Tanger Factory Outlet Centers Inc. is charged with growing – and finding new ways to do it.
This month, Tanger revealed a unique strategic partnership within the company’s portfolio of 38 properties, including one in Nashville, Tennessee, under development. Tanger has taken over the marketing, leasing and management of Palm Beach Outlets in West Palm Beach, Florida, and may potentially acquire ownership of the property depending on its performance. The 455,000 square foot property, owned by Clarion Partners, has been rebranded as Tanger Outlets Palm Beach.
Last May, Tangier opened its 290,000 square foot mall in Nashville, a booming market. The center is expected to be completed in the fall of 2023 at an estimated cost of $135-145 million, and Tangier is considering other expansion opportunities.
Additionally, rents are rising, longer-term leases are being signed, and Tangier has a “fast-track lease” strategy, which effectively opens up the opening of the brands and retailers it pursues as tenants.
This week, the company announced better-than-expected results for its second quarter ended June 30 and raised its outlook. The net income was $0.19 an action, or $19.7 millioncompared to $0.02 an action, or $2.3 million, for the prior year period, which included a loss due to the prepayment of $14 million in debt. Funds from operations were $0.45 per share, or $48.8 millioncompared to $0.30Where $32.4 millionfor the period one year ago.
Tangier now expects net earnings of $0.71 to $0.77 per share this year, up from a previous estimate of $0.69 to $0.77 per share.
Occupancy was 94.9 percent on June 30th, against 93.2% 12 months earlier. Jsales productivity has increased to $450 per square foot average for the 12 months ended June 30th, of $423 one square foot for the period a year ago, which represents an increase of 6.4% for the entire portfolio and on a comparable basis.
The stock price is down from its 52-week high of $22.51, but has seen recent gains and is currently trading above $16.
“We feel good as a business because we’ve built a strategy in the wake of COVID-19 where we’ve lost tenants and had to kind of rebuild our business,” said Stephen Yalof, president and CEO. the management of Tanger Outlet, in an interview.
He specified that the strategy revolves around “three levers” of growth: accelerating the leasing platform; effectively manage and decentralize real estate operations to focus more on local needs, and digitize marketing to better communicate with customers. “The success we’ve had over the past four or five consecutive quarters is because we continue to execute on this strategy,” Yalof said.
“The most important part is that we believe in our real estate. And we regained our pricing power. We’re not afraid to charge more rent, and retailers are more tolerant of spending a few dollars more on rent than they have in the past. Our rents as a percentage of our portfolio sales are approximately 8.5%. That’s up from about 8% a few quarters ago. We think we can push that number into the double digits. »
He said a year ago the average length of new leases was 5.4 years. Now, in 2022, with the rebound in sales and traffic, it’s 8.4 years. “It’s more normal. Typically, before COVID-19, we were doing 10-year transactions… The best indicator of our ability to increase rents is our rent spreads – we have five consecutive quarters of rent spread growth. This year, on our re-tenant space, these new offers, we have increased by more than 10%. »
Asked about the structure of the Tanger Outlets Palm Beach deal, Yalof explained, “As we are successful in developing the mall, we will have the opportunity to acquire ownership over time.” It’s like a bonus, he says. In addition, Tanger Outlets Palm Beach will be “a low capital investment for us. We receive rental fees, management fees, the typical fees when a company manages a particular asset.
“It is a center that has been well leased and well managed, but we realize that with our scale and ability to lease, market and operate outlet centers under the Tanger brand, it adds another level of cache and a another level of credibility. Under our leadership, there are so many opportunities to take this center to the next level. We have great customer marketing and our scale gives us the flexibility to purchase a lot of operational services in bulk, which ultimately means we can manage a lot of expenses from the P&L.
“We drive shoppers to our centers in a way that other retail store developers don’t necessarily do,” Yalof added. “A lot of our retail partners invest a lot of their money in advertising their brand, to drive customers to their full-price sites, and not so much to their off-price sites. They rely on us and, in many cases , contribute to a promotional fund intended to bring us this customer in the mall.
“From a leasing perspective, we have great access to retailers who may not have considered the Palm Beach market before. They can consider it now because they know how we operate and market the centers. There is an opportunity to bring in tenants who have never been there before. Current tenants include Saks Off 5th, Polo Ralph Lauren, Nike, Michael Kors and Coach.
Tangier’s Florida centers are among the most productive in the portfolio. “There’s a lot of dynamics at work,” Yalof said. “It’s definitely tourism, and there’s been a big migration from the northeast to Florida. Palm Beach is one of Florida’s fastest growing counties. It will be a bonus to give us the opportunity to eventually get some equity in the center over time.
When asked if Tanger was in the market for similar opportunities to Tanger Palm Beach, Yalof replied, “Yes, we continue to look for opportunities. We’d love to have a bigger turnout early on, so this one is really unique, but we’re looking at several opportunities right now. We love the Florida market and are currently not on the West Coast.
He also said there were between 10 and 12 smaller independent developers, similar to Clarion Partners, “that we have in our sights.”
For the future Nashville center, 70% of the space is committed, with Nike, Oakley, Vera Bradley, Aerie, Fossil, Michael Kors, Levi’s, Ralph Lauren, Under Armor and Puma among the tenants lining up.
“This particular center is designed around a central park, essentially a community space. We hope to activate this central park area with a stage and give local musicians the opportunity to perform,” Yalof said. “We want to be a true partner of the communities where we position a shopping centre.
Asked why Nashville is such a hot market, Yalof replied, “It’s the city of music. Amazon is building two towers in the marketplace and Oracle is creating 8,500 jobs over the next five years. It’s booming from a technology standpoint, from a music standpoint, for health care, and there’s no income tax. There’s a big tourist business in Nashville. Over 16 million people in 2019. Then you have this permanent population growing by hundreds of people a day. Eight hundred construction jobs and 500 permanent jobs will be created with the Nashville Mall.
Yalof suggested Tangier’s growth will be aided by environmental efforts that will benefit the bottom line. “We will double our solar kilowatt hours by adding more solar panels to more malls. It’s great for the environment. It requires an investment on our part, but that investment has a low double-digit return when you calculate the expense savings that come with it,” Yalof said. In 2021, Tangier produced nearly 6.2 million kilowatt hours of solar energy.
“Similarly, the EV charging partnership agreements we have with Volta across our portfolio are also having returns. We will double our e-car charging stations from last year,” from a baseline of 150 stations in 2021. Having EV charging stations is another reason to shop at outlets. sale.
Thanks to Tangier’s accelerated leasing strategy, “we’re not just going after retailers who do business. We’re looking for all retailers, whether you’re just a department store brand or just a direct-to-consumer online merchant. So we come in front of everyone and introduce them to the point of sale as a distribution channel that gives them the opportunity to eliminate excess inventory so that they can maintain their margin and acquire a customer who likes to shop in our channel and who may not complete their purchases. -price stores.
“When we accelerate leasing, it means we increase the population of retailers that we are looking for. We are increasing our rents on our properties – 3% on base rents and 3-4% on common areas – because we think it is worth it. We’re using our pricing power to our advantage and maybe saying goodbye to some of the traditional retailers who don’t want to pay the rent or we’re converting them to short-term contracts [leases] knowing that we will eventually replace them with longer-term contracts that command higher rents, which gives us more stability.
“I don’t want to get out of my skis too much but I think we’re still relatively low priced compared to all the other retail channels. We think we have room to push prices. We think retailers have some tolerance for this.