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HomeInvestmentsTanger Reports Third Quarter Results and Raises Full-Year 2023 Guidance

Tanger Reports Third Quarter Results and Raises Full-Year 2023 Guidance

Tanger Reports Third Quarter Results and Raises Full-Year 2023 Guidance

Grows Occupancy by 80 Basis Points Sequentially and 150 Basis Points Year over Year

Achieves 7th Consecutive Quarter of Positive Rent Spreads

Opens Tanger Outlets Nashville 96.5% Leased

GREENSBORO, N.C., Nov. 6, 2023 /PRNewswire/ — Tanger® (NYSE:SKT), a leading owner and operator of upscale open-air outlet centers, today reported financial results and operating metrics for the three and nine months ended September 30, 2023.

“We are pleased to announce another quarter of strong results, the grand opening of Tanger Outlets Nashville, a recent 6% dividend increase and a raise in our full-year 2023 earnings guidance,” said Stephen Yalof, President and Chief Executive Officer. “Our strategic plan to elevate and diversify our tenant mix, drive total rents and leverage our platform to realize additional growth is reflected in our solid performance, with double-digit rent spreads, occupancy growth, high renewal rates and continued operating efficiencies.”

Mr. Yalof continued, “Tanger Nashville opened to the public in late October at 96.5% leased as a testament to retailer demand for our platform of open-air shopping that can offer a truly differentiated experience to guests and retailers alike. With our strong balance sheet and liquidity, we believe Tanger has the flexibility to execute on our long-term growth strategies and unlock additional value for our shareholders.”

Third Quarter Results

  • Net income available to common shareholders was $0.26 per share, or $27.2 million, compared to $0.22 per share, or $23.0 million, for the prior year period.
  • Funds From Operations (“FFO”) available to common shareholders was $0.50 per share, or $55.8 million, compared to $0.47 per share, or $51.7 million, for the prior year period.
  • Core Funds From Operations (“Core FFO”) available to common shareholders was $0.50 per share, or $55.8 million, compared to $0.47 per share, or $51.7 million, for the prior year period.

Year-to-Date Results

  • Net income available to common shareholders was $0.70 per share, or $74.5 million, compared to $0.60 per share, or $63.0 million, for the prior year period.
  • FFO available to common shareholders was $1.45 per share, or $160.2 million, compared to $1.37 per share, or $149.9 million, for the prior year period.
  • Core FFO available to common shareholders was $1.44 per share, or $159.4 million, compared to $1.37 per share, or $149.9 million, for the prior year period. Core FFO for the first nine months of 2023 excluded the reversal of previously expensed compensation related to a voluntary executive departure of $0.01 per share, or $0.8 million. Core FFO for the first nine months of 2022 excluded $0.02 per share, or $2.4 million, related to certain executive severance costs, offset by a gain on sale of the corporate aircraft of $0.02 per share, or $2.4 million. The Company does not consider these items indicative of its ongoing operating performance.

FFO and Core FFO are widely accepted supplemental non-GAAP financial measures used in the real estate industry to measure and compare the operating performance of real estate companies. Complete reconciliations containing adjustments from GAAP net income to FFO and Core FFO, if applicable, are included in this release. Per share amounts for net income, FFO and Core FFO are on a diluted basis.

Operating Metrics

Key portfolio results for the total portfolio, including the Company’s pro rata share of unconsolidated joint ventures, were as follows:

  • Occupancy was 98.0% on September 30, 2023, compared to 97.2% on June 30, 2023 and 96.5% on September 30, 2022
  • Same center net operating income (“Same Center NOI”), which is presented on a cash basis, increased 7.6% to $87.9 million for the third quarter of 2023 from $81.7 million for the third quarter of 2022 driven by higher rental revenues from increased base rent and expense recoveries, as well as out-of-period rent collections. Same Center NOI for the year-to-date period increased 6.5% to $254.5 million for the first nine months of 2023 from $239.0 million for the first nine months of 2022, benefiting from occupancy gains, rent growth, operating expense efficiencies, expense timing and the mild winter experienced in the first quarter of 2023
  • Average tenant sales productivity of $437 per square foot for the twelve months ended September 30, 2023 decreased 1.4% compared to $443 per square foot for the twelve months ended June 30, 2023 and decreased 2.0% from $446 per square foot for the twelve months ended September 30, 2022
  • On a same center basis, average tenant sales per square foot of $437 per square foot for the twelve months ended September 30, 2023 decreased 1.4% compared to $443 per square foot for the twelve months ended June 30, 2023 and decreased 2.2% from $447 per square foot for the twelve months ended September 30, 2022
  • The occupancy cost ratio (“OCR”), representing annualized occupancy costs as a percentage of tenant sales, was 9.1% for the twelve months ended September 30, 2023 compared to 9.0% for the twelve months ended June 30, 2023 and 8.5% for the twelve months ended September 30, 2022
  • Lease termination fees (which are excluded from Same Center NOI) for the total portfolio totaled $409,000 for the third quarter of 2023 and $484,000 for the first nine months of 2023, compared to $228,000 for the third quarter of 2022 and $2.9 million for the first nine months of 2022

Same Center NOI is a supplemental non-GAAP financial measure of operating performance. A complete definition of Same Center NOI and a reconciliation to the nearest comparable GAAP measure is included in this release.

Transaction Activity

Tanger Outlets Nashville, the Company’s newest development, opened on October 27, 2023 and is 96.5% leased. The center is approximately 291,000 square feet and is estimated to cost between $144 million and $146 million with a projected stabilized yield range of 7.5% to 8.0%. Through September 30, 2023, Tanger had incurred costs of $119.0 million associated with this development.

The open-air center offers shopping and dining across seven retail buildings and a unique, placemaking community space. Tanger Nashville reflects the Company’s commitment to diversify and enhance the shopping experience for its customers with nearly one quarter of the center’s dynamic assortment new to Tanger’s portfolio or first to the outlet channel.

