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Tanger Factory Outlet Centers (SKT)

Participants
Steven Tanger Executive Chair
Stephen Yalof Chief Executive Officer
James Williams Executive Vice President, Chief Financial Officer
Cyndi Holt Senior Vice President, Finance and Investor Relations
Katy McConnell Citi
Robbie Keybanc
Samir Khanal Evercore
Caitlin Burrows Goldman Sachs
Craig Schmidt Bank of America
Mike Mueller JP Morgan
Call transcript
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Cyndi Holt

Good morning. This is Cyndi Holt, Senior Vice President of Finance and Investor Relations, and I would like to welcome you to the Tanger Factory Outlet Centers second quarter 2021 conference call. Yesterday evening we issued our earnings release as well as our supplemental information package and investor presentation. This information is available on our Investor Relations website, investors.tangeroutlets.com. Please note that during this conference call, some of management’s comments will be forward-looking statements that are subject to numerous risks and uncertainties and actual results could differ materially from those projected. our detailed the and discussion to Commission and uncertainties. you a for of direct filings Securities with Exchange We these risks

rebroadcast as EBITDA. FFO, core During non-GAAP same center G, will we income, FFO, these funds defined financial and our non-GAAP operating measures measures adjusted to being for including and in or in supplemental our the Regulation in This included period the of by recorded the most operations also from net a for measures directly time of earnings are comparable SEC is information. Reconciliations call, financial GAAP call future. discuss release

As such, this participants are be include only accurate comments it as in of listen-only time, management’s all mode. August is At to that today’s information XXXX. may note time-sensitive that date, important X,

to management’s as the comments, We follow-up that to everyone for will and happy questions. for of only open many re-queue to permits, you questions. request you for be one prepared Following additional question possible If one time ask ask we allow are your questions. call as

will the Steven Steven Please On Chief today Vice go Officer. Steve. and Yalof, now Jim Williams, be Officer; to call Tanger, Executive President Stephen Executive Financial will I Chief call the over Executive turn Chair; and ahead, Tanger.

Steven Tanger

Tanger joining shareholder evolve Good of to our execution successful for value. morning and earnings our in thank results you continuing demonstrate the us improved call. strategic and drive for second These profitability quarter XXXX progress to initiatives and

both of welcome is of to shoppers. would previously of Sandeep have Group Brookfield board currently as proposition offer Properties pre-pandemic CEO of excellent our and and levels traffic Retail directors. the and open I return for centers sales to an Tanger’s Sandeep was CEO to like GGP. We air WeWork value also Mathrani seen and retailers

priorities. Yalof forward turn and to ongoing We call over his guidance. and to Steve now will to and to the on quarter to our look are benefit second from our I wisdom experience performance and strategic provide details his privileged counsel discuss

Stephen Yalof

Thank you Steve.

demonstrate of our open in quarter are leasing, outpacing domestic second Tenant progress traffic operating results now the Our continued pre-pandemic air centers. and levels. sales retail and marketing

We achieved and meaningful in same center a in rebound sequential point occupancy basis increase NOI. a have XXX

and brands We to a the for a shoppers Same uses, compelling same creating second curating and are quarter more of up period mix monetizing experiential XXXX centers. of of the of of elements personalized and connecting XX% the place non-store sense center XX% ways, represents second in with in our compared XXXX. in NOI was the outings, quarter

partners second the the domestic levels centers For quarter, air This shopping sustained of rebound traffic our reflects traffic same to was XXXX. of attraction open in our centers, their the above period clearly both retainer and $XXX dominant square offer proposition Tenant and trajectory. a that have sales we value locations, to our followed market shoppers. grew similar per to tenant sales Average accessories, the XXX jewelry, portfolio quarter XX%, occupancy increase the sales trailing foot for performing up was end home. basis Categories particularly average beauty brands, increased X.X% athleisure, well for quarter. months, same a a end and the X.X%. that youth-oriented the include first basis, center the $XXX square XXXX productivity comparable from foot period. per tenant Consolidated from On of point at are XX

brands, re-populate variable term lease our to upside variable When leasing and legacy collected increasing after XX,XXX rent additional of rates. points by bankruptcies unable XX,XXX re-price space achieve for shortly through sooner and we to to recaptured an recaptured were represents strategic estate our and shortening square retailer break expected us to due we terminations reducing end to feet outlet or and and fees. the second desired real we negotiated preserving termination our of approach rents, early which enable was rent feet included quarter, where have We restructurings square the pay

