Tanger Factory Outlet Exercises on Strategic Plan

Tanger Factory Outlet posted improvements in its occupancy, rent spreads and sales in its third quarter. Those improvements, Steven Tanger, executive chair of the board said during the REIT’s earnings call, contributed to earnings, which exceeded the REIT’s expectations. 

“Our proactive capital market success has also positioned us well with low leverage, ample liquidity and exciting potential growth opportunities,” he explained. “I’m proud of the tireless efforts of the entire Tanger team who are successfully delivering our strategic objectives.”

Also on the call was Stephen Yalof, director, president and CEO of the firm, who pointed out that the company has demonstrated momentum across its portfolio. “The successful execution of our strategic plan is evident across all of our key metrics, including occupancy, rent spreads, tenant sales and our focus on driving non-rental revenues, all of which continue to contribute to core FFO growth,” he said.

In addition, he pointed out that the REIT’s portfolio occupancy has returned to pre-pandemic levels, despite having recaptured over 1 million square feet due to bankruptcies and brandwide restructurings since the beginning of 2020. This includes 55,000 square feet recaptured in the third quarter as anticipated, he explained. As of September 30, occupancy was 94.3%, up 140 basis points year-over-year and up 130 basis points since the end of the second quarter.

With regard to rent spreads, he said the REIT continues to see positive momentum for leases that commenced in the 12 months ended September 30. “Blended average rates improved by 240 basis points on a cash basis compared to the 12 months ended June 30. Spreads have improved each quarter this year and we believe that the continued improvement we are seeing in traffic and sales will help sustain this trend,” he said. 

Tanger also benefited from significant percentage rental growth this quarter, which was more than 2.5 times the comparable 2019 period, he explained. “During the height of the pandemic, we renegotiated select leases with an aim to trade value for value, in some cases, trading base rent for a larger variable rent component,” he said. “In many cases, reducing break points and increasing variable rent pay rates are now producing total rents that exceed the prior contractual fixed rents.”

He noted towards the end of the call that they intend to continue to focus on growing the non-apparel and footwear tenant base and have added multiple new brands and categories to our portfolio this quarter. “Key categories include furniture and home goods and wellness and beauty. We have also focused on growing our food offerings, adding numerous sit-down, quick serve and grab-and-go concepts across our portfolio and we are growing the presence of entertainment stores, kiosks and amenities aimed to driving shopper visits, frequency, dwell time and ultimately larger spend,” he said. 

Looking ahead to holiday shopping, he is “encouraged.” In partnership with the REIT’s retailers, they are starting early. “Holidays began at Tanger on November 1 and we are underway running campaigns, programs and events to encourage early shopping,” he said. “Many retailers across the country are facing potential logistics and staffing issues but are proactively navigating the situation. Although the impact of labor and supply chain is unknown, we are optimistic with regard to our ability to deliver an exciting and fulfilling holiday experience to our customers and guests.”