053         1993               (2)
Nags Head         Nags Head, NC            1,853         6,679         8,532            63         1997(3)            (2)
Pigeon Forge      Pigeon Forge, TN           299         3,503         3,802         1,373         1988               (2)
Riverhead         Riverhead, NY            6,152        89,462        95,614         5,843         1993               (2)
</TABLE>
                                                                             
                                                                              
                                      F-15


<PAGE>


                      TANGER PROPERTIES LIMITED PARTNERSHIP
                           SCHEDULE III - (Continued)
                    REAL ESTATE AND ACCUMULATED DEPRECIATION
                      For the Year Ended December 31, 1997
                                 (In thousands)


<TABLE>
<CAPTION>
                                                                                                Costs Capitalized  
                                                                                                  Subsequent to    
                                                                                                  Acquisition      
          Description                                       Initial Cost to Company               (Improvements)   
--------------------------------------                     -------------------------       --------------------------   
                                                                         Buildings,                       Buildings, 
Outlet Center                                                           Improvements                     Improvements
Name              Location            Encumbrances           Land        & Fixtures           Land        & Fixtures 
---------------------------------------------------------------------------------------------------------------------
<S>               <C>                      <C>             <C>             <C>             <C>             <C>    
San Marcos        San Marcos, TX             10,206           2,012           9,440              17           8,940
Sevierville       Sevierville, TN                --              --          18,495              --           4,303
Seymour           Seymour, IN                 8,184           1,794          13,249              --              16
Stroud            Stroud, OK                     --             446           7,048              --           4,782
Terrell           Terrell, TX                    --             805          13,432              --           3,850
West Branch       West Branch, MI             6,836             350           3,428             120           3,516
Williamsburg      Williamsburg, IA           16,946             706           6,781             716           9,337
---------------------------------------------------------------------------------------------------------------------
Totals                                     $ 74,050        $ 38,552        $274,074        $  9,507        $132,575
=====================================================================================================================

<CAPTION>
                                         Gross Amount Carried at Close of Period                                             
          Description                                  12/31/97 (1)                                               Life Used to 
--------------------------------------   ---------------------------------------                                     Compute   
                                                     Buildings,                                                   Depreciation  
Outlet Center                                       Improvements                 Accumulated     Date of            in Income   
Name              Location                Land       & Fixtures       Total      Depreciation  Construction         Statement   
------------------------------------------------------------------------------------------------------------------------------ 
<S>               <C>                    <C>           <C>           <C>           <C>             <C>                <C>
San Marcos        San Marcos, TX            2,029        18,380        20,409         2,929        1993               (2)
Sevierville       Sevierville, TN              --        22,798        22,798           503        1997(3)            (2)
Seymour           Seymour, IN               1,794        13,265        15,059         2,397        1994               (2)
Stroud            Stroud, OK                  446        11,830        12,276         3,348        1992               (2)
Terrell           Terrell, TX                 805        17,282        18,087         2,881        1994               (2)
West Branch       West Branch, MI             470         6,944         7,414         1,863        1991               (2)
Williamsburg      Williamsburg, IA          1,422        16,118        17,540         4,578        1991               (2)
------------------------------------------------------------------------------------------------------------------------------ 
Totals                                   $ 48,059      $406,649      $454,708      $ 64,177                          
============================================================================================================================== 
</TABLE>

     (1)  Aggregate  cost for  federal  income  tax  purposes  is  approximately
          $429,597,000

     (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-16

<PAGE>


                      TANGER PROPERTIES LIMITED PARTNERSHIP
                           SCHEDULE III - (Continued)
                    REAL ESTATE AND ACCUMULATED DEPRECIATION
                      For the Year Ended December 31, 1997
                                 (In thousands)


The changes in total real estate for the three years ended December 31, 1997 are
as follows:

                                           1995           1996            1997
                                       -----------------------------------------
Balance, beginning of year             $ 292,406      $ 325,881       $ 358,361
Acquisition of real estate                    --             --          37,500
Improvements                              33,475         32,511          59,519
Dispositions and other                        --            (31)           (672)
                                       -----------------------------------------
Balance, end of year                   $ 325,881      $ 358,361       $ 454,708
                                       =========================================

The changes in accumulated  depreciation  for the three years ended December 31,
1997 are as follows:

                                               1995         1996          1997
                                           -------------------------------------
Balance, beginning of year                 $ 18,007      $ 31,458      $ 46,907
Depreciation for the period                  13,451        15,449        17,327
Dispositions and other                           --            --           (57)
                                           -------------------------------------
Balance, end of year                       $ 31,458      $ 46,907      $ 64,177
                                           ====================================


                                      F-17