in ultimately rent that contributions COVID spreads Some capture the of height don’t total produced variable these during rents our spreads cases, completed exceeded as deals fully fixed measure the were rent that uncertainty Leasing rents. prior In contractual and rent common the million area XX renewals base leasing and new over activity change XXX with to during totaling the continues only. last charges months. X.X feet of square leases commenced accelerate that

the to This proven of end our represented to the rebound of as leasing or traffic of As renewals renewal process year. our XX% improve. sound expire to of rates rental during our hold strategy and build. and activity continue to space has This the market on pace executed the continues scheduled in reflects quarter, some the while sales

improvement categories introduce variety We opportunity of and pop-up leases helped as of and continue to vibrancy an partners our a tremendous conditions bigger and visits, have and the us sequential contribute market from ultimately iconic which frequency, opportunity centers, of upscale our to improve. increase addition of tenancy to gourmet to time, real Permanent base. new activations and new those goal brands, flow, the as the leasing a first as their such is on build continue cookie centers represent Tanger’s concepts dwell our core continuing to whole end continuing the shopper which uses uses maintain portfolio experiential driving The and lease reported and The achieve has term brands new the to Welcoming place and shopper our remains the pursue cupcake as these our apparel to of These to appeal provided cash are of our to baskets. activity spreads, however we transactions retailer gain provide entertaining estate to strategy. and concepts quarter. for ground higher continue occupancy, our uses. microbreweries, local offer of value new making we and to our food grocers restaurants, sit-down realize to added help near footwear,

of in us our this ESG retailers tenant coming and Through up launched communities. compelling shoppers. mix new to we small at discovered new brands which access have part our have local strategy, and we our enhanced provided supporting year initiative program, this and as retailers aimed our Additionally, business

are on walls, non-store creating store. area delivering business brands our which paid and center their includes include marketing outside common onsite opportunities the on This results. are can We sponsorship promote but and streams, focused walls where their on activations. revenue initiatives These bright media growing of four directories, opportunities digital promising

year fun providing more to which is ways date and these XX% XXXX. over addition captured year activations during engage in revenues In last to up XX% visit. to This line, create their branding, is shoppers our the other on-center programs revenue and from

monetize parcels continue land estate up peripheral existing parcels will create real additional opportunistically as have team ancillary and We presently revenue additional advantage at property leasing these we demand our two-thirds of acquire our for centers have and we our take types to increases. stood land inventory portfolio lands. and our As to of of streams, a peripheral over

As an example, our entertainment center as center we adjacent parking. have event and at well Arizona expand uses, as to for an provide footprint recently our additional that parcel Glendale, to more paid acquired shopping F&B and

pick digital we our physical develop our continue our We and available where customer our pre-shop store merchandise and customers expanding To expand program, seamless to space, where our in either Through in in virtual that can strategy our further connect capabilities shopper remotely meet centers. enhance can store digital directly are. to customers that products and or execute initiatives we’re as search our shop online them. shipped are up experiences they and see customer have to

initiative participating and live pop-up continue sales customers. to to flash have channels, our our our our as and retailers social and and Tanger reach brands app sales looks, on-center By fashion Club loyal host innovate and digital our members shopper providing of Tanger providing with insiders quarter Tanger emerging is with Tanger on touch grow discover is centers demographics. our aimed summary, Through our and to retailers, at for shoppers to designed execute and to brand. also shopper. particularly younger enriched our we and In this frequency social our all visits we core more digital customers, relevant our posts we help are and channels, We in director and shops attract website, introduced strategic more our reach shop channels. business. complement we media our new through them These digital ways curates content to new goal personalized continue virtual more which center, our higher content, who engagement of we with and experience greater on who to plan points and focus drive frequency the and and the This is

categories new and We with and are brands, pursuing new delivering center the new occupancy. uses, actively new goal of increasing leasing

we paid customer center new are new our reach revenue We and continue to to grow peripheral and stream, media, to as sponsorship, and land, ways our such visits. drive build innovating

our this the momentum deliver financial seeing and our sheet to to leasing flow, use traffic, results, improving rapidly to value real the business like results outlook balance of would to long our to through and increase and XXXX. now We cash Williams term of estate, turn call are drive development you the I remainder take growth. over positioned and are Jim for we

James Williams

results, We second Thank strong momentum. continued quarter Steve. showing delivered positive you

