Q1 2020 Earnings Call
Good morning, and welcome to the tanker factory outlet centers first quarter 2020 conference call.
All participants will be in listen only mode. So do you need assistance leased secondly conference specialist by pressing the Star then zero on your telephone keypad. After today's presentation, there will be an opportunity to watch question.
Lastly question you May of course Star then one on your telephone keypad withdraw. Your question. Please press Star then Kim. Please note. This event is being recorded.
I would now like to turn the conference over to Cyndi Holt Vice President head of Investor Relations. Please go ahead.
Good morning, This just Cyndi Holt, Vice President of Investor Relations and I would like to welcome you to the tanker factory outlet centers first quarter 2020 conference call yesterday evening, we issued our earnings release as well with our supplemental information package and Investor presentation. This information is available on her.
Best Relations website investors Dot Tanger outlets Dotcom. 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 we direct you to our filings with the Securities and Exchange Commission card.
They'll discussion of these risks and uncertainties.
Turning to call. We will also discuss non-GAAP financial measures as defined by FCC regulation G, including funds from operations or SFL core Epo same center net operating income and adjusted EBITDA.
Reconciliations of these non-GAAP measures to the most directly comparable GAAP financial measures are included in our earnings release and in our supplemental information.
This call is being recorded for rebroadcast for a period of time in the future as such it is important to note that management's comments include time sensitive information that may only be accurate as of today's date May 12 2020.
At this time all participants are in listen only mode. Following management's prepared comments the call will be opened for your question.
We request that everyone at only one question and one follow up to allow as many of you.
Ask questions that's possible.
If time permits we are happy for you to re queue for additional questions.
On the call today will be Stephen Tanger, Chief Executive Officer, Stephen you all.
Resident and Chief operating Officer, and Jim Williams, Executive Vice President and Chief Financial Officer, I will now turn the call ever to Stephen Gengaro. Please go ahead Steve.
Good morning, Thank your for joining us.
Perhaps the entire Tanger team.
I want to convey our sincere best wishes for everyone's good health could well be.
During these unprecedented times.
The safety of our employees tenants and customers are the focus of every decision we have made since the start of the pandemic.
On today's call will provide our first quarter results and discuss the impact of cobot 19 on our business.
Also we will provide an update on the actions we have taken to fortify our liquidity position to support our employees to work with our tenants and to facilitate the ongoing process of stores successfully reopening as of today approach.
Auction badly 18% of the stores in our consolidated portfolio our open.
As Reopenings increase we're seeing shoppers return.
Prior to the emergence it impacted cobot 19 and related stay at home restrictions, we anticipated the start of 2020 would average challenges.
However January February performed better than our expectations.
As discussed on our yearend call we expected occupancy.
Operating income declined due primarily to the space, we recaptured from bankruptcies and brand wide restructurings, along with select lease modifications.
Beginning in mid March.
They at home orders and the classification of almost all of our tenants as non essential led to virtually all of these stores closing across our portfolio.
These closings at an immediate impact on tenant sales and therefore put pressure on variable rents.
Our same center NOI in the first quarter was down 3.7%.
As anticipated and previously communicated our consolidated portfolio occupancy declined both sequentially and up from a year ago period.
Ending the quarter at 94.3% occupancy.
Additionally.
Leases that commenced during the trailing 12 months, our average rental rates were down, 1.5% and 6.7% honest straight line and cash basis, respectively.
Prior to stay at home mandates and the store closures the sales trend was positive.
To provide some perspective for the trailing 12 months ending February 29 tenant sales the consolidated portfolio for $405 per square foot and same center tenant sales performance for the overall portfolio increased 4%.
For the trailing 12 months ended March 31st.
Average tenant sales the consolidated portfolio were $387 per square foot down 1% from the prior year.
Same center tenant sales performance decreased 80 basis points from that for the overall portfolio.
These results reflect the impact of the closures that began in mid March.
Our centers are primarily open air shopping destinations and they have never close and orders in order to support the tenants who were deemed essential and stayed open.
Stores in our centers began closing in mid March as a result of the Panda.
And by April six operations at all of our 39 centers were under restrictions.
The lowest point on April six opened stores represented 6% of the consolidated portfolio in terms of gross leasable area and 2% or in terms of annualized base rent.
As of yesterday, these percentages had improved to 16% and 12% respectively.
As mandates that are used or lifted and jurisdictions, where 24, 63% Oh centers and tankers consolidated portfolio are located.
These totals include some stores that are open only for curbside pickup or where maximum store capacity is restricted by governmental mandates. It remains unclear when mandates will be lifted completely or is that additional locations.
