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Tanger Reports Healthy Q1 and Growth With Victoria’s Secret, Warby Parker, Ulta, Others

The Greensboro, N.C.-based operator of 39 outlet centers and one lifestyle center is leasing to a greater variety of tenants, including full-price brands.

Tanger Reports Healthy Q1 and Growth With Victoria’s Secret, Warby Parker, Ulta, Others

Tanger Outlets Nashville

Tanger, continuing to build and diversify the mix of tenants at its shopping centers, posted strong first-quarter operating results and raised its outlook for the year.

Net income was slightly down due to added depreciation and amortization expense from two acquired properties and one developed property in the fourth quarter, to $0.20 per share, or $22.2 million, compared to $0.22 per share, or $23.3 million, for the year-ago period. But funds from operations, which is the standard measure of performance in the real estate investment trust industry, exceeded market expectations, rising to $0.51 per share, or $58.6 million, compared to $0.47 per share, or $52 million, for the prior year period.

“We continue to grow this company, and recognize that our shopping centers are more than just outlet centers. They are community centers in great geographies. They need to be all they can be and we will continue to add new uses,” Stephen Yalof, Tanger’s president and chief executive officer, told WWD on Wednesday.

Tanger Reports Healthy Q1 and Growth With Victoria’s Secret, Warby Parker, Ulta, Others

Stephen Yalof

Tanger is expected to reveal a new batch of tenants later this year, including the Tecovas boot brand.

The Greensboro, N.C.,-based operator of 39 outlet centers and one lifestyle center has for several seasons been adding new kinds of tenants, and not just outlets. Full-price stores such as Warby Parker, Victoria’s Secret, Ulta and Barnes & Noble are among those recently signing their first leases with Tanger.

So far, Ulta has stores in three Tanger centers and Victoria’s Secret has locations in 12 Tanger centers.

Warby Parker will soon open in Tanger’s Bridge Street Town Centre, in Huntsville, Ala. It’s a lifestyle center Tanger purchased last November.

Planet Fitness is coming to Tanger Outlets Savannah in Georgia and a Barnes & Noble is coming to Tanger Outlets Rehoboth in Delaware, reflecting further diversification of the tenant mix.

Lafayette 148, Kate Spade, Wacoal, Ba&sh, Shake Shack and Planet Fitness also not long ago signed their first leases with Tanger. In certain situations, such as with Planet Fitness, Tanger makes use of previously unused “peripheral” space, often owned by Tanger.

“As we create these relations with new retailers, our mission is to get them to cascade throughout our portfolio,” Yalof said. “We’re selectively introducing full-price retail into some of our outlet centers where they provide a new use. Ultimately, the end game is where we can draw that local customer far more frequently and have them stay longer.”

Yalof also told WWD that Tanger is continuing to eye potential property acquisitions.

In the fourth quarter of last year, Tanger closed on two properties, Asheville Outlets in North Carolina, as well as Bridge Street Town Centre, Tanger’s first full-price center. In addition, Tanger Outlets Nashville, built from the ground up, opened in October 2023.

In its quest for additional properties, Yalof said Tanger will choose carefully, and won’t rule out another full-price center.

Tanger Reports Healthy Q1 and Growth With Victoria’s Secret, Warby Parker, Ulta, Others

Tanger purchased Bridge Street Town Centre, in Huntsville, Ala., last year.

Last quarter, family apparel, athletic and footwear were the strongest-performing categories for Tanger. Yalof singled out Hollister, Aerie, America Eagle, Ugg and Under Armour as among the bestselling brands.

In April, Express, a major tenant in outlet centers and malls, declared bankruptcy and said it’s closing more than 100 stores. Tanger has an Express outlet in 30 of its properties but only one of those Express outlets is slated to close, Yalof said. That particular lease was expiring anyway, he said. “Express has been on our watch list for over a year. We’ve had really good intel on what stores would close.”

Yalof said Tanger this year will keep up its “robust” leasing pace from last year when 2.3 million square feet of space was leased or re-leased involving 542 leases, compared to nearly 1.7 million square feet involving 414 leases during the year before.

“With the suburbanization of America, our local shopper base keeps growing,” Yalof said. “That is driving a lot of our decision-making,” involving attracting more food and beverage, and entertainment players.

Yalof said the company is working to precisely determine how much of its shopper is local versus tourist. “Anecdotally, it’s 50/50 in some cases. We built Nashville to cater to tourists and we’re pleasantly surprised at how much of a local customer business we are getting…I think the consumer remains strong. They want to buy products they love and find them in places that are comfortable to shop, where they feel the environment is safe, and where there are plenty of things to do.”

In other first-quarter results at Tanger,

  • Core funds from operations, which exclude certain items, was $0.52 per share, or $60.1 million, compared to $0.46 per share, or $51.2 million, for the prior year period.
  • Average tenant sales per square foot was $437 for the 12 months ended March 31, compared to $436 for the 12 months ended Dec. 31, 2023, and $447 for the 12 months ended March 31, 2023.
  • On a same center basis, average tenant sales per square foot was $434 for the 12 months ended March 31, compared to $433 for the 12 months ended Dec. 31, 2023, and $447 for the 12 months ended March 31, 2023.
  • Occupancy was 96.5 percent on March 31, compared to 97.3 percent on Dec. 31, 2023, and 96.5 percent on March 31, 2023. On a same-center basis, occupancy was 97.1 percent on March 31, 97.9 percent on Dec. 31, 2023, and 96.5 percent on March 31, 2023.
  • In April, the board of directors approved a 5.8 percent increase in the dividend to $1.10 per common share from $1.04 on an annualized basis.

In his prepared statement issued Tuesday when the quarterly results were posted after the market close, Yalof said, “We are strategically focused on elevating and diversifying our tenant mix, driving total rents and leveraging our platform to realize additional growth. We achieved our ninth consecutive quarter of positive rent spreads with continued significant leasing volume, which positions us to further enhance our portfolio for our shoppers and retail partners.”

Yalof continued, “In early April, we also increased the capacity, extended the term, and improved the pricing of our unsecured lines of credit, further strengthening our balance sheet and liquidity, positioning the company to continue to execute on its long-term growth strategies and unlock additional value for all of our stakeholders.” Borrowing capacity was increased to $620 million from $520 million, with an accordion feature to increase total borrowing capacity to $1.2 billion, subject to lender approval.