XX.X% of was for date million of reductions along dilution per tenant of we Second the $X.XX quarter revenues XXXX FFO per NOI performance share for in share increased excludes portfolio and driven bonds. the for as year a share the XXXX. better in Same for to due issued quarter early from or the prior year. variable core to to per $X.XX higher $X.XX $XXX reflects expected FFO $XX Core this since the shareholders of per of the with $X.XX quarter by consolidated second second common the available quarter redeemed to million center than shares debt XXXX sales extinguishment pandemic share rents compared includes our charge rental the

maintained last collections. quarter, discussed we As we high have rent

rents collected have in half the of XXXX. billed fixed contractual of first XX% approximately We

rents the due Through deferred XX% to collect be repaid first have July XX, to XXXX, rents continued XXXX XXXX. for to half amounts of defer of had tenants XXXX. our the to We allowed related to collected in we prior periods, billed that we also XXXX including

balance the issued to date, million share. and raised per we strengthen weighted $XX.XX common a that we raised at $XX shares of using net $XX.XX XX million opportunistically price of million program to Year capital second X.X and quarter, at $XXX During proceeds sold price an share. sheet. our reduce average further our We of ATM generated of million equity shares average per debt

outstanding. in on and As our enhances to notes for April principal $XXX million due reduction our XXXX the early Subsequent of our announced, improves December This previously ratio XX aggregate the million leverage redemption million amount flexibility. partial $XXX balance of remains in $XXX redemption, completed cash. X.XXX% we senior debt sheet

term million unsecured our down loan by paid $XXX $XX million. also bringing to the an June, outstanding We balance additional in

to extended and we including in Additionally million July credit, July, certifications. This interest Star to to amended a with billion. includes sustainability date capacity increase initiatives. of extension pushing further and regarding providing accordion borrowing demonstrates and lines capacity of options The facility feature rate accountability LEED an environmental $XXX metric savings tying commitment Energy XXXX the potential our and $X.X to maturity unsecured our

until debt XXXX. We maturities December have no significant

We financial prioritized strong position. a have always maintaining

will approach allocation. and to We our continue disciplined prudent capital

leverage in selective Our and levels growth, and NOI, extending board include time, maturities, over evaluating uses continue reducing grow investing pre-COVID earnings portfolio growth distributions evaluate of to opportunities. our to our alongside dividend will debt capital priority to

and the for that assumes retail guidance continue Our conditions remainder there year are government-mandated of shutdowns. no macro the further current

the to improvement year business offset in of per full guidance we to in expectations the additional second the the share, per common and dilution from related in the range $X.XX. FFO of approximately included guidance. by $X.XX sequential expect of quarter, $X.XX of This first which $X.XX prior be issuances in our dilution our sold our $X.XX addition prior in reflects from continued to core For quarter XXXX, the the up is share $X.XX shares to

lease reserve back in to year second Our reversals termination and higher of XXXX. fees the as XXXX recognized as guidance we lower also half the get operating due in occupancy difficult last and more comparisons half reflects expenses which year-over-year that of well

Our with remainder for space feet we the guidance XXX,XXX feet to includes and XX,XXX for the date have square along brand-wide recaptured an to through the additional bankruptcies the of related July year. of square potential restructurings of end

Operator, can our For night. now open up our additional see I’d first like please release assumptions, details it issued our questions. take on to last for key we question?

Operator

comes first from [Operator instructions] Citi. Our Katy Please McConnell go with question ahead.

Katy McConnell

can and an percentage your With going think today? Great, about rent leasing significantly Good rent this annualized thanks. talk history, forward, should we relative how everyone. morning your quarter percentage structuring you up deals rate new run into how and to about

Stephen Yalof

returned. uncertainty structured fairly protection, rent. that renewal break These upside if leaned exchanged is the the we a retailer and to and to we question. and included sales definitely a around of our we deals, to Katy, as rates, variable see downside sales going can on but and thanks that we’ll those to look with deal more particularly reflection our all material percentage deals height is performance back some the sales us deals forward consider market term percentage on rent, variable our if we gave rent COVID, you a I’m morning say a on where performance, ago structure, With were pay regard lower heavily our shorter deals, for rent Good basis. continues points, higher inflected sure improve, With regard year deals structured partners impact percentage rent

sales our concerned. all I are sales year and big anticipated across far a a stronger to as find have as enviable gain the variable indicate, rents we our we in ago, numbers pretty guess, that position came far back As portfolio would had than, ourselves

Katy McConnell

drove it, guidance could can so your what next lowered quarter, Got fairly this that you you more year? background provide capex significantly Then how okay. some trend change capex and Thanks. on

James Williams

in traffic Katy, right to in we our now. many leases, in are and we’re pleased reflects reduction these leasing the Hi said, very and as some XXXX how spend. reduction negotiate of so very Steve is strategic that’s how activity approaching see really leasing Jim. to sales, the we capex and capex on Certainly this our has be The been the rebound of and the environment of pushed to trying we’re reflective strategy our

