Q3 2022 Tanger Factory Outlet Centers Inc Earnings Call
Good morning. This is Ashley Curtis and I would like to welcome you to the Tanger factory outlet centers third quarter 2022 conference call Yes.
Yesterday evening, we issued our earnings release as well as our supplemental information package and Investor presentation.
Formation is available on our Investor Relations website investors Dot Tanger outlet dot com.
Please note that during this conference call. Some of management's comments will be forward looking statements 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 for a detailed discussion of these risks and uncertainties.
During the call. We will also discuss non-GAAP financial measures as defined by SEC regulation G, including funds from operations or <unk> core <unk>.
<unk> net operating income adjusted EBITDA and net debt reconcile.
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.
It is important to note that management's comments include time sensitive information that may only be accurate as of today's date November three 2022.
At this time all participants are in listen only mode. Following managements prepared comments the call will be opened for your questions.
A request that everyone ask one question and one follow up to allow as many of you as possible to ask question. It's.
If time permits we are happy for you to re queue for additional questions.
On the call today will be Steven Tanger, our executive Chair, Stephen Yalof, President and Chief Executive Officer, and Doug Macdonald, Senior Vice President Finance and capital market.
In addition, other members of our leadership team will be available for Q&A I will now turn the call over to Steven Tanger. Please go ahead Steve.
Good morning.
Thank you for joining us for our third quarter 2022 earnings call.
The hard work of the entire Tanger team as evidenced in our results.
We continue to provide a compelling value proposition to both consumers and retailers.
Thank you to all of our stakeholders for your ongoing support.
I will now turn the call over to Stephen Yalof.
Thanks, Steve and good morning, I'm pleased to announce another quarter of strong results. During the third quarter, we delivered solid cash flows occupancy growth and the sixth straight quarter of rent spread improvement.
We executed our strategy of diversifying our tenant mix, adding new platform brands digitally native retailers and food and beverage concepts that attract new shoppers extend dwell times and drive frequency of visits we delivered new commercial activations that supported CAGR club growth marketing partnership revenue.
And performance marketing initiatives.
Based on our positive outlook, we're raising our full year guidance and we recently increased our annual dividend for the second time this year, bringing our year to date dividend growth to over 20%.
We ended the third quarter at 96, 5% occupancy a 160 basis point sequential increase and up 210 basis points year over year.
We have recovered almost 500 basis points of occupancy since the trough we experienced during the pandemic. We have done so by Curating our centers with popular brands Entertainment uses and great local and national food and beverage outposts.
All of which continue to enhance the tanger shopping experience.
With occupancy above 96%.
Optimizing the composition of our centers and repricing aerospace.
Having growth in rent spreads and lease duration.
We're increasing the stability of our cash flows by converting variable rents to permanent fixed rate, while maintaining or driving higher than previous percentage rates contributing to additional long term upside.
For the trailing 12 months ended September 30th.
We achieved positive blended rent spreads of five 7%, including an 18, 6% spread on re tenanted space.
This is the sixth consecutive quarter of improvement with positive spreads for each quarter. This year.
We have also extended lease terms with an average term of eight five years for new leases.
We continue to diversify and elevate our portfolio with due to platform brands and categories, including digitally native brands, who recognize the importance of the value channel and their retail ecosystems.
Such brands that have opened or will be opening soon across our platform include Serena and Lily Summersault Regatta, Mac, Weldon, Hey, Dude and all birds.
Additionally, this quarter, we welcomed Ulta beauty to our center and we're hope at Beach Delaware.
We have also converted a number of high quality national brands and popular local and regional tenants from temporary or pop up stores to long term leases.
After they've enjoyed sales success and new customer acquisitions in our centers.
Traffic in the third quarter was in line with our expectations relatively flat for the total portfolio compared to the prior year as we comp the particularly strong quarter last year.
But in store traffic do paid media Activations and Tanger digital promotions.
We have had immediate impact at our partnership property in Palm Beach.
Over the past 90 days, we have rebranded the asset Tanger outlets Palm Beach completed transactions with new National brands and stood up our marketing partnership customer service and Tanger club programs, which all contributed to elevating the shopping experience for the existing customer base driving new shoppers to the center and gender.
