Q1 2025 Tanger Inc Earnings Call
Good morning, Ashley Curtis Assistant Vice President of Investor Relations and I would like to welcome you to Tanger Inc's first quarter 2025 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 website Tanger Dot com.
Please note that this call may contain forward looking statements that are subject to numerous risks and uncertainties and actual results could differ materially from those projected direct future filings with the Securities and Exchange Commission for a detailed discussion of these risks and uncertainties.
The call. We will also discuss our 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.
Call is being recorded for rebroadcast for a period of time in the future as such it's important to note that management's comments include time sensitive information that may only be accurate as of today's date may 1st 2025.
Speaker Change: This time all participants are in listen only mode. Following managements prepared comments the call will be opened for your questions. We request that everyone ask only one question and one follow up question. If time permits we were happy for you to re queue for additional questions on the call today will be Stephen Yalof, President and Chief Executive Officer, and Michael Bilerman, Chief Financial Officer and she.
Speaker Change: Investment Officer. In addition, other members of our leadership team will be available for Q&A I'll now turn the call over to Steven. Please go ahead.
Stephen Yalof: Good morning.
Steven: I am pleased to report the Tanger started 2025 with continued positive momentum delivering a robust first quarter that builds on our outstanding performance from last year, and we are reaffirming our full year same center NOI growth and core <unk> guidance.
Steven: Our first quarter core SFO increased 53 per share driven by a 2.3% rise in same center NOI.
Steven: Strong revenue growth was partially offset by higher snow expense in the quarter and certain expense refund that benefited our results in the first quarter of 2024.
Steven: Traffic, particularly over the past two months has been strong and we are encouraged by this positive momentum leading into our very important summer selling season.
Steven: Sales for the trailing 12 months period averaged $455 per square foot for the total portfolio up from the prior quarter and year due in part to the execution of our strategy of merchandising, replacing less productive tenants at evolving our portfolio.
Steven: We ended the quarter with occupancy of 95, 8%, which reflects an anticipated seasonal decline from year end and further reflects our strategy to add new in demand retailers and uses replacing poor performers much.
Steven: Much of this modest decline in occupancy is the result of timing between old tenants, leaving and new tenants taking possession.
Steven: We continue to expand into new categories and welcome new brands as we diversify our offerings.
Steven: Create environments that encourage more frequent visits extended stays.
Steven: And drive increased spend across a broader customer profile and age range.
Steven: Our strategy is resonating with our widening shopper demographic, although executing this strategy may yield lower near term occupancy. We are delivering solid same center NOI growth, while positioning our portfolio for continued growth in coming years.
Steven: Leasing activity remained solid.
Steven: We executed $2 5 million square feet over the trailing 12 month period, representing nearly 550 transactions.
Steven: Renewals executed or in process through April 30 of 2025 totaled 57% on space scheduled to expire during 2025 compared to 47% over the same period last year.
Steven: With our 13th consecutive quarter of positive rent spreads our brand partners continue to show confidence and invest in expanding their presence within our tanger centers.
Steven: Ancillary revenues continue to grow as our attendance and other national consumer brands see the value of utilizing our platform to reach sought after shoppers.
Steven: Additionally, as we've continued to optimize our digital capabilities, we are gaining enhanced customer insights and analytics that enable us to partner with our retailers to deliver targeted real time promotions that best resonate with shoppers ultimately driving increases in both traffic and sales performance.
Steven: We continue to execute on our external growth strategy as previously announced during the first quarter, we acquired Pine crest, a lifestyle center in Cleveland, which followed the purchase of the promenade at Chanel Little rock in December.
Steven: In recent years, we've made significant strides in differentiating our platform to maximize growth potential within our existing portfolio, while capitalizing on value creating opportunities through strategic expansion.
Steven: Our first quarter results reflect the ongoing execution of this strategy to elevate and diversify our centers with the retailers restaurants and entertainment that shoppers want.
Steven: As uncertainty grows within the broader macro environment, we remain confident in Congress positioning and our differentiated model first and foremost we've established a field led organization that we believe provides for the ideal combination of scale and flexibility.
Steven: Prioritize how we show up every day for our retailers and our shoppers and by staying close to them, we remain nimble against an evolving consumer landscape.
Steven: Additionally, hangars value positioning continues to resonate with consumers today.
Steven: Today, we will launch our Tanger deal days campaign.
Steven: In partnership with our retailers. This marketing initiative will reinforce the value of great brands messaging at Tanger centers, leading to our summer of savings launch in June where every day of summer offers back to school sales encouraging our guests to shop earlier in the season.
Steven: Our high quality assets are strategically located in metropolitan areas.
Steven: Both tourist destinations and local communities, which continue to benefit from demographic tailwind and employment growth.
Steven: <unk>, our market positioning value proposition and expansion strategy.
Steven: We maintain unwavering confidence in our ability to deliver compelling value to both retailers and consumers.
Steven: Our well positioned conservatively leveraged balance sheet combined with our consistent generation of strong free cash flow provides stability and the flexibility to pursue opportunistic growth.
Speaker Change: Behalf of the entire Tanger team I want to thank Dave Henry for his nearly 10 years of service on the Tanger Board, including these time spent as our lead director Dave.