Katy McConnell

So to would year? next level for expect be your more original you year’s guidance similar this to

James Williams

Yes Katy.

to purely these is from at a and leases strategic negotiate right thing, this a trying time. think thing, the I again timing we’re

to guided I to year. think year, next you’ll something we similar probably see this normalize originally what it to

Katy McConnell

that’s helpful. Thank you. Okay,

Operator

Our Thomas comes Todd next from Keybanc. ahead. question go Please with

Robbie

line morning. This on the good for Hey, Todd is [indiscernible] Robbie Thomas.

ones? ask or about into you and to can here term short success in leases wanted converting permanent Just term occupancy how temporary in talk these is short nature, much

Stephen Yalof

quarters, short pop-up or Good we about temp really again but Robbie. to now, morning talked about call leasing We’ve right just a us. and strategy or X.X% talk past to the up it for fact was and back we’re term short let’s in like that term in as about it, leasing, go leasing

by between keeping stores term they term all, properties in rooms, were certainly real centers and store, increasing full turned folks back flow that we’ve doesn’t shopping difference customers, and traveling, essentially increase a in number general of Going to but leasing weren’t where ourselves new and draw results. went flow, to We and different pull of when was longer of they that ones and and our to vacant centers, general this help store some our for of in into discussions open weren’t ago long opportunity improved partners the know term the a them closed out get was and really in driving times and with created for managers able test in our fill pretty right and XX and the some know into between really All go team restructuring strategy traveling estate find difference shopper result. year members an on retailer number also the empowered of us out shopping lights uses near our term We of concepts lease, uses most on uncertain a we’re new turn new bankruptcies, brought space with a short way. a did lights vacancy center and delivering of our and and but occupancy a a cash in with other lease I great fantastic value probably we our be those to, that brand-wide our to with A strategy a that deals. occurred term job. our of and things created our growth, opened, brought cash and all, tenants long the turn shopping that first to a as to now our deputized

Robbie

Perfect.

Just more from one conditions sales, me. here them, wondering anything you’re or from operating changes to any in Just the the hearing reporting seeing to ground. the and Are delta rise cases? retailers new any traffic, they’re on or since related variant if

Stephen Yalof

that not have yet. of any We heard

Robbie

Perfect, thanks much. so

Stephen Yalof

Thanks Robbie.

Operator

Samir from comes with ahead. Evercore. Please Khanal question next The go

Samir Khanal

up talked others. seeing and centers you regions I I’m sales to breakdown, some and about Maybe you sales you’re is region there’s where us of region know how traffic give ran Steve, just trying or here. centers. in center everyone. traffic a or a the maybe are at to return center maybe morning differences if initiatives you’re the than you’ve talked Good see about up. to from better any seeing

Stephen Yalof

would that--our improvement. the shopping resort Well our geographies of have portfolio, of sweet seem core top drive-to spot amount XX and shown the the Samir, I the say are in greatest located be MSAs. markets That’s that and that really that to are in centers centers those the

probably coming business we’ve gambling or a drive the that of dependent that, the traffic, are the that centers back, couple not they’re pace shopping to flipside on back other of or those coming international are the imagine, tourism could are. as got and whether entertainment uses, although other On it’s or same centers things at hotel casino you

Samir Khanal

second the quarter. guess quite it. here, lot occupancy question your a as my--just second Got in a I up was

do on I’m rent next how let’s trend, say, as think think understand have balancing just to still you how will few quarters? you and the rents pressure the think You do XX months that over side, right, on about over occupancy so metric spreads, trying and about guys you new especially next the rents,

Stephen Yalof

a time and to brands and a a to being remarks, rent those and take by different might rent rents rent on stores deals opening spend old that replacing they’re strategic the pivoting effort results component parts of of bit replacing some of a so to less outlet frequency deals, high about we’re which some more Purple are from obviously that two community, rent that come space, are of in look spreads prioritizing enhancing, of in uses. sum maybe an fact the those in base reflected and the lot with grocery centers view, thinking in legacy a the vacancy grocery that Sporting center, but same the had particular uses leasing new Goods, lower some at Dick’s our base Historically once we’re were numbers the draw we’re spreads. apparel shopping this collecting, of but higher at gone portfolio, of new many both in with by some but those is years, great in uses about We and the on store the out our pay iconic, frequency of uses little are than to variable uses instances far those Mattresses, if we seeing traffic of caused Nantucket in Well, rent that mark our so footwear, a seeing trip working, you be and the with are our now centers, recent the in Meat rent visit dependent particular also and in be closed an that like although the customer. resort talked we’re we’re center, would new to we shopping point these - direct-to-consumer Fish going draws old brands their and These at with great folks space, uses of they’re to the legacy customer. doing these