Waiting additional revenue.
With less than a year until grand opening constructed a tanger outlets Nashville is underway leasing activity has been brisk as we're over 75 per cent committed with top random retail do to platform retailers and the best national and local food and beverage offerings are.
Projected opening in fall 2023, with a stabilized yields of 7% to 7.5% remains unchanged.
Even as we are encouraged by our strong performance, we're cognizant of the uncertain macroeconomic environment.
Maine prison with near term capital allocation and May delay certain non essential projects as the economic environment shifts.
We're optimistic going into holiday shopping season, and I'm encouraged by our momentum and look forward to reporting on our continued success.
As a values led organization, we are proud of our commitment to our people our planet and our communities in September we awarded $160000 through more than 140 Kangaroo Kids grants with a key focus on supporting more inclusive classroom environments for under certain schools and student.
Asia.
Last month, we raised over $450000 to Tanger pink in support of funding breast cancer research support and care services are nationwide awareness campaigns.
The support of our customers, we've raised over $22 million to support these initiatives over the past 25 years.
We continue to execute to our sustainability initiatives virtually all centers in our managed portfolio now have free EV charging available to our shoppers and we are investing too.
Grow these capabilities.
Further we are on track to meet our 2022 goes to double the number of EV charging stations that are centers as well as our solar footprint by the end of the year.
I want to welcome microfilament to the Tanger leadership team, Michael will join as Chief Financial Officer, and Chief Investment Officer at the end of this month and you will hear from him on our year end earnings call.
Michael is a proven leader who brings a breath relevant experience to this critical role for our company.
I want to thank our entire team our customers and all of our stakeholders for their continued support.
I would now like to turn the call over to Doug Mcdonald to take you through our financial results balance sheet and increased guidance for 2022.
Thank you, Steve we delivered solid results for the third quarter with core F. F. A per share a 47 cents, which was consistent with the same period last year, although the prior year benefited from higher lease termination fees.
Same center NOI for the total portfolio increased to 4% to $82.2 million.
We have further enhanced are well positioned balance sheet in September we refinance the loan on our joint venture property in Columbus, Ohio, extending the term until October of 2032 at a fixed rate of 6.25%.
Our share of outstanding debt remains at $35.5 million.
As of September 30th our net debt to adjusted EBITDA re was five three times for the trailing 12 months.
Are weighted average interest rate was 3.3% with 95 per cent of our outstanding debt fixed and a weighted average term to maturity of five years.
Subsequent to quarter, and we amended our $300 million term loan and increase the outstanding balance by $25 million to $325 million, we extended the maturity to January 2027, plus a one year extension option.
Use the pricing margin by five basis points and incorporated sustainability metric.
We also amended our LIBOR swaps to adjusted Sofa and realized additional interest savings of nearly seven basis points.
In October we refinanced our mortgage on our South Haven, Mississippi Center near Memphis, extending the maturity to October of 2026, plus a one year extension option new loan carries an interest rate of adjusted Sopher, plus 200 basis points and we increase the proceeds from $41 million.
To $51.7 million.
With these financing activities are weighted average term to maturity is now five nine years and we have no significant debt maturities until September 2026.
We have always prioritise, maintaining a strong financial position by utilizing a disciplined and prudent approach to capital allocation. We currently have over $200 million of cash and short term deposits and full availability on our 520 million dollar credit facilities.
As of September 30th we have deployed nearly $22 million of the approximately $135 million to $145 million of total anticipated cost of our national development.
[noise] dividend was well covered.
With a bad payout ratio of 43% for the third quarter and our board of directors approved a 10% increase in the annual dividend to 88 cents per share last month.
Based on our strong performance to date and our outlook for the remainder of the year.
We are again, increasing the midpoint of our guidance for 2022.
We now expect core F F O per share to be in the range of $1.78 to $1.83 or four and a half cent increase at the midpoint. In addition, we expect same center NOI growth at a range of 3.5% to 5% compared to our prior expectation of 3% to 4.5%.
