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 second 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 this call may contain forward-looking statements that are subject to numerous risks and uncertainties, and actual results can 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, August 2, 2024. At this time, all participants are in listen-only mode. Following management's prepared comments, the call will be open for your questions. We request that everyone ask only one question and one follow-up question, and if time permits, we are happy for you to reach you for additional questions. On the call today will be Stephen Yala, President and Chief Executive Officer, and Michael Billerman, 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 Stephen Yala. Please go ahead.

I'm pleased to announce another quarter of strong performance and an increase in our full-year guidance. Our same center NOI grew by 8% from the prior year, while FFO per share was up 13%. These results demonstrate the continued execution of our strategy and our focus on optimizing our value proposition to both retailers and shoppers. We are elevating the retail mix in our centers and creating a community experience to drive traffic and increase engagement. Our centers are well located in fast-growing markets that benefit from an attractive mix of tourists, seasonal, and local residents. We're delivering a personalized and engaging experience to target each of these audiences. Year-to-date traffic was held to last year's levels with growth in May and June. We've also seen continued positive momentum in sales with another sequential quarterly increase in our sales productivity for the trailing 12 months. We continue to enhance the value of our centers for our customers by curating the right mix of brands, food and beverage, and entertainment uses, and elevating and creating an exciting and dynamic shopping experience. This strategy has led us to achieve our 10th consecutive quarter of positive rent spreads, which drives total rent and NOI growth. Demand for our space continues to be strong, driving robust leasing activity. We've executed 2 million square feet of leases over the trailing 12 months and an average spread of 15%. which we believe demonstrates the importance our retailers place on being in a Tanger Center. We ended the quarter with 96.5% occupancy. As of quarter end, we had renewals executed or in process for 66% of the space expiring this year ahead of last year's pace. We continue to believe in our real estate and focus on optimizing our merchandising mix, whether through renewals or re-tenanting, where appropriate. We are very pleased with the execution of our strategy to enhance and diversify our retailer mix with more productive brands. In addition to growing relationships with our existing tenants, we've seen approximately half of our retenanting activity come from new to portfolio brands over the past year and a half. And many are seeing success and expanding. For example, we've executed leases for six new Sephora stores, five of which are under construction and will open in the coming months. We're also activating peripheral land with concepts that draw additional traffic. Our new tenant pipeline is strong and we are encouraged by the momentum going into next year as we grow relationships with new and innovative brands. As publicly announced, Route 21 and Express both recently went through bankruptcy proceedings. We maintained proactive relationships with all of our tenants, and we were prepared for these situations and worked expeditiously to a resolution. Out of the 50 combined stores in our portfolio, only one was rejected, and we elected to recapture three other locations with near-term expirations to immediately re-tenant at greater rent. the Route 21 stores closed while they went through their ownership change, and they had begun to reopen and will all be open prior to the holiday selling season. In May, we published our 2023 ESG report, which discusses our focus on enhancing our sustainability metrics, resource efficiency, stakeholder engagement, and return on these investments. A few highlights include our notable increase in renewable energy production and the further rollout of electric vehicle charging stations, our initiatives to foster a healthy workplace culture and community involvement, and our commitment to diversity, governance, and investor engagement. In June, we were honored to receive the 2024 NAREIT Investor Care Gold Award for Communication and Reporting Excellence. I want to thank the entire Tanger team, our customers, and all of our stakeholders for their continued support. I'd now like to turn the call over to Michael to discuss our financial results, balance sheet, and outlook for the remainder of the year.