Leasing Activity

For the total portfolio, including the Company’s pro rata share of unconsolidated joint ventures, as of September 30, 2023, Tanger has renewals executed or in process for 88.0% of the space scheduled to expire during 2023 compared to 75.6% of expiring 2022 space as of September 30, 2022.

The following key leasing metrics are presented for the total domestic portfolio, including the Company’s pro rata share of domestic unconsolidated joint ventures.

  • Total renewed or re-tenanted leases (including leases for both comparable and non-comparable space) executed during the twelve months ended September 30, 2023 included 528 leases, totaling nearly 2.2 million square feet
  • Blended average rental rates were positive for the seventh consecutive quarter at 14.5% on a cash basis for leases executed for comparable space during the twelve months ended September 30, 2023. These blended rent spreads, which were up 880 basis points year over year, are comprised of re-tenanted rent spreads of 30.6% and renewal rent spreads of 13.4%

Dividend

In October 2023, Company’s Board of Directors approved a 6.1% increase in the dividend on its common shares from $0.98 to $1.04 per share on an annualized basis. Simultaneously, the Board of Directors declared a quarterly cash dividend of $0.26 per share, payable on November 15, 2023 to holders of record on October 31, 2023.

Balance Sheet and Liquidity

The following balance sheet and liquidity metrics are presented for the total portfolio, including the Company’s pro rata share of unconsolidated joint ventures. As of September 30, 2023:

  • Net debt to Adjusted EBITDAre (calculated as net debt divided by Adjusted Earnings Before Interest, Taxes, Depreciation and Amortization for Real Estate (“Adjusted EBITDAre”)) remained stable at 5.2x for the twelve months ended September 30, 2023 from 5.1x for the year ended December 31, 2022, reflecting incremental Nashville development spending
  • Interest coverage ratio (calculated as Adjusted EBITDAre divided by interest expense) was 4.6x for the first nine months of 2023 and 4.6x for the twelve months ended September 30, 2023
  • Cash and cash equivalents and short-term investments totaled $206.8 million with full availability on the Company’s $520 million unsecured lines of credit
  • Total outstanding debt aggregated $1.6 billion with $91.2 million (principal) of floating rate debt, representing approximately 6% of total debt outstanding and 2% of total enterprise value
  • Weighted average interest rate was 3.4% and weighted average term to maturity of outstanding debt, including extension options, was approximately 5.0 years
  • Approximately 88% of the total portfolio’s square footage was unencumbered by mortgages with secured debt of $226.7 million (principal), representing 14% of total debt outstanding
  • Funds Available for Distribution (“FAD”) payout ratio was 53% for the first nine months of 2023

As of September 30, 2023, $300 million of the outstanding balance of the Company’s $325 million unsecured term loan, which matures in January 2027 plus a one-year extension, is fixed with interest rate swaps at a weighted average Adjusted SOFR rate of 0.5%. These swaps expire on February 1, 2024, and the interest expense impact of these expirations and new swaps will begin at that time. As of November 6, 2023, the Company has entered into $250 million of forward-starting swaps that commence February 1, 2024 and have varying maturities through January 2027, as outlined in the table below. Collectively, these swaps fix the Adjusted SOFR base rate at a weighted average of 4.0%.

Effective Date


Maturity Date


Notional
Amount

(in thousands)


Bank Pay Rate


Company Fixed
Pay Rate

Interest rate swaps:










Current


February 1, 2024


$300,000



Adjusted SOFR


0.5 %

Forward-starting:










February 1, 2024


February 1, 2026


$60,000



Adjusted SOFR


3.4 %

February 1, 2024


August 1, 2026


$65,000



Adjusted SOFR


3.8 %

February 1, 2024


January 1, 2027


$125,000



Adjusted SOFR


4.3 %





$250,000



Adjusted SOFR


4.0 %

Adjusted EBITDAre, Net debt and FAD are supplemental non-GAAP financial measures of operating performance. Definitions of Adjusted EBITDAre, Net debt and FAD and reconciliations to the nearest comparable GAAP measures are included in this release.

Guidance for 2023

Based on the Company’s better-than-anticipated performance in the third quarter and its outlook for the remainder of 2023, management is increasing its full-year 2023 guidance with its current expectations for net income, FFO and Core FFO per share for 2023 as follows:

For the year ending December 31, 2023:

Revised


Previous


Low
Range

High
Range


Low
Range

High
Range

Estimated diluted net income per share

$    0.93

$    0.97


$    0.90

$    0.97

Depreciation and amortization of real estate assets – consolidated and the
Company’s share of unconsolidated joint ventures

0.98

0.98


0.96

0.96

Estimated diluted FFO per share

$    1.91

$    1.95


$    1.86

$    1.93

Reversal of previously expensed compensation related to executive departure (1)

(0.01)

(0.01)


(0.01)

(0.01)

Estimated diluted Core FFO per share

$    1.90

$    1.94


$    1.85

$    1.92

(1)  During the first quarter of 2023, the Company reversed $0.8 million of previously expensed compensation related to a voluntary executive departure.

Tanger’s estimates reflect the following key assumptions (dollars in millions):

For the year ending December 31, 2023:

Revised


Previous


Low
Range

High
Range


Low
Range

High
Range

Same Center NOI growth – total portfolio at pro rata share

4.75 %

5.50 %


3.50 %

5.00 %

General and administrative expense, excluding executive departure adjustments (1)

$73.0

$76.0


$73.0

$76.0

Interest expense

$47.5

$48.5


$47.0

$49.0

Other income (expense) (2)

$8.0

$9.0


$7.0

$9.0

Annual recurring capital expenditures, renovations and second generation tenant
allowances

$40.0

$50.0


$45.0

$55.0

(1)  During the first quarter of 2023, the Company reversed $0.8 million of previously expensed compensation related to a voluntary executive departure.

(2)   Includes interest income.

Weighted average diluted common shares are expected to be approximately 106 million for earnings per share and 111 million for FFO and Core FFO per share. The estimates above do not include the impact of the acquisition or sale of any outparcels, properties or joint venture interests, or any additional financing activity.

Corporate Name Change

Effective November 16, 2023, the Company will change its corporate legal name from Tanger Factory Outlet Centers, Inc. to Tanger Inc. This change reflects the continued implementation of the Company’s updated corporate identity as first announced in May 2023 along with its refreshed logo and visual identity.

Management and Board of Directors Update

Effective January 1, 2024, Steven B. Tanger will transition from his role as Executive Chair of the Board of Directors to Non-Executive Chair in connection with his retirement from the Company under the terms of his employment agreement.

Third Quarter 2023 Conference Call

Tanger will host a conference call to discuss its third quarter 2023 results for analysts, investors and other interested parties on Tuesday, November 7, 2023, at 8:30 a.m. Eastern Time. To access the conference call, listeners should dial 1-877-605-1702. Alternatively, a live audio webcast of this call will be available to the public on Tanger’s Investor Relations website, investors.tanger.com. A telephone replay of the call will be available from November 7, 2023 at approximately 11:30 a.m. through November 21, 2023 at 11:59 p.m. by dialing 1-877-660-6853, replay access code #13740617. An online archive of the webcast will also be available through November 21, 2023.

Upcoming Events

The Company is scheduled to participate in the following upcoming events:

  • Nareit’s REITworld: 2023 Investor Conference held at the JW Marriott LA Live in Los Angeles, CA from November 14 through November 15, 2023
  • Jefferies Real Estate Conference held at 1 Hotel South Beach in Miami Beach, FL on December 4, 2023
  • A tour of Tanger Outlets Phoenix on December 11, 2023 in connection with the Evercore ISI Phoenix Multi-Asset Tour
  • A tour of Tanger Outlets Palm Beach on January 8, 2024 in connection with Bank of America’s Southeast Florida Multi-Asset Tour
  • Citi’s 2023 Global Property CEO Conference held at the Diplomat Resort & Spa in Hollywood, FL from March 4 through March 6, 2024
  • A tour of Tanger Outlets Nashville in connection with ICR’s Nashville Multi-Asset Tour from March 12 through March 13, 2024

About Tanger®

Tanger Factory Outlet Centers, Inc. (NYSE: SKT), a leading operator of upscale open-air outlet centers, fully or partially owns and/or manages a portfolio of 37 centers, including the newly opened Tanger Outlets Nashville. Tanger’s operating centers, which comprise over 14 million square feet, are located in 20 states and in Canada and are leased to over 2,900 stores operated by more than 700 different brand name companies. Tanger has more than 42 years of experience in the outlet industry and has been a publicly traded REIT since 1993. Tanger is furnishing a Form 8-K with the Securities and Exchange Commission (“SEC”) that includes a supplemental information package for the quarter ended September 30, 2023. For more information on Tanger, call 1-800-4TANGER or visit tanger.com.

Safe Harbor Statement

This news release contains certain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. The Company intends such forward-looking statements to be covered by the safe harbor provisions for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995 and includes this statement for purposes of complying with the safe harbor provisions. Forward-looking statements, which are based on certain assumptions and describe the Company’s future plans, strategies and expectations, are generally identifiable by use of the words “believe,” “expect,” “intend,” “anticipate,” “estimate,” “project,” “will,” “forecast” or similar expressions, and include the Company’s expectations regarding future financial results and assumptions underlying that guidance, long-term growth, trends in retail traffic and tenant revenues, development initiatives and strategic partnerships, the anticipated impact of the Company’s newly-opened Nashville development and related costs and anticipated yield, expectations regarding operational metrics, renewal trends, new revenue streams, its strategy and value proposition to retailers, participation in upcoming events, uses of and efforts to reduce costs of capital, liquidity, dividend payments and cash flows.

You should not rely on forward-looking statements since they involve known and unknown risks, uncertainties and other important factors which are, in some cases, beyond our control and which could materially affect our actual results, performance or achievements. Important factors which may cause actual results to differ materially from current expectations include, but are not limited to: our inability to develop new outlet centers or expand existing outlet centers successfully; risks related to the economic performance and market value of our outlet centers; the relative illiquidity of real property investments; impairment charges affecting our properties; our dispositions of assets may not achieve anticipated results; competition for the acquisition and development of outlet centers, and our inability to complete outlet centers we may identify; environmental regulations affecting our business; risks associated with possible terrorist activity or other acts or threats of violence and threats to public safety; risks related to the impact of macroeconomic conditions, including rising interest rates and inflation, on our tenants and on our business, financial condition, liquidity, results of operations and compliance with debt covenants; our dependence on rental income from real property; our dependence on the results of operations of our retailers and their bankruptcy, early termination or closing could adversely affect us; the fact that certain of our properties are subject to ownership interests held by third parties, whose interests may conflict with ours; risks related to climate change; increased costs and reputational harm associated with the increased focus on environmental, sustainability and social initiatives; risks related to uninsured losses; the risk that consumer, travel, shopping and spending habits may change; risks associated with our Canadian investments; risks associated with attracting and retaining key personnel; risks associated with debt financing; risks associated with our guarantees of debt for, or other support we may provide to, joint venture properties; the effectiveness of our interest rate hedging arrangements; uncertainty relating to the potential phasing out of LIBOR; our potential failure to qualify as a REIT; our legal obligation to make distributions to our shareholders; legislative or regulatory actions that could adversely affect our shareholders, including the recent changes in the U.S. federal income taxation of U.S. businesses; our dependence on distributions from the Operating Partnership to meet our financial obligations, including dividends; the risk of a cyber-attack or an act of cyber-terrorism and other important factors set forth under Item 1A – “Risk Factors” in the Company’s and the Operating Partnership’s Annual Report on Form 10-K for the year ended December 31, 2022, as may be updated or supplemented in the Company’s Quarterly Reports on Form 10-Q and the Company’s other filings with the SEC. Accordingly, there is no assurance that the Company’s expectations will be realized. The Company disclaims any intention or obligation to update the forward-looking statements, whether as a result of new information, future events or otherwise. You are advised to refer to any further disclosures the Company makes or related subjects in the Company’s Current Reports on Form 8-K that the Company files with the SEC.






Investor Contact Information



Media Contact Information






Doug McDonald




KWT Global

SVP, Finance and Capital Markets




[email protected]

336-856-6066





[email protected]





TANGER FACTORY OUTLET CENTERS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except per share data)

(Unaudited)



Three months ended


Nine months ended


September 30,


September 30,


2023


2022


2023


2022

Revenues:








Rental revenues

$110,835


$105,569


$319,005


$311,587

Management, leasing and other services

2,138


1,897


6,174


4,860

Other revenues

4,373


3,980


11,751


9,705

Total revenues

117,346


111,446


336,930


326,152

Expenses:








Property operating

36,758


36,076


103,618


105,531

General and administrative (1)

18,937


17,370


54,675


52,166

Depreciation and amortization

25,374


25,445


76,656


77,908

Total expenses

81,069


78,891


234,949


235,605

Other income (expense):








Interest expense

(11,688)


(11,660)


(35,997)


(34,870)

Other income (expense) (2)

1,899


1,395


7,023


4,154

Total other income (expense)

(9,789)


(10,265)


(28,974)


(30,716)

Income before equity in earnings of unconsolidated joint ventures

26,488


22,290


73,007


59,831

Equity in earnings of unconsolidated joint ventures

2,389


2,055


6,030


6,795

Net income

28,877


24,345


79,037


66,626

Noncontrolling interests in Operating Partnership

(1,253)


(1,069)


(3,422)


(2,927)

Noncontrolling interests in other consolidated partnerships



(248)


Net income attributable to Tanger Factory Outlet Centers, Inc.

27,624


23,276


75,367


63,699

Allocation of earnings to participating securities

(414)


(232)


(854)


(669)

Net income available to common shareholders of

Tanger Factory Outlet Centers, Inc.

$27,210


$23,044


$74,513


$63,030









Basic earnings per common share:








Net income

$0.26


$0.22


$0.71


$0.61









Diluted earnings per common share:








Net income

$0.26


$0.22


$0.70


$0.60

(1)    The nine months ended September 30, 2023 includes the reversal of $0.8 million of previously expensed compensation related to a voluntary executive departure. The nine months ended September 30, 2022 includes $2.4 million of executive severance costs.

(2)    The nine months ended September 30, 2022 includes a $2.4 million gain on the sale of the corporate aircraft.

TANGER FACTORY OUTLET CENTERS, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(in thousands, except share data)

(Unaudited)


September 30,


December 31,


2023


2022

Assets




   Rental property:




   Land

$275,081


$275,079

   Buildings, improvements and fixtures

2,575,872


2,553,452

   Construction in progress

128,361


27,340


2,979,314


2,855,871

   Accumulated depreciation

(1,295,139)


(1,224,962)

      Total rental property, net

1,684,175


1,630,909

   Cash and cash equivalents

188,459


212,124

Short-term investments

13,150


52,450

   Investments in unconsolidated joint ventures

72,313


73,809

   Deferred lease costs and other intangibles, net

54,096


58,574

   Operating lease right-of-use assets

77,715


78,636

   Prepaids and other assets

115,395


111,163

         Total assets

$2,205,303


$2,217,665





Liabilities and Equity




Liabilities




   Debt:




Senior, unsecured notes, net

$1,039,377


$1,037,998

Unsecured term loan, net

322,162


321,525

Mortgages payable, net

65,293


68,971

Unsecured lines of credit


Total debt

1,426,832


1,428,494

Accounts payable and accrued expenses

99,041


104,741

Operating lease liabilities

86,621


87,528

Other liabilities

80,379


82,968

         Total liabilities

1,692,873


1,703,731

Commitments and contingencies




Equity




Tanger Factory Outlet Centers, Inc.:




Common shares, $0.01 par value, 300,000,000 shares authorized, 105,331,191 and
104,497,920 shares issued and outstanding at September 30, 2023 and December 31,
2022, respectively

1,053


1,045

   Paid in capital

992,901


987,192

   Accumulated distributions in excess of net income

(486,488)


(485,557)

   Accumulated other comprehensive loss

(16,795)


(11,037)

         Equity attributable to Tanger Factory Outlet Centers, Inc.

490,671


491,643

Equity attributable to noncontrolling interests:




Noncontrolling interests in Operating Partnership

21,759


22,291

Noncontrolling interests in other consolidated partnerships


         Total equity

512,430


513,934

            Total liabilities and equity

$2,205,303


$2,217,665

TANGER FACTORY OUTLET CENTERS, INC. AND SUBSIDIARIES

CENTER INFORMATION

(Unaudited)



September 30,



2023


2022

Gross Leasable Area Open at End of Period (in thousands):





Consolidated


11,349


11,457

Unconsolidated


2,113


2,113

Pro rata share of unconsolidated


1,056


1,056

Managed (1)


758


455






Total Owned and/or Managed Properties (2)(3)


14,220


14,025

Total Owned Properties including pro rata share of unconsolidated JVs (2)(3)


12,405


12,514






Outlet Centers in Operation at End of Period:





Consolidated


29


30

Unconsolidated


6


6

Managed


1


1

Total Owned and/or Managed Properties (3)


36


37






Ending Occupancy:





Consolidated


97.9 %


96.4 %

Unconsolidated


98.4 %


96.8 %

Total Owned Properties including pro rata share of unconsolidated JVs


98.0 %


96.5 %






Total U.S. States Operated in at End of Period (4)


20


20

(1)    In the third quarter 2023, the Company began managing an adjacent open-air retail center in Palm Beach, FL.

(2)    The Company also has a new center in Nashville, TN, totaling approximately 291,000 square feet, which opened in October 2023.

(3)    Amounts may not recalculate due to the effect of rounding.

(4)    The Company also has an ownership interest in two centers located in Ontario, Canada.

TANGER FACTORY OUTLET CENTERS, INC. AND SUBSIDIARIES

RECONCILIATION OF GAAP TO NON-GAAP SUPPLEMENTAL MEASURES (1)

(in thousands, except per share)

(Unaudited)


Below is a reconciliation of Net Income to FFO and Core FFO:



Three months
ended


Nine months ended



September 30,


September 30,



2023


2022


2023


2022

Net income


$28,877


$24,345


$79,037


$66,626

Adjusted for:









Depreciation and amortization of real estate assets – consolidated


24,953


24,853


75,077


76,129

Depreciation and amortization of real estate assets – unconsolidated joint ventures


2,608


2,871


7,893


8,416

FFO


56,438


52,069


162,007


151,171

FFO attributable to noncontrolling interests in other consolidated
partnerships




(248)


Allocation of earnings to participating securities


(651)


(412)


(1,560)


(1,270)

FFO available to common shareholders (2)


$55,787


$51,657


$160,199


$149,901

As further adjusted for:









Compensation-related adjustments (3)




(806)


2,447

Gain on sale of non-real estate asset (4)





(2,418)

Impact of above adjustments to the allocation of earnings to participating
securities




6


Core FFO available to common shareholders (2)


$55,787


$51,657


$159,399


$149,930

FFO available to common shareholders per share – diluted (2)


$0.50


$0.47


$1.45


$1.37

Core FFO available to common shareholders per share – diluted (2)


$0.50


$0.47


$1.44


$1.37










Weighted Average Shares:









Basic weighted average common shares


104,461


103,749


104,308


103,655

Effect of notional units


1,026


527


898


473

Effect of outstanding options


832


661


783


701

Diluted weighted average common shares (for earnings per share
computations)


106,319


104,937


105,989


104,829

Exchangeable operating partnership units


4,738


4,762


4,738


4,762

Diluted weighted average common shares (for FFO and Core FFO per
share computations) (2)


111,057


109,699


110,727


109,591

(1)    Refer to Non-GAAP Definitions beginning on page xv for definitions of the non-GAAP supplemental measures used in this release.

(2)    Assumes the Class A common limited partnership units of the Operating Partnership held by the noncontrolling interests are exchanged for common shares of the Company. Each Class A common limited partnership unit is exchangeable for one of the Company’s common shares, subject to certain limitations to preserve the Company’s REIT status.

(3)    For the 2023 period, represents the reversal of previously expensed compensation related to a voluntary executive departure. For the 2022 period, represents executive severance costs.

(4)    Represents gain on sale of the corporate aircraft.


Below is a reconciliation of FFO to FAD (1):



Three months ended


Nine months ended



September 30,


September 30,



2023


2022


2023


2022

FFO available to common shareholders


$55,787


$51,657


$160,199


$149,901

Adjusted for:









Corporate depreciation excluded above


421


592


1,579


1,779

Amortization of finance costs


796


763


2,395


2,304

Amortization of net debt discount


159


131


455


372

Amortization of equity-based compensation


3,387


3,006


9,040


9,965

Straight-line rent adjustments


409


155


1,410


1,190

Market rent adjustments


257


186


545


499

Second generation tenant allowances and lease incentives


(3,389)


(1,779)


(7,718)


(4,938)

Capital improvements


(10,275)


(4,047)


(19,776)


(10,672)

Adjustments from unconsolidated joint ventures


(423)


203


(528)


165

FAD available to common shareholders (2)


$47,129


$50,867


$147,601


$150,565

Dividends per share


$0.2450


$0.2000


$0.7100


$0.5825

FFO payout ratio


49 %


43 %


49 %


43 %

FAD payout ratio


58 %


43 %


53 %


43 %

Diluted weighted average common shares (2)


111,057


109,699


110,727


109,591

(1)    Refer to page ix for a reconciliation of net income to FFO available to common shareholders.

(2)    Assumes the Class A common limited partnership units of the Operating Partnership held by the noncontrolling interests are exchanged for common shares of the Company. Each Class A common limited partnership unit is exchangeable for one of the Company’s common shares, subject to certain limitations to preserve the Company’s REIT status.

Below is a reconciliation of Net Income to Portfolio NOI and Same Center NOI for the consolidated portfolio and total portfolio at pro rata share:



Three months ended


Nine months ended



September 30,


September 30,



2023


2022


2023


2022

Net income


$28,877


$24,345


$79,037


$66,626

Adjusted to exclude:









Equity in earnings of unconsolidated joint ventures


(2,389)


(2,055)


(6,030)


(6,795)

Interest expense


11,688


11,660


35,997


34,870

Other income


(1,899)


(1,395)


(7,023)


(4,154)

Depreciation and amortization


25,374


25,445


76,656


77,908

Other non-property (income) expenses


(306)


(279)


(1,327)


(45)

Corporate general and administrative expenses


18,950


17,495


54,674


52,309

Non-cash adjustments (1)


670


348


1,971


1,711

Lease termination fees


(392)


(228)


(400)


(2,859)

Portfolio NOI – Consolidated


80,573


75,336


233,555


219,571

Non-same center NOI – Consolidated


(90)


(479)


(50)


(950)

Same Center NOI – Consolidated (2)


$80,483


$74,857


$233,505


$218,621










Portfolio NOI – Consolidated


$80,573


$75,336


$233,555


$219,571

Pro rata share of unconsolidated joint ventures


7,418


6,850


20,949


20,406

Portfolio NOI – Total portfolio at pro rata share


87,991


82,186


254,504


239,977

Non-same center NOI – Total portfolio at pro rata share


(90)


(479)


(50)


(950)

Same Center NOI – Total portfolio at pro rata share (2)


$87,901


$81,707


$254,454


$239,027

(1)    Non-cash items include straight-line rent, above and below market rent amortization, straight-line rent expense on land leases and gains or losses on outparcel sales, as applicable. 

(2)    Sold outlet centers excluded from Same Center NOI:

Outlet centers sold:

Blowing Rock

December 2022

Consolidated

Below are reconciliations of Net Income to Adjusted EBITDA:



Three months ended


Nine months ended



September 30,


September 30,



2023


2022


2023


2022

Net income


$28,877


$24,345


$79,037


$66,626

Adjusted to exclude:









Interest expense, net


9,283


10,297


28,584


33,260

Income tax expense (benefit)


4


34


(32)


186

Depreciation and amortization


25,374


25,445


76,656


77,908

Compensation-related adjustments (1)




(806)


2,447

Gain on sale of non-real estate asset (2)





(2,418)

Adjusted EBITDA


$63,538


$60,121


$183,439


$178,009



Twelve months ended



September 30,


December 31,



2023


2022

Net income


$98,242


$85,831

Adjusted to exclude:





Interest expense, net


38,696


43,372

Income tax expense (benefit)


(80)


138

Depreciation and amortization


110,652


111,904

Gain on sale of assets


(3,156)


(3,156)

Compensation-related adjustments (1)


(806)


2,447

Gain on sale of non-real estate asset (2)



(2,418)

Loss on early extinguishment of debt 


222


222

Adjusted EBITDA


$243,770


$238,340

(1)    For the 2023 period, represents the reversal of previously expensed compensation related to a voluntary executive departure. For the 2022 period, represents executive severance costs.

(2)    Represents gain on sale of the corporate aircraft.

Below are reconciliations of Net Income to EBITDAre and Adjusted EBITDAre:



Three months ended


Nine months ended



September 30,


September 30,



2023


2022


2023


2022

Net income


$28,877


$24,345


$79,037


$66,626

Adjusted to exclude:









Interest expense, net


9,283


10,297


28,584


33,260

Income tax expense (benefit)


4


34


(32)


186

Depreciation and amortization


25,374


25,445


76,656


77,908

Pro rata share of interest expense, net – unconsolidated joint ventures


2,224


1,804


6,550


4,838

Pro rata share of depreciation and amortization – unconsolidated joint ventures 


2,608


2,871


7,893


8,416

EBITDAre


$68,370


$64,796


$198,688


$191,234

Compensation-related adjustments (1)




(806)


2,447

Gain on sale of non-real estate asset (2)





(2,418)

Adjusted EBITDAre


$68,370


$64,796


$197,882


$191,263



Twelve months ended



September 30,


December 31,



2023


2022

Net income


$98,242


$85,831

Adjusted to exclude:





Interest expense, net


38,696


43,372

Income tax expense (benefit)


(80)


138

Depreciation and amortization


110,652


111,904

Gain on sale of assets


(3,156)


(3,156)

Pro rata share of interest expense, net – unconsolidated joint ventures


8,684


6,972

Pro rata share of depreciation and amortization – unconsolidated joint ventures


10,495


11,018

EBITDAre


$263,533


$256,079

Compensation-related adjustments (1)


(806)


2,447

Gain on sale of non-real estate asset (2)



(2,418)

Loss on early extinguishment of debt


222


222

Adjusted EBITDAre


$262,949


$256,330

(1)    For the 2023 period, represents the reversal of previously expensed compensation related to a voluntary executive departure. For the 2022 period, represents executive severance costs.

(2)   Represents gain on sale of the corporate aircraft.

Below is a reconciliation of Total Debt to Net Debt for the consolidated portfolio and total portfolio at pro rata share:



September 30, 2023



Consolidated


Pro Rata

Share of
Unconsolidated
JVs 


Total at

Pro Rata Share





Total debt


$1,426,832


$160,318


$1,587,150

Less:







Cash and cash equivalents


(188,459)


(5,239)


(193,698)

Short-term investments (1)


(13,150)



(13,150)

Total cash and cash equivalents and short-term investments


(201,609)


(5,239)


(206,848)

Net debt


$1,225,223


$155,079


$1,380,302



December 31, 2022



Consolidated


Pro Rata

Share of Unconsolidated JVs


Total at

Pro Rata Share





Total debt


$1,428,494


$164,505


$1,592,999

Less:







Cash and cash equivalents


(212,124)


(8,686)


(220,810)

Short-term investments (1)


(52,450)



(52,450)

Total cash and cash equivalents and short-term investments


(264,574)


(8,686)


(273,260)

Net debt


$1,163,920


$155,819


$1,319,739

(1)   Represents short-term bank deposits with initial maturities greater than three months and less than or equal to one year.

NON-GAAP DEFINITIONS

Funds From Operations

Funds From Operations (“FFO”) is a widely used measure of the operating performance for real estate companies that supplements net income (loss) determined in accordance with generally accepted accounting principles in the United States (“GAAP”). We determine FFO based on the definition set forth by the National Association of Real Estate Investment Trusts (“NAREIT”), of which we are a member. In December 2018, NAREIT issued “NAREIT Funds From Operations White Paper – 2018 Restatement” which clarifies, where necessary, existing guidance and consolidates alerts and policy bulletins into a single document for ease of use. NAREIT defines FFO as net income (loss) available to the Company’s common shareholders computed in accordance with GAAP, excluding (i) depreciation and amortization related to real estate, (ii) gains or losses from sales of certain real estate assets, (iii) gains and losses from change in control, (iv) impairment write-downs of certain real estate assets and investments in entities when the impairment is directly attributable to decreases in the value of depreciable real estate held by the entity and (v) after adjustments for unconsolidated partnerships and joint ventures calculated to reflect FFO on the same basis.

FFO is intended to exclude historical cost depreciation of real estate as required by GAAP which assumes that the value of real estate assets diminishes ratably over time. Historically, however, real estate values have risen or fallen with market conditions. Because FFO excludes depreciation and amortization of real estate assets, gains and losses from property dispositions and extraordinary items, it provides a performance measure that, when compared year over year, reflects the impact to operations from trends in occupancy rates, rental rates, operating costs, development activities and interest costs, providing perspective not immediately apparent from net income (loss).

We present FFO because we consider it an important supplemental measure of our operating performance. In addition, a portion of cash bonus compensation to certain members of management is based on our FFO or Core FFO, which is described in the section below. We believe it is useful for investors to have enhanced transparency into how we evaluate our performance and that of our management. In addition, FFO is frequently used by securities analysts, investors and other interested parties in the evaluation of REITs, many of which present FFO when reporting their results. FFO is also widely used by us and others in our industry to evaluate and price potential acquisition candidates. We believe that FFO payout ratio, which represents regular distributions to common shareholders and unit holders of the Operating Partnership expressed as a percentage of FFO, is useful to investors because it facilitates the comparison of dividend coverage between REITs. NAREIT has encouraged its member companies to report their FFO as a supplemental, industry-wide standard measure of REIT operating performance.

FFO has significant limitations as an analytical tool, and you should not consider it in isolation, or as a substitute for analysis of our results as reported under GAAP. Some of these limitations are:

  • FFO does not reflect our cash expenditures, or future requirements, for capital expenditures or contractual commitments;
  • FFO does not reflect changes in, or cash requirements for, our working capital needs;
  • Although depreciation and amortization are non-cash charges, the assets being depreciated and amortized will often have to be replaced in the future, and FFO does not reflect any cash requirements for such replacements; and
  • Other companies in our industry may calculate FFO differently than we do, limiting its usefulness as a comparative measure.

Because of these limitations, FFO should not be considered as a measure of discretionary cash available to us to invest in the growth of our business or our dividend paying capacity. We compensate for these limitations by relying primarily on our GAAP results and using FFO only as a supplemental measure.

Core FFO

If applicable, we present Core Funds From Operations (“Core FFO”) as a supplemental measure of our performance. We define Core FFO as FFO further adjusted to eliminate the impact of certain items that we do not consider indicative of our ongoing operating performance. These further adjustments are itemized in the table above, if applicable. You are encouraged to evaluate these adjustments and the reasons we consider them appropriate for supplemental analysis. In evaluating Core FFO you should be aware that in the future we may incur expenses that are the same as or similar to some of the adjustments in this presentation. Our presentation of Core FFO should not be construed as an inference that our future results will be unaffected by unusual or non-recurring items.

We present Core FFO because we believe it assists investors and analysts in comparing our performance across reporting periods on a consistent basis by excluding items that we do not believe are indicative of our core operating performance. In addition, we believe it is useful for investors to have enhanced transparency into how we evaluate management’s performance and the effectiveness of our business strategies. We use Core FFO when certain material, unplanned transactions occur as a factor in evaluating management’s performance and to evaluate the effectiveness of our business strategies, and may use Core FFO when determining incentive compensation.

Core FFO has limitations as an analytical tool. Some of these limitations are:

  • Core FFO does not reflect our cash expenditures, or future requirements, for capital expenditures or contractual commitments;
  • Core FFO does not reflect changes in, or cash requirements for, our working capital needs;
  • Although depreciation and amortization are non-cash charges, the assets being depreciated and amortized will often have to be replaced in the future, and Core FFO does not reflect any cash requirements for such replacements;
  • Core FFO does not reflect the impact of certain cash charges resulting from matters we consider not to be indicative of our ongoing operations; and
  • Other companies in our industry may calculate Core FFO differently than we do, limiting its usefulness as a comparative measure.

Because of these limitations, Core FFO should not be considered in isolation or as a substitute for performance measures calculated in accordance with GAAP. We compensate for these limitations by relying primarily on our GAAP results and using Core FFO only as a supplemental measure.

Funds Available for Distribution

Funds Available for Distribution (“FAD”) is a non-GAAP financial measure that we define as FFO (defined as net income (loss) available to the Company’s common shareholders computed in accordance with GAAP, excluding (i) depreciation and amortization related to real estate, (ii) gains or losses from sales of certain real estate assets, (iii) gains and losses from change in control, (iv) impairment write-downs of certain real estate assets and investments in entities when the impairment is directly attributable to decreases in the value of depreciable real estate held by the entity and (v) after adjustments for unconsolidated partnerships and joint ventures calculated to reflect FFO on the same basis), excluding corporate depreciation, amortization of finance costs, amortization of net debt discount (premium), amortization of equity-based compensation, straight-line rent amounts, market rent amounts, second generation tenant allowances and lease incentives, recurring capital improvement expenditures, and our share of the items listed above for our unconsolidated joint ventures. Investors, analysts and the Company utilize FAD as an indicator of common dividend potential. The FAD payout ratio, which represents regular distributions to common shareholders and unit holders of the Operating Partnership expressed as a percentage of FAD, facilitates the comparison of dividend coverage between REITs.

We believe that net income (loss) is the most directly comparable GAAP financial measure to FAD. FAD does not represent cash generated from operating activities in accordance with GAAP and should not be considered as an alternative to net income (loss) as an indication of our performance or to cash flows as a measure of liquidity or our ability to make distributions. Other companies in our industry may calculate FAD differently than we do, limiting its usefulness as a comparative measure.

Portfolio Net Operating Income and Same Center Net Operating Income

We present portfolio net operating income (“Portfolio NOI”) and same center net operating income (“Same Center NOI”) as supplemental measures of our operating performance. Portfolio NOI represents our property level net operating income which is defined as total operating revenues less property operating expenses and excludes termination fees and non-cash adjustments including straight-line rent, net above and below market rent amortization, impairment charges, loss on early extinguishment of debt and gains or losses on the sale of assets recognized during the periods presented. We define Same Center NOI as Portfolio NOI for the properties that were operational for the entire portion of both comparable reporting periods and which were not acquired, or subject to a material expansion or non-recurring event, such as a natural disaster, during the comparable reporting periods. We present Portfolio NOI and Same Center NOI on both a consolidated and total portfolio, including pro rata share of unconsolidated joint ventures, basis.

We believe Portfolio NOI and Same Center NOI are non-GAAP metrics used by industry analysts, investors and management to measure the operating performance of our properties because they provide performance measures directly related to the revenues and expenses involved in owning and operating real estate assets and provide a perspective not immediately apparent from net income (loss), FFO or Core FFO. Because Same Center NOI excludes properties developed, redeveloped, acquired and sold; as well as non-cash adjustments, gains or losses on the sale of outparcels and termination rents; it highlights operating trends such as occupancy levels, rental rates and operating costs on properties that were operational for both comparable periods. Other REITs may use different methodologies for calculating Portfolio NOI and Same Center NOI, and accordingly, our Portfolio NOI and Same Center NOI may not be comparable to other REITs.

Portfolio NOI and Same Center NOI should not be considered alternatives to net income (loss) or as an indicator of our financial performance since they do not reflect the entire operations of our portfolio, nor do they reflect the impact of general and administrative expenses, acquisition-related expenses, interest expense, depreciation and amortization costs, other non-property income and losses, the level of capital expenditures and leasing costs necessary to maintain the operating performance of our properties, or trends in development and construction activities which are significant economic costs and activities that could materially impact our results from operations. Because of these limitations, Portfolio NOI and Same Center NOI should not be viewed in isolation or as a substitute for performance measures calculated in accordance with GAAP. We compensate for these limitations by relying primarily on our GAAP results and using Portfolio NOI and Same Center NOI only as supplemental measures.

Adjusted EBITDA, EBITDAre and Adjusted EBITDAre

We present Earnings Before Interest, Taxes, Depreciation and Amortization (“EBITDA”) as adjusted for items described below (“Adjusted EBITDA”), EBITDA for Real Estate (“EBITDAre”) and Adjusted EBITDAre, all non-GAAP measures, as supplemental measures of our operating performance. Each of these measures is defined as follows:

We define Adjusted EBITDA as net income (loss) computed in accordance with GAAP before net interest expense, income taxes (if applicable), depreciation and amortization, gains and losses on sale of operating properties, joint venture properties, outparcels and other assets, impairment write-downs of depreciated property and of investment in unconsolidated joint ventures caused by a decrease in value of depreciated property in the affiliate, compensation-related adjustments, gain on sale of non-real estate asset, casualty gains and losses, gains and losses on extinguishment of debt, net and other items that we do not consider indicative of the Company’s ongoing operating performance.

We determine EBITDAre based on the definition set forth by NAREIT, which is defined as net income (loss) computed in accordance with GAAP before net interest expense, income taxes (if applicable), depreciation and amortization, gains and losses on sale of operating properties, gains and losses on change of control and impairment write-downs of depreciated property and of investment in unconsolidated joint ventures caused by a decrease in value of depreciated property in the affiliate and after adjustments to reflect our share of the EBITDAre of unconsolidated joint ventures.

Adjusted EBITDAre is defined as EBITDAre excluding gains and losses on extinguishment of debt, net, compensation-related adjustments, gain on sale of non-real estate asset, casualty gains and losses, gains and losses on sale of outparcels, and other items that that we do not consider indicative of the Company’s ongoing operating performance.

We present Adjusted EBITDA, EBITDAre and Adjusted EBITDAre as we believe they are useful for investors, creditors and rating agencies as they provide additional performance measures that are independent of a Company’s existing capital structure to facilitate the evaluation and comparison of the Company’s operating performance to other REITs and provide a more consistent metric for comparing the operating performance of the Company’s real estate between periods.

Adjusted EBITDA, EBITDAre and Adjusted EBITDAre have significant limitations as analytical tools, including:

  • They do not reflect our net interest expense;
  • They do not reflect gains or losses on sales of operating properties or impairment write-downs of depreciated property and of investment in unconsolidated joint ventures caused by a decrease in value of depreciated property in the affiliate;
  • Adjusted EBITDA and Adjusted EBITDAre do not reflect gains and losses on extinguishment of debt and other items that may affect operations; and
  • Other companies in our industry may calculate these measures differently than we do, limiting its usefulness as a comparative measure.

Because of these limitations, Adjusted EBITDA, EBITDAre and Adjusted EBITDAre should not be considered in isolation or as a substitute for performance measures calculated in accordance with GAAP. We compensate for these limitations by relying primarily on our GAAP results and using Adjusted EBITDA, EBITDAre and Adjusted EBITDAre only as supplemental measures.

Net Debt 

We define Net Debt as Total Debt less Cash and Cash Equivalents and Short-Term Investments and present this metric for both the consolidated portfolio and for the total portfolio, including the consolidated portfolio and the Company’s pro rata share of unconsolidated joint ventures. Net debt is a component of the Net debt to Adjusted EBITDA ratio, which is defined as Net debt for the respective portfolio divided by Adjusted EBITDA (consolidated portfolio) or Adjusted EBITDAre (total portfolio at pro rata share). We use the Net debt to Adjusted EBITDA and the Net debt to Adjusted EBITDAre ratios to evaluate the Company’s leverage. We believe this measure is an important indicator of the Company’s ability to service its long-term debt obligations.

SOURCE Tanger Factory Outlet Centers, Inc.

Originally published at https://www.prnewswire.com/news-releases/tanger-reports-third-quarter-results-and-raises-full-year-2023-guidance-301979076.html
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