As Steve discussed, while we remain optimistic going into the holiday season or guidance incorporates macroeconomic uncertainty that could impact fourth quarter per cent address.
We have reduced our G&A guidance to between 68 and $70 million from $69 million to $72 million previously.
This is due to a combination of expense management initiatives and a slower pace of new hires and budgeted.
We have also reduced our anticipated returning capex and second generation tenant allowance due to continued high retention along with certain timing and scope changes on non essential capital projects.
For additional details on our key assumptions. Please see our release issued last night.
I'd now like to open it up for questions. Operator May we please take our first question.
Certainly.
As a reminder, star one to be placed in the question queue and you ask you. Yes, you. Please ask one question and one follow up our first question today is coming from Greg Mcginnis from Scotiabank. Your line is now alive.
Hey, good morning.
I'm, just hoping you could help us understand the elevated level of remaining lease expirations. In 2022 is that just kind of more a month to month leasing and if you could also touch on no expectations for more leasing to deal with in 2023 more lease expirations to deal with <unk>.
2023, as well and how much of an opportunity you see there.
Good morning breaks so first of all as far as the exploration.
Expiration activity that we saw this year.
Probably higher than most years, because a lot of that COVID-19 negotiation.
Was burning off this year, we said in previous quarters.
We.
Put in a position to favor occupancy over rat.
And we did shorter term visa thinking that we would re price our real estate.
I will have the opportunity to replace our real estate Fortunately for US we feel that we've got pricing powers are real estate evidenced by the spread growth that we showed this quarter.
So we see.
That the population of expiring leases opportunity for us to continue to push our rats.
And then it just and does that reflect the elevated expirations for 2022 or is that short term like mark to market, Oh, sorry short term month to month leases or is it just.
I'm just trying to trying to understand you've got like the 76% of leasing completed versus.
For 2022 versus last year, when it was lower but the explorations are higher and so I'm just trying to understand that kind of delta between those two sure well as ran to continue to build there's a lot of.
Opportunity for us at our retailer partners to start making commitments for the 22 and 23 leases right now <unk>.
Obviously, our retailer partners want to lock in rats as rents continue to build.
We've also done a really good job of sweeping a lot of that overdraft from a lot of the leases the COVID-19 leases into permanent fixed rent. So that's been a strategy of ours as well. So as you as we continue to have six straight quarters of spread growth.
Taking advantage with a relatively low OCR of about eight 5% versus historical high <unk> pre COVID-19.
Low double digits, we think we've got a lot of bandwidth to push our push our rent's going forward and our leasing team is absolutely taking advantage of that opportunity and our retailer partners had the tolerance to pay more rent, particularly in our platform mhm.
Okay and just final one from you real quick just as financing market. Some more challenge generally you guys. So that'll be sent a good job with your balance sheet.
Do you expect that to create opportunities to utilize your balance sheet for external growth.
Sure Greg This is Doug.
I think you are right.
We do believe that will create opportunities we're fortunate to have.
A strong balance sheet, we've got over $200 million in cash and short term deposit we've got the revolver capacity that we talked about and.
We'll continue to evaluate opportunities to deploy that capital and and do affect the capital market dislocation to create some opportunities.
Alright, thank you.
That your next question today is coming from Todd Thomas from Keybanc capital market. Your line is now alive.
Yeah, Hi, Thanks, Good morning, I guess first I just wanted to follow up on that hopefully I'll still have a question a follow up after after that but just related to the spending initiatives.
I think Steve you mentioned that you might actually delay certain initiatives and your prepared remarks can you just elaborate on that and I wasn't sure if that's new developments.
That are in the pipeline are sort of shadow pipeline or certain redevelopment initiatives or or something else.
Good morning time, so the answer is.
What I was what I was referencing the prepared remarks was really.
Some of the proactive work that we do on our shopping centres to just.
Make sure our centers are always looking.
What we call.
Hangar appropriate, meaning we think we've got some investment going shopping centers in the industry.