Well it is premature to speculate on the timing and pace of ongoing openings I want to provide an update what we've experienced today.
Once mandates I've been lifted or reviews and stores have been allowed to reopen.
We have seen the percentage of stores open to be in the mid single digit range within a week.
Over the subsequent week.
The percentage reopening has climbed to the high teens on average.
In South Carolina.
Which is the state where we have five centers that had been opened the longest.
After three weeks approximately 33% of the stores are now open.
We anticipate more stores to open going forward, particularly as national retailers established opening protocols.
From a tanker perspective, we're fully prepared to support our retailers.
During this period of uncertainty and store closures, we did not Germany or furlough any employees. So we have a talented and experienced team that is ready to pick up again quickly.
We are working closely with our tenants as they implement new safety protocols and resume their operations. We're also closely monitoring C.D.C. and other applicable health guidelines to assess these new measures on an ongoing basis.
The most important thing we can do today, it's the demonstrated our commitment to providing a consistent experience across our portfolio that focuses on public safety measures.
These measures currently include frequently cleaning of high touch surface. There is providing signage that reinforces the recommended six speed of social dismissing for customers in Q outside their stores and closing children's player.
We are working hard to create a safe environment for our loyal employees and our dedicated shoppers.
As mandates the close not a central businesses began.
We anticipate that practically all of our tenants would be facing store closures for a period of time.
We formulated the strategy to take control of the situation with the goal of ultimately facilitating store reopenings in the most efficient way.
With that in in late March we offered all tenants in Arkansas validated portfolio.
Yeah option to defer 100% or April and May rents well reserving our all of our rights under these lease agreements deferred rent would then be payable in January and February of 2021, providing what we believe will be sufficient time to rebuild.
The operations and monetize their inventory.
This proactive approach we allowed tenants to preserve capital on the short term and in turn we're helping them to be prepared to reopen as soon as possible.
Well. This approach certainly has a short term impact on our cash flow. We are focused on the long term viability of our tenants and maintaining vibrant highly occupied centers.
I'm proud of the steps, we've taken as a community partners.
Throughout this crisis, we have made our centers available for frontline relief efforts.
Through partnerships with organizations like the Red Cross.
We have hosted blood drives our properties and many of our centers.
<unk> partnership was second harvest volunteers and the National Guard distributed over 1000, food packs and less than five hours to our first responders from just one of our locations.
Jim will provide additional details, but it is important to note that we feel confident that our liquidity position should allow us to successfully navigate this period of uncertainty.
Balance sheet strength has long been a core tenets of tanker.
And this discipline is serving us well.
We entered 2020 with one of the strongest balance sheets and our peer group.
And we have since taking additional steps that we feel our prudent until there's greater clarity.
As part of this approach our board of directors has decided to temporarily suspend future dividend distributions to provide additional flexibility and liquidity.
The board will continue to evaluate.
And your dividend distributions on a quarterly basis.
Note that we intend to pay the dividend that we declared in January as scheduled on May 15th.
Which based on what we know today should satisfy the minimum read taxable distribution requirements for the year.
We believe a solid balance sheet is crucial to navigate these challenging times and to reemerge with the strength necessary to pursue potential opportunities that might arise as a result of this crisis.
As we look at the ultimate duration and impact of the pandemic is very difficult to forecast.
In the near term, we continued to endure store closures cautious consumer behavior and the impact of rent deferrals.
However, our strategy and our portfolio gives us optimism.
The near term opportunity I discussed is regarding new permanent and temporary pop up stores to help retailers monetize their current excess inventory.
Also.
Over many economic cycles during the past 39 years, we've shown that in good times people like a bargain and a tough time like this they need a bargain.
We believe in our fundamental.
Principal holds true today now more than ever.
Most important.
Our conviction on the outlet distribution channel remains steadfast.
The current situation as a moment in time.
Albeit one that has persisted for longer than anyone could have hoped but it will pass.
Well, we do not know exactly what long term changes will arise from US we are confident that the fundamental value proposition that tanger outlets provide will persist.
Our tenants, we provide an attractive profitable channel with a low cost occupancy compared to other forms of distribution.
Our shoppers, we will continue to provide the brands that they're seeking at the prices they want.
Well, our country has not been through a crisis such as this in our lifetimes.
There have been several other shocks to the system over the years that this seasoned management team has successfully navigated and have come out stronger on the other.
I'd like to I would like to sincerely. Thank the entire tanger team for their hard work dedication and result.
We are delighted that Steve Yallop has joined Tanger as our new President and Chief operating Officer <unk>.
