Tanger Inc.

Good morning. I'm Ashley Curtis, Assistant Vice President of Investor Relations, and I would like to welcome you to Tanger, Inc.' 's first quarter 2024 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 IR website, investors.tanger.com. Please note that this call may contain 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. 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 1st, 2024. At this time, all participants are in listen-only mode. Following management's prepared comments, the call will be opened for your questions. On the call today will be Steven Yaloff, President and Chief Executive Officer, and Michael Billerman, Executive Vice President, Chief Financial Officer, and Chief Investment Officer. In addition, other members of our leadership team will be available for Q&A. I will now turn the call over to Steven Yaloff. Please go ahead.

Thank you, and good morning. I'm pleased to announce another quarter of solid performance. Last year's positive momentum carried into our first quarter, and we continue to successfully execute on our strategic initiatives of unlocking the embedded value in our portfolio through our leasing, operating, and marketing efforts and selectively pursuing external growth. In the first quarter, same center NOI grew by 5.2 percent and core FFO per share by 13 percent, driven by the execution of our internal and external growth initiatives. Leasing volume and rent spreads are key indicators of our ability to reprice our space, and over the trailing 12 months, we leased more than 2.3 million square feet of GLA, representing nearly 20 percent of our portfolio. and an average increase of 13% on a comparable basis as reflected in our rent spreads. Rent spreads the quarter were 36% for re-tenanted space and 11% for renewals. We are pleased with the demand for space in our portfolio as we maintain a robust pipeline of deals in progress with existing best-in-class brands and new to Tanger retailers, categories, and uses seeking to grow their business with us. As of March 31st, our portfolio occupancy was 96.5%, flat for the prior year period for the total portfolio, with our same center portfolio up 60 basis points. As we discussed last quarter, we continue to grow occupancy and create demand for space in our centers. To that end, we're focused on portfolio enhancement, where appropriate, Our leasing professionals are prioritizing re-tenanting and right-sizing over renewing selected stores in order to enhance the overall merchandising mix, utility, and shopper experience. Over the past few years, we have seen renewal rates greater than historical averages. Today, we see our increased pricing power as a catalyst to driving higher re-tenanting activity, which may result in renewal rates returning to our previous levels. Peripheral land has continued to be an important driver of incremental growth as we continue to activate and monetize our real estate with a variety of complementary uses and attractions that add to the diversity of experiences on center and drive both local and tourist trade. Additionally, the locations of our centers are benefiting from broader demographic, travel, and migration trends. We have the advantage of serving high tourist destinations, which are also the areas of the country that are experiencing elevated population and employment growth. This creates additional demand drivers for our centers and uniquely positions them to cater to both destination shoppers and more frequent local shoppers. These shoppers enjoy our mix of apparel and footwear retailers, as well as the new categories we've added, which include food and beverage, entertainment, and health and beauty uses. Traffic in the quarter was up slightly to last year as a challenging January was impacted by weather-related closures. However, this was offset as the quarter progressed with a stronger February and March due in part to the earlier timing of Easter. Sales led by family apparel, athletic, and footwear brands drove an increase in trailing 12-month total portfolio sales per square foot to $437, a sequential improvement over our year-end reported numbers. We are pleased with the integration of the three centers we added to the Tanger platform in the fourth quarter last year. Nashville continues to build momentum, benefiting from tourist shopper visits and the growing local population. As sales and traffic continue to grow, we've executed leases for most of the remaining space and look forward to welcoming these exciting retailers to Tanger and Asheville. Both our Asheville and Huntsville centers have proven to be strong contributors and natural fits to our platform. We are executing against our strategic plans for each with new tenant announcements, food and beverage additions, and shopper amenities expected later this year. With our proven track record as operators and asset managers of open-air centers, we continue to see opportunities to selectively pursue expansion. Our solid balance sheet position and operational expertise have provided a wider addressable market as we consider additional acquisition opportunities. We will maintain a disciplined approach, which incorporates leveraging our best-in-class leasing and operating platform, as well as our retailer relationships create value. I want to thank the Tanger team, our shoppers, retailer partners, and all of our stakeholders for their contributions and support toward our continued success. I'd now like to turn the call over to Michael.

