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

Tanger Inc. announced positive third-quarter results, including an 11th consecutive quarter of positive rent spreads, and increased its full-year 2024 guidance.

Summary

• Tanger Inc. reported its financial results and operating metrics for the three and nine months ended September 30, 2024.
• The company achieved its 11th consecutive quarter of positive leasing spreads.
• Net income available to common shareholders was $0.22 per share, or $24.6 million, for the third quarter of 2024, compared to $0.26 per share, or $27.2 million, for the same period last year.
• Funds From Operations (FFO) available to common shareholders was $0.54 per share, or $62.7 million, compared to $0.50 per share, or $55.8 million, for the prior year period.
• Core FFO available to common shareholders was also $0.54 per share, or $62.7 million, compared to $0.50 per share, or $55.8 million, for the prior year period.
• For the first nine months of 2024, net income available to common shareholders was $0.65 per share, or $71.4 million, compared to $0.70 per share, or $74.5 million, for the prior year period.
• FFO available to common shareholders for the first nine months was $1.58 per share, or $182.2 million, compared to $1.45 per share, or $160.2 million, for the prior year period.
• Core FFO available to common shareholders for the first nine months was $1.60 per share, or $183.7 million, compared to $1.44 per share, or $159.4 million, for the prior period.
• Occupancy was 97.4% on September 30, 2024, compared to 96.5% on June 30, 2024, and 98.0% on September 30, 2023.
• Same center net operating income (Same Center NOI) increased 4.3% to $91.7 million for the third quarter of 2024 from $87.9 million for the third quarter of 2023.
• Same Center NOI increased 5.8% to $269.2 million for the first nine months of 2024 from $254.4 million for the first nine months of 2023.
• Average tenant sales per square foot was $438 for the twelve months ended September 30, 2024.
• Blended average rental rates were positive for the 11th consecutive quarter at 14.4% on a cash basis for leases executed for comparable space during the twelve months ended September 30, 2024.
• The company sold 0.8 million common shares under its at-the-market stock offering (the ATM Offering) at a weighted average price of $30.53 per share, generating gross proceeds of $25.0 million during the three and nine months ended September 30, 2024.
• In October 2024, the Company sold an additional 0.5 million common shares at a weighted average price of $33.38 per share, totaling approximately $16.2 million of gross proceeds.
• Net debt to Adjusted EBITDAre improved to 5.0x for the twelve months ended September 30, 2024 from 5.8x for the year ended December 31, 2023.
• The company increased its full-year 2024 guidance for net income, FFO, and Core FFO per share.

Sentiment

Score: 8

Explanation: The document conveys a positive sentiment due to the strong financial results, increased guidance, and positive leasing activity. The company's management also expresses confidence in future performance. However, there are some minor negative points such as a decrease in net income and occupancy, and the temporary closure of one center due to a hurricane, which prevents a perfect score.

Positives

• The company has shown strong performance with positive rent spreads for the 11th consecutive quarter.
• Same Center NOI has increased, indicating improved operational efficiency.
• The company has successfully raised capital through its ATM offering.
• The company's leverage has improved, with a decrease in the net debt to Adjusted EBITDAre ratio.
• The company has increased its full-year 2024 guidance, reflecting confidence in future performance.
• The company has a strong balance sheet and liquidity with no significant maturities until late 2026.

Negatives

• Net income available to common shareholders decreased in the third quarter of 2024 compared to the same period last year.
• Occupancy decreased from 98.0% on September 30, 2023 to 97.4% on September 30, 2024.
• Lease termination fees decreased in the third quarter of 2024 compared to the same period last year.

Risks

• The company's performance is subject to risks related to economic conditions, including rising interest rates and inflation.
• The company is dependent on rental income from real property and the results of operations of its retailers.
• The company faces competition for tenants with competing retail centers.
• The company's properties are subject to risks related to climate change and natural disasters.
• The company is subject to risks associated with debt financing.
• The company's future performance is subject to uncertainties of costs to comply with regulatory changes.

Future Outlook

Management increased its full-year 2024 guidance for net income per share to $0.88-$0.92, FFO per share to $2.08-$2.12, and Core FFO per share to $2.09-$2.13. Same Center NOI growth is expected to be between 4.25% and 5.00%.

Management Comments

• I am pleased to announce another quarter of strong performance and an increase in our full-year guidance, said Stephen Yalof, President and Chief Executive Officer.
• Our team remains focused on elevating our shopper experience and attracting in-demand retailer brands and a diversified tenant mix, along with more food and beverage and experiential destinations.
• Our strategy is driving total rents, including our 11th consecutive quarter of positive leasing spreads, and we will continue leveraging our platform to realize additional growth.
• With our strong balance sheet and liquidity, including no significant maturities until late 2026, we have the flexibility to remain opportunistic and are well-positioned to unlock additional value for all our stakeholders.
• A core value of Tanger is to Consider Community First, and our team has recently demonstrated this commitment as we have responded to the impacts of Hurricanes Helene and Milton in the Southeastern U.S.

Industry Context

The report indicates a positive trend in the retail real estate sector, with Tanger demonstrating resilience and growth despite economic challenges and weather events. The focus on enhancing shopper experience and diversifying tenant mix aligns with broader industry trends aimed at attracting and retaining customers in a competitive market.

Comparison to Industry Standards

• Tanger's occupancy rate of 97.4% is relatively high compared to the average occupancy rates of shopping centers in the US, which have been fluctuating between 90% and 95% in recent years, indicating a strong demand for their properties.
• The positive blended average rental rate spread of 14.4% is a strong indicator of Tanger's ability to increase rental income, which is a key metric for REITs. This is higher than the average rent growth seen in the broader retail sector, which has been in the single digits for most of 2024.
• The company's net debt to Adjusted EBITDAre ratio of 5.0x is within the acceptable range for REITs, which typically aim for a ratio between 4x and 6x. This indicates a healthy balance sheet and manageable leverage.
• Tanger's FFO payout ratio of 61% for the first nine months of 2024 is a good indicator of dividend sustainability, as it is within the range of 50% to 75% that is considered healthy for REITs. This suggests that the company is distributing a reasonable portion of its earnings to shareholders while retaining enough capital for reinvestment.
• Compared to peers like Simon Property Group (SPG) and Macerich (MAC), Tanger's focus on outlet centers provides a unique market position, which has allowed it to maintain strong occupancy and rental rates. While SPG and MAC have a larger portfolio of higher-end malls, Tanger's outlet centers cater to a different segment of the market, which has shown resilience in the current economic climate.

Stakeholder Impact

• Shareholders will benefit from the increased guidance and dividend payments.
• Employees will benefit from the company's continued growth and stability.
• Customers will benefit from the company's focus on enhancing the shopper experience.
• Retailers will benefit from the company's efforts to attract in-demand brands and diversify the tenant mix.
• Creditors will benefit from the company's strong balance sheet and liquidity.

Next Steps

• The company will host a conference call on November 7, 2024, to discuss the third quarter results.
• The company is scheduled to participate in the Nareits REITworld: 2024 Investor Conference from November 19 through November 20, 2024.
• The company is scheduled to participate in the Tour of Tanger Outlets Phoenix on November 21, 2024.

Key Dates

Keywords

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