Steve has over 30 years and the retail real estate business on both the tenants and landlord side working for gap, Ralph Lauren and most recently, leading Simon's premium outlet division.
Since joining the team a month ago Steve's impact has been fell throughout our organization has he has helped focus our team's efforts on leasing rent collection and expense management.
His extensive experience working with the world's biggest brands and landlords has already proven fruitful and we look forward to is welcome leadership as we begin to Reimagine, our business and develop our future vision a vision for our very valuable properties and.
Our brand.
I'm now very please to turn the call over to Steve.
Thank you, Steve I'm excited to be easier.
He sent me an interesting an unprecedented time to be joining the tenured team.
In my new role and currently focusing on three key initiatives first developing organizing and implementing our strategy around rent collections and managing our rent deferment program.
Second.
Providing support to our retail partners, while they manage their store reopenings and ensure that the shopping experience is safe organized and fun for many loyal shoppers.
And third leading the leasing effort to fill vacant stores with new permanent short term and pop up stores.
With respect to rank collections and our deferral program, we have prioritized the long term over short term collections and we're committed to working with our retailer partners towards achieving a mutually beneficial outcome.
In late March we proactively offered all of the tenants in our consolidated portfolio the option to 400% of April and May read interest rate and payable in January and February 2021.
Due to the deferral program April that receipts represented approximately 12% to be amount billed.
And that we expect to be lower in May.
Our proactive deferral approach.
It's designed to avoid potential defaults will stores are closed and facilitate store reopening as quickly as possible when restricted when restrictions are lifted.
Standing leases specify that must be paid even if the tenant is not open.
Should we not agree to a default or payment schedule tenants, we will pursue our lease rights and remedies as appropriate.
Our best in class property management and marketing teams are currently hard at work assisting our retail partners reopening efforts and ensuring that the centers are equipped.
Resourced and staffed to execute appropriate safety protocol as we welcome back our tenants and our loyal shoppers the approved geography.
To date, just over half the bars centers are in jurisdictions that have lifted mandates and are welcoming shoppers.
Lastly.
Beyond the China is widely recognized as the place to find the best brand names on sale every day and the shopper friendly and traditionally open air environment.
Therefore, tanger outlets are the natural destination for brands looking to clear excess inventory. It were intended for other distribution channels. Our leasing team is focused on filling vacant stores with permanent short term and pop up stores aimed at both exciting tenants and new to channel retailers, but.
And to clear excess inventory acquired new customers.
While it is premature to provide details on these efforts. We are encouraged by the initial reception and the prospect of adding rent paying tenancy and exciting new brands to our centers in the near term.
Tanger outlets remain the lowest cost distribution channel for our tenants I would now like to turn the call over to Jim take you through our financial results and provide a brief balance sheet recap.
Thank you Steve.
Well the first quarter net loss available to common shareholders was 30 cents per share compared to net income of 66 cents per share in the prior year.
This year's per share results were impacted by 47 cents noncash impairment charge related to our Fox Whats outlet center, while the prior year benefited from a 44 cents gain on the sell all four of our centers.
With regard to the impairment charge on our Fox Whats outlet center and Mashantucket, Connecticut, the opening of several casinos and nearby markets. Since the center was developed has negatively impacted the traffic to the resort and our center and Consequentially. The performance of our tenants based on the expected decline in the occupancy of the center and its future.
In Hawaii and cash flows we wrote yes, it down to its estimated fair value.
First quarter core FFO available to common shareholders was 50 cents per share compared to 57 cents per share in the first quarter of 29 team.
Note that core FFO at the same metric that we previously referred to as a FFO, but we've adjusted our terminology to be more in line with most of our peers and to eliminate the confusion by those that use the same acronym to refer to an after capex metric for purposes of computing payout ratios.
And the first quarter for the consolidated portfolio same center NOI decreased 3.7% compared to the prior year quarter, driven primarily by tenant bankruptcies lease modifications and store closures. These results were slightly better than we had anticipated due to lower operating expenses.
And snow removal expense as a result of a mild winter season, partially offset by lower variable rent due to the sales impact from Cove at night team and the second half of March.
I would like to take a moment to discuss how we are treating the rent deferrals on our financial statements.
Our tenants they simply take our offer we will continue to recognize revenue from these leases and our net income F and same center NOI and record a lease receivable on our balance sheet.
Well, there's deferrals are paid we will evaluate the collectability other receivables and each quarter and reduce revenues to the extent the receivable is not probable of being paid.
Other changes to the lease contract or maybe we will need to evaluate the substance of the change to determine the amount of revenue and the timing of set to be recognized.