And we've done a lot of proactive work, we are constantly reinvesting in the look and feel of the shopping centers that being said as well as sharing into this macroeconomic environment that may change. We've we've said that we're going to be prudent with our spend and we can we will give ourselves the opportunity to may be delays, so that's bad but it really.
Is the.
The who wants to have as opposed to need to have in the event that there is life safety or any maintenance, we're always going to spend capital to make sure that our centers are in great condition to receive our shoppers and customers.
Okay, so that that comment generally.
It reflects the reduction in the the Capex that was updated with the the guidance is at.
Part of of what you're referencing okay got it.
And then just question around the guidance. So the revised guidance implies 44 cents in the fourth quarter.
Can you just walk us down from 47 in the third quarter to that 44 cent mid point, just so we can get a sense of I guess the run rate heading heading into 23, a little bit better to the extent that there's anything that we should be.
Thinking about.
Sure Todd the.
We continue we remain optimistic about the fourth quarter of the holiday sales period, but we do have more variable rent exposure historically in the fourth quarter, just given the larger volume of sales production that these stores do and we wanted the guidance to incorporate the macroeconomic uncertainty.
And.
And allow for some volatility in that number.
Okay. So it's it's primarily around percentage rent that might come off a little bit just given the software sales environment.
Right variable Redwood sales and just remember softer sales were still for the outlet channel Alpha channels of value channel a lot of our retailer partners see that value channels opportunity to be very promotional to clear excess inventory. So we're not necessarily seeing software sales compared to last year, what we're seeing is lower price.
Compared to last year.
Okay got it and then just the last question Steve I just wanted to ask about your thoughts.
More generally around the post holiday season and.
Potential for some some.
Fallout are some vacates, which is typical after the holidays right. So thoughts around that heading into twenty-three obviously, we're coming off a very muted year in terms of space recapturing. So I'm just curious to get your take as as we sort of turned the corner here in the 23 and then.
Curious if you if you have any thoughts specifically that you might be able to share around route 21, they represent 1.4% of your base rent any any expectations there.
Well.
The leading indicators that we look at relative to retailer's.
Performance and.
How we think they're going to perform on the fourth quarter and what they're what our expectations are for their.
Their tendency to remain our shopping centers has to do with the renewal renewal rates I mean, if you take a look at it I just mentioned the last question that we probably had a disproportionate amount of renewables. This year versus other typical year is just by virtue of the COVID-19 adjusted leases burning off this year and what we found.
Years passed about 80% of our leases will renew this year will probably have over 90% very few retailers are closing stores right now, particularly in stores that are amortized because it's tough for them to replace the store that cash flows they.
They will have to make sizable investments in order to do so so because of that paradigm, we're finding retailers stepping up paying more rent, particularly on renewables our platform.
With regard to the watch list, which is the second sort of leading indicator as to where we see the health of our retailers or watch list has never been smaller.
And then you mentioned specifically route 21 into recent conversations with grew 21 I think they believe their business is going to.
Be sustained the holiday shopping season, and we're very optimistic about them staying within our portfolio and ultimately growing.
Okay, Great. That's helpful. Thank you.
Thanks Hon.
The next question is coming from Craig Millman from City. Your line is not alive.
Thanks good.
Maybe Steve I'm, just kinda curious if you guys have has got some good momentum this year on the <unk> side and ran side you have the new partnership on the kind of the management branding peace down in Florida, I'm, just kind of curious as we stand here today, how much more runway do you think you have.
From the existing portfolio to drive <unk> growth here.
Over the next few years from either returning and kind of merchandising mix. Some of these partnerships just trying to get a sense of your ability to sustain this momentum.
Well first of all there is a lot of new retailers that are starting to find the alpha channel.
Looking to us to grow their portfolio.
Say probably.
In the past four or five years.
There were fewer retailer's.
So therefore to supply and demand equation was a little bit tougher right now we're seeing with all this new interest.
We've got a great population are.
Leasing activity has never been stronger.
I rattled off the name of a couple of brand new brands to our platform as brand new black brands to outlet.
At.
Have entered our will be opening stores with us. Shortly so we think that there is a lot of opportunity for new brands to join I think a lot of those do brands will help us absorb some of that.
<unk> that we still have outstanding.
And we're going to continue to push Iraq I've had historically, we were in the low double digits from an OCR point of view at $8. Five we're still relatively inexpensive as low double digits will still be inexpensive, but we think there's great runway for us to push we can only push based on the.
The churn in our portfolio or our ability to.
To lease some of that available space. So that we can turn the entire portfolio over at one particular point in time, but we've had some real consistency I keep on going back to six successive quarters of.
Of a spread growth.
We're focused on pushing risks and in the past where occupancy was our strategy now we're we're going to favor read over occupancy on a going forward basis.
And and do you guys you made the point Capex it down cause Retentions out then you may delayed some non essential projects here, but from kind of net affected the sister MTV basis, I mean, how much better is the leasing coming in from.
From a contribution of cash flow that maybe what you guys. Originally someone at the beginning of the year.
Some of the new deals you can look at our supplement.
Raised rates on permanent feels by $10 and <unk> have gone up by the same $10.
But what what the important metric bears were also growing the term of those leases.
So that's a good trade for us.
Okay, and then just last one.
Guys think about the future here your cost of equity capital is still.
Kind of high single digit cost of data is moving higher.
Again, you are having some success here on the operating portfolio, which will hopefully improve that cost of capital because you guys think about maybe the opportunity set coming out of some dislocation here.
How are you guys positioning yourself from either source and capital partners or trying to figure out how to best kind of stress that capital to be as accretive or less dilutive as possible to to potentially grow the portfolio here.
Sure Craig.
I think palm each have a good example of that where.
Very little capital investment and we're going to partner with them grow value of the asset.
And we will continue to look for opportunities, where we can partner with other capital providers that may have a lower cost of capital and look for acquisition opportunities development opportunities.
Virginity deploy capital were also focused on reinvesting in our own portfolio and.
Enhancing the assets investing in sustainability initiatives.
Investing in the out parcels strategies that we've talked about.
Obviously, nashville's a piece of our growth and we locked in a lot of our capital for that last year through the equity offerings and our bond transaction.
That was able to lock in the cost of capital against the yield that we've we've stated and our expectation so.
And we're continuing to evaluate a lot of opportunities and obviously, keeping a close eye on the deck capital markets and equity.
Equity markets and.
Will we do have the ATM capacity still available to the extent that our stock prices at a level, where the issuance makes sense relative to the proceeds in the investment opportunities to use the proceeds is what I meant to say.
Great. Thank you all right.
The next question is coming from foreign spent I come from accomplished point. Your line is now alive.
Good morning, guys. Thanks for taking my question I.
I noticed a lot of skepticism still in a lot of these questions.
Questions and and a lot of the investors still out there. Despite the fact that you guys have performed pretty well your date.
Relative to the <unk> next door or frankly to your to your mall peers as well just I was curious uhm.
And maybe maybe we're asking the question the wrong way, but but.
Outlets should have a cruising speed of around 3% based on fixed rent bumps and based on your Cam obviously, you're cruising speed near term is going to be higher or your growth and underlying NOI should be higher because of your <unk>. Your further occupancy gains you simply revenues the higher OCR the variable.
All to fixed all of those initiatives, maybe if you can touch on the.
D as in O pipeline touch on the how we measure.
Going forward your ancillary revenues and also when can you get back to 19.
19 levels of NOI, I think you've reported 304 million of NOI 19.
Obviously, you're gonna be short of that this year.
Can you achieve that next year, maybe if you can give us some more color on that that'll be that'll be very helpful.
Sure we don't want to provide guidance for next year's NOI, where the growth rates, but you raise some good points, we do have contractual escalators and a lot of these leases. There is any built an annual rent bumps often around 3%.
We do have opportunities to continue to grow our occupancy or replaced lower productivity occupancy short term type tenants with more permanent higher rent payers.
We also have the eight 5% occupancy cost ratio that day reference we believe that that average.
There is a tolerance from a lot of these retailers and want to stay in Tanger centers and our valued partners.
And they're willing to step up to market rent to retain their space. So we think there is an opportunity to grow the occupancy grow the rent.
Continue driving same center NOI growth.
What is your S N O pipeline today.
You're saying not open pipeline.
Half a percentage point.
So 50 basis points, though.
That's right.
That's consistent with I guess last quarter as well.
But in terms of at while I'm not asking you to provide guidance for for for next year, obviously, but.
Are you guys internally focused on trying to get back to that and do you have a goal to get back to the the 19 levels of of NOI.
<unk> over the medium term.
That's the Northstar, we wanted to eat that number for us I mean, we're doing.
Ah results are proving out our strategy, we've been talking about our strategy fairly consistently and we shape our operations, we're going after new brand new uses.
To fill our space what we're finding is were absorbing a lot of space, where monetizing our peripheral land, where we think there's a whole new revenue stream for us that will firstar cash flowing in 2003 and well on into 24 and beyond.
So we're going after or organic growth of the existing portfolio.
Then, adding Nashville, which will come online at the end of next year and we're seeing great results in North Palm Beach partnership as well and we think that there's there's many other opportunities for us ahead.
Once again, we are very focused on our core business in our core strategy and I think that that's where most of these results are coming from today, we're going to continue.
Pushing art on that.
Thanks to even if I can have one follow up you talked a little bit about new to market tenants in some digitally native brands. In particular, you mentioned that are coming to your presumable, you're you're competing with Simon for some of these and they're also opening Simon.
Outlets I would imagine as well, maybe if you could touch on.
One of the strengths in retail have has been the luxury elements, obviously outlets are not necessarily perceived as luxury but you do have some luxury tenants, particularly tapestry brands that are in your in your outlets do you see.
The potential for you to bring other luxury.
Tenants.
Due to the outlets and particularly now that with the ESG you they can't burn their excess inventory anymore and not that they have a whole lot of excess inventory typically but as.
They want to dispose of of things that aren't selling that season potentially.
Increasing.
Or.
Getting the the revenues from that by selling through through an outlet I do see an opportunity there for ya going forward.
Definitely.
Great.
Presumably that could show up an additional leasing going forward.
Yes.
I think we've got some elevated centers.
Between Palm Beach Nashville.
And a number of our other centres across the portfolio, we've got great opportunity to push into new categories. We've proven that we can do that we continue to do it.
Have a whole team that's focused on going after brand new new brand new brands to outlet and we keep on improving success and very willing to share the names of those brands as we.
Otomi, we open those stores.
Thanks to you that's it for me.
Thanks, a lot.
The next question is coming from the familiar canal from Evercore. Your line is in our life.
Thank you Uhm his Steve good morning can you provide more and more details on the occupancy pick up in the quarter I mean, just curious that.
So that there are a few properties in any kind of your listing of Atlantic City Riverhead, That's a big job maybe provide for the details on kind of what you're doing to those assets.
Driving that occupancy and now that you're sort of at that 96%.
Range, which was much higher than I'd thought sequentially.
Kind of what the upside is here.
Thanks, Samir and I think a lot of that increase.
Has to do with our pivoting it to new uses so as you take a look at Riverhead as an example, we recently opened.
Michael Mitchell gold and crate and barrel and.
Restoration restoration hardware store, so essentially what we're doing is we're building a destination for home in that particular location same with our center in San Marcos, where we've been very successful doing a number of big home deals in that market as well <unk>.
<unk> City is a location, where we were able to do some entertainment uses we sign a big least with Dave and Buster's. So we're taking each of these individuals centers.
Bifold, who our customer is in those centers, what they're looking for when they come in a visit and what what role our center place in those communities and where those communities are underserved with particular uses posted it uses that we're going after we're still pure play outlet, but it's great to round out that merchandise.
<unk> with other uses that give other folks that come to visit our shopping centres things to do and again, what it does it gets people arrived more frequently draws a new customer get some to stay longer when they're there and ultimately build bigger baskets, which drives bigger sales.
And then and then remind me, but I think temporary tenants are going to be part of that number right and and I guess, if so what percentage makeup.
Sort of temporary tenants.
