Tanger Reports Second Quarter 2015 Results

Funds From Operations Per Share Increases 14.9%, 2015 Guidance Increases by $0.07 Per Share

Same Center Net Operating Income Increases 4.6%, Guidance Increases for the Year

Aug 04, 2015, 16:05 ET from Tanger Factory Outlet Centers, Inc.

GREENSBORO, N.C., Aug. 4, 2015 /PRNewswire/ -- Tanger Factory Outlet Centers, Inc. (NYSE: SKT) today reported funds from operations ("FFO") available to common shareholders, a widely accepted supplemental measure of REIT performance, increased 14.9% to $0.54 per share, or $54.1 million for the three months ended June 30, 2015, from $0.47 per share, or $46.1 million for the three months ended June 30, 2014.  Adjusted funds from operations ("AFFO") for the six months ended June 30, 2015 increased 13.0% to $1.04 per share, or $103.9 million, from $0.92 per share, or $90.5 million for the six months ended June 30, 2014.  A reconciliation of FFO to AFFO is shown in the table below.  

"We were pleased to have surpassed consensus FFO for the second quarter of 2015 by $0.03 per share and grown FFO per share by 14.9% compared to the second quarter of 2014.  Consolidated portfolio same center net operating income for the second quarter rose 4.6%, our largest increase since the fourth quarter of 2012.  The 42nd consecutive quarterly increase in comparable net operating income was driven in part by an average increase in base rental rates of 25.8% for the first half of 2015, our best year-to-date increase since the fourth quarter of 2008," commented Steven B. Tanger, President & Chief Executive Officer.  "In addition, two of the four new Tanger Outlet Centers planned for 2015 opened during the second quarter, and a third opened last week.  The response to the new Tanger Outlet Centers in the Savannah, Georgia market; at Foxwoods Resort Casino in Mashantucket, Connecticut; and in the Grand Rapids, Michigan market has been positive from shoppers and tenants alike," he added.

 

Three months ended

Six months ended

June 30,

June 30,

In thousands, except per share amounts:

2015

2014

2015

2014

FFO as reported

$

54,145

$

46,094

$

103,916

$

88,937

As adjusted for:

Acquisition costs

7

Abandoned pre-development costs

1,596

Impact of above adjustments to the allocation of  earnings to participating securities

(33)

Adjusted FFO ("AFFO")

$

54,145

$

46,094

$

103,916

$

90,507

Diluted weighted average common shares

99,873

98,989

99,783

98,890

FFO per share

$

0.54

$

0.47

$

1.04

$

0.90

AFFO per share

$

0.54

$

0.47

$

1.04

$

0.92

 

Net income available to common shareholders for the three months ended June 30, 2015 was $24.2 million, or $0.26 per share, as compared to $18.4 million, or $0.20 per share, for the three months ended June 30, 2014.  Net income available to common shareholders for the six months ended June 30, 2015, which was positively impacted by a $13.7 million gain on the sale of the company's 50% ownership interest in the Wisconsin Dells, Wisconsin joint venture, was $58.3 million, or $0.62 per share, as compared to $32.6 million, or $0.35 per share, for the six months ended June 30, 2014.

Net income, FFO and AFFO per share are on a diluted basis.  FFO and AFFO are supplemental non-GAAP financial measures used in the real estate industry to measure and compare the operating performance of real estate companies.  Complete reconciliations containing adjustments from GAAP net income to FFO and to AFFO are included in this release.

Highlights for the Quarter

  • Same center net operating income increased 4.6% during the quarter, marking the 42nd consecutive quarter of same center net operating income growth
  • Blended increase in average base rental rates of 25.8% on space renewed and released throughout the consolidated portfolio during the first half of 2015, compared to 24.0% for the first half of 2014
  • Period-end consolidated portfolio occupancy rate of 96.8% at June 30, 2015
  • Average tenant sales for the consolidated portfolio increased 2% to $391 per square foot for the rolling twelve months ended June 30, 2015
  • Debt-to-total market capitalization ratio of 32% as of June 30, 2015
  • Interest coverage ratio of 4.67 times, compared to 3.97 for the three months ended June 30, 2014
  • Opened a new Tanger Outlet Center in the Savannah, Georgia market on April 16, 2015
  • Opened a new Tanger Outlet Center at Foxwoods Resort Casino in Mashantucket, Connecticut on May 21, 2015
  • Commenced construction of a new Tanger Outlet Center in the Columbus, Ohio market on June 25, 2015
  • Opened a new Tanger Outlet Center in the Grand Rapids, Michigan market on July 31, 2015

