Release Date: May 01, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Tanger Inc (SKT, Financial) reported a solid performance with Same Center NOI growing by 5.2% and core FFO per share increasing by 13%.
- The company successfully leased over 2.3 million square feet of GLA, representing nearly 20% of their portfolio, with an average increase of 13% on a comparable basis in rent spreads.
- Portfolio occupancy remained strong at 96.5%, with same center portfolio up by 60 basis points.
- Tanger Inc (SKT) has continued to enhance its portfolio through strategic re-tenanting and rightsizing, which has led to renewal rates greater than historical averages.
- The company has effectively utilized peripheral land for incremental growth, adding diversity to the shopping experience and attracting both local and tourist trade.
Negative Points
- Increased interest expense from new interest rate swaps impacted financial growth, partially offsetting the gains from operational growth.
- Weather-related closures in January slightly impacted traffic, although it recovered in the following months.
- The company anticipates potential fluctuations in tenant retention rates as they prioritize re-tenanting over renewing certain leases.
- While Tanger Inc (SKT) has a robust leasing strategy, the focus on re-tenanting could lead to short-term dips in occupancy.
- The need for significant tenant improvements (TIs) for new leases could pose challenges in maintaining cost efficiency.
Q & A Highlights
Q: Congrats on the quarter. Can you talk more about enhancing the merchandising mix? Are these tenants already in outlets, or are they new to Tanger or outlets in general?
A: (Stephen J. Yalof - President, CEO & Director) It's a combination of all. We're bringing in new brands and retailers that haven't been in the Tanger platform or outlets before. We're also diversifying uses, adding better restaurants and different brands for our peripheral land. This diversification aims to create a more diverse experience for both tourist customers and local shoppers.
Q: As you've been enhancing the merchandising mix, are you attracting a different or new customer base at some centers?
A: (Stephen J. Yalof - President, CEO & Director) Absolutely. For example, at Hilton Head, South Carolina, the addition of Nantucket's Meat and Fish has brought in a whole new set of people. Our strategy is to improve the complement of uses, which is expanding our catchment area and frequency of visits.
Q: Can you discuss the potential impact of re-tenanting and remerchandising on tenant retention and occupancy?
A: (Stephen J. Yalof - President, CEO & Director) We anticipate less renewal this year as we see renewal base as an opportunity to re-tenant. We're achieving over 30% spreads on re-tenanting, which is a great trade for us. This strategy involves replacing older retailers with more productive ones, enhancing the overall shopping experience.
Q: How are the new digital initiatives, like the new app, impacting customer interactions or shopping patterns?
A: (Stephen J. Yalof - President, CEO & Director) We're using our digital footprint to communicate better with our shoppers, especially in offering discounts in partnership with our retailers. This digital approach helps drive shoppers into our centers more effectively.
Q: Could you discuss the impact of the peripheral land strategy and any upcoming announcements?
A: (Stephen J. Yalof - President, CEO & Director) Peripheral land continues to be a significant growth driver. We're activating and monetizing our real estate with various uses that complement our shopping centers, like the upcoming opening of Texas Roadhouse in Arizona.
Q: What are the trends in tenant improvements (TIs) and how are you deciding on agreements with tenants?
A: (Michael Jason Bilerman - Executive VP, CFO & CIO) Tenant allowances have been relatively flat sequentially. We consider the investment in real estate for productivity, ensuring that tenants also invest significantly in their build-outs, which has been evident in the quality of new store openings.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
