Tanger Posts Strong Q4, Widens Aperture for Acquisitions
For Tanger Inc., it was a milestone year, capped by a fourth quarter of major square footage growth and a healthy bottom line.
Across several metrics, from leasing activity to same-center net operating income, Tanger exceeded its fourth-quarter expectations, despite recent mildly declining tenant sales.
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Net income available to common shareholders was 22 cents per share, or $23.5 million for the fourth quarter ended Dec. 31, compared to 17 cents per share, or $18.1 million, for the prior-year period, which included a 3 cents per share, or $3.2 million, gain from selling a non-core outlet center in Blowing Rock, N.C.
Funds from operations was 52 cents per share, or $58.2 million, compared to 47 cents per share, or $51.6 million in the year-ago period.
Same-center net operating income, or NOI, increased 5.4 percent to $91.1 million in the fourth quarter compared to $86.5 million in the year-ago quarter.
Tanger posted its eighth consecutive quarter of positive rent spreads and more than 2.3 million square feet of leases executed in 2023, a record for the company, driving NOI growth while elevating and diversifying its tenant mix.
Tanger’s stock price ticked up 4 percent, or $1.08, to $28.78 by noon Friday, following the report, which was issued after the market closed Thursday, and for the first time its market cap exceeded $3 billion. By the close of the market Friday, the stock was up 3.4 percent, or $0.94 cents, to $28.64.
“We delivered robust organic growth, while also executing on our external growth strategy with the grand opening up of Tanger Outlets Nashville and the acquisitions of Tanger Outlets Asheville and Bridge Street Town Centre in Huntsville, our first non-outlet center,” said Stephen Yalof, president and chief executive officer.
He told WWD, “We’re looking for centers with solid fundamentals that dominate the markets they serve, have great local catchment as well as some tourist population. There’s a number of those similar-type centers out there.
“That acquisition activity in the fourth quarter put us on the map and on the speed dial of the number of brokers and bankers that are actively marketing centers across the country,” Yalof said in the interview. The acquisition of Bridge Street Town Centre alone “opened up our total addressable market of potential acquisition targets.”
Tanger owns and operates 38 open-air outlet centers plus the one full-price open-air center comprising a total of more than 15 million square feet.
In addition to acquisitions, Yalof said Tanger will sustain momentum through further diversification of the tenant mix to increase the presence of home, beauty, food and health and wellness brands, which it started to do last year with introduction of Ulta Beauty, Shake Shack, RH and Crate & Barrel at a few Tanger centers.
He also cited stepped up efforts to replace temporary, short-term leases with longer-term, more permanent tenants. “We’re being very selective,” Yalof said.
In addition, Tanger has been accelerating efforts to activate or monetize unused property right by its centers such as with entertainment features like Dave & Buster’s.
While the gains were seen across several metrics, average tenant sales per square foot slipped modestly to $436 for the 12 months ended Dec. 31, compared to $437 for the 12 months ended Sept. 30, and $444 in 2022. Yalof said the slightly reduced tenant sales productivity reflected a “normalization” of sales trends from post-COVID-19 highs.
Asked what categories performed well last quarter and what didn’t, Yalof replied, “Athletic, athleisure and family apparel saw gains last quarter. Fifty percent of our shopping centers is apparel, on average, and those categories did surprisingly well in the fourth quarter. But accessories and high-end discretionary items were less of a priority last holiday season.”
While 2023 marked a major year of growth — organically and through acquisitions — Tanger’s biggest growth year in terms of square footage was in 2003 when along with an affiliate of Blackstone Real Estate Advisors, the Charter Oak Partners’ portfolio of nine outlet centers totaling 3.3 million square feet was acquired.
Tanger also reported that for the full year, net income was 92 cents per share, or $98 million, compared to 77 cents per share, or $81.2 million, for the prior-year period. FFO was $1.96 per share, or $218.4 million, compared to $1.83 per share, or $201.5 million, for the prior year period.
Occupancy was 97.3 percent on Dec. 31 compared to 98 percent on Sept. 30, and 97 percent on Dec. 31, 2022. The sequential change was driven by the acquisitions of Tanger Asheville and Bridge Street Town Centre. On a same center basis, occupancy was 97.9 percent on Dec. 31.
For 2024, Tanger forecasts net income of 83 cents to 91 cents per share; diluted FFO of $2.01 to $2.09 per share, and same center NOI growth of 2 to 4 percent.
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