As Steve Tanger discussed maintaining a strong financial position as of the utmost importance. We came into this period with a solid balance sheet and we have taken a number of additional steps to further increase liquidity and preserve financial flexibility through the current current uncertainty.
As a pandemic spread we moved quickly to reduce cash outflows. These actions included temporary reductions in salaries for management and cash retainers for the board of directors, along with a difficult decision temper the implement temporary salary reductions for other employees, we have deferred certain operating and DNA expenses.
As well as certain capital expenditures, including the Nashville Predevelopment project at this time.
And they moved to further strengthening our financial position, we drew down substantially all of the capacity under our 600 million dollar unsecured line of credit at the end of the quarter.
As of March 31st we had a largely unencumbered portfolio was 94% of our consolidated portfolio unencumbered by mortgages and a trailing 12 month interest coverage ratio, a four and a half times.
Other than our unsecured line of credit, which matures in October of 2021, and maybe extend it at our option for an additional year, we have no significant debt maturities until December 2023.
As of April Thirtyth, we had a cash balance of $594 million. Additionally, as disclosed in our released last night. The board has elected to temporarily suspend future dividend payment, which equates to approximately $35 million on a quarterly basis. These steps will help position.
Yes from a liquidity perspective, 10 door, a protracted challenging environment.
Based on our estimated pre Cove at 19 cash expenditures of approximately $25 million per month.
We expect to have sufficient liquidity to meet our obligations even under our most conservative rent collection scenario of not receiving any rent for approximately two years, assuming no dividend payments or debt maturities and we remain in compliance with our debt covenants.
Finally, due to the uncertainty around the current environment and our limited visibility regarding the left and depth of the impact of the pandemic.
We have withdrawn our previously issued guidance.
I want to reiterate that despite significant near term challenges. We remain optimistic we believe we are taking all the steps necessary to navigate the current environment, we have a resilient model a compelling value proposition and a strong balance sheet.
Now I'd like to open it up for questions. Operator can we take our first question.
We will now begin the question and answer session.
Ask your question. Please press Star then one telephone keypad, if you're using a speakerphone. Please pick up your handset before pressing the keys if at any time. Your question has been addressed and you'd like to withdraw. Your question. Please press Star then too.
This time, we will pause momentarily to assemble our roster.
The first question comes from Christy Mcelroy of Citi. Please go ahead.
Hi, good morning, and thank you if it the if the collections were 12% if I think about 80%.
Hey, what portion of that 88% signs the deferral agreement versus what remains unresolved and can you provide any additional detail on the modifications of the leases. If there were any other changes like that moved to a sales base rents or or if there's anything that you received then return.
Good morning Kristen.
Morning.
Let me be clear.
We offered the.
Short term deferral.
As a method for.
The retailers to get open as quickly as possible.
We are sensitive to the short term impact.
On their cash flow.
And on our cash flow.
As most of our.
Since most of our tenants.
We're forced to close by.
Government mandate.
We wanted to facilitate their opening stores as quickly as possible when those mandates were lifted.
We feel comfortable.
The tenants appreciate the fact that we.
Wanted to help them.
Through this period of time, where they can monetize their inventory.
And bring back their employees and get back in business.
However.
With that are being over stake.
We are continuing to preserve.
All of our rights under our contract.
And if necessary.
We will will take actions to collect and the unpaid rent.
Could you say at this point, what percentage remains unresolved versus what percentage higher de agreement.
Bars are as far as we are concerned.
Everybody plans to.
Except the deferral offer.
If they do not.
We will preserve our rights under the lease.
If there aren't any changes in our offer.
Then.
We will.
We will put forward requirements.
Change some of the tenant friendly language to more landlord friendly language, but right now.
We're anticipating that virtually all of the tenants will accept.
And we're looking forward to getting them oak.
Of course, we're happy to update you as the year goes but.
In regard to the the expense reduction can you provide some additional information on your efforts to reduce the property operating expenses by the centers have been close and are you looking at property tax deferrals or maintenance at all.
Yes.
We every every year.
We look at the local property tax Bill.
And as a standard practice.
There are attorneys that review those bills to be sure that there are accurate and appropriate.
Most of the bills or do.
Later in the years, sometimes in December so we have time to work with the local communities on that.
But we want to continue to be good corporate citizens as we have for close to 40 years.
We feel the property tax.
Provides revenue for.
Police fire teachers first responders, so there's a balance and being a good corporate citizen.
And being sure that the property taxes reflective.
The value of the property in today's world.
Good. Thanks in terms of what you will report for operating expenses in the second quarter aside from property taxes are there any other.