Steven: Dave will be retiring from the Tanger Board after our annual meeting next week.
Steven: I also wanted to extend my sincere appreciation to our dedicated Tegra team members.
Steven: Retail partners loyal shoppers and financial stakeholders for your ongoing support and confidence I'd now like to turn the call over to Michael.
Michael Bilerman: Thank you Steve.
Michael Bilerman: Yeah, I'm going to discuss our first quarter financial results balance sheet, and then provide an update on our outlook for the remainder of the year.
Michael Bilerman: The first quarter, we delivered course, it though a 53 a share.
Michael Bilerman: <unk> to <unk> 52 cents a share in the first quarter of the prior year.
Michael Bilerman: Same center NOI increased two 3% for the quarter.
Michael Bilerman: Driven by higher rental revenues from the continued strong retailer demand and leasing activity.
Michael Bilerman: As well as the ancillary revenues that we derive from our portfolio and platform.
Michael Bilerman: As we had anticipated and discussed in our last call. Our first quarter same center NOI growth was impacted by higher snow expenses this year.
Michael Bilerman: And certain expense refunds that we received in the first quarter of last year.
Michael Bilerman: In February we completed the acquisition of Pine crest in Cleveland for $167 million using cash on hand and draws on our line of credit.
Michael Bilerman: We've also further improved our portfolio through the recent sales of non core center in Howell, Michigan in April for $17 million.
Michael Bilerman: Conjunction with this sale, we recognized a noncash impairment charge of $4 $2 million in the first quarter.
Michael Bilerman: Our balance sheet remains well positioned for stability.
Michael Bilerman: And funding of our internal and external growth initiatives with low leverage.
Michael Bilerman: Largely fixed rate debt.
Michael Bilerman: Ample liquidity through our lines of credit and Undrawn forward equity and the additional free cash flow we produce after dividends.
Michael Bilerman: Quarter end, our net debt to adjusted EBITDA was five two times.
Michael Bilerman: And it was even lower with a full 12 months of EBITDA from the recent acquisitions and self help.
From a liquidity perspective, we ended the quarter with $16 million of cash.
Michael Bilerman: $481 million available on our unsecured lines of credit.
Michael Bilerman: And $70 million of proceeds that are available from the potential settlement of our forward ATM agreements.
Michael Bilerman: Additionally in April we refinanced the mortgage of Tanger outlets net this increasing the borrowings by $10 million and extending the maturity date from October 2026.
Michael Bilerman: April 2030, with no change to the interest rates are.
Michael Bilerman: Next significant debt maturity is in September of 2026.
Michael Bilerman: We also continue to manage our interest rate exposure entering into $75 million of new forward starting swaps.
Michael Bilerman: I'll begin next February when $75 million of swaps expire.
Michael Bilerman: These new swap fixed sofa at three 3%.
Michael Bilerman: Is down 20 basis points from the maturing swaps at three 5%.
Michael Bilerman: The swaps will expire in April of 2028.
Michael Bilerman: April 25 the board.
Michael Bilerman: Of directors approved a six 4% increase in the dividend.
Michael Bilerman: Dollar 10 to $1 17 per share on an annualized basis.
Michael Bilerman: The dividend remains well covered with a 53% dividend payout ratio as a percentage of our funds available for distribution in the first quarter.
Michael Bilerman: Now turning to our guidance for 2025.
Michael Bilerman: We are updating the EPS outlook to account for the noncash impairment charge I discussed earlier related to the Howell Center disposition.
Michael Bilerman: And from a core SFO perspective, we continue to expect core SSO of $2.22.
Michael Bilerman: $2 30 per share, which represents growth of four <unk>.
Michael Bilerman: 8%.
Michael Bilerman: We continue to expect same center NOI growth to be in a range of 2% to 4%.
Michael Bilerman: We've maintained our ranges for interest expense G&A and Capex.
Michael Bilerman: For additional details on our key assumptions. Please see our release issued last night.
Michael Bilerman: We're also excited to continue to engage with our financial stakeholders at conferences and property tours.
Michael Bilerman: There is no better way to get an appreciation for Tanger and how we are executing on our strategy and by touring our centers and meeting with our teams.
Michael Bilerman: We will be hosting a tour of Tanger outlets Charleston on May eight.
King: King with Wells Fargo's real estate Securities Conference.
King: We are attending Bmo's North American real estate conference in New York on May 13th.
King: We will be touring <unk> town center in Huntsville once more.
King: Lifestyle acquisitions on May 14th.
King: <unk> with Evercore ISI multi REIT property tour.
King: We will also be at ICSC from May 19th through May 20th.
King: We'll be hosting a tour of Tanger outlets National Harbor on May 28.
King: These days you see retail tour will.
King: We'll be presenting.
King: We we in New York from June 35th.
King: Finally, we will be touring CAGR Nashville on June 11th with BMO, and we hope to see many of you over the next few months.
Speaker Change: With that operator, we can take our first question.
Speaker Change: Thank you you will now be conducting a question and answer session. If you'd like to ask a question. Please press star one on your telephone keypad.
