Q4 2024 Tanger Inc Earnings Call
Speaker Change: Broadcast Dec didn't find out he has a disease, but will report it this summer.
Speaker Change: Good morning. I'm Ashley Curtis, Assistant Vice President of Investor Relations, and I would like to welcome you to Tanger, Inc.'s fourth quarter 2024 conference call. Yesterday evening, we issued our earnings release, as well as our supplemental information package and investor presentation. This information is available on our IR website, investors.tanger.com.
Speaker Change: Please note this call may contain 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 for a detailed discussion of these risks and uncertainties.
Speaker Change: During this call, we will also discuss non-GAAP financial measures as defined by SEC Regulation G. 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.
Speaker Change: 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, February 20, 2025. At this time, all participants are in listen-only mode. Following management's prepared comments, the call will be open for your questions.
Speaker Change: We request that everyone ask only one question and one follow-up question. If time permits we are happy for you to requeue for additional questions
Speaker Change: On the call today will be Stephen Yalof, President and Chief Executive Officer, and Michael Bilerman, Chief Financial Officer and Chief Investment Officer. In addition, other members of our leadership team will be available for Q&A. I will now turn the call over to Stephen Yalof. Please go ahead.
Stephen Yalof: Thank you, Ashley. Thank you for joining us today. I'm pleased to share that Tanger delivered a strong fourth quarter that culminated in a highly productive and successful year with four-year performance at the top end of our guidance.
Stephen Yalof: Full-year core FFO per share was up 8.7% from the prior year, driven by a 5.1% increase in same-center NOI.
Stephen Yalof: traffic grew for the quarter and for the year. Our marketing efforts proved successful by focusing on on-center events and targeted offers to our shoppers through our enhanced digital marketing channels.
Stephen Yalof: Comparable sales for the trailing 12-month period grew year-over-year by approximately 1% and were up 2% to $444 per square foot on a total portfolio basis.
Brands, Categories, and New to Tanger Centers.
Stephen Yalof: continues to resonate with our growing shopper base as we diversify our mix and create a fun and engaging experience that influences more frequent trips, longer visits, and bigger spends for a wider age group.
Stephen Yalof: New and expanded tenant categories including sought-after restaurants, beauty and home brands have contributed to this success.
Stephen Yalof: We ended the year with center occupancy at 98% up 70 basis points year-over-year and 60 basis points for the quarter. For the same period, same center occupancy was 98.2% up 90 basis points for the year and 80 basis points for the quarter.
Stephen Yalof: We have reported positive rent spreads for 12 consecutive quarters. For the year, we completed 473 transactions across 2.1 million square feet, with total rent spreads of 15%.
This includes 38% spreads on re-tenanted space.
Stephen Yalof: and 13% spreads on renewed space as retailers continue to reinvest and grow demonstrating the value Tanger Centers have on their retail store portfolios.
Stephen Yalof: We continue to evolve and build on our digital marketing capabilities.
Stephen Yalof: enabling us to strategically target our marketing initiatives which in turn drive sales and traffic growth.
Stephen Yalof: With regard to external growth, over the past two years, we've added five centers consisting of four through acquisitions and one new development, which have added approximately 2.2 million square feet of GLA to our portfolio and over $50 million of first-year NOI.
Stephen Yalof: Two of these open-air centers were acquired since our last call.
Stephen Yalof: The Promenade at Chanel, in the growing Sunbelt Market of Little Rock, Arkansas, and Pinecrest, in one of the most desirable suburbs of Cleveland, Ohio.
Stephen Yalof: The Promenade at Chanel is 270,000 square foot, upscale, open-air lifestyle shopping center, which we acquired in December 2024 for $73 million.
Stephen Yalof: This property is Central Arkansas's prominent destination for shopping, dining, entertainment, and lifestyle, and boasts a lineup of highly sought-after national brands such as Lululemon, Sephora, and Athleta.
and the state's only Apple, Anthropologie, and Urban Outfitters stores.
Stephen Yalof: These are complemented by regional and local retailers as well as a variety of elevated and casual dining options and an AMC IMAX theater.
Stephen Yalof: This center sits in the middle of a rapidly growing community that includes new office, residential, hotel and medical uses, adding to the market's regional drawing power.
Stephen Yalof: Pinecrest is a 640,000 square foot open-air mixed-use center anchored by Whole Foods, which we acquired for 167 million dollars earlier this month.
Stephen Yalof: As Northeast Ohio's premier retail and entertainment destination, Pinecrest has become the first choice for retailers seeking entry into this upscale market.
Stephen Yalof: The impressive Kenya roster includes a curated mix of top national, regional, and local brands, including Alo Yoga, Madewell, Sephora, and Warby Parker, as well as an expansive roster of entertainment and dining options.
Stephen Yalof: Pinecrest is also home to upscale residential apartments, high-end modern offices, an AC hotel, and is adjacent to a newly developed RH mansion and restaurant, contributing to seven-day center foot traffic.