Property operating expenses that you'll be able to caught during that period aside from utilities, which is.
I came up with his or her.
As you May know pardon me.
Hi. This is he will take you you want to tech tourism couldn't take that.
Christy we we've been able to you know cut you know a few million out of the operating expense budget. It's not it's not a good run rate to use right now because it's based on the a lot of the stores being closed our centers never close so we still have seen a security and maintenance and those types of costs, but we have reduced hours.
That does help us to save on costs as long as the center is operating own reduced hours.
But as we ramp back up some of those I'm sure those costs are going to return.
Okay. Thank you.
The next question comes from Todd Thomas of Keybanc. Please go ahead.
Hi, Thanks, Good morning, Steve you you talked a little bit about you know what you're experiencing at the centers that stores begin to reopen for for the 50% of the portfolio I guess in locations where restrictions have been east is there a time at which tenants a must reopened wants retail.
Establishment in that location or are given the go ahead and what rights to the tenants have read regarding that that reopening process part of the per the lease.
We do have the strong contract.
Each tenant in the properties.
As as we reported.
The end of the quarter, we were 94.3% occupied.
We.
Our working with the tenants to try to get them.
Open as soon as possible.
And we're providing.
And open air environment.
Where our customers will feel comfortable returning and enjoying shopping again.
The leases require continuous operation.
And if necessary.
We will enforce our rights under the lease.
Okay and in your discussions with with your your retail partners you know, what's what's the biggest challenge our hurdle that that there that they are discussing in in terms of reopening you know it's you know for some of these centers now it has been a few weeks is it.
Is it staffing a inventory safety do you have a sense for what the biggest obstacle that they're facing.
In the reopening processes.
And Scott as you might imagine.
We have over 320.
Different comments.
Each with a different perspective and business model. So it's very much tenant by tenant.
I hate to be redundant, but.
Our entire team is working with our tenant partners.
Helped trying to help them facilitate a prompt reopening.
Other stores.
To start clearing their excess inventory and getting back into business.
The outlets by all conversations we have with our tenants remains one of if not their most profitable business division.
And they all want to get back to work as do most people in this country.
Alright, and then just a one last question here as I was wondering if you have information from either you or if the tanker club membership program or your shopper app or otherwise or do you have a sense for how much of your shopper base across the portfolio you know shops at your centers while Walt.
Traveling.
Maybe staying in a hotel and you have to have a break out of that between you know sort of air and car.
By any chance.
Todd whatever breakout we haven't we have very sophisticated data.
On our customers.
Pre coated.
I don't know how much value that has in this world.
I'm happy to continue that dialogue with you as the year goes by and we can see what the new normal looks like.
I'm, sorry, I really don't have.
A really good accurate answer for you today would be obsolete.
Okay all right. Thank you.
The next question comes from Greg Mcguinness of Scotiabank. Please go.
Hi, Good morning, yes to avoid some confusion here I'll be a bit more formal so Mr. Tanger.
Could you give us an update on printing connectivity most encouraged to see releasing activity through March was inline with last year. We're just trying to understand what's happening now in regards to expiring leases and then with the impact may be on land spread.
Where occupancy tenants willing to sign options right now our most renewals being renegotiated.
We continue to.
To renegotiate not renegotiate we continue to work with our tenants.
To renew.
Existing leases in our existing portfolio.
And I appreciate you're noticing that the volume of the extension of the leases is pretty much consistent with last year.
As you might imagine.
In this crisis mode.
Most of the tenants to push the pause button.
I'm talking about.
Existing renewals for awhile into they get back open again.
We are.
And that very exciting conversations with.
Several new to Tanger and in some instances new to the outlet concept tenants.
To either open permanent stores with us.
Or open pop up stores, where they can test the outlet concept.
And possibly continued to roll out new stores upon that success.
Okay. Thank you and then a follow up on a Christie's Karl question, just looking for a few more detail. The deferrals include that inclusive of Reimbursable expenses and adjust based rent and then at this point you have any idea how much right you may intend on shifting to Catholic Downing from an accrual basis.
The deferral includes base rent and extra charges.
And as a with the information we have today, we have shifted no receivable to cash buyers.
I think yeah.
The next question comes from Samir Khanal of Evercore. Please go ahead.
Hey, good morning, Steve I guess to expand on on the previous question. I know you talked about you know in sort of engaging with their many retailers about opening stores.
All right dealing what sort of excess inventory into the curbside pickup you expand on that a little bit and just talk about Tony.
Kind of demand I mean, I I don't need to go into every specific retailer disclose on that but just kind of generally what categories are looking to come into space, especially for a closer to 300000 square feet. The that you've gotten back kind of in the first quarter here.