Core Portfolio Drives Operating Results

During the six months ended June 30, 2015, Tanger executed 323 leases totaling 1,428,000 square feet throughout its consolidated portfolio with a 25.8% increase in average base rental rates, compared to a 24.0% increase for the six months ended June 30, 2014.  Lease renewals accounted for 1,059,000 square feet, which generated a 22.9% increase in average base rental rates, compared to an 18.1% increase for the six months ended June 30, 2014.  Leases renewed represent 68.3% of the space scheduled to expire in 2015.  Re-tenanted space accounted for the remaining 369,000 square feet, with an increase in average base rental rates of 33.0%, compared to a 36.6% increase for the six months ended June 30, 2014. 

Consolidated portfolio same center net operating income for the three months ended June 30, 2015, increased 4.6%, compared to a 3.3% increase for the three months ended June 30, 2014.  For the six months ended June 30, 2015, consolidated portfolio same center net operating income increased 4.3%, compared to a 3.3% increase for the six months ended June 30, 2014. Same center net operating income excludes lease termination fees of $1.7 million and $2.8 million for the three months and six months ended June 30, 2015, respectively. Consolidated portfolio average tenant sales for the twelve months ended June 30, 2015 increased approximately 2% to $391 per square foot.

As of June 30, 2015, the company's consolidated portfolio was 96.8% occupied, down slightly compared to June 30, 2014, due primarily to bankruptcy-related and brand-wide store closings that occurred during the second half of 2014 and the first half of 2015.  Management believes the vacancy provides Tanger an exceptional opportunity to upgrade its tenant mix and mark rents to market.  The company anticipates recapturing a total of 214,000 square feet throughout its consolidated portfolio by the end of 2015 as a result of these store closings, including 133,000 square feet that had closed through June 30, 2015.  Of the remaining 81,000 square feet expected to close this year, 52,000 square feet is related to closing announcements made by Kasper, Hartstrings, and DKNY since March 31, 2015.   As of June 30, 2015, Tanger had executed leases with new tenants representing approximately 45,000 square feet, or 21% of the total square feet expected to be recaptured, at a 40% increase in average base rents. 

Investment Activities Provide Potential Future Growth

The company expects to increase its total footprint by approximately 10% in 2015 by delivering four new Tanger Outlet Centers totaling 1.4 million square feet at an expected weighted average stabilized yield on cost of approximately 10.2%.  These projects represent a $388.7 million total investment, of which Tanger's net equity requirement is expected to be approximately $155.8 million.  The balance is expected to be funded with a combination of joint venture partner equity contributions and mortgage loan proceeds.  Tanger's remaining equity contribution required to complete these projects was approximately $49.4 million as of June 30, 2015.   

Following the April 16, 2015 opening of Tanger Outlets Savannah, Tanger Outlets at Foxwoods opened on May 21, 2015.   Located at Foxwoods Resort Casino in Mashantucket, Connecticut, the 312,000 square foot center is suspended above ground to join the resort's two casino floors which, along with Foxwoods' other various on-site entertainment venues, attract millions of visitors each year.  As of  June 30, 2015, the center was 93% leased.

On July 31, 2015, the newest Tanger Outlet Center opened in the Grand Rapids, Michigan market.  The 350,000 square foot center, which features local architectural details and 80 brand name and designer outlets, was 89% leased at opening.  The shopper turnout for the opening required the company to utilize nearby off-site overflow parking lots to accommodate the high volume of shopper traffic.

Construction is well underway in the Memphis, Tennessee market in Southaven, Mississippi, the site of the next Tanger Outlet Center that the company expects to deliver in November 2015.

On June 25, 2015, Tanger and its joint venture partner commenced construction of a new Tanger Outlet Center in the Columbus, Ohio market.  The company currently expects to complete construction in time to open the center during the second quarter of 2016.

Sale of Four Outlet Centers No Longer Probable

Subsequent to June 30, 2015, Tanger concluded that the sale of a portfolio of four outlet centers, classified in the company's balance sheets as rental property held for sale, was no longer probable.  As of June 30, 2015, these four centers, which accounted for less than 5% of the company's consolidated net operating income, were 93% occupied on average, cash flow positive, and free of mortgage encumbrances.