Stephen Yalof: Our scalable platform is positioned Tanger for continued growth through our existing portfolio and newly acquired centers.
Stephen Yalof: are high-quality, well-positioned assets in MSAs that serve both tourist trade and local populations.
Stephen Yalof: should continue to benefit from outsized population and employment growth over time, validating our strategic positioning.
Stephen Yalof: value proposition, and ability to grow our footprint across our existing platform.
Stephen Yalof: Our external growth strategy is focused on targeting the dominant open-air specialty retail center in the market, where we can create additional value by leveraging our strengths across leasing, marketing, and operations.
Stephen Yalof: Our confidence in the outlet channel is unwavering and has proven to deliver an unmatched value proposition for both retailers and shoppers.
Stephen Yalof: We will continue to pursue and invest in opportunities across the open-air landscape that meet our disciplined investment criteria and provide for sustained growth over time.
Stephen Yalof: Our well-positioned, low-leverage balance sheet, coupled with our track record of delivering strong annual free cash flow.
provides us with the flexibility to pursue these new opportunities.
Stephen Yalof: Over the past few years, we've made tremendous progress in differentiating our platform to unlock the embedded growth potential within our existing portfolio.
for capitalizing on real estate value creation opportunities.
through external growth.
Stephen Yalof: I want to thank our dedicated Tanger team members, retail partners, shoppers, and financial stakeholders for your continued support. I'll now turn the call over to Michael to discuss our financial results and outlook in more detail.
Michael Bilerman: Thank you, Steve. Today I'm going to discuss our fourth quarter financial results, which came in at the high end of our expectations.
Michael Bilerman: our active external growth and balance sheet activity and then outline our inaugural 2025 guidance which represents four to eight percent core FFO growth.
Michael Bilerman: In the fourth quarter, we delivered core FFO of $0.54 a share compared to $0.52 a share in the fourth quarter of the prior year.
Michael Bilerman: leading to Core FFOs $2.13 a share for 2024, representing 8.7% growth over 2023.
Michael Bilerman: Our strong financial results were driven by robust internal and external growth offset by the swap maturities earlier last year.
Michael Bilerman: Same-center NOI increased 3% for the quarter, driven by higher rental revenues from the continued strong retailer demand and leasing activity.
Michael Bilerman: which has led to increased base rents and higher expense recoveries. Our full year same-center NOI was up 5.1%.
Michael Bilerman: We've been active on the external growth front with the acquisition of the Promenade at Chenal and Little Rock in December for $73 million and the acquisition of Pinecrest in Cleveland last week for $167 million.
Michael Bilerman: Both acquisitions were made with cash on hand and available liquidity.
Michael Bilerman: We are excited to add both centers to our portfolio, and estimate that these centers will deliver an approximate 8% return during their first year, with future growth over time as we leverage Tanger's operating, leasing, and marketing platforms.
Thank you very much.
Michael Bilerman: From a balance sheet perspective, pro forma for both acquisitions, our net debt to EBITDA would be between 4.9 and 5 times.
Michael Bilerman: versus ending 2024 at 4.8 times and ending 2023 at 5.3 times pro forma for a full year EBITDA from the three centers that we added in late 2023.
Michael Bilerman: During the fourth quarter of 2024, we sold 2.6 million shares under our ATM at a weighted average price of $35.57.
Michael Bilerman: generating gross proceeds of ninety one million dollars which includes approximately sixteen million dollars that we issued in October that we previously announced with 3Q results.
Michael Bilerman: For the full year, we sold 3.4 million common shares, generating $116 million of gross proceeds.
Michael Bilerman: In addition, during the fourth quarter, we entered into forward sale agreements under our ATM for 1.9 million shares at a weighted average price of $36.40 representing $70 million of future gross proceeds.
Michael Bilerman: All of these shares remain unsettled and can be drawn down over the next 12-16 months, providing us with
future liquidity.
Michael Bilerman: From a sources and uses standpoint, we ended the year with low leverage and pro-rata cash and cash equivalents of $56 million and full availability under our 620 million unsecured lines of credit.
Michael Bilerman: This year-end liquidity reflected the $73 million cash purchase in Little Rock, and last week we used cash on hand and our line of credit to complete the $167 million acquisition of Pine Press.
Michael Bilerman: Overall, our balance sheet remains well positioned to fund our internal and external growth initiatives with low leverage, largely fixed rate debt,
Ample liquidity through last year's upsized lines of credit.
and the $70 million of undrawn forward equity.
and additional free cash flow after dividends.
Michael Bilerman: Our annualized $1.10 cash dividend remains well covered with a continued low payout ratio ending 2024 with a 61% dividend payout as a percentage of our funds available for distribution.
Now turning to our guidance for 2025.
Michael Bilerman: We are introducing a core FFO per share range of $2.22 to $2.30, which represents growth between 4% and 8%.
Michael Bilerman: This guidance includes the recent Pinecrest and Chenal acquisitions, but does not assume any additional acquisition or financing activity.