Speaker Change: Confirmation tone will indicate your line is in the question queue. You May Press Star two if you would like to remove your question from the queue for participants using speaker equipment. It may be necessary to pick up your handset before pressing the star keys, one moment, please while we poll for questions.
Speaker Change: Thank you. Our first question comes from the line of Andrew Real with Bank of America. Please proceed.
Andrew Real: Hi, good morning, Thanks for taking my questions. It would be helpful to hear your thinking on what the impact to temp occupancy occupancy could look like if this macro uncertainty persists. So maybe can you just talk about how temp tenants behave during previous downturns.
Speaker Change: Certainty.
Stephen Yalof: Good morning, Andrew Thanks for the question.
Speaker Change:
Speaker Change: Look for Tanger, Tampa occupancy as a strategy and it always has been.
Speaker Change: Some of the best examples of temp occupancy, particularly in our portfolio is our pop up stores is restored and understand.
Speaker Change: I understand that the outlet business, which is our primary business.
Speaker Change: I'll, let retailers.
Speaker Change: There's a lot of barriers to entry before you get into the outlet business first of all a lot of these brands don't know how much excess inventory theyre going to have and if you're using it strictly as a clearing.
Speaker Change: Model.
Speaker Change: Make sure that they.
Speaker Change: Hi, Bob first try to see how much velocity there is how much product. They can move how long it's going to take before they'll sign up for a long term lease.
Speaker Change: So in the case of tech tenants in the pop up arena.
Speaker Change: When speaking to a number of retailers that are very interested in being in it.
Speaker Change: Yeah that business.
Speaker Change: We're speaking to us about possibly going in on a short term basis to understand what the outlet business is how it can help there how it can help there Brad.
Speaker Change: It could it's retail get there their shoppers to convert into their ecosystem.
Speaker Change: So I understand their brands at a price point that they can afford to go again.
Speaker Change: A great tool great strategy, we've used it we've talked about it for a number of quarters in the past.
Speaker Change: Did you buy it started that way started that way and you can turn those into long term retailers across our portfolio today.
Speaker Change: Okay. Thank you and maybe just as a follow up I just curious if you've had any recent conversations with retailers about inventory expectations for the second half of the year I'm. Just curious if they've shared any thoughts or if you have any thoughts on their ability to source inventory for back to school or the holidays. Thank you.
Speaker Change: Yeah, you know we're.
Speaker Change: As you probably are aware we are in front of all of our retailers on a regular basis, we're speaking to our top.
Speaker Change: Retailers' inventories so far what we're hearing is that there has not been much of an inventory issue again in the outlet channel. We will see a lot of that excess inventory will flow through our channel I do inventory will go into the full price arena.
Speaker Change: So.
Speaker Change: What we're doing though this summer is an anticipation.
Speaker Change: Perhaps some retailers who might.
Speaker Change: Sidor.
Speaker Change: Getting their sales going earlier in the season, we're promoting our back to school sales starting with June 1st. So we as we said earlier today, we launched submarine deals do promotion across our channel.
Speaker Change: We're starting with the campaign starting as early as June <unk> looks like.
Speaker Change: November.
Speaker Change: Black Friday sales started on November one this year just to get the customer who's thinking about getting into the stores earlier and starting to build their baskets. Much earlier. We're also doing the same thing with back to school shopping which is typically an event that we hosted in at the end of the summer we're going to start to pull that forward to the beginning of the summer so that if if if.
Speaker Change: Folks are are concerned that there might be less inventory or less choice and selection available to them later, they can stock up and buy those products earlier.
Speaker Change: Okay. Thank you.
Speaker Change: Sandra.
Speaker Change: Thank you. Our next question comes from the line of Todd Thomas with Keybanc capital markets. Please proceed.
Todd Thomas: Hi, Thanks, good morning.
Todd Thomas: First I wanted to ask about occupancy I realize the occupancy impact from.
Todd Thomas: From seasonality is largely a <unk> phenomenon, but do you anticipate an additional impact related to proactive re merchandising or any any additional vacate activity in the second quarter that you can speak about or should we expect occupancy to begin building back next quarter from here and do you have a target.
Todd Thomas: For year end occupancy that that's embedded in the guidance.
Todd Thomas: Yeah.
Todd Thomas: If you think about our current run rate of occupancy a lot of that to your point. It is definitely in the re merchandising.
Todd Thomas: Where we were just talked to you earlier about Lego, which is going to take we have a legacy tenet in our Huntsville, Alabama shopping center that shot Lego opens up in two weeks.
Todd Thomas: We had our first Marc Jacobs, we've done a number of Marc Jacobs deals are first Marc Jacobs store, just opened up in an old legacy tenet location in Washington D. C and they think what are the what are the.
Todd Thomas: Bigger impacts is paid event, which will be taking over a space that was recently.
Todd Thomas: H hated by waste there.
Todd Thomas: Deer Park.
Todd Thomas: There's a lot of that.
Todd Thomas: Timing noise in those numbers.
Speaker Change: As we continue to merchandise and Thats, a remerchandise and I think that's an important part of our strategy. Maybe if you take a look at our rent spreads Todd.
Speaker Change: Over 30% on re testing for over 10% on renewal.