Tanger Raises FFO Per Share Guidance for 2015

As of June 30, 2015, management currently believes its net income available to common shareholders and funds from operations for 2015 will be as follows: 

For the year ended December 31, 2015:

Low Range

High Range

Estimated diluted net income per share

$1.21

$1.27

Noncontrolling interest, depreciation and amortization

of real estate assets including noncontrolling interest

share and our share of unconsolidated joint ventures,

and gains on sale of interests in unconsolidated entities

0.95

0.95

Estimated diluted FFO per share

$2.16

$2.22

 

The company's earnings estimates for the year ended December 31, 2015 reflect average general and administrative expense of approximately $11.5 million to $12.0 million per quarter.  Tanger is increasing its 2015 full year same center net operating income guidance to 3.5% to 4.0%.  In addition, the company increased its annual FFO guidance for 2015 by $0.07 per share. The components of the increase include $0.02 per share related to stronger than expected operations and termination fees during the second quarter of 2015, $0.01 per share due to the elimination of dilution during the second quarter of 2015 related to the previously proposed sale of certain assets, $0.01 per share related to better projected operating results for the second half of 2015 compared to the company's previous forecast, and $0.03 per share due to the elimination of dilution in the second half of 2015 related to the previously proposed sale of certain assets.

Second Quarter Conference Call

Tanger will host a conference call to discuss its second quarter results for analysts, investors and other interested parties on Wednesday, August 5, 2015, at 10 a.m. Eastern Time.  To access the conference call, listeners should dial 1-877-277-5113 and provide conference ID # 34699254 to be connected to the Tanger Factory Outlet Centers Second Quarter 2015 Financial Results call.  Alternatively, the call will be web cast by SNL IR Solutions and can be accessed at Tanger Factory Outlet Centers, Inc.'s web site by clicking the Investor Relations link at www.tangeroutlet.com.  A telephone replay of the call will be available from August 5, 2015 at 1:00 p.m. through August 19, 2015 at 11:59 p.m. by dialing 1-855-859-2056, conference ID # 34699254.  An online archive of the broadcast will also be available through August 19, 2015.

 

 

About Tanger Factory Outlet Centers

Tanger Factory Outlet Centers, Inc. (NYSE: SKT), is a publicly-traded REIT that, as of August 4, 2015, operates and owns, or has an ownership interest in, a portfolio of 47 upscale outlet shopping centers in 24 states coast to coast and in Canada, totaling approximately 14.7 million square feet leased to over 3,100 stores operated by more than 470 different brand name companies.  With more than 30 years experience in the outlet industry and 2 additional centers currently under construction, Tanger Outlet Centers continue to attract more than 185 million shoppers annually.  Tanger is headquartered in Greensboro, North Carolina.  Tanger is furnishing a Form 8-K with the Securities and Exchange Commission that includes a supplemental information package for the quarter ended June 30, 2015.  For more information on Tanger Outlet Centers, call 1-800-4TANGER or visit the company's web site at www.tangeroutlet.com.

This news release contains forward-looking statements within the meaning of federal securities laws. These statements include, but are not limited to, estimates of future net income and FFO per share, same center net operating income, general and administrative expenses, and the dilutive impact from sales of certain properties and equity interests in unconsolidated joint ventures;  plans for new developments, expansions, and dispositions; the expected duration of the construction process for, and the projected openings of, proposed developments; the determination of whether any potential disposition opportunity is probable; equity requirements to complete construction of new outlet centers; tenant demand for space; the renewal and re-tenanting of space and the expected timing of rent commencement for executed leases; leasable space expected to be recaptured and the opportunity to upgrade tenant mix and rental rates for such space; tenant sales and sales trends as well as other statements regarding plans, estimates, intentions, and similar statements concerning anticipated future events, results, circumstances, performance or expectations that are not historical facts.

These forward-looking statements are subject to risks and uncertainties. Actual results could differ materially from those projected due to various factors including, but not limited to, the risks associated with general economic and real estate conditions in the United States and Canada, the company's ability to meet its obligations on existing indebtedness or refinance existing indebtedness on favorable terms, the availability and cost of capital, whether the company's regular evaluation of acquisition and disposition opportunities results in any consummated transactions, and whether or not any such consummated transaction results in an increase or decrease in liquidity, net income or funds from operations, whether projects in our pipeline convert into successful developments, the company's ability to lease its properties, the company's ability to implement its plans and strategies for joint venture properties that it does not fully control, the company's inability to collect rent due to the bankruptcy or insolvency of tenants or otherwise, and competition. For a more detailed discussion of the factors that affect our operating results, interested parties should review the Tanger Factory Outlet Centers, Inc. Annual Report on Form 10-K for the fiscal year ended December 31, 2014.