Thank you, Steve. Today I'm going to discuss our first quarter financial results, our balance sheet activity, and our increased guidance for the year. Overall, we continue to deliver strong financial results driven by both internal and external growth backed by a solid balance sheet, which was further enhanced by the recent upsizing, extension, and reduced pricing on our unsecured lines of credit. In the first quarter, we delivered core FFO of 52 cents a share compared to 46 cents a share in the first quarter of the prior year as we saw continued solid operating growth along with the contributions from the three new centers added in the fourth quarter. This growth was partially offset by increased interest expense from the new interest rate swaps, which became effective during the first quarter. SANE Center NOI increased 5.2% in the first quarter, driven by the robust leasing and positive rent spreads that Steve talked about. which has led to higher rental revenues from increased base rent and higher expense recoveries. In addition, in the first quarter, we recognized certain expense refunds related to expenses from prior year periods, which were approximately one cent higher than we anticipated. This was partially offset by additional snow removal expenses compared to the milder winter in the prior year. our balance sheet remains well positioned to support our internal and external growth initiatives. With low leverage, a largely fixed rate balance sheet, minimal debt maturities until late 2026, and ample free cash flow after dividends. At quarter end, we had an equity market capitalization of $3.4 billion and had $1.6 billion of pro rata net debt. including the $325 million of interest rate swaps that went into effect in February of this year, approximately 93% of our total debt outstanding is at fixed rates. While our net debt to adjusted EBITDA was 5.7 times at pro rata share for the trailing 12 months ended March 31st, 2024, pro forma for a full year of adjusted EBITDA for the three new centers that came online during the fourth quarter, we estimate that our leverage ratio would be between 5.2 and 5.3 times on a trailing 12-month basis, still one of the lowest in the REIT sector. At quarter end, we had $474 million of availability on our unsecured lines of credit and $23 million of pro rata cash and investments. Subsequent to quarter end, we were pleased to amend our lines of credit, which increased Tanger's liquidity, reduced our borrowing costs, and extended our maturity through 2029 with options, further enhancing our flexibility to pursue Tanger's growth initiatives. With the amendment, our borrowing capacity increased by $100 million to $620 million with an accordion feature to increase that capacity to 1.2 billion, subject to lender approval. In addition, our pricing grid was improved, including a 15 basis point reduction at current levels, while all of our financial covenant thresholds were maintained. We were very pleased with the execution of our line recast, especially during a difficult real estate lending environment, and greatly appreciate the continued strong support from our overall lender group. Thank you for your confidence and tanger, our growth, our credit, and our team. In April, our board approved a 5.8% increase in our dividend to $1.10 per share on an annualized basis, which lifted our dividend yield approximately 20 basis points with the shares yielding just under 4% today. Our quarterly cash dividend remains well covered with a continued low payout ratio that provides free cash flow to support our growth. In the first quarter, our dividend payout ratio was at 54%. Now turning to our increased guidance for 2024. We are increasing our core FFO per share expectations by 1 cent to a range of $2.03 to $2.11 or 4% to 8% growth over 2023. We have increased our SANE Center NOI growth expectations by 25 basis points on both ends of the range to a new range of two and a quarter to four and a quarter percent, predominantly due to the better than expected expense refunds that I previously discussed. All the other expectations remain unchanged from the guidance that we provided on our year-end call. For additional details on our key assumptions, please see our issue, our release issued last night. We are greatly looking forward to seeing many of our financial stakeholders at upcoming industry events and property tours. The next stop on the Tanger tour will be at Tanger Outlet Savannah. which will take place on May 7th in conjunction with Well Fargo's 27th Annual Real Estate Securities Conference, which takes place on May 8th and 9th in Florida. In addition, members of our management team will be hosting meetings at BMO's conference in New York on May 8th, the ICSC conference in Las Vegas on May 20th and 21st, and NAIRIC's REIT Week in New York on June 4th through the 6th. With that, I would now like to open up the call for questions. Operator, can we take our first question, please?