Good morning sooner.
Morning.
As you might as you know obviously, we're only three weeks.
Into opening up America again.
And the people being free allowed to.
Leave their homes and trial about.
I don't really want to get into for all kinds of reasons.
The names of these exciting tenants that were talking to.
But it's a mix of existing designer and brand name tenants that we've worked with for years that may be testing brand extensions.
And it's a new.
Online only.
Ecommerce tenants that are looking for physical presence.
And it's some designer tenants that still feel there's a market.
In the outlets, which has been very successful for them to.
We continue to open new stores.
And to expand their market two outlets shoppers, which have always been aspirational shoppers.
You get the best brand name and designer names in the World.
Prices that are more affordable.
So for every.
Challenge.
And there are lots of challenges.
People today are planning to take advantage of these opportunities.
We have.
And the environment.
With the lowest cost of occupancy.
So very profitable for our tenants.
And we have a dedicated.
Seasoned team of real estate professionals talking to a wide wide universe of potential tenant partners.
Led by Steve you all along.
And we'll keep you up to date.
As the year goes bye bye.
But as we've all said we are optimistic.
That overtime.
America is going to reopen.
Businesses will start to generate cash flow and profits.
And the outlets rule.
We will be a place to shop.
I hate to say this again, but the loved to say it in good times people like a bargain and in tough times like these they need a bargain.
Our business model for 40 years has been sustained.
Okay and I guess my second question is on on the dividend and maybe shifting over to Jim When you look at your 2019.
I think it sort of Dollarsthirty, two which was paid is ordinary income.
And I guess I'm, just curious as to how you can only pay one division that at this time it sort of satisfy the taxable income here.
Hi, Samir.
So when we pay that may 15th dividend that'll be our second dividends for the year.
Just a clear clarify that and there's it it's a taxable income and book income are completely different things and.
We certainly can see certain tax scenarios.
Where we might be able you some deductions that's afforded to us by the cares act that will allow us to meet the the minimum distribution requirements. This year.
Okay. Okay. Thanks for that.
The next question comes from Craig Schmidt of Bank of America. Please go ahead.
Thank you.
My question also focuses on the a possible new tenants in this clearly a need for the existing U.S. retailers to.
Liquidate their inventory, but it also seems like there's a lot of orders that were cancelled in March and April that suggests that maybe the vendors have excess inventory to get rid of is it any way to.
To have the the vendors take part in the entry of a possible new tenants for Tanger.
Good morning, Craig.
Most of the product that you mentioned that is made.
In various.
Locations around the world.
That's being a delay to the shipments are being delayed or canceled.
Have a brand name in the label.
It's very difficult to take that out.
And as such it would be difficult for us to do to cut out.
Our tenant partner and go directly to their supplier.
We I don't think that were who were not set up and nor would we be interested in doing that.
Uh huh.
So we're we're only working with the brand names that we have existing.
And new brand names.
Okay and then these new tenants do you think that could be opened by third quarter.
Uh huh.
It depends on.
How quickly they want to move.
Weaken in some instances get them open next week.
And we're working with several new people.
That will be open.
We hope in second quarter, that's our plan.
And.
They.
There's no reason why they can't.
Okay. Thank you.
Your next question comes from time to bone of Green Street Advisors ceased away.
Hi, Good morning, how are you thinking about offering additional rent deferral in June and beyond that foot traffic and sales and slow to recover during initial reopening phase of the country. How long you before you expect to get back to your normal levels of monthly cash collections.
Vince right now.
We have no intention of extending.
The deferral program.
Okay. That's fair enough what I mean, what's your tactics on June 1st a lot of companies are your partners just choose not to pay rent and then it's probably more active negotiation than prior given you know the decision to.
Yeah to offer rent deferral for all just I'm, just trying to get a sense of when you know.
Or how you will handle that situation that seems likely audit legal cases.
Vince we.
We have taken very proactive approach with our tenant partners.
We were the first.
The end of March.
To go to our tenant partners.
With our hand out.
So we're happy to try to help.
You through this situation.
We understand.
You are going to be closed a new will have cash flow issues.
[laughter] and be able to defer the rent not a beep the rent, but the further rent until January and February after you've had a chance to sell through <unk>.
During the Thanksgiving holiday and Christmas holiday season seasons, where most times are able to monetize their inventory.
[music].
Today.
We have no interest.
And extending that deferral period.
We feel that we'd have a very strong.
Enforceable contracts.
And.
It's not our first choice.
But if.
We're not able to.