Contact:  Frank C. Marchisello Executive Vice President and CFO (336) 834-6834

Cyndi Holt Vice President of Finance and Investor Relations (336) 834-6892

 

TANGER FACTORY OUTLET CENTERS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except per share data)

(Unaudited)

Three months ended

Six months ended

June 30,

June 30,

2015

2014

2015

2014

REVENUES

Base rentals (a)

$

72,329

$

68,160

$

139,958

$

135,136

Percentage rentals

2,042

1,915

4,271

3,998

Expense reimbursements

29,909

29,452

63,273

60,994

Management, leasing and other services

1,727

758

3,010

1,324

Other income

1,729

1,927

3,150

3,543

Total revenues

107,736

102,212

213,662

204,995

EXPENSES

Property operating

34,958

33,629

72,690

69,656

General and administrative

11,612

10,761

22,917

21,483

Acquisition costs (b)

7

Abandoned pre-development costs (c)

1,596

Depreciation and amortization

24,272

25,197

48,261

51,260

Total expenses

70,842

69,587

143,868

144,002

Operating income

36,894

32,625

69,794

60,993

OTHER INCOME/(EXPENSE)

Interest expense

(13,088)

(14,582)

(26,177)

(29,502)

Gain on sale of assets and interests in unconsolidated

 entities

13,726

Other nonoperating income (expense)

(493)

64

(187)

123

Income before equity in earnings of unconsolidated joint ventures

23,313

18,107

57,156

31,614

Equity in earnings of unconsolidated joint ventures

2,046

1,788

4,589

3,721

Net income

25,359

19,895

61,745

35,335

Noncontrolling interests in Operating Partnership

(1,313)

(1,028)

(3,168)

(1,831)

Noncontrolling interests in other consolidated partnerships

435

(17)

416

(38)

Net income attributable to Tanger Factory Outlet Centers, Inc.

24,481

18,850

58,993

33,466

Allocation of earnings to participating securities

(308)

(481)

(716)

(910)

Net income available to common shareholders of

Tanger Factory Outlet Centers, Inc.

$

24,173

$

18,369

$

58,277

$

32,556

Basic earnings per common share:

Net income

$

0.26

$

0.20

$

0.62

$

0.35

Diluted earnings per common share:

Net income

$

0.26

$

0.20

$

0.62

$

0.35

a.

Includes straight-line rent and market rent adjustments of $1,278 and $791 for the three months ended and $1,746 and $2,075 for the six months ended June 30, 2015 and 2014, respectively.

b.

Represents potential acquisition related expenses incurred during the periods presented.

c.

Represents costs related to pre-development projects no longer considered probable.

 

 

TANGER FACTORY OUTLET CENTERS, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(in thousands, except share data)

(Unaudited)

June 30,

December 31,

2015

2014

ASSETS

   Rental property

   Land

$

217,994

$

217,994

   Buildings, improvements and fixtures

2,078,946

1,947,083

   Construction in progress

95,167

98,526

2,392,107

2,263,603

   Accumulated depreciation

(699,836)

(662,236)

      Total rental property, net

1,692,271

1,601,367

   Cash and cash equivalents

16,949

16,875

   Rental property held for sale (a)

46,862

46,005

   Investments in unconsolidated joint ventures

212,939

208,050

   Deferred lease costs and other intangibles, net

133,909

140,883

   Deferred debt origination costs, net

11,417

12,126

   Prepaids and other assets

74,393

72,354

         Total assets

$

2,188,740

$

2,097,660

LIABILITIES AND EQUITY

Liabilities

   Debt

Senior, unsecured notes (net of discount of $6,090 and $6,426, respectively)

$

793,910

$

793,574

Unsecured term loans (net of discount of $162 and $241, respectively)

267,338

267,259

Mortgages payable (including premiums of $2,542 and $3,031, respectively)

276,942

271,361

Unsecured lines of credit

176,300

111,000

Total debt

1,514,490

1,443,194

     Accounts payable and accrued expenses

83,787

69,558

   Deferred financing obligation

28,388

28,388

     Other liabilities

30,639

32,634

         Total liabilities

1,657,304

1,573,774

Commitments and contingencies

Equity

Tanger Factory Outlet Centers, Inc.

Common shares, $.01 par value, 300,000,000 shares authorized, 95,842,047 and 95,509,781 shares issued and outstanding at June 30, 2015 and December 31, 2014, respectively

958

955

   Paid in capital

798,587

791,566

   Accumulated distributions in excess of net income

(272,948)

(281,679)

   Accumulated other comprehensive loss

(22,470)

(14,023)

         Equity attributable to Tanger Factory Outlet Centers, Inc.