Speaker Change: Lot of instances, where we have the opportunity to replace a poorer performing retailer without much better somebody new to the portfolio somebody that will grow with us across our portfolio, we're going to take advantage of that I think the fact that theres very little new retail space coming online in the United States right now, particularly in the outlet space.
Speaker Change: We have a unique opportunity to take advantage of the fact that theres retailer demand for our space and we're going to try and reposition as much of that space as we can to set ourselves up with longing for the future.
Speaker Change: Okay are you able to provide an update for forever 21, or any updates around timing.
Speaker Change: Timing to recapture some of that space and are you able to share.
Speaker Change: Any backfill plans and timeline for that.
Speaker Change: Sure.
Speaker Change: The forever 21 store closure as we'd anticipated for quite some time.
Speaker Change: Constant communication with that brand when we do that they were going to be closing stores. We had already had lined up some temp replacement for most of those spaces.
Speaker Change: As you probably know those retail those retail stores there were nine of them about 100000 square feet from a rent point of view, they're relatively low rent payers. So our temp rent replacements will not be a material.
Speaker Change: Decline in what they were currently paying and we think that there is a tremendous amount of upside in all of those boxes as I said to you earlier I mean, there's not a lot of new space are available on the market right. Now there is increased demand, particularly from retailers that are only willing to pay a much higher rents, but also doing much.
Speaker Change: Better sales performance.
Speaker Change: Okay. If I could just sneak one more in here you know I, just I understand the value proposition of the outlet channel.
Speaker Change: But you know and I think you mentioned that some of your retailers. They clear excess merchandise you know I think you were referencing a lot of the pop ups and I know a bunch of others do too, but a lot of retailers I think some of the bigger apparel chains.
Speaker Change: <unk> I believe have separate made for outlet channels and I was just wondering you know if you have a sense for that product whether they plan to pass through higher prices to customers at the outlets and I was just wondering if you could talk about that a little bit.
Speaker Change: You know as we move further into the year and the impact from tariffs.
Speaker Change: Might change.
Speaker Change: Change sort of the pricing our value proposition dynamic a little bit at some of your centers.
Speaker Change: Yeah, well you know I think the retailers, particularly in the outlet space use those stores for a number of different reasons. So if you take a look at the biggest athletic footwear player in the marketplace. Every for every product in that store is excess inventory, there's no manufactured for that business.
Speaker Change: There are other brands that do do some manufacturing for that business.
Speaker Change: But my feeling is retailers in the outlet space can change pricing relatively quickly. So we're in their full price business is there plans are probably far more set budgets during the course of the year and the outlets if they have excess inventory flowing into their channel. They can move that good move those goods.
Speaker Change: A quick price and promotion.
Speaker Change: So you know I'm not familiar with all the retailers our pricing strategy as it relates to to outlet and going.
Speaker Change: Going into the next.
Speaker Change: Next quarter in the back half a year, but I do know that they are going to be using that business extremely extremely.
Speaker Change: Strategically because it's going to be the opportunity for them to move through excess inventory.
Speaker Change: Aren't flowing into the stores right now.
Speaker Change: Is there going to be late hitting some of their they're full price businesses, they're going to want to have to turn that inventory into cash in the best way to do it is in front of a consumer wants to shop value and that to the 125 million people that shop Tanger outlets, that's where those customer that customer is.
Speaker Change: Okay. Thank you.
Speaker Change: Thank you.
Speaker Change: Our next question comes from the line of Steve <unk> with Evercore ISI. Please proceed.
Speaker Change: Yeah. Thanks, I guess I just wanted to ask maybe on Nashville, you know what's the most recent center you've opened that was built you know I'm, maybe a little surprised that it kind of ranks call. It middle of the pack. If you will within the portfolio. So just curious any thoughts you had kind of one that centers since its.
Speaker Change: Opened as you kind of think about the merchandize mix and maybe what's worked and maybe what's been disappointing.
Speaker Change: And you know I think a lot of a lot of shopping centers takes a couple of years to build even the best centers in the country. That's taken 10 or 15 years to get to this to the sales production volumes.
Speaker Change: Where they are right now we always say when we opened a center we don't build a propylene day, we built it for the generation and.
Speaker Change: And the important part of that is we learn we put a number of retailers in that center right off the bat. Some local it just didn't work, but we also have replaced a number of retailers. You know, we just opened our Kate Spade store and they were one of the most recent retailers to come into that shopping center, they're doing they're doing a great business. There, we merchandise that center with a number of.
Speaker Change: Food retailers as well I think the national food is doing extraordinarily well, but one of our best food performers is a local a.
Speaker Change: Our local restaurant chain.
Speaker Change: Several stores in the Nashville area. So you know I think we have the opportunity to.
Speaker Change: We move some of these retailers around I think we also one of the things that we did was some of the stores just a little bit too big.
Speaker Change: The 300000 square foot shopping center, where we have about 65 stores, probably could have had 75 to 80 stores in that shopping center if that were the case.
Speaker Change: We'd be far more dense in the state and the sales productivity for each of the stores would be.
Speaker Change: Much greater because of it so I think that those are sort of the early reads on Nashville, where extraordinary extraordinarily pleased with the business.