Get the tenants open.
We will pursue we will.
Ah reluctantly pursue every rate we have anomalies.
Okay that makes some sense helpful color one more for me can you discuss any co tenancy clauses that are common in your tenant leases are there any risk associated with any individual tenant or drew a centers total occupancy levels.
Most most movies is [laughter] have some sort of co tenancy clause.
Since we don't have been a big department stores.
They're not normally tied to a major anchor, but then baby one when a halo brand, but we're pretty comfortable that.
Most co tenancy is also have a requirement for occupancy levels.
But our leases are written so that we're comfortable there won't be.
A co tenancy issue because our leases for the most parts a.
[laughter] the space will be either leased.
And or Hooper.
So if the tenant decides not to open.
But still leaves.
It qualifies as least occupied space.
Got it no that's helpful color. Thank you for the time.
The next question comes from Mike Mueller of Jpmorgan. Please go ahead.
Yeah, Hi, I'm curious for the centers that you've had we opened so far can you talk a little bit about how sales have trended in relation to traffic.
Good morning, Mike.
Yeah.
We have.
As we mentioned in South Carolina.
About a third of the stores now have reopened.
Oh more stores are opening everyday.
And some of the larger.
Well known.
Tenants, we call them Halo tablets.
We are people travel agreed deal.
To go in shop, we'll be opening over the next two to three weeks, so any any traffic or sales they either.
I would be premature and based on a really small sample set.
We'd be happy to update you.
Each quarter as the year grows by.
I will tell you anecdotally.
From reports on site.
The store managers, who stores that are now open.
Our delighted with.
Our sales.
The consumers are delighted to go back to shop again.
And the tenants and tanker are doing whatever we can.
To follow guidelines provide an area were provided an environment, where our customers feel comfortable.
And that's our primary goal is to get the centers open again.
Got the tenants installed.
And let's just get back to business to move forward.
Yeah, and I guess for the Reopenings or you are you the might fit your thinking that this is you know one scenario, where it takes maybe several weeks two a month or so month or two to kind of get tenants back open or should we be thinking you. This like hey, I guess, a new development project, where it can take.
Several quarters, two a year or two that has stabilized in terms of occupancy.
Mike every tenant is different.
It only took us three or four days to reduce refresh our center.
As we mentioned.
Tangorre never furloughed never laid off a single employee.
Every employee of Tanger had a paycheck and their health benefits continue.
That is morally the correct thing to do in my opinion.
But also from a business perspective.
The team now is back in place.
There are well trained well motivated and ready to serve our tenant partners.
Every tenant has a different strategy every tenant has a different timeline.
Can't give you a precise answer.
It's not really like a new development for us because.
It's an existing asset with existing customers. So we're we're working hard to get our tenants open and the professional tenants are working hard to get their stores open because they have a lease obligation a contract to pay the rent.
And.
They understand that and they're working hard to get to get their stores or.
Got it okay.
Helpful. Thank you.
Again, if you have a question. Please press Star then one touchtone phone.
And with the follow up from Christy Mcelroy of Citi. Please go ahead.
Good morning.
It's Michael Bilerman I hear a christie.
So is it I people, referring to it sounds mr. team Mr. why.
Internally.
[laughter] Hi, Michael how are you doing I was hoping you'd be able to join the call today.
Uh Huh every week to week cause a various different names, it's Steve you all off or Steve Tanger, or Esquire S T, but just calls.
Well I've a question for Yalof, yeah, what.
Maybe you can talk a little bit that you talked about the three thing to even focused on but maybe you can just step back in terms of thinking about the opportunity to join Tanger. Eventually become CEO you know how do you think about that opportunity that portfolio relative to where are you sat before we sign then which obviously is also within the outlet.
Business, but.
Higher productive portfolio, a little bit different of a tenant base I guess, what drew you to tanger and the opportunity set it affords.
Well Michael Thanks for the question I appreciate it.
Well first of all I mean, I'm thrilled to have joined.
Tanger, that's great management team great marketing team.
And I'm looking forward to the partnership with Steve.
Obviously, we see a lot opportunity in the out of that business I'd been than the other business pretty much my entire 40 year to year.
Not only have wide then a landlord.
Laminates I previously, but I've also docomo deals.
The tenant.
Both GAAP and <unk> going.
But the one part we don't really talk about if I'm also not customer I.
Shopping frequently I believe in the channel I.
And I think that there's great upside and great opportunity.
For opening our value oriented shopping centers, especially in today's they're getting age.
So from my perspective, with or some of things, it's Steven I've been talking about as far as what we think that we can do on a going forward basis.
