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

Tanger Inc. announced positive second quarter results, highlighted by increased rental revenue and a tenth consecutive quarter of positive rent spreads, leading to an increased full-year 2024 guidance.

Summary

• Tanger Inc. reported its financial results and operating metrics for the three and six months ended June 30, 2024.
• Net income available to common shareholders was $0.22 per share, or $24.6 million, for the second quarter, compared to $0.23 per share, or $23.9 million, for the same period last year.
• Funds From Operations (FFO) available to common shareholders was $0.53 per share, or $60.9 million, for the second quarter, compared to $0.47 per share, or $52.4 million, for the prior year period.
• Core FFO available to common shareholders was also $0.53 per share, or $60.9 million, for the second quarter, compared to $0.47 per share, or $52.4 million, for the prior year period.
• For the first half of 2024, net income was $0.43 per share, or $46.8 million, compared to $0.45 per share, or $47.3 million, for the prior year period.
• FFO for the first half of 2024 was $1.04 per share, or $119.5 million, compared to $0.95 per share, or $104.4 million, for the prior year period.
• Core FFO for the first half of 2024 was $1.05 per share, or $121.0 million, compared to $0.94 per share, or $103.6 million, for the prior period.
• Occupancy was 96.5% on June 30, 2024, compared to 97.2% on June 30, 2023.
• Same center occupancy was 97.1% on June 30, 2024, the same as on March 31, 2024, and compared to 97.2% on June 30, 2023.
• Same center net operating income (NOI) increased 8.0% to $89.6 million for the second quarter of 2024 from $83.0 million for the second quarter of 2023.
• Same center NOI increased 6.6% to $177.5 million for the first half of 2024 from $166.5 million for the first half of 2023.
• Average tenant sales per square foot was $439 for the twelve months ended June 30, 2024, compared to $443 for the twelve months ended June 30, 2023.
• On a same center basis, average tenant sales per square foot was $436 for the twelve months ended June 30, 2024, compared to $443 for the twelve months ended June 30, 2023.
• Blended average rental rates were positive for the tenth consecutive quarter at 15.1% on a cash basis for leases executed for comparable space during the twelve months ended June 30, 2024.
• The company has renewed or re-tenanted 65.5% of the space scheduled to expire during 2024.
• The company's unsecured lines of credit were amended, increased to $620 million, and extended to April 2028, with an option to extend to April 2029.
• Net debt to Adjusted EBITDAre improved to 5.4x for the twelve months ended June 30, 2024, from 5.8x for the year ended December 31, 2023.
• The company estimates that Net debt to Adjusted EBITDAre would be in a range of 5.1x to 5.2x for the June 30, 2024 period assuming a full twelve months of Adjusted EBITDAre for Tanger Nashville, Tanger Asheville, and Bridge Street Town Centre.
• The company increased its full-year 2024 guidance for net income per share to $0.85-$0.92, FFO per share to $2.04-$2.11, and Core FFO per share to $2.05-$2.12.

Sentiment

Score: 8

Explanation: The document conveys a positive sentiment due to strong financial results, increased guidance, and positive operational metrics. The company's strategic initiatives and financial health are highlighted, indicating a favorable outlook.

Positives

• Tanger has shown consistent positive rent spreads for ten consecutive quarters.
• The company's same center NOI has increased significantly, indicating strong operational performance.
• The increase in blended average rental rates demonstrates the company's ability to secure favorable lease terms.
• The amendment and increase of the unsecured lines of credit provide greater financial flexibility.
• The improvement in net debt to Adjusted EBITDAre ratio indicates a stronger balance sheet.
• The company's increased full-year guidance reflects management's confidence in future performance.
• The company has a high occupancy rate of 96.5% for total owned properties including pro rata share of unconsolidated JVs.

Negatives

• The occupancy rate for total owned properties including pro rata share of unconsolidated JVs decreased slightly from 97.2% on June 30, 2023 to 96.5% on June 30, 2024.
• Average tenant sales per square foot decreased slightly from $443 for the twelve months ended June 30, 2023 to $439 for the twelve months ended June 30, 2024.
• Net income available to common shareholders was slightly lower at $0.43 per share for the first half of 2024 compared to $0.45 per share for the same period last year.

Risks

• The company's performance is subject to macroeconomic conditions, including rising interest rates and inflation, which could impact tenants and the business.
• The company is dependent on rental income from real property, and any decrease in occupancy or rental rates could adversely affect results.
• The company's tenants' financial health and potential bankruptcies could impact rental income.
• The company faces competition for tenants with competing retail centers.
• The company's diversification of tenant mix and entry into full-price retail may not achieve expected results.
• The company is subject to risks related to climate change and environmental regulations.
• The company is subject to risks related to cyber-attacks and technology system outages.

Future Outlook

Tanger increased its full-year 2024 guidance for net income per share to $0.85-$0.92, FFO per share to $2.04-$2.11, and Core FFO per share to $2.05-$2.12. The company expects same center NOI growth to be between 3.25% and 4.75%.

Management Comments

• Stephen Yalof, President and Chief Executive Officer, stated that the team continues to execute on the strategic plan, which is translating into total rent growth.
• Mr. Yalof also noted that Tanger is well positioned to further enhance the portfolio for shoppers and retail partners due to a strong balance sheet and liquidity.

Industry Context

The results reflect a positive trend in the retail REIT sector, with Tanger demonstrating strong leasing activity and operational performance. The company's focus on tenant diversification and enhancing the shopper experience aligns with broader industry trends aimed at attracting and retaining customers in a competitive market.

Comparison to Industry Standards

• Tanger's occupancy rate of 96.5% is strong compared to the average occupancy rates of other retail REITs, which often fluctuate between 90% and 95%.
• The 15.1% blended average rental rate increase is a significant achievement, indicating strong demand for Tanger's properties and outperforming many of its peers.
• The company's net debt to Adjusted EBITDAre ratio of 5.4x is within the acceptable range for REITs, but the company is actively working to reduce this ratio further.
• Simon Property Group, a major competitor, reported a similar occupancy rate of 95.5% in their latest results, but Tanger's rent growth is higher.
• Macerich, another competitor, has struggled with occupancy and rent growth, making Tanger's performance stand out.
• The company's focus on open-air centers is a strategic move that aligns with current consumer preferences, differentiating it from enclosed mall operators.

Stakeholder Impact

• Shareholders will benefit from the increased dividend and positive financial performance.
• Employees will benefit from the company's continued growth and success.
• Customers will benefit from the enhanced shopping experience and diversified tenant mix.
• Retail partners will benefit from the company's strong performance and strategic initiatives.
• Creditors will benefit from the company's improved financial health and reduced leverage.

Next Steps

• Tanger will host a conference call on August 2, 2024, to discuss the second quarter results.
• The company is scheduled to participate in several upcoming industry events in August and September 2024.
• The company will continue to focus on portfolio enhancement and diversifying its retailer mix.

Key Dates

Keywords

REIT, Real Estate, Retail, Outlet Centers, Shopping Destinations, Leasing, Occupancy, Net Operating Income, FFO, EBITDA, Debt, Guidance