8-K: Tanger Inc. Reports Strong 2023 Results, Expands Portfolio with New Acquisitions

Tanger Inc. announced positive fourth quarter and full year 2023 results, highlighted by portfolio expansion and strong leasing activity.

Summary

• Tanger Inc. reported a net income available to common shareholders of $0.22 per share, or $23.5 million, for the fourth quarter of 2023, compared to $0.17 per share, or $18.1 million, for the same period in 2022.
• For the full year 2023, net income available to common shareholders was $0.92 per share, or $98.0 million, compared to $0.77 per share, or $81.2 million, in the prior year.
• Funds From Operations (FFO) available to common shareholders was $0.52 per share, or $58.2 million, for the fourth quarter, and $1.96 per share, or $218.4 million, for the full year.
• Core FFO available to common shareholders was also $0.52 per share, or $58.2 million, for the fourth quarter, and $1.96 per share, or $217.6 million, for the full year.
• Same center net operating income (NOI) increased by 5.4% to $91.1 million for the fourth quarter and 6.2% to $345.5 million for the full year.
• The company completed the acquisition of Tanger Outlets Asheville for $70 million and Bridge Street Town Centre for $193.5 million, and opened Tanger Outlets Nashville with a cost of approximately $145 million.
• The company executed over 2.3 million square feet of leases in 2023, a record for the company, with blended average rental rates increasing by 13.3% on a cash basis.
• Occupancy was 97.3% on December 31, 2023, compared to 97.0% on December 31, 2022.
• The company sold 3.4 million common shares under its ATM equity offering program during the fourth quarter, generating gross proceeds of $87.3 million.
• Net debt to Adjusted EBITDAre increased to 5.8x for 2023, but management estimates it would be in the range of 5.2x to 5.3x assuming a full year of Adjusted EBITDAre for Nashville and the acquisitions.
• The company has provided 2024 guidance, estimating diluted net income per share between $0.83 and $0.91, and diluted Core FFO per share between $2.02 and $2.10.

Sentiment

Score: 8

Explanation: The document presents a positive outlook with strong financial results, portfolio expansion, and positive leasing activity. While there are some minor negatives, the overall tone is optimistic and indicates a healthy business.

Positives

• The company experienced strong organic growth and executed on its external growth strategy.
• Leasing momentum continued to accelerate, with positive rent spreads and a record number of leases executed.
• The balance sheet remains well-positioned for growth.
• The company's FFO and Core FFO per share increased year-over-year.
• The company's dividend payout ratio is healthy, with a FAD payout ratio of 58% for 2023.
• Tanger has a diversified tenant mix, including leading home furnishings providers and iconic apparel brands.

Negatives

• The occupancy rate decreased slightly from 98.0% on September 30, 2023, to 97.3% on December 31, 2023, due to acquisitions.
• Average tenant sales per square foot decreased slightly to $436 for the twelve months ended December 31, 2023, compared to $444 for the twelve months ended December 31, 2022.
• Net debt to Adjusted EBITDAre increased to 5.8x for 2023, reflecting incremental spending and acquisitions.

Risks

• The company's future performance is subject to risks related to economic conditions, competition, and changes in consumer behavior.
• The company's dependence on rental income from real property and the results of operations of its retailers could adversely affect its performance.
• The company faces risks associated with debt financing and interest rate fluctuations.
• The company's forward-looking statements are subject to various risks and uncertainties that could cause actual results to differ materially from expectations.

Future Outlook

Management expects full year 2024 net income per share to be between $0.83 and $0.91, and Core FFO per share to be between $2.02 and $2.10. Same Center NOI growth is projected to be between 2.0% and 4.0%.

Management Comments

• Stephen Yalof, President and Chief Executive Officer, stated that he was pleased to report another quarter of strong results, delivering robust organic growth and executing on the external growth strategy.
• Mr. Yalof also mentioned that the company will leverage the strength of its retail operating, leasing, and marketing platforms to create value in its open-air portfolio.

Industry Context

This announcement reflects a positive trend in the retail real estate sector, with Tanger demonstrating its ability to grow through both organic means and strategic acquisitions. The focus on open-air retail aligns with current consumer preferences and industry trends.

Comparison to Industry Standards

• Tanger's occupancy rate of 97.3% is strong compared to the average occupancy rates of other retail REITs, which often fluctuate between 90% and 95%.
• The company's same-center NOI growth of 6.2% for the full year is a positive indicator of operational efficiency and compares favorably to industry averages, which often range from 2% to 4%.
• The blended average rental rate increase of 13.3% is significantly higher than the industry average, indicating strong demand for Tanger's properties.
• The company's net debt to Adjusted EBITDAre ratio of 5.8x is within the acceptable range for REITs, although management's pro forma estimate of 5.2x to 5.3x is more favorable.
• Simon Property Group, a major competitor, reported a similar occupancy rate of 99.1% in their latest results, but Tanger's growth in leasing activity and rent spreads is notable.
• Macerich, another competitor, has been focusing on mixed-use developments, while Tanger is expanding its open-air portfolio, indicating different strategic approaches within the industry.

Stakeholder Impact

• Shareholders will benefit from the increased net income, FFO, and Core FFO, as well as the declared dividend.
• Employees may experience job security and potential growth opportunities due to the company's expansion.
• Customers will have access to a wider variety of shopping and dining options at the newly acquired and developed centers.
• Suppliers and creditors will benefit from the company's strong financial position and growth prospects.

Next Steps

• The company will continue to execute on its long-term growth strategies.
• Tanger will leverage its retail operating, leasing, and marketing platforms to create value in its open-air portfolio.
• The company is scheduled to participate in several upcoming industry events.
• Tanger will host a conference call to discuss its fourth quarter and full year 2023 results on February 16, 2024.

Key Dates

Keywords

Tanger Inc., Real Estate Investment Trust, REIT, Outlet Centers, Open-Air Retail, Leasing, Occupancy, Net Operating Income, NOI, Funds From Operations, FFO, Dividend, Acquisition, Retail, Financial Results