Michael Bilerman: We expect SANE Center NOI growth to be in a range of 2-4%. And note, for 2025, our SANE Center NOI pool now includes Nashville, Asheville, and Huntsville.
Michael Bilerman: Our expected G&A will remain at consistent levels relative to the last two years, while interest expense is estimated at sixty three and a half to sixty five and a half million dollars.
Michael Bilerman: For additional details on our key assumptions, please see our release issued last night.
Michael Bilerman: And just before we open the call for questions, we are excited to continue to engage with our financial stakeholders at conferences, property tours, and various events. We will be participating at Citi's 30th annual Global Property CEO Conference in Florida in early March.
Michael Bilerman: Bank of America's Retail Re-Executive Summit in New York in late March, a tour of Tanger Outlets Charleston on May 8th in connection with Well Fargo's 20th Annual Real Estate Security Conference.
Michael Bilerman: We'll also be attending BMO's North American Real Estate Conference in New York in mid-May and then a tour of Bridge Street Town Center in Huntsville on May 14th in connection with Evercore ISI's Multi-Property Retour. And with that, operator, we can take our first question.
Speaker Change: Thank you, and I'll be conducting a question and answer session. If you'd like to be placed into question queue, please press star 1 on your telephone keypad, and as a reminder, we ask that you please ask one question, one follow-up, then return to the queue.
Speaker Change: Our first question today is coming from Craig Mailman from Citi, your line is now live.
Craig Mailman: Hey good morning everyone. Can you guys just talk about capital needs for this year given that you have the forward, is there anything in the acquisition pipeline that's
Craig Mailman: you know, closer to the finish line, or anything on redevelopment of pad sites or other, can you just kind of walk through the decision here to pull that equity down and line of sight on deploying it?
http://www.youtube.com
Great. Thank you, Craig.
Speaker Change: I think on the ATM side, that's really for future liquidity, both from an internal and external perspective, and just given the volume of things that we are
Speaker Change: We can draw that down over the next 12 to 15 months, and just given that outlook, we felt $70 million was a reasonable amount and at a price and a yield that we felt was accretive to those potential uses.
You know, we only announce deals when we close them.
Speaker Change: but we are actively working on things, but we'll have a lot of time to deploy and take down that capital if it's needed. The balance sheet, as you know, remains in outstanding shape with low leverage below five times. And so that equity would really be drawn if we were able to deploy capital. And most of our CapEx.
Speaker Change: that's targeted in the core portfolio with the free cash flow that we're generating is able to be used for that.
Speaker Change: I mean, you guys have been really successful at sourcing sort of ACAP initial yields going in.
Speaker Change: How much more of that type of product that you guys would want geographically to fit the portfolio, is there out there or should we assume that over time, you know, incremental acquisitions as your cost of capital comes down a bit, those yields could also drift a little bit lower?
Craig Mailman: Craig, you know, we really look at it on a long-term basis, right? You know, the current yield is just a factor of where the NOI is in the purchase price.
Craig Mailman: and I think as evidenced as talking about Asheville and Huntsville and Little Rock and Pinecrest, we see tremendous opportunity to use our platform to drive growth in those assets.
Craig Mailman: You know, just given our size, you know, at $5.5 to $6 billion, it's a really big country. We have both outlets as well as lifestyle centers to look at. It's a big country, and so we don't need to elephant punch here. We can do smart deals, the deals that make sense both from a financial perspective as well as a strategic perspective, and continue to grow the portfolio in the right way.
Craig Mailman: Great and maybe slip one more in. You guys have been pretty insulated from
Craig Mailman: Ken and Credit issues that the other open-air guys have dealt with. Could you just talk about your watch list, kind of maybe on a percent of ABR or anything there, and then maybe just run through how much exposure within the 77 stores of Catalyst Forever 21 represents?
Sure, so we have nine Forever 21 stores.
added at 77.
Craig Mailman: So it's a pretty small amount relative to the square footage. And, you know, we believe there's.
and then I would say just over 10 credit overall.
Craig Mailman: You know, our watch list remains at reasonable levels, there's all these attendants that come in and come out and we're we try to get ahead of these situations as evidenced last year when Rune Express and our ability to overcome those.
Great, thank you.
Speaker Change: Thank you. Next question is coming from Andrew Royale from Bank of America. Your line is now live.
Andrew Royale: Good morning, thanks for taking my questions. I guess just on the consumer, can you talk about if you're seeing any change in demand or spending patterns across your various markets and income levels? Just curious if there's been, you know, any evidence of trading down or pullback beyond just expected seasonality?
Andrew Royale: You know, we ended the quarter really strong, so we thought the consumer was in great shape, and our sales numbers were up, and our traffic was.
Andrew Royale: was up, going into, obviously going into January, you know, we've seen a lot of weather issues in January. So I don't think that that's a good indication of future run rate. I think the best indication of the strength of the consumer, we look to the retailers.
