Tanger Inc.

Good morning. This is Doug McDonald, Senior Vice President of Finance and Capital Markets, and I would like to welcome you all to the Tanger Factory Outlet Center's first quarter 2022 conference call. Yesterday evening, we issued our earnings release, as well as our supplemental information package and investor presentation. This information is available on our investor relations website, investors.tangeroutlets.com. Please note that during this conference call, some of management's comments will be forward-looking statements that are subject to numerous risks and uncertainties, and actual results could differ materially from those projected. We direct you to our filings with the Securities and Exchange Commission for a detailed discussion of these risks and uncertainties. During the call, we will also discuss non-GAAP financial measures as defined by SEC Regulation G, including funds from operations, or FFO, core FFO, same-center net operating income, adjusted EBITDA RE and net debt. Reconciliations of these non-GAAP measures to the most directly comparable GAAP financial measures are included in our earnings release and in our supplemental information. This call is being recorded for rebroadcast for a period of time in the future. As such, it is important to note that management's comments include time-sensitive information that may only be accurate as of today's date, May 6, 2022. At this time, all participants are in listen-only mode. Following management's prepared comments, the call will be opened for your questions. We request that everyone ask only one question and one follow-up to allow as many of you as possible to ask questions. If time permits, we are happy for you to re-queue for additional questions. On the call today will be Steve Tanger, our Executive Chair, Stephen Yaloff, Chief Executive Officer, and Jim Williams, Executive Vice President and Chief Financial Officer. I will now turn the call over to Steve Tanger. Please go ahead, Steve.

Good morning, and thank you for joining us for our first quarter 2022 earnings call. The results reflect our company's ongoing positive momentum. as evidenced by our strong operating performance, including sustained high occupancy, raised guidance for the year, and a recent dividend increase. I want to thank our team for their unwavering commitment to executing on our strategy to increase cash flow and to grow the value of our real estate. I will now turn the call over to Steve Yaloff, to provide additional details. Thanks, Steve.