Samir Khanal

me. for Steve. That’s so much, Thanks it

Stephen Yalof

Samir. Thanks

Operator

go next ahead. The with comes Burrows Sachs. question from Please Caitlin Goldman

Caitlin Burrows

rents. I morning. recent on reliant had leases on a more the good Hi, the follow-up percent quick were first that

it of Over does consistent that leases, the the or sales life threshold lease? that is over of life those change

Stephen Yalof

sure the annual rents base rent it, the differently, Caitlin, written I’m the rent grows, as have CTI base that fixed rent are of all you grow a a rent. natural growth percentage so increase, component base know or a to a with breakpoint leases component does but whether it’s that commensurately and

Caitlin Burrows

Then the just with was anything square it. wondering XXX,XXX on playing of estimate out know are earnings, if got expectation that. that’s was recapture Okay, I back year, commentary stores you terms so on initial feet I of gave some guys that the impacted, in like give versus for exact could or how you timing, estimate wondering I the that XQ

Stephen Yalof

another we brands mentioned from was one was - XXX,XXX is back. guidance, back but back, we’ve XX,XXX buffer. quarter, this feet some it coming the that got We the in Beginning known the early coming was that we that knew bulk of feet legacy shared square expected, but remainder space square it of of quarter really our definitely and of

Caitlin Burrows

Then maybe any updated you some, okay. last give Nashville there a if one, is the if development. on commentary, Got can it, wondering just

in Given or we’ve there, year, the wondering not this if retail been strength progress yet. there’s just quite that seen

Stephen Yalof

we’ll beginning announced interest great certainly the of development. you there’s moves probably next Yes, a a to year. put keep from get get partners, anticipate leased, definitely ground, that XX% think and it’s shovel and the as forward our on we we market we’ll we in progress there and we’ll when retailer some We updated

Caitlin Burrows

Thanks. great. Okay,

Operator

question comes ahead. America. next Schmidt Please Craig with Bank of Our from go

Craig Schmidt

you just between cull I’m chart, within that assets surrounds want the Ranking. periodically these hasn’t total, maybe Thank if I of. might NOI disposing wondering and you. you looking that percent if occupancy, but of portfolio, sixth My at know really the just the consider tiers, and square of up, it the total fifth footage portfolio I’m difference percent to worked and wondering its the way question still are Outlet Center

Stephen Yalof

for thanks Craig, question. the

of flow, all, marketing is our any First and not we’re currently centers. the cash of still center

Craig Schmidt

that still? positive you’re so flow saying Okay, list, in the cash centers have all

Stephen Yalof

flowing? I sorry, cash said those you are what is centers think all I’m

Craig Schmidt

met just of I I’m positive flow. confirming that centers just sorry, all confirming--I’m cash was their these with XX

Stephen Yalof

Yes.

Craig Schmidt

Okay, thanks a lot.

Operator

star As question, have then a The Mueller go JP with ahead. press Morgan. a Mike one. reminder, comes question please Please next if from you

Mike Mueller

Yes, hi.

date from $X.XX to done and Looking about year midpoint you’ve FFO moving the the QX down It that that get of major looks parts to year print Can the there quarterly tax to just one-time full to FFO been would may are you at for walk a property what the cent benefits, $X.XX but $X.XX? it couple bridge an gap, helpful. have what guidance, like of that implies range. if be the average you through could

James Williams

Mike, good this Sure - morning Jim. is

You a issued the the expect top of time. one There’s in from second $X.XX was into we quarter of guidance ATM last the penny another per we a of that’s of that did dilution built taxes dilution property things - $X.XX we major share the around also the there, the had that identify quarter refund share. shares the on

end the your season. do the the the really XX,XXX XX,XXX additional effect in got back potential think thing before second in that have just the final and higher mentioned, the we Then holiday July Steve go is events that that’s school are through Those to of like we I square the back feet and remaining year. is that as that driving you’ve operating expenses main came component components. come may the half that feet of back

Mike Mueller

thank That okay. it, was it, you. Got

Operator

for to closing Tanger conference our the Steve remarks. and any to I would turn back over answer concludes question This session. like

Steven Tanger

colleagues Good soon. morning. team results. to see to a tireless you I each produce efforts summer, to I our wanted for on hope the Have their excellent thank Goodbye. wonderful these Tanger of and

Operator

attending Thank now conference presentation. you for concluded. The today’s has

You may now disconnect.