I think it's important to really focus on what's happening right now.
And the critical focus for US is obviously that.
The safety in the health of our employees that are working her shopping centers some of which it has.
As Steven mentioned earlier the centers it never closed.
And have been working through.
And now also supporting the retail partners as they get open.
And starts are the same they the shoppers and our customers and.
Right.
Well that had some good successes over the past.
A few weeks it as we've been getting open our national tenants are starting to get open our food retailers and our bar kiosks and pop up stores are getting open.
So we're we're enjoying watching as.
Let's get turned back on the centers get energized the customers come back and that's really going to be our focus for the foreseeable future and hopefully a going forward will start talking about plans for what's next for Tanger.
To your tagline that is gonna be I'm not only the tanker pressing I'm also a client stealing from the hair club and then.
[laughter].
Thanks, Michael I try and trademark that yeah, So and if you you talked a little bit about the rent collections by 88% or not paying in April and that's going to go higher into may what percentage of those because you started this program in late March what.
Actually all of that 88% have actually now signed your deferral agreement to pay rent in January and February.
And I assume a good portion of it and have because were two and half months into this just to give us a sense of how much is still on the table reverses outparcels not because as we come into June.
Yeah, I think though the if you're not going to be offering anymore deferrals that breakdown is gonna be important because let's say half, let's just say, 50% accepted your deferral and 50% didn't.
It kind of makes a lot pay rent in June that half. So that's what they get some clarity on the breakdown of what actually has occurred.
Michael Let me take that.
Clearly.
The risk of being redundant.
We have offered.
Gracious.
Solution for our tenant partners to get open.
And to try to help them.
We've made that offer.
We're assuming.
That they will accept.
We feel comfortable.
With those that have accepted we have appropriate documentation.
And so.
If cheering first comes.
And we're not comfortable we intend fully to pursue our rights under the lease.
It's premature for me to give you an actual number.
With that I really can't if I had the number I'd be happy to give you, but I don't have it yet and we'd be happy to report it too.
At the 90 days.
I don't need a specific it's 42.3% I think it's just trying to get a sense you clearly I mean, you started in late March were now sitting here in mid May two and a half month of past I just to get a sense a cycle for them and and look I think it's the you you did a very honorable thing there.
Allowing your tenants not to pay rent when they had lease agreements I don't think we've seen any other read actually go to their entire tenant base and say you know what don't pay offs, we know you're hurting.
Oh, I know, it's going to build goodwill with your tenants, let's hope that's helped most of them stay solvent. So that those rents will get paid but I. We're just trying to get a sense of loans that I saw that an accepted it only a quarter. It wasn't 75, just some range some goalpost to think about.
As it would be helpful to you know that having a little bit more certainty around that I think is investors' confidence of what the future may hold.
It's too early for me to give you the certainty that you're looking for.
I can do that in 90 days when we have more information.
As I mentioned.
We're going on to the operating.
Assumption.
But if they have not paid April and may they have accepted and we have appropriate documentation that they have accepted the deferral and we'll see what happens in June.
And we expect that the tenants will honor.
Their contract.
And if not we will take whatever now series that we deem appropriate to protect <unk>, our rights and the rights or shareholders, but Michael I can't give you more information than that today.
Okay, right I think the added uncertainty and it's probably going to.
I mean system, it's just more uncertainty I think actually having at least saying like half of them to find it and taking that or quarter at least giving some sense in the street cutting most people given the environment artist can assume the worse that.
No no tenant has actually find the deferral or a very small percentage and we're going to roll into June and see what happened versus having the confidence is saying well look at our good majority of that has we've spoken to them. They accepted it they understand their thankful that grateful and their intention is to start paying us rent in June and.
You know pass back for April and May next January and February.
So if he and I would say if you instead of 90 days I would say, there's as we roll into June I think a proper update to the street, maybe at near rate would be would be helpful.
I appreciate that I will tell you that our tenant partners.
Echo what your thoughts or.
They very much appreciate.
Our sensitivity to their issue.
And.
We'll see.
What happens if they're able to or they are willing to fulfilled their legal obligation.
Yep, Okay. Thank you.
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This concludes our question and answer session.
To turn the conference back over to seize tender for any closing remarks.
Quanta, thank everybody for joining us today.
This will be as most the very interesting journey this year.
Once again I'd like to welcome Steve you all off to our team.
And thank everybody on the Tanger team for all their hard work during these extraordinary times to maintain the viability of our shopping centers.
I wish each of you good health and please PC.
Goodbye now.
I'm, France has now concluded. Thank you for attending today's presentation you may now disconnect.
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