504,127

496,819

Equity attributable to noncontrolling interests

Noncontrolling interests in Operating Partnership

26,712

26,417

Noncontrolling interests in other consolidated partnerships

597

650

         Total equity

531,436

523,886

            Total liabilities and equity

$

2,188,740

$

2,097,660

a.     Subsequent to June 30, 2015, the company concluded that the sale of these assets was no longer probable.

 

 

TANGER FACTORY OUTLET CENTERS, INC. AND SUBSIDIARIES

SUPPLEMENTAL INFORMATION

(in thousands, except per share, state and center information)

(Unaudited)

Three months ended

Six months ended

June 30,

June 30,

2015

2014

2015

2014

FUNDS FROM OPERATIONS (a)

Net income

$

25,359

$

19,895

$

61,745

$

35,335

Adjusted for:

Depreciation and amortization of real estate assets - consolidated

23,919

24,782

47,556

50,484

Depreciation and amortization of real estate assets - unconsolidated joint ventures

5,038

2,403

9,114

5,008

Gain on sale of assets and interests in unconsolidated entities

(13,726)

Funds from operations (FFO)

54,316

47,080

104,689

90,827

FFO attributable to noncontrolling interests in other consolidated partnerships

412

(37)

370

(77)

Allocation of earnings to participating securities (b)

(583)

(949)

(1,143)

(1,813)

Funds from operations available to common shareholders

$

54,145

$

46,094

$

103,916

$

88,937

Funds from operations available to common shareholders per share - diluted

$

0.54

$

0.47

$

1.04

$

0.90

WEIGHTED AVERAGE SHARES

Basic weighted average common shares

94,741

93,800

94,639

93,690

Effect of notional units

Effect of outstanding options and restricted common shares

54

74

66

72

Diluted weighted average common shares (for earnings per share computations)

94,795

93,874

94,705

93,762

Exchangeable operating partnership units (c)

5,078

5,116

5,078

5,128

Diluted weighted average common shares (for funds from operations per share computations)

99,873

98,990

99,783

98,890

OTHER INFORMATION

Gross leasable area open at end of period -

Consolidated

11,657

11,544

11,657

11,544

Partially owned - unconsolidated

2,747

1,721

2,747

1,721

Outlet centers in operation at end of period -

Consolidated

37

37

37

37

Partially owned - unconsolidated

9

7

9

7

States operated in at end of period (d)

23

24

23

24

Occupancy at end of period (d)

96.8

%

98.0

%

96.8

%

98.0

%

 

a.   

FFO is a non-GAAP financial measure.  The most directly comparable GAAP measure is net income (loss), to which it is reconciled.  We believe that for a clear understanding of our operating results, FFO should be considered along with net income as presented elsewhere in this report.  FFO is presented because it is a widely accepted financial indicator used by certain investors and analysts to analyze and compare one equity REIT with another on the basis of operating performance.  FFO is generally defined as net income (loss), computed in accordance with generally accepted accounting principles, before extraordinary items and gains (losses) on sale or disposal of depreciable operating properties, plus depreciation and amortization of real estate assets, impairment losses on depreciable real estate of consolidated real estate and after adjustments for unconsolidated partnerships and joint ventures, including depreciation and amortization, and impairment losses on investments in unconsolidated joint ventures driven by a measurable decrease in the fair value of depreciable real estate held by the unconsolidated joint ventures.  We caution that the calculation of FFO may vary from entity to entity and as such the presentation of FFO by us may not be comparable to other similarly titled measures of other reporting companies.  FFO does not represent net income or cash flow from operations as defined by accounting principles generally accepted in the United States of America and should not be considered an alternative to net income as an indication of operating performance or to cash flows from operations as a measure of liquidity.  FFO is not necessarily indicative of cash flows available to fund dividends to shareholders and other cash needs.

b.   

Notional units granted in 2010 were converted into 933,769 restricted common shares in January 2014 which vested on December 31, 2014.  The restricted common shares were considered participating securities through the vesting date.

c.   

The exchangeable operating partnership units (noncontrolling interest in operating partnership) are not dilutive on earnings per share computed in accordance with generally accepted accounting principles.

d. 

Excludes the centers in which we have ownership interests but are held in unconsolidated joint ventures.

 

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SOURCE Tanger Factory Outlet Centers, Inc.



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