Thank you, Steve. Today, I'm going to discuss our second quarter financial results, our balance sheet activity, and our increased guidance for the year. In the second quarter, we delivered core FFO of 53 cents a share compared to 47 cents a share in the second quarter of the prior year, as we saw continued core growth, along with the contributions from the three new centers that we added in the fourth quarter of last year. Same center NOI increased 8% for the quarter, driven by higher rental revenues from the continued strong retailer demand and robust leasing activity, leading to increased base rents, as well as higher expense recoveries. Our second quarter same center NOI also benefited from flat operating expenses versus last year, in part based on the timing of our operating expenses throughout the year. Within our non-same center pool, we are pleased with the performance at our three recently added centers in Nashville, Huntsville, and Asheville. They are performing in line with our expectations, and we are continuing to execute on our leasing, merchandising, and marketing strategies at each center. Our balance sheet remains well positioned to support our internal and external growth initiatives with low leverage, a largely fixed rate balance sheet, almost full availability on our lines of credit, essentially no debt maturities until late 2026, and ample free cash flow after dividends given our low dividend payout ratio. At quarter end, we had $1.6 billion of pro rata net debt with a weighted average interest rate of 4.1%. Our net debt to adjusted EBITDA RE was 5.4 times for the 12 months ended June 30th, and pro forma for a full year of adjusted EBITDA for the three new centers that we added in the fourth quarter, we estimate that our leverage ratio would be between 5.1 to 5.2 times, still one of the lowest in the retail and REIT sectors. As previously announced during the quarter, we also extended the maturity, increased the borrowing capacity, and reduced our pricing on our unsecured lines of credit. At quarter end, we had $585 million of availability under our lines and $20 million of cash and cash equivalents. In April, our board approved a 5.8% increase in our dividend to $1.10 per share annualized with The share is yielding approximately 4% today. Our quarterly cash dividend remains well covered with a continued low payout ratio, providing free cash flow to support our growth. Now turning to our increased guidance for 2024. We are increasing our core FFO per share expectations to a range of $2.05 to $2.12. for a prior range of $2.03 to $2.11, implying 5% to 8% core FFO growth. We are increasing our SANE Center NOI growth expectations by 75 basis points at the midpoint to a range of 3.25% to 4.75% up from 2.25% to 4.25% last quarter. The increases are due to the better than expected performance in the second quarter and our outlook for the balance of the year. For additional details on our key assumptions, please see our release issued last night. And now I'd like to turn the call for questions. Operator?

Thank you. If you would like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star 2 to remove your question from the queue. And for participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. Please ask one question and one follow-up question and re-queue for additional questions. Our first question is from Jeff Spector with Bank of America. Please proceed.

Good morning. It's Andrew Real on for Jeff. Thanks for taking our questions. Could you just discuss in a little more detail the property expense timing benefit in the period? I guess what specifically saw the benefit and are there any timing impacts to be aware of in the second half?

Thanks, Andrew. When you look at our operating expenses between what we spend on our common area maintenance as well as our marketing expenses, those could be variable through the year, but in part it impacts what was spent in the year prior in terms of that year-over-year comparison. So when we look at our operating expenses in the second quarter, they were flat year-over-year. And as we think about the full year, that sort of blends into our expectations of same-center NOI, which we raised at both the low and the high end. You just have some variable timing as that expense flows through each quarter affecting that year-over-year on a quarterly basis impact.

Okay. Thank you. And then guidance suggests some meaningful deceleration in the same-center NOI growth in the back half. Is that just largely due to more downtime as you ramp up re-tenanting efforts, or are there other factors to call out there? Thank you.

We look at our business on an annual basis. And when you look at where our guidance is moving, what you've seen is both that low end coming up and the high end moving up. And so on a quarterly basis, just going back to that first question, that quarterly impact from the same center perspective is going to get impacted by the timing of that expenses year over year. But in aggregate for the year, our business is producing very well. as we've continued to see that growth. I would say on the revenue side, there is a little bit of downtime associated as those root stores reopen, but that's not a significant impact, and all of that has an exit rate as we go into next year as all those stores will be open.

Our next question is from Floris Van Dykem with Compass Point. Please proceed.

Hey, morning. Question on the Route 21 leases. I think you had 20 before, 18 are continuing. Maybe if you could talk about the economics of those leases relative to where they were before, and will all 18 open before the, I think you said before the holiday season, are some of them going to open in the third quarter as well?