Andrew Royale: We asked them how they're planning the year. We asked them to give us an update on their open to buys. The retailers are not looking to pull back. They're looking to continue to grow their portfolios. And I think that speaks as loudly about the strength of the consumer as anything else I can share.
Andrew Royale: Okay, thank you. And then, you know, you mentioned a few times just the potential for additional growth beyond the 8% first-year yields at Pinecrest and the Promenade. Can you just quantify the level of potential upside and maybe the steps it'll take to get there?
Andrew Royale: Andrew, you know we're not putting out sort of five-year expectations. You know what we can say is those deals currently have some vacancies, some re-merchandising opportunities, and you know it takes time to execute that.
Andrew Royale: same center effective growth as they roll into the same center pool as we leverage our platform.
Thank you.
Andrew Royale: Thank you. Next question today is coming from Steve Sakwa from Evercore ISI. Your line is now live.
Thank you. This is Martin. This one's for Steve.
Andrew Royale: A quick question on lease expiration schedule, which I believe stands at 23% of GLA and ABR for 2025.
Andrew Royale: Just wondering how the conversations are going with tenants that are up for renewal and if you are aware of any larger move-outs that could potentially result in a lower retention rate for this year. Obviously, I understand that the retention rate has been really high for you in recent years, so we're just trying to understand that a little bit better, if there are any risks potentially coming from there.
Andrew Royale: Sure, there's no risk to speak of, so thank you for asking the question. From a retention rate point of view, our retention rate from renewal...
Andrew Royale: have gone down over the last year or so, we've done that strategically.
Andrew Royale: You know, if you take a look at our 12 consecutive quarters of positive rent spreads, and you look at our re-tenanting spreads versus our renewal spreads, there's a lot of upside opportunity in the re-tenanting, and we're taking advantage of that.
Andrew Royale: We're also taking advantage of replacing some of the weaker retailers.
Andrew Royale: that perhaps have lost some market share, whose sales performance hasn't kept up with our growth, and we're looking to add new retailers that we think will add a number of benefits.
to our centers.
Andrew Royale: from New Uses, New Variety, you know, we lean fairly heavily over the last...
Andrew Royale: I would say 12 to 24 months on the health and beauty with adding an ulta.
and Sephora to our portfolio.
Andrew Royale: I think that added a number of excellent benefits to our shopping center. You know, we're going after what we believe is a much younger customer just to introduce them to our brand of shopping. I think Sephora and Ulta have done a really good job of drawing that customer, getting them to shop with us more frequently.
Andrew Royale: staying longer when they're there, and then ultimately spending more money. So from the strategic point of view, we're going to continue to think about new brands, new uses, so we can diversify and continue to add variety for our shopper base.
Speaker Change: Thank you. Next question is coming from Flores Van Dyck from Compass Point. Your line is now live.
Hey, morning guys.
Speaker Change: You've got four of them now. If I were to say, Steve, in 18 months time or 24 months time, how many of these types of centers would Tanger own in your view? And what percentage of NOI do you think that we could reasonably expect you get from these types of centers?
Speaker Change: Well, thanks for the question, Taurus. You know, you talk about a pivot. I think the pivot started about four or five years ago when we started to add new uses to our outlet portfolio.
Speaker Change: recognizing that outlet shopper was looking for more of an experience when they came to visit with us than simply the the thrill of the hunt that one gets when they shop an outlet center.
Speaker Change: In that connection, we've added better food and beverage options for our customers. We've added more experiential options for our customers. We've done a better job of amenitizing our properties. We introduced loyalty.
So, you know, our shopping centers.
Speaker Change: The outlet component of our shopping centers really sort of gave us
Speaker Change: The strength and the thesis that we can move forward and start building or add a lot of value to these other types of properties.
Speaker Change: We're going to continue to look and to answer the question, we're going to continue to look
Speaker Change: at Open Air Lifestyle Full Price Shopping Centers and we'll acquire them as they are strategic.
Speaker Change: to our portfolio. We're an operating company, so we're not looking to buy low-yield shopping centers and put coupons. We're looking at centers where we know we can add tremendous value, leveraging our leading, our operations, and our marketing muscle in order to get there.
Michael Bilerman: Thanks. Maybe a follow-up and maybe this is more for Michael. Michael, could you touch on your six cam and and how does that impact
your
Michael Bilerman: your ultimate results. What percentage upside could there be if you transition more tenants into FixCam and how do you deal with the temp tenants and obviously they wouldn't be on FixCam. Maybe if you can give us some more details on that and some of the potential levers that you have at your disposal.
Speaker Change: Thanks, Flores. Largely, most of our tenants are now on a fixed camp basis, and when you think about our rent spreads...
Those rent spreads take into account base rent.
and Sixth Chance.
Speaker Change: And so, as you've seen, our rent spreads move up over the last three years.
finishing 2024 at up 15% on 2.1 million square feet.
Speaker Change: That spread, we're getting higher base, and we're getting higher picture.
and James Chamberlain.
Speaker Change: And that's why the recovery rate last year averaged about 87% for the full year as we're growing that fixed.
as we're pushing some part of that total rent.
Speaker Change: and then as we're operating as efficiently as possible and we would expect, you know, that percentage to be relatively similar in 2025, you know, and as we
Speaker Change: convert and maybe reduce some of that temp percentage. There is some opportunity down the road for a little bit more, but that's
Speaker Change: just goes into NOI. That's just total rent upside at the end of the day, and we've been very focused on, you know, re-merchandising existing tenants overall.
Thanks.
Please go ahead and connect.
Please go ahead.
Thank you.
Speaker Change: Our next question today is coming from Juan Sanabria from BMO Capital Markets. Your line is now live.
Good morning.
Juan Sanabria: I'm just hoping you could talk a little bit more about Catalyst Brands and Forever 21, just kind of the average box size for Forever 21, recognizing it's small and kind of how we should think about downtime and what your experience has been trying to backfill some of the spaces you've gotten it back over the last couple of years. That would be helpful, please.
Speaker Change: Hey Juan, this is Justin Stein. How are you? Thanks for the question. So our sizes with the Forever 21 boxes range anywhere from 6 to 12,000 square feet. As Michael indicated, we have about nine left, but you know we've been slowly replacing them over the last several years and we are, we have multiple deals pending on these spaces. If we get them back, obviously we know, we all know, we can all read what's going on out there, but we are being very proactive.
Speaker Change: go away. We're very proactive in replacing them and that is not like Forever 21, just like every other tenant in our portfolio that is underperforming or under-rent paying.
Speaker Change: Great, and then you had very good success with Samestore NOI growth. It was 5.1% in 2024 and the midpoint for 2025 is 3%. So just curious if you could talk big picture, maybe this is a question for Michael, about the puts and takes to the midpoint of the guidance for this year with regards to Samestore NOI.
Great, thanks Juan and welcome to the Tancred Calls.
Speaker Change: You know, I'd say from a same-center NOI perspective, as you start the year you have the most variability, you know, the most unknowns and the widest range of outcomes.
Speaker Change: I think just from our business perspective, there's no moderation in our business as evidenced by all of the metrics that we put out.
Thank you. Bye.
Speaker Change: Positive leasing, our rent spreads, supply is low, the tenant demand is high, all of that is positive. And we start the year at a guidance range that we feel comfortable with.
We have a very operating, intensive business.
Speaker Change: You know, we obviously have our role this year and, you know, just as you asked about downtime, right, our range contemplates, you know, different levels of.
Speaker Change: Spreads and downtime and timing, you know range of credit outcomes
Speaker Change: and so it all sort of rolls into that two to four percent growth.
Speaker Change: and we look at our enterprise from an FFO perspective driving four to eight percent.
Speaker Change: FFO growth as really being, you know, healthy and continuing to drive value for our stakeholders. Within that two to four, you know, on a quarterly basis
Speaker Change: There's obviously some seasonality relative to our operating expenses. And so you look back to the first quarter of last year of 24, you know, our same center expenses were down 5% as we had some expense refunds.
Speaker Change: I don't know about you, but it's been snowing in a lot of different places that usually doesn't snow. So the first quarter, just from a cadence perspective, relative that two to four, will likely just be, just given the comp on the expense side, a little bit lower from that perspective.
I appreciate it. Thank you.
Bye.
Speaker Change: Thank you. Next question today is coming from Caitlin Burrows from Goldman Sachs. Her line is now live.
Caitlin Burrows: Hi, good morning everyone. Maybe just a question kind of similar to Flores' on lease structure, but about overage rents. I guess if I look at like the five years before COVID, percent rents were in like the 3% range as a percent of base rents. They went up during COVID, now they're down to like the 5% range. Obviously anything can happen with actual sales outcomes. But as you guys think about the lease structure, is there still a portion of that that's kind of
Speaker Change: going into base runs, or are you at like a normalized level now? Does that make sense?
Speaker Change: Hi Caitlin, it's Justin. So, you know, as we've previously discussed, we are very focused, as when leases come up for expiration, of sweeping that variable rent into fixed.
Speaker Change: Got it. Okay. And then maybe just on occupancy, I'm wondering if you guys could clarify a couple things. One, the 98% that you guys report just is at least versus occupied. And then on the temp side, is it still at 10% or has it moved? And then also, I mean, like 98% occupancy is pretty high. So wondering to what extent that might be like a seasonal high versus sustainable.
It's normal.
Speaker Change: Well, first of all, at the end of the year, you're always going to have far more occupancy just because some of those ten tenants that fill space for the fourth quarter of the year.
Speaker Change: But, you know, on our temp basis is probably pretty consistent with what we've been saying. It has been, you know, 10 percentage range. So that really hasn't changed materially. But, you know, like I've mentioned in the past, you know,
Speaker Change: Templating is really a strategy for us, so embedded in that
chunk of temp space.
Speaker Change: is retailers that move from space to space as we fill it.
Speaker Change: They were very diligent about making sure that spaces are cash flowing. So if there's a retailer that
Speaker Change: You know, a signed lease that's waiting to take occupancy, we'll always keep that space filled with the 10th tenant until the delivery of occupancy date, and keep it vibrant, lights on, and obviously cash flowing.
national tenants.
Speaker Change: that, you know, come into markets, that they want to make sure that there's a customer base for them before they go long term. We've had great success using PopUp as a strategy to get retailers into markets and ultimately, ultimately convert them into.
Speaker Change: permanent tenants in the same spaces. And, you know, we've mentioned a number of those brands that we've had success with in the past like Ugg and Vineyard Vines and, you know, we're going to continue to use that as a strategy going forward.
Speaker Change: Got it. And the last one, realize there might not be a large spread, but is that 98% a lease number or economic occupancy?
For more information visit www.FEMA.gov
Hey Caitlin, that's occupancy. Okay, thanks. Not least percentage.
Thank you.
Speaker Change: Thank you. Our next question today is coming from Hong Zhang from JP Morgan. Your line is now live.
Speaker Change: I guess expense recoveries were in the high 80s as a percent of operating expenses this year. I guess just ring between the lines of your commentary about
about just moving tents to fixed cam is the expectation
Speaker Change: pretty much remain constant for the near term or do you see further upsides?
Speaker Change: Thanks, Hong. You know, a lot of it is just driving that total rent. So when you're driving 15% rent spreads and we're driving both base and the cam, that's what's growing our revenue base.
overall, and then you know the denominator, the operating expense
Speaker Change: you know, over the course of the year, you know, we have been able to be very efficient on our operating expenses.
Speaker Change: and the denominator has been relatively flat to up a couple of percent. That's what's really causing the ratio to move.
We did end 24 at about 87%.
Speaker Change: And just from a cadence, you know, typically you're a little bit higher in the front half of the year than the back half of the year just given the higher seasonal expenses that we have relative to the cam part being flat.
throughout the years.
Speaker Change: I mentioned to Juan's question, the first quarter, just relative to last year, will likely come down a little bit just because our operating expenses last year, given the expense refunds that we had talked about on the first quarter call last year, affected the expense base. But over the course of the year,
Speaker Change: we should be in and around that 87% level, give or take.
Got it. Thank you.
Thanks Han.
Speaker Change: Thank you. Next question is coming from Neysha Shaw from Green Street. Your line is now live.
Speaker Change: Hey, good morning. This is Michael on Today for VINCE. Thank you for taking my question. I was curious if you could discuss the building blocks of 2025 same-store NOI guidance a bit further, so maybe with regards to what is assumed in terms of renewal spreads, occupancy changes, and expense growth. Thank you.
Thanks, Michelle.
Speaker Change: are two to four percent. It's got a lot of different assumptions. I mentioned before, we are a very operationally intensive business. I mean, we're not going to shy away from it. We've got 20 percent role this year.
Speaker Change: and the other is the financial aid. So just dealing with that amount of role in terms of the different expectations on spread, the timing, when we deliver, how we may use different strategies. We have that aspect. We have a range of different credit outcomes over the course of the year. We have obviously the timing of our expenses and what we can do. So we're not going to
Speaker Change: sort of detail every single line item because every one of those has got different ranges and we have to get comfortable with a range that we feel we can deliver towards and that two to four is something that we think at this
Stephen Yalof, Michael Bilerman
Speaker Change: Depending on how things go, lift that guidance if performance is there.
Michael Bilerman: Gotcha. That's helpful. And then maybe just one more on the expense side. So Tanger's been pretty effective at managing their operating expenses in recent years, and I was curious if management expects same-story expense growth to return to levels near inflation? Do we think the current run rate is sustainable moving forward? Any color on that would be helpful.
Michael Bilerman: Hi, it's Leslie Swanson. You know, we continue to look at every efficiency we can from an operational expense.
Michael Bilerman: certainly we continue to have providers that need to have cost of living adjustments for their
Michael Bilerman: their teams that keep our properties very clean and safe. But we continue to find efficiencies year over year to mitigate extreme expense growth and we're committed to doing that. That's part of being, you know, part of operational excellence that we provide out to our retailers and to our shoppers.
Thank you very much.
Speaker Change: Thank you. Next question is coming from Connor Peaks from Deutsche Bank. Your line is now live.
Thank you for tuning in.
Connor Peaks: Hi, thank you for taking my question. I wanted to talk about the Capri and Tapestry merger not going through. Maybe if you could talk about any updates around this or maybe any adjustments to your real estate strategy as a result.
Speaker Change: We'll share with you what we know, and what we know is probably similar to what you know. Any other information, I would obviously refer you to those brands.
Speaker Change: But as far as coach is concerned, you know, our tapestry brands, you know, look, we're we're we have a great working relationship with the folks over at tapestry They continue to grow within our portfolio and they had a great last quarter selling last quarter
Speaker Change: We read, like you did, of the sale of the Stuart Weitzman brand to Claris.
Speaker Change: which just happened last couple of days, you know, for us, we find that to be really exciting, you know, Stuart Weitzman hadn't been growing, and now perhaps under Claris' operations and under their excellence, we might see some more stores.
Speaker Change: So we're anxious to speak to them and find out what their plans are for the brand and what the Open Dubai is.
Speaker Change: and we know that our customer loves to shop that brand and we're hoping we can bring that product to them.
Speaker Change: With regard to Capri, they had their investor day yesterday. I think their outlook looks pretty good going into
26 and 27 as they talked about.
Speaker Change: And again, you know, they're a very important retailer with us. Our customer loves that brand, continues to shop that brand.
Speaker Change: and although they've had some challenges over the last couple of quarters
Speaker Change: we feel pretty strongly that they're going to be able to continue to grow their business and continue to be a really important brand inside of our portfolio.
Thank you.
Speaker Change: Thank you. Our next question today is coming from Greg McGinnis from Scotia Bank. Your line is now live.
Hey, good morning.
Speaker Change: I'm looking at acquisitions obviously have been more non-outlet focused. Is that due to limited outlet opportunities or is this more of a desire to shift the balance of the portfolio to more traditional open-air retail?
Speaker Change: You know, I think we got, we're focused on acquisitions primarily because the cost of buying and buying these shopping centers is far less expensive than building a new shopping center. You know, obviously we learned that with our latest development in Nashville.
Speaker Change: And when we're buying centers at, you know, sort of 50 cents on the replacement dollar, you know, it's a great use of our capital to look for available properties. You know, I also said earlier in the call that, you know, we really built some muscle to go after alternative uses.
Speaker Change: that aren't just outlet uses for outlet centers. And that success and that strength has given us the confidence that we can continue to add additional value in the full price business.
Speaker Change: Lastly, what I'd say is that there's far more product available in that full-price business than there is in the outlet business. We have looked at other outlet centers that have been listed or marketed for sale, but unless we think that we can come in and add real value to those centers,
Speaker Change: you know we're not going to move forward on any acquisition.
Speaker Change: Right, okay, and is there any, you know, do you see any limit in terms of...
Speaker Change: you know how much non-outlet you're willing to own or is this kind of what we should expect to see kind of going forward because we you know we recognize that there's very few high quality outlet opportunities out there.
Speaker Change: Yeah, you know, I mean, you know, the the paradigm may change that development makes sense again. You know, obviously we've we've been looking at markets where we think new outlet center would definitely be beneficial to that marketplace, the customer and obviously our overall business.
Speaker Change: In the meantime, we're going to continue to look at all available real estate that we think we can add value to.
Speaker Change: as far as a number, you know, we really, you know, it's not about the numbers. It's about making sure that every acquisition is one that we know through our
Speaker Change: leveraging our operations, our marketing, and our leasing team, we can we can go in and we can add a tremendous amount of value downstream. That's how we're looking at it.
Okay, thank you.
Speaker Change: Thank you. Next question today is coming from Todd Thomas from KeyBank Capital Markets. Your line is now live.
Todd Thomas: Good morning. I just wanted to go sticking with acquisitions a little bit you know and pricing. I realize you're not focused on
the initial yield solely, but
Todd Thomas: Is the 8% year-one yield still achievable on new deals that you're underwriting today? And, you know, does your improved cost of capital, you know, enable you to expand the universe of assets that you're looking at, you know, even further today as you look ahead?
Yeah, look, I think the only rule, Todd, is...
Todd Thomas: that we're looking at property where we can add value. You know, that 8% yield, you know, that's, we've been, you know, we've been fortunate to be able to get really good going in economics.
Todd Thomas: If those numbers are below 8% and we decide to move forward with an acquisition, it's because we believe that there's a tremendous amount of upside in that project.
Todd Thomas: And that's really where we think we as a company, as an operating company, we think we can add more value.
Speaker Change: Okay and well when you're executing on new acquisitions after closing, the opportunities that you see to leverage the Tanger platform, does the yield go backwards at all initially as you're sort of implementing some of your strategies or are you able to grow the yield initially right out of the gate?
You know, our underwritten yield is a forward.
Speaker Change: One Year Yield, so it takes into account some of that re-merchandising activity.
and just, you know, we'll look at these deals.
Speaker Change: on a five to 10 year basis as we execute the plans. A lot of it has to deal with the existing vacancy that may be there and the role in those centers to how quickly we can get after those opportunities. But we would expect it does take a couple of years to build up over time.
Thank you.
Speaker Change: Okay, and just one last question. I just wanted to follow up. I think it was Caitlin's question around the temp tenant space.
Speaker Change: which I guess is still around 10%. Seems like that's a strategy going forward.
Speaker Change: But I just wanted to ask about the rent for that space, which, you know, I think historically you've discussed being, you know, lower in the 10th tenant pool versus
Speaker Change: Those for permanent leases, you know, our rents and economics for the 1010 and pool still below permanent leases today or has there been, you know, some change around rents and pricing for the 1010 and pool and is the 10% level expected?
Speaker Change: to remain fairly consistent going forward? Or is there a point at which, you know, the merchandising of the centers and the portfolio, you know, is such that the tenant exposure does decrease and you convert those leases to PERM with better economics?
Speaker Change: Yeah, so Todd, as you can probably imagine, in higher performing assets there's less temp. In assets that don't perform as well, there's probably a little bit more.
Speaker Change: you know that being said those numbers will definitely change depending on where that asset is located and the position that the temp tenant takes in that particular center
Speaker Change: But we did talk as part of that temp strategy were pop-up retailers and pop-up retailers typically being National retailers the rents that they pay for that short-term look on the space is not
Speaker Change: much dissimilar to what a permanent deal might ultimately be. So it's very variable. I think that the cheapest rent deals in our space
are in space where the retailer has the fewest rights.
Speaker Change: So, for example, if a retailer wants to come in on a 30-day month-to-month, you know, we have the right to recapture that space on 30 days' notice.
Frost
Speaker Change: to keep that space occupied with a vibrant tenant that keeps lights on, the property cash flowing, that's probably the cheapest deal. But that particular retailer needs to be prepared that if I've got a long-term tenant that's looking to take that space, or the retailer next door wants to expand into it,
Speaker Change: that they're going to need to move to either another location in that shopping center or if nothing is available, they'll have to leave altogether.
Speaker Change: So, that's sort of how we use temp as a strategy and try to give you both ends of the spectrum. Some of the higher rent-paying temp tenants in the pop-up field and some of the lower rent-paying tenants in those monthly retails that give us maximum flexibility repurpose our real estate as we need to.
Okay, thank you. Thanks, Tom.
Speaker Change: Thank you. Next question is a follow-up from Caitlin Burrows from Goldman Sachs from Mine Is Not Live.
Speaker Change: earlier somebody asked about downtime and I just had to follow up on that so it's wondering if you could give some color on I know historically you guys have talked about one of the benefits of your outlet center property type is that you can move tenants in and out pretty quickly so it's running if you think about like a 3,000 versus 5 10 12 thousand square foot box like how does that timing to backfill vary if you have like a permanent tenant that's ready to
if that makes sense.
Speaker Change: anticipate, let's assume a tenant can't open until November of this year and a tenant now recently expired, we're going to use that temp program to fill that to avoid as much downtime as possible. In the full price channel, build-outs take typically a little bit longer than they do in the outlet channel.
Speaker Change: but we are going to do everything we can to utilize the TEMP program to mitigate downtime and mitigate exposure with with revenue as well.
Speaker Change: Got it. And just on the temp program, which I know we've talked a lot about today and in the past, is that something that works just as well in the full price format or is that more of like an outlet strategy?
Speaker Change: It works in both platforms for us extremely well, and we're implementing it in both Huntsville and Little Rock, and there's not much vacancy in Pinecrest, but if and when we have it there, we will implement the TEMP program there as well.
Thanks.
Speaker Change: Thank you. Next question is a follow-up from Juan Sanabria from BMO Capital Markets. Your line is now live.
Juan Sanabria: Hi, thanks for the extra time. Just curious if you guys have any thoughts on the potential impact down the track and proximity etc. of Simon's plan development in Nashville versus your existing center.
So we have competition in every market that we serve.
Juan Sanabria: So, as far as we're concerned, we're 100% leased in Nashville. We're excited about the retailers and the business that they're doing in that market.
Juan Sanabria: There's other shopping centers. There's other outlet centers in that market and you know, we're going to continue to Grow our business what's exciting about where we're positioned in the market is that we're part of a 300 acre entertainment complex where Tiger Woods just
Thank you.
Juan Sanabria: announced and broke ground on a new pop stroke. So Tiger and Tanger on the same 300 acre parcel were excited for that. They're excited for their ground, their opening.
Juan Sanabria: Also, the Nashville Soccer Club is on our location, and they're currently expanding the number of fields that they have. We're across the street from where the Predators have their practice facility and other ice rinks. So there's a tremendous amount of...
Juan Sanabria: residential, hotel, restaurant, medical use, entertainment use, new residential being planned and developed, and a lot of the
Juan Sanabria: What we love in most of our markets, that's that sports tourism business, where folks travel from across the country for tournaments in both soccer and hockey, and bringing that to our site as well will only help us continue to grow our business over time.
Thank you.
I should be a marketing guy.
That's right. Thank you.
Speaker Change: Thank you. We have reached the end of our question and answer session and ladies and gentlemen, that does conclude today's teleconference webcast. You may disconnect your lines at this time and have a wonderful day. We thank you for your participation today.