Our first quarter results reflect our strong operating fundamentals. Positive leasing momentum, occupancy improvement, and a return to positive leasing spreads are translating into earnings growth. This strength, along with a constructive outlook, led our Board of Directors to approve a 9.6% increase in the annual dividend. Our first quarter operating and financial metrics were ahead of our expectations, and with our leasing results to date supporting a positive outlook, we are raising our full year's earnings guidance. In particular, traffic in the first quarter was up about 1% compared to the prior year first quarter, which I will remind you is when we saw traffic rebound and approach pre-pandemic levels. Traffic was lighter in March on a year-over-year comparable basis due to the timing of Easter, and our related Tanner-style marketing program. Yet, April traffic has returned even as consumers face higher gas prices and an inflationary environment. Tenant sales remained strong at $464 per square foot for the trailing 12-month period, an almost 20 percent increase from the pre-pandemic comparable period in 2019. We ended the first quarter with 94.3 percent total portfolio occupancy, of 230 basis points from the year-ago period, leasing spreads turned positive with blended average rental rates up 1.3% for all comparable renewed and retenanted leases executed during the 12 months ended March 31, 2022. This is a significant milestone and one which underscores the importance of our shopping destinations to our retailers and tenants. Taken together, these metrics helped generate robust growth. Same-center NOI was up 9.9% compared to the prior year, driven by growth in occupancy, variable rents, and other revenues in 2022. The current quarter benefited from reversal of revenue reserves as we collected previously doubtful or disputed rents. As we've been discussing over the past several quarters, we are laser-focused on three strategic priorities. all aimed at sustaining growth over time. We continue to make meaningful progress on accelerating leasing, commercializing marketing, and reshaping operations, which are evident in our results, and we are laying the foundation for growth in the quarters and years to come. Our goals to accelerate leasing are simple. Increase occupancy, grow rent over time, and elevate and diversify and attract new brands. We continue to achieve this with our best-in-class centers and a best-in-class leasing team, all supported by enhanced analytics that allow us to make the right decisions to optimize the merchandising of our properties. What's increasingly clear is that the retailers are committed to our open-air shopping destinations as part of their growth strategies, evidenced by our leasing momentum and tenants' desire to expand their footprint within Tanger Centers. We have also welcomed a number of new brands to the portfolio, such as Wolfert, St. John, Ulta, and Regatta, and new F&B businesses, Junction 35 to our flagship Sevierville destination, and Brooklyn Lobster at Tanger Outlets Foxwoods. Our focus on non-apparel and footwear tenants also continues as we sign leases with new F&B, furniture and home, and digitally native brands. These new additions deliver high-quality shopper visits by attracting a higher-income shopper and a younger demographic. Over the trailing 12-month period ended March 31st, we executed 1.8 million square feet of leases across 375 transactions, representing a 39% increase in space and a 42% increase in transactions from the comparable prior period. Driven in large part by the strong renewal activity, approximately 45% of this GLA was executed in the first quarter of this year. Growing customer traffic coupled with increased sales productivity at Tanger Centers has led to the absorption of vacancy as evidenced by our 230 basis point pickup in occupancy over the last 12 months. This dynamic is translating into our ability to execute far more landlord favorable lease terms and enabling us to convert valuable rent to fixed rent while commanding greater over-rent pay rates and tighter breakpoints. We also saw the lengthening of the average initial lease term by six months on renewal and four years on re-tenanted comparable leases executed in the trailing 12 months ended March 31, 2022, versus the prior year period. Our leasing momentum fuels our optimism and our continued ability to achieve our leasing objectives. Furthermore, we feel confident in our tenant base with a watch list that is meaningfully smaller than it has been for many years, and only 1% of our portfolio is on a cash basis, down from 3% by year's end. Our core strategy of commercializing marketing revolves around our ongoing digital transformation. We are focused on performing marketing that is targeted, measurable, and drives higher conversions. We have shifted some of our marketing spend from broader brand awareness to targeted programs designed to achieve specific goals, including drawing cars into our parking lots and growing the average spend per shopper. Our retailers are the direct recipients of these targeted initiatives, and as they continue to derive value, their partnership and participation continues to grow, thus resulting in higher shopper spends and bigger basket sizes. We have also improved our Tanger Club paid membership program by enhancing the value proposition, exclusive offerings, and shopper perks aimed at growing our active membership. Year-to-date, new enrollments were up 20% compared to the prior year, and we continue to see this group as the most productive of our customers. We are focused on reshaping operations by maximizing operational efficiency and growing ancillary revenues through marketing partnerships and media. On-center activations and partnerships with national brands such as Coca-Cola and the National Football League are growing across our entire portfolio as these brands seek to leverage the traffic and customers we drive to Tanger shopping destinations. These other revenues increased by almost 50% in the first quarter from the prior year, and there is additional opportunity in these non-rental revenues in the quarters and years to come. We are continuing to invest and execute on our sustainability initiatives that provide a return to our shareholders and our communities. Efforts include doubling our renewable energy footprint with solar infrastructure that will also produce expense savings over time, growing our EV charging station program by adding 200 new units across 17 centers, delivering free charging options to our shoppers, and bringing our very popular eco-friendly Rooftop B initiative to more Tanger centers. Finally, we are encouraged by our tenants' desire to expand their footprint with Tanger and for new tenants to begin and grow their relationship with us. We are pleased with the progress of our Nashville project, and continue to be on track to break ground later this quarter with grand opening scheduled for fall 2023. Our peripheral land team is aggressively pursuing opportunities to monetize and develop our out parcel portfolio. We are unlocking new opportunities to enhance our offering at exciting shopper amenities and generate new revenue streams, all creating long-term portfolio value. In summary, We're encouraged by our continued progress and our ability to execute on our strategic priorities. The value proposition of our open-air centers is being validated by shoppers, tenants, and the communities we serve. I would now like to turn the call over to Jim Williams to take you through our financial results, balance sheet, and increased guidance for 2022. Thank you, Steve.