Good morning, Forrest, and thanks for the question. So with regard to Route 21, we started with 20. We'll have 18 stores reopened before the end of the year, many of which are already reopened. As far as the deals themselves, you know, we don't really get into the details of each of these deals, but, you know, just we called out in our prepared remarks the two of those stores we elected to take back because we were able to replace that tenancy almost immediately with higher paying rent tenants mitigating part of that expense as well. Remember post-COVID, we've made some interesting deals with some tenants that were in bankruptcy, a lot of which we lean far more heavily into the overdraft piece of the equation. We think that Route 21 with the new leadership will really pay us back far, far, Shoppers in our centers really love that brand, and under this new leadership, we're looking forward to great results coming out of those stores. I will say the first one that reopened in our portfolio under the new leadership was in our North Carolina center right down the street from our corporate office here, and I was customer number one. It was great shopping experience. The stores looked amazing.

Thanks, Steve. Maybe if I could follow up and have you guys comment on the transaction markets and what you're seeing and what we can expect. And is it more likely that we're going to see another lifestyle center potentially being added to the, or is there enough opportunity in the outlet sector as well where you could add another outlet before the end of the year? Thanks, Loris.

By practice, we're only going to announce deals when they're executed. I think we are very active in the marketplace, looking across each of the strategies that we're after, and deals will come about. It is a competitive marketplace. The lens that we are looking through is where can we add value in deals that we want to bring into the Tanger portfolio where we can create that value from our leasing, our marketing, and our operations to really drive value over time for our stakeholders. And the balance sheet is extraordinarily well positioned with low leverage and a lot of liquidity to be able to act opportunistically when deals come about. We're going to remain very prudent and disciplined on our external growth and we have a lot of internal opportunities as we continue to grow our same center NOI and activate a lot of our peripheral land.

Our next question is from Todd Thomas with KeyBank Capital Markets. Please proceed. Hi, thanks. Good morning.

I wanted to follow up on the same store and timing of expenses just to help understand the quarterly cadence in the second half. I think you spoke previously about the full year expense recovery rate being in the mid 80% range, maybe slightly better, which would suggest a very steep decline or drag from net recoveries in the second half of the year. Does the updated guidance and same store forecast include an update to the recovery rate for the full year that you're anticipating? Or is that sort of mid maybe high 80% range still the right place to be for the full year?

Thanks, Todd. And I think you hit it right, which is our expense recovery rate, because our CAM is largely fixed and because we have variable expenses and those expenses tend to be heavier from a variable expense in the back half than they are in the first half, just naturally the percentage is going to be lower in the second half, right? And so we continue to believe, you saw the expense recovery rate in the first half averaged about 90%. And we continue to expect to be in the mid-80s for the full year, which would imply sort of high 70s, low 80s in the back half from our recovery rate as that CAM is largely fixed. And that expense load will be a little bit variable in the second half.

Okay. And then, you know, in terms of thinking about 2025 a little bit, you know, relative to this year, you know, how should we think about, you know, I guess net recoveries going forward? I know that there's, you know, the leasing, some of the leasing initiatives and, you know, you've talked about the structure of the leases and so forth that are, you know, underway and how you've been transitioning the tenant base a little bit. You know, can you sustain this high expense recovery rate going forward? Is there a little bit of room to the upside still, or could it potentially be a drag next year as we think about the year-over-year comps?

So we're not prepared to give 2025 guidance. We'll have to stay tuned for that for next February. But our strategy is we continue to push rent. You see the leasing spreads that we disclosed in the supplemental that pushes both base rent and expense recoveries. So we're trying to grow that amount. And we're trying to operate as efficiently as possible in terms of our expenses. And so these trends, I mean, that's what we're trying to keep on driving NOI growth. That's the whole name of the game is trying to drive NOI and cash flow growth. And so that's what we'll continue to try to push each and every day.