Speaker Change: We think the local community is definitely shopping that center, we're starting to see that tourism traffic pick up with our tourist traffic initiatives.
Speaker Change: We're in this for the long for the long game. So we think that center would be a really important part of our business as we go forward and the center if you've seen it.
Speaker Change: Looking shopping center.
Speaker Change: It is definitely the model for what what centers.
Speaker Change: Will and should look like going forward.
Speaker Change: Okay. Thanks, maybe secondly.
Speaker Change: You guys, obviously sold how.
Speaker Change: You know probably not high dollar value I don't know if you have provided a cap rate on that but just how do you think about the kind of lower tiered part of the portfolio today, I guess I'm thinking centers 28 up 33, and just ultimate monetization of those and redeploying that capital.
Speaker Change: Sure well first of all it will take out separately of all of our centers cash flow positive as Lady.
Speaker Change: You know all of our centers, particularly the outlet shopping centers.
Speaker Change: Filled with national credit retailers go how it was built a long time ago. It was built at a time when outlet shopping centers where.
Speaker Change: <unk> 75 miles away from regional malls.
Speaker Change: Many of our geographies.
Speaker Change: Those markets have grown up and it would become extraordinarily important to those communities population has built demographics and built their uses have developed around it.
Speaker Change: The case of how we'll do that.
Speaker Change: That was slow to come.
Speaker Change: So a lot of the retailers that have since were placed national outlet retailers are more local in nature.
Speaker Change: It's not the same credit that's not the business that we're in so we elected to sell a howl because that center is definitely going to take on a different life under new ownership.
Speaker Change: And it's an outlet center, that's our focus.
Speaker Change: And you know we're in a national tenant high credit high rent paying fixed rent business and I think how it moved away from that as far as other shop.
Speaker Change: Shopping centers there are very few centers that actually put the how bill do you think that a number of our centers are really important in the communities and we think there's great upside in that part of the portfolio that doesn't mean, if there's an opportunity to sell a center because you don't know.
Speaker Change: It's a it's a deal.
Speaker Change: Deal, we can't pass up.
Speaker Change: Currently there is nothing on our list that we wanted that we're looking to dispose of and I think there's a we've got a lot of upside in our in our portfolio going forward.
Speaker Change: Thanks.
Speaker Change: Operator, if theres a follow up we cant hear the question.
Speaker Change: Steve Your line is mute on muted.
Speaker Change: Alright looks like you are.
Speaker Change: Okay.
Speaker Change: Two if he's got a follow up question.
Speaker Change: Alright. Our next question comes from the line of Emily Bearish with BMO. Please proceed.
Emily Bearish: Good morning, and thank you for taking my questions.
Emily Bearish: I wanted to ask you on the hollow ASUR, what was the cap rate on the disposition and breakfast removal already contemplated in guidance.
Emily Bearish: Please speak to its impact on your same store results this quarter.
Emily Bearish: Thank you.
Speaker Change: Thanks Emily.
Emily Bearish: The whole sale in the original guidance wasn't.
Emily Bearish: And played it.
Emily Bearish: It's currently in the updated range that we've maintained.
Emily Bearish: Steve talked about it's really not a cap rate type of transaction.
Emily Bearish: It's embedded in the non same center pool.
Emily Bearish: So there is a certain amount of.
Emily Bearish: NOI that comes out when we deploy the cash proceeds to repay our line.
Emily Bearish: Hum.
Speaker Change: And that's sort of where we are in the second part of your question Emily I missed them.
Emily Bearish: Peter.
Speaker Change: I guess I wanted to ask you about the impact on your same store results this quarter.
Speaker Change: This is just one of the house.
Speaker Change: So how old.
Speaker Change: <unk> is in the non same center pool goes out of the same center NOI, how old was our smallest asset less than 1% of NOI and NOI has been trending down and certainly our view towards the future.
Speaker Change: Was where the contraction was and so we had two 3% same center NOI. If we were to include it would drop less than 10 basis points to two two.
Speaker Change: Okay. Thank you and.
Speaker Change: Same store NOI do you feel more comfortable at galore.
Speaker Change: Great. Thanks for any Fi or should we expect the.
Speaker Change: The same store NOI to accelerate through the rest of the year.
Speaker Change: So our guidance is 2% to 4% we talk a lot when we provided that guidance that the range is differing assumptions related to credit our downtime.
Speaker Change: Our rent spreads sales so there's a lot of variables that go into it.
Speaker Change: Continue to feel comfortable in that 2% to 4% range.
Speaker Change: Range.
Speaker Change: And there's a number of things that didn't.
Speaker Change: And help us as we move through the year as we report our second quarter less of the uncertainty will be removed and we will be able to update that guidance over time.
Speaker Change: Hey, Thank you.
Speaker Change: Thank you.
Speaker Change: Our next question comes from the line of Craig Mailman with Citi. Please proceed.
Craig Mailman: Hey, good morning.
Craig Mailman: Wanted to circle back I know you guys mentioned timing lags as a driver of the accuracy decline.