Now we send in the past the temporary tendency was over 10% we don't break the numbers out.
That number is actually going to start to come down as we convert a lot of these temporary or pop ups tenants into longterm permanent deals and we start to absorb a lot of that space with retailers successful retailers that are expanding we've seen a lot a lot of that through the portfolio, particularly this year.
And again you know.
New brands that are finding outlet.
Long term permanent deals with a lot of these brands and they're gonna make exciting New addition to our shopping center. So we feel pretty optimistic about our occupancy growth.
More importantly, we're really optimistic about our rent growth and I think those two things together are the key fundamentals tough growing our business an organic basis.
And just one last for me one last question for me on pricing power into next year.
Certainly when you think about leasing spreads.
I mean, it sounds like you will see continued improvement in that number eight minutes is that correct and I guess the reason I'm asking is I know occupancy costs are low, but when you look at sales sales are relatively flat year over year, So I guess how much.
I mean, how much more upside or improvement do you think you can see on pricing power into next year.
Well first of all <unk>.
Right or spaces cheap, we definitely have pricing power, we have opportunities we push Reds you.
You can see it in the numbers.
You look at the flat sales and I just wanted to make sure that you know.
We understand where an outlet center. So when you have one of the largest national retailers announced that in order to keep their full price channels clean with brand new inventory and that they're going to close all they're going to close out all of this excess inventory through the outlet channel essentially what's happening is they're being.
More promotional in our channel so that they can be more clean and pushed prices in the full price retail channel in those instances are channels doing exactly what these retailers are paying for they're looking for they're looking for customer traffic.
Promotional selling in a value oriented environment, where we're drawing customers the shopping center and there had the ability to clear that excess inventory. So not every retailer is looking at outlet the same way, it's not all about.
The high water Mark of sales, it's being promotional clearing excess inventory and making sure that it's serving a purpose to the entire omnichannel retail.
Ecosystem for each of those individual retailers, we have a number of retailers that only sell access in our channel.
And they are promotional and it serves a great purpose and keeps their margins high in their full price business and that's why there's plenty.
Many of our many of our retail partners haven't.
Serving multiple channels.
Got it thank you.
Thank you as a reminder, that star one to be placed into question Q. Our next question today is coming from Craig Schmidt from Bank of America. Your line is now alive.
Thank you.
Steve I was wondering if you could tell us the national tenants that Tanger brought to getting our outlets Palm Beach and are there any operational changes.
That you might bring to the asset.
Well.
The reason why we made the partnership was because of our operational excellence and what we bring to the table I mean first of all branding the shopping center Tanger.
Has national reach we've got a sizeable Tanger club where are Tanger members.
Hey into that club, but get returned additional discounts shopping days and through our digital <unk>.
Marketing strategies, we communicate with these customers in a very personal way and drive that not only to the shopping center in their particular geography, but make sure that when they're traveling.
They know that there's a tanger shopping center close by so.
So that's number one <unk>.
A number two from an operational efficiency point of view with 36 now with Palm Beach, 37th in Nashville will be 38 shopping centers, we've got great buying power.
And pricing power as it relates to national contracts and those have served us extremely well, whether it's repairs and maintenance janitorial national landscaping or national security contracts.
Our partners definitely benefit from that buying power.
You also have a leasing team that is a national leasing team that we can leverage when we add additional centers to our portfolio.
We without without growing the size of that leasing team, we can expand our reach particularly with that national tenant population, that's starting to join US with regard to Palm Beach in particular, we have over 25000 square feet of new tenants to that center that are in various stages of <unk>.
To executed and we have our partner and we will release those names and a shirt press release.
As those stores.
Open.
Not we're not announcing stores were in a very competitive environment, we choose not to announce the stores until those stores are open or their signs go up.
Okay. Thank you for that and then just are there any route 21 stores that leases expire in 2023.
Justin Sighed who's our EVP leasing is sitting in the room going to ask him to answer that question, Hey, Greg how Ya doing.
We're a communication with all of our retailers on a monthly basis in fact, I personally speak with the CD over 21.
Every three to four weeks in our portfolio was very clean with 21 through 23, and we look forward to you mentioned earlier to confer.
Continuing to watch them turn their business around and growth.
Thank you.
Thank you next question today is coming from Mike Muller from J P. Morgan Your line is not alive.
Yes, hi.
Two quick ones here I guess first for the 160 basis points is sequential leaf great pick up can you give us a sense as to how much of that was permanent.
Kiffin C versus temp and then for the second question when Nashville opens next fall.
What sort of occupancy do you expect it to open that and about how long to stabilize.
Sure Michael I'll take the first one I'll, let Steve answer the Nashville, one, but while we don't break out the hen versus permanent.
To that level, we do acknowledged that the second the third quarter is often when we see some of the seasonal all the holiday tenants that are coming in so that is a component of the 160 basis points of sequential game, but we have strong momentum on the permanent side and have continued to lock in longterm leases.
But.
A meaningful part of that number.
It looks like we're not going to stop using temp leasing as a strategy. We've talked about the fact that we decentralized our operations team. Therefore with 37 opening centres, we've got 37 general managers and operations team on the ground and if there is a square foot of unoccupied.
Space, it's incumbent on them to find a retailer a suitable retailer to take that space to keep the lights on and go for us I call. It a strategy because with a great retailer in one of those faces comes a potential for a long term tenants, maybe a new food and beverages or some local retailers that does a great job of drawing a new customer.
The shopping center that I hadn't visited before and that's important to us it's important to our strategy and it's and it's important to the communities that we serve.
So as we talk about Ash, Nashville, where 75% committed with a year to go in Nashville.
You've been extremely selective with regard to the brands that are going into that center, we've made a very.
Real effort to make sure that we get some new brands so that isn't just.
The same the same lineup that you'll see it every outlet across the country, we're inviting brand new retailers into the portfolio.
And some of their new debuts will happen.
Not shopping center there is a number of brands, we're going to do a released shortly but there's a number of very interesting brands that will be joining us there and we're really excited to welcome them to the Tiger.
A family of brands.
Got it got it.
You have a sense as to when the project opens about roughly with the initial occupancy give me just a rough rage.
Yes.
I don't want to sort of get out over my ski easier, but I know it will be in the nineties.
Okay, great. Thank you.
Thank you. The next question is a follow up from Greg Mcginnis from Scotiabank. Your line is not life.
Hey, Thank you so much I just wanted to quickly touch on base and percent rent in the context of the guidance race, but also performance in Q3 so.
<unk> was flat to cute too despite the increase in occupancy so it was kind of <unk>.
Per cent rent the peace leading into the queue for we expect to see kind of the upside driving E.
Are you a head on your break points, there and the leases and.
If you could also just kind of touch on again, the base rent kind of being flat Q2 that'd be appreciate it.
Sure you are seeing.
Based trend.
So based around $71.7 million in Q2, and Q3 and soon it was kind of unexpected given the occupancy increase.
And then.
That is the expectation than just that per cent rent is going to be kind of the driver of of the the performance and Q Q for in regards to the beat and race.
Q2's base rent included some of the reserve reversals that we talked about last quarter.
There were some non-recurring items that overstated the queue to run right. If you will.
There was growth in the base rent from Q2 Q3 and.
And then on the variable side that is something where we continue to convert variable into fix that contributes to the base rent growth, but but that also derisks.
The ability of these cash flows going into potential periods of macroeconomic uncertainty so that the strategy will continue employing.
But we continue to be.
And the base rent the fixed rent category and also the recovery category as we convert some of these leases into world full.
Operating style.
Thank you we've reached the end of our question and answer session I'd like to turn the floor over to Mister Tanger for any further closing comments.
Thank you for joining us this morning.
We appreciate your ongoing interest in our company.
We will see some of you at San.
San Francisco shortly and if you have any additional questions. Please feel free to call, Steve dug rationally and we'd be happy to respond.
Well in a happy early holidays goodbye.
Thank you that does conclude today's teleconference and webcast you may disconnect. Your lines at this time and have a wonderful day, we thank you for your participation today.