Our next question is from Craig Melman with Citigroup. Please proceed.

Hey, good morning. Steve, I'm just curious. You know, adding Sephora to the portfolio was a good win. I'm just, you know, wondering, have you had a pickup in, you know, calls or interest from, you know, tenants you've been courting or just new tenants you haven't really spoken with post that announcement who are interested in, you know, maybe opening a first outlet outpost or, you know, interested in Tanger now more so given that announcement?

Yeah, the answer is yes. You know, we said in our prepared remarks earlier that half of our new leasing in the past 18 months has been new to Tanger platform retailers. You know, I think they're responding to a number of things. First of all, just the change in the makeup of our shopping center where we're pivoting from pure play outlet retail in most of our properties to adding better free beverage, adding entertainment, adding local uses and better amenities. We think it speaks to the local customer as well as the tourist that's shopping in the marketplace, extends stays, it gets more customers in the door, and increases frequency. The Sephora deals will do just that. I mean, the Sephora's got a very loyal shopper that will shop our shopping centers far more frequently than they may for a traditional outlet brand, and we think the synergy of those two together will definitely open the door for further conversations with brands that are looking to the outlet platform to get in front of a customer they may not see in any of their other channels.

And just separately, you know, you guys consistently have kind of put up good rent spreads here. What is the update on where kind of the blended OCR is versus that target, you know, 10% to 12%? You know, how many of your centers also are kind of already at that target versus, you know, centers that you have more work to do. Just give us a sense of, you know, the breakdown of that as well, because sometimes it gets lost on the average.

Sure, it makes sense. And look, I would say we disposed of a few non-core assets over the past two or three years. Most of the rating centers in our portfolio are all positive contributors. So currently we're at about a 9.4%. OCR, you only started talking about this several years ago. We were at an 8% and said that we've got opportunity to get into the double digits. It takes time to get there because we certainly don't touch every single lease every year. But the spreads are great contributors to us growing our rents. We have a strategy of replacing versus renewing. Our retention rates have been historically 95% over the past few years. We're leaning a little bit more heavily into replacing some of the retailers that need to either be right-sized or just aren't as productive as they might have been with far more productive retailers, evidenced by the Sephora brand that you just mentioned and a number of others. So we think all of those will lead to us to continue to drive rents, grow our productivity in each of our centers on a sales per square foot basis, and make our shopping centers far more interesting for the customers that come and visit us every day.

Our next question is from Greg McGinnis with Scotiabank. Please proceed.

Hey, good morning. I just want to follow up on your comment regarding activating peripheral land. Can you give us any details in terms of how much space is left to add out parcels or just kind of entitlements on square footage? Any sort of detail you can provide in terms of what the opportunity set is on that peripheral land would be appreciated.

Sure. Well, first of all, we've said in the past, and I'll reiterate, that over half of our shopping centers have some peripheral land. attached to them, most of that land is already approved by virtue of being on a retail footprint already. So the improvements are there, the parking facilities are there. So that peripheral land activation is a great source of revenue for us because it requires relatively low capital and relatively high returns. There are some instances where we all have a pad or two. and other instances where we have acres of land that were earmarked for either a phase two of one of our productive shopping centers or some alternative uses, some of which that we've executed to in recent years are hotel pads, entertainment uses like Dave & Buster's, sit-down restaurants from Cracker Barrel to Texas Roadhouse, And most recently, our most recent executed lease in Savannah, Georgia, where we've added a Planet Fitness. So we're looking to monetize that land but also create important destinations for the local catchment as well as the tourists that shop in our shopping centers.

Okay. I do think that we, you know, investors may appreciate a little more disclosure in terms of where money is being spent on that peripheral land, expected yields on that, how much is available. But to my follow-up question, just looking at the Hunter Lock. Yep.

Right. Each end of our supplemental includes all the money that we spend, you know, for all of our activities, both what we invest in the portfolio, new developments, and all the TAs, and second, and our operating cