8-K: Tanger Inc. Reports Strong First Quarter Results and Raises Full-Year Guidance

Tanger Inc. announced positive first quarter results, including a 60 basis point year-over-year increase in same center occupancy and a 5.8% dividend increase, while also raising full-year 2024 guidance.

Summary

• Tanger Inc. reported its first quarter 2024 results, showing a net income available to common shareholders of $0.20 per share, or $22.2 million.
• Funds From Operations (FFO) available to common shareholders was $0.51 per share, or $58.6 million, and Core FFO was $0.52 per share, or $60.1 million.
• Same center occupancy increased by 60 basis points year-over-year, reaching 97.1% as of March 31, 2024.
• Same center net operating income (NOI) increased by 5.2% to $87.9 million compared to the first quarter of 2023.
• The company achieved its ninth consecutive quarter of positive rent spreads, with blended average rental rates increasing by 12.9% on a cash basis.
• Tanger increased its full-year 2024 guidance for net income per share to a range of $0.84 to $0.92, FFO per share to a range of $2.02 to $2.10, and Core FFO per share to a range of $2.03 to $2.11.
• The company also increased its dividend by 5.8% to $1.10 per share on an annualized basis.

Sentiment

Score: 8

Explanation: The document conveys a positive sentiment due to strong financial results, increased guidance, and a dividend increase. The company's strategic initiatives and improved financial metrics suggest a positive outlook.

Positives

• Tanger demonstrated strong leasing activity, with a 38.9% increase in square footage leased compared to the same period last year.
• The company's balance sheet and liquidity were strengthened by the amendment of its unsecured lines of credit.
• The Funds Available for Distribution (FAD) payout ratio was a healthy 54% for the first quarter of 2024.
• Net debt to Adjusted EBITDAre improved to 5.7x for the twelve months ended March 31, 2024, from 5.8x for the year ended December 31, 2023.
• The interest coverage ratio was 4.6x for the first quarter of 2024 and 4.8x for the twelve months ended March 31, 2024.

Negatives

• Net income available to common shareholders decreased slightly to $22.2 million from $23.3 million in the prior year period.
• Average tenant sales per square foot decreased to $437 for the twelve months ended March 31, 2024, from $447 for the twelve months ended March 31, 2023.
• Occupancy for the total portfolio was 96.5% on March 31, 2024, the same as March 31, 2023, but down from 97.3% on December 31, 2023.

Risks

• The company's performance is subject to risks related to macroeconomic conditions, including rising interest rates and inflation.
• Tanger is dependent on rental income from real property and the results of operations of its retailers.
• There are risks associated with potential changes in consumer, travel, shopping, and spending habits.
• The company faces competition for tenants with competing retail centers.
• There are risks related to the impact of geopolitical conflicts and the outbreak of infectious diseases.

Future Outlook

Management increased its full-year 2024 guidance for net income per share to a range of $0.84 to $0.92, FFO per share to a range of $2.02 to $2.10, and Core FFO per share to a range of $2.03 to $2.11. Same Center NOI growth is expected to be between 2.25% and 4.25%.

Management Comments

• Stephen Yalof, President and Chief Executive Officer, stated that the company is pleased to announce another quarter of strong financial and operating results along with a recent 6% dividend increase.
• Mr. Yalof also mentioned that the company is strategically focused on elevating and diversifying its tenant mix, driving total rents, and leveraging its platform to realize additional growth.
• He noted that the company achieved its ninth consecutive quarter of positive rent spreads with continued significant leasing volume.
• Mr. Yalof highlighted the increase in capacity, extension of term, and improvement in pricing of the company's unsecured lines of credit.

Industry Context

This announcement reflects a positive trend in the retail REIT sector, with Tanger demonstrating strong operational performance and financial health. The company's focus on enhancing its portfolio and diversifying its tenant mix aligns with broader industry trends aimed at attracting and retaining shoppers in a competitive market.

Comparison to Industry Standards

• Tanger's same-center occupancy of 97.1% is strong compared to the average occupancy rates of other retail REITs, which often fluctuate between 90% and 95%.
• The 5.2% increase in same-center NOI is a positive indicator, outperforming some peers who have reported flat or declining NOI growth in the same period.
• The 12.9% blended average rental rate increase is significant, suggesting strong demand for Tanger's properties and effective lease negotiations, which is higher than the average rent growth seen in the broader retail sector.
• Simon Property Group (SPG), a major competitor, has also reported positive results, but Tanger's focus on outlet centers provides a unique niche in the market.
• The dividend increase of 5.8% is a positive signal for investors, indicating confidence in future cash flows, and is higher than the average dividend growth in the REIT sector.
• The amendment and extension of the unsecured lines of credit, increasing borrowing capacity to $620 million, is a strategic move to improve liquidity and financial flexibility, which is a common practice among well-managed REITs.

Stakeholder Impact

• Shareholders will benefit from the increased dividend and positive financial performance.
• Employees may experience increased job security and potential for career growth due to the company's positive outlook.
• Customers will benefit from the company's focus on enhancing the shopping experience.
• Retail partners will benefit from the company's efforts to elevate and diversify the tenant mix.
• Creditors will benefit from the company's improved financial health and liquidity.

Next Steps

• Tanger will host a conference call on May 1, 2024, to discuss the first quarter results.
• The company is scheduled to participate in several upcoming industry events, including Wells Fargo's 27th Annual Real Estate Securities Conference, BMO's 19th Annual Real Estate Conference, ICSC Las Vegas, and Nareit's REITweek: 2024 Investor Conference.

Key Dates

Keywords

REIT, Real Estate, Retail, Outlet Centers, Occupancy, Net Operating Income, Rent Spreads, Dividend, Leasing, FFO, EBITDA, Debt, Guidance