Craig Mailman: Specifically Huntsville saw an occupancy dip I know, Steve you had mentioned Lagos because of open there, but could you guys just talk about what drove the sequential decline.
Craig Mailman: And what the backfill timing is going to be and then just more broadly on that asset I know you guys bought it at a cap going in and you talked about yield upside over time with the re merchandise that you guys have done so far where are you in the process of that like where does the yield today sit pro forma maybe simply because you have.
Craig Mailman: On the comm versus the initial eight cap.
Craig Mailman: Thanks, Craig So it was an eight five cap.
Craig Mailman: So went in and.
Craig Mailman: We talked about.
Craig Mailman: So growth over time and a lot of that growth is coming from that re merchandising activity that youre starting to see coming through and that we're talking about so we mentioned that logo store, but a big part of the occupancy was that former bed Bath and beyond box, which was 30000 square feet now that 30000 square feet, we had <unk> for a bit.
Craig Mailman: We've got some leases out for that space and we'll be really excited to tell you. Once those are signed and what those are.
Craig Mailman: And so that 30000 square feet whats it.
Speaker Change: 125 basis points at Huntsville occupancy.
Speaker Change: And almost 25 basis points of that sequential occupancy decline combined with that main event that Steve talked about at Deer Park.
Speaker Change: So our expectation is we're going to continue to bring newness.
Speaker Change: Newness and we're really excited about the retailers that are coming into Huntsville, both from a specialty perspective, as well as a food beverage entertainment perspective.
Speaker Change: And I didn't mean to shave off 50 basis points, there, but I guess just.
Speaker Change: The other part of the question like where where does that APAC. When they go pro forma kind of what you guys are underwriting for the bed Bath backfill plus the Lego and some other things.
Speaker Change: Like what's the what's the uplift you've seen so far versus what you think could happen over the next.
Speaker Change: In the medium term as other leases roll.
Speaker Change: So what we talked about a lot in our acquisitions as we want those acquisitions to be greater growth than what our core portfolio, otherwise, we're not creating value.
Speaker Change: And so you know we had our first year, which we talked about being eight and a half.
And as these things come in it will continue to see growth in this year and thereafter in the year after that and we're very optimistic about what type of yield on cost.
Speaker Change: As we also that some capital that this asset will be able to drive.
Speaker Change: Very solid return for our stakeholders.
Speaker Change: Okay.
Speaker Change: And then just maybe a second question here.
Speaker Change: We've seen the discount channel kind of get a.
Speaker Change: Yeah.
Speaker Change: An influx of higher income consumers have you guys track that or seen any of that trade out in sort of the core tendency that our core client base that you guys have had over the last.
Speaker Change: Three 612 months whatever time frame you you would look at it.
Speaker Change: We're definitely paying attention to the customer.
Where we have a loyalty program that we continue to build and continue to sign up new members.
Speaker Change: And we continue to communicate with those customers they opt into the program. So they shared with us their purchasing activity.
Speaker Change: We're seeing where theyre coming from and we're seeing what theyre buying so we're tracking that customer.
Speaker Change: We are seeing a new customer I think a lot of that has to do with the fact that we are also trading up.
Speaker Change: Our tenant base. So some of these older legacy brands that have lost some market share or havent reinvested in their business get replaced with new brands to the channel.
Speaker Change: We're bringing out a new customer for that too and I think that.
Speaker Change: Higher demographic wealthier customer that's finding the products that they like in the outlet channel and everyday value pricing is a great draw, but let's not let's not forget the generation Alpha that young consumer that's now coming to our center also for a number of brands that we've merchandised for them.
Speaker Change: I think immediately of Sephora, which is a brand that you say hey, this younger customer is lining up for brands like and if so who are we don't have a number of stores with them as well younger customers seeking those brands too.
Speaker Change: So we look to merchandize, our shopping centers for the consumer to make sure that they come and visit us more frequently stay longer when they're there and when they do obviously, they build bigger baskets and we get better sales.
Speaker Change: Great. Thank you.
Speaker Change: Thank you our next.
Speaker Change: Question comes from the line of Caitlin Burrows with Goldman Sachs. Please proceed.
Caitlin Burrows: Hi, Good morning, everybody, maybe following up on some of the previous points from earlier in the call. I think one concern is that there won't be enough excess inventory to that and bring product to outlet center. So I was wondering do you know how much of your tenant product is made for outlet how that might have changed over time is that a concern of yours and do you hear anything about this.
Speaker Change: Our retailers yet.
Speaker Change: We haven't heard any concern yet I think the retailers are probably thinking that they're going to rely.
Speaker Change: Far more heavily on outlet and perhaps you're suggesting.
Speaker Change: If you go back to the.
Speaker Change: The Covid case, just as an example.
Speaker Change: Post Covid 2021 hanger.
Speaker Change: Tanger saw the highest sales performance on a per square foot basis than we've ever seen in our portfolio.
Speaker Change: As we're moving back towards those numbers I think a lot of the reason was because a lack of inventory flow and the timing of when that inventory started to flow.
Speaker Change: This year the.
Speaker Change: Full price selling season and therefore.
Speaker Change: Found itself into the outlet channel. So I think we're far more optimistic about the flow of inventory to the outlet channel.
And.
Speaker Change: As we've been speaking to our retailers I think they echoed that they're not as concerned either.
Speaker Change: Got it so are you, saying kind of like there might be uncertainty in the near term on the.
Speaker Change: Flow of inventory, but eventually it will come maybe the timing will be wrong, then for full price and that will benefit outlets.
Speaker Change: I think so okay got it and then I guess in light of the new uncertainty that feels like it would be impacting your business, but happy to hear if that's not the case.
Speaker Change: Could you guys just go through how leasing was in <unk> their earnings release showed.
Speaker Change: That was pretty good but then more importantly, how it progressed over April and kind of your outlook for ICSC.
Speaker Change: Yeah, I think our leasing.
Speaker Change: We're optimistic about these things you know I mentioned earlier in the call Theres not a loose not a lot of new space being developed in the country and Theres a lot of demand from retailers. So theres a couple of ways to facilitate the bad one is to replace older.
Speaker Change: Older and less performing retailers withdrew.
Speaker Change: The retailers that want to be in this space or when leases roll asking retailers to downsize and optimized I mentioned earlier, we talked about Nashville, I was asked what mistakes by debated Nashville, and I said I don't think we we densify that 300000 square foot shopping center right now.
Speaker Change: I think one of our leasing team strategies right now is to right size stores to maximize productivity and create more space in our existing and our existing productive shopping centers that ultimately will drive more rent drive more variety more types of uses and give us the.
Speaker Change: Opportunity to bring in the brands that are looking to get into our channel.
Speaker Change: Got it any other details you out enough justin's that can give about the April leasing.
Speaker Change: Sure. Thank you.
Speaker Change: Bottomline is the fundamentals of our business are strong and the open to buys are there and we talked last quarter about all the tenants that have the open to buys and theyre looking at not only a 25% 26% 27.
All of our yield committees that we've had in the first quarter and including April were amazing.
Speaker Change: I have noticed that we are way ahead of our renewals.
Speaker Change: This time, we're about 50, 657% complete the reason we jumped out ahead because of all these open to buys new brands that are looking to come into our portfolio. So we can focus on that business. The April committee was strong both from a renewal standpoint.
Speaker Change: Standpoint, and a new business standpoint, so we're really optimistic about the balance of 25 and looking into 'twenty six.
Speaker Change: Thank you.
Speaker Change: Thank you. Our next question comes from the line of Hong Zhang with Jpmorgan. Please proceed.
Speaker Change: Yeah.
Hong Zhang: You talked about moving the back to school sales to June I was wondering if theres anything seasonal to call out in terms of revenues or expenses from the shifts.
Speaker Change:
Speaker Change: When I talk about Michael you want to talk with revenue, especially I just address it I'll just address the campaign because.
Speaker Change: It was a really smart idea on behalf of our marketing Department is theres a lot of noise in the.
Speaker Change: In the marketplace.
Speaker Change: Caitlin mentioned, perhaps the back half of the year. If there was going to be some shifting in terms of product delivery. We thought it would just be smart if we had a call to action, particularly.
Speaker Change: To drive customers into our centers are more early as far as.
Speaker Change: Any sort of.
Speaker Change: Yes.
Speaker Change: If we think about the impact.
Speaker Change: A lot of our revenues are fixed and growing and that's where we talked about on a quarterly basis.
Speaker Change: There are operating expenses given that they are highly variable will impact that year over year right. So we saw that obviously in the first quarter with the snow expenses in last year, having the expense refunds, we saw that in the fourth quarter, where we had larger marketing spend in the fourth quarter of 24 relative to 'twenty three.
Speaker Change: So there may be some timing of that marketing spend throughout the year as we promote different strategies that doesn't have a meaningful.
Speaker Change: Impact overall to that.
Speaker Change: Your range that we've given the 2% to 4%, which obviously started the year lighter just given that comp from last year, where we continue to be optimistic about our same center range. We're cognizant of the macro factors, but all of that's embedded in to our guidance.
Speaker Change: Got it and I guess on the marketing spend so it sounds like you.
Speaker Change: You wouldn't necessarily be more.
Speaker Change: Lean on the marketing channel more this year, just given the economic uncertainty around tariffs and everything.
Speaker Change: I mean, it's not a it's not a significant driver of maintenance are important aspect of our business.
Speaker Change: That we drive traffic.
Speaker Change: And it's our teams that are coming up and creating the creators and all of the programs do we have to drive traffic and sales.
Speaker Change: For our retail partners and for the consumers.
Oh, thank you.
Speaker Change: Thank you. Our next question comes from the line of this table with Green Street. Please proceed.
Speaker Change: Hi, good morning.
Speaker Change: You discuss trends in foot traffic since the tariff uncertainty heightened on April 2nd in consumer confidence took ahead I'm. Just curious have you noticed any material changes in consumer behavior shopping patterns in the past few weeks.
Speaker Change: Uh huh.
Speaker Change: Well yeah I.
Speaker Change: What's interesting is January and February traffic.
Speaker Change: Largely in part to weather and January being a relatively slow months for shopping as it is.
Speaker Change: Oh, we're a little bit or lack luster, we saw the build.
Speaker Change: Of traffic start to occur towards the end of March and consistent with the announcement of traffic. Our April traffic numbers have been extraordinarily positive you know I've heard another.
Speaker Change: Peer Reits.
Speaker Change: They're reporting earlier this week the echo the same thing April traffic to our centers has been extraordinarily strong.
Speaker Change: Oh that's.
Speaker Change: That's great to hear.
Speaker Change: Then somewhat related to that how should we think about the sensitivity of NOI in your portfolio to changes in tenant sales. So percentage rents have been declining but my sense is that you know.
Speaker Change: A function of you're prioritizing fixed rates over and there can be fixed rent over variable rent during renewals nothing no issues with sales, but just given the uncertain backdrop here like you know tenant sales grew 2% and 25 versus let's say falling 2% and 25 for example, like how much of that actually.
Speaker Change: Impact.
Speaker Change: NOI for the full.
Speaker Change: Full year.
Speaker Change: Sure. Thanks, Vince So when you look at our overage rents.
Speaker Change: What's been happening is we've been sweeping a lot of that overage rent and fixed rents as we prioritize when you look at the overage rent in totality.
Speaker Change: It's only running about 3% of our total revenues.
Speaker Change: And so that that sensitivity in the current year is part of why we are a little bit of a wider range in our business, but it's not a.
Speaker Change: Yes.
Speaker Change: Significant enough and what we're finding is you can look at the overall sales productivity of the portfolio as we've.
Speaker Change: Executed re merchandising strategy.
Speaker Change: Portfolio up to $455 a square foot.
Speaker Change: All of that's driving higher rents, which is much more impactful to our NOI and changes in overage from.
Speaker Change: Changes in sales.
Speaker Change: No no no.
Speaker Change: Are there any like.
Quantify I mean, maybe not an exact example, I laid out but do you see what I'm trying to get at just like there's operating leverage if you will with the overdrafts because you know if you hit the breakpoint or don't that.
Speaker Change: Good influence you know how much you received so nothing overly worried about but just trying to understand kind of upside downside.
Speaker Change: More quantitatively due to the sale, but I understand its hard to provide and it depends on the tenant nuance. So.
Speaker Change: And the range contemplates.
Speaker Change: A range of outcomes relative.
Speaker Change: At overage rent.
Speaker Change: As you know right to get over the breakpoint Theyre like options right because you don't get anything up until the breakpoint and then once you get where the breakpoint yields move up so we have a range for that line item.
Speaker Change: Relative.
Our numbers you know last year, you know percentage rents were $17 5 million in the consolidated portfolio.
Speaker Change: Okay No that's fair thank you.
Vince: Thank you Vince.
Vince: Thank you.
Speaker Change: Our next question comes from the line of Tayo Okusanya with Deutsche Bank. Please proceed.
Speaker Change: Oh, yes, good morning, everyone.
Tayo Okusanya: Wanted to talk a little bit just about the jewelry category, just a lot of conversation around diamond prices being down 40%.
Tayo Okusanya: Taking that actually may have worn on earnings earlier on this year.
Tayo Okusanya: Should we be thinking in cloud.
Tayo Okusanya: Hum.
And like one of the biggest part of pricing on one of their biggest.
Tayo Okusanya: Products coming down so meaningfully.
Justin: Hi, This is Justin thanks for the question so.
Justin: Jewelry, the jewelry category has been fairly strong for us and we've been doing.
A lot more business with <unk>.
Justin: Brands like Pandora Cigna as a major player in our portfolio, they're thinking about their merchandising and how theyre targeting their customers a little bit differently and.
Justin: We're seeing positive trends in that category and we're happy with what we see.
Speaker Change: Okay. That's helpful.
Justin: And then.
Justin: Michael in terms of the swaps.
Justin: The song that expire in August rather than the February swaps.
How's it going to be kind of thinking about that just kind of given you you do have this unique opportunity right now are to get attractive pricing on swaps given the unusual shape of the forward curve.
Speaker Change: Yeah. Thanks, Tycho for the question. So when you look at.
Justin: Our swap activity page 16 of the sup.
Justin: A $325 million term loan that we have swapped from floating to fixed using.
Justin: Swap strategy.
Justin: Those swaps, we had 75 million that we're gonna mature on February 1st of next year that we were able to.
Justin: Effectively not put forward starting swaps that will reduce.
Justin: We have fixed and sulfur at three five.
Justin: 5% down to three three.
Justin: August $75 million is currently at.
Justin: 3.7% and we will look at opportunities just to manage our interest rate exposure to push out.
Those swaps to maintain that term loan is effectively fixed.
Justin: And so we'll look at those opportunities over the course of the balance of the year to address any interest rate exposure that we have.
Justin: Thank you.
Tayo Okusanya: Thanks Tayo.
Tayo Okusanya: Thank you.
Tayo Okusanya: There are no further questions at this time.
Tayo Okusanya: With that.
Tayo Okusanya: This concludes today's teleconference. You may disconnect your lines at this time.
Tayo Okusanya: Thank you for your participation.
Tayo Okusanya: Okay.
Tayo Okusanya: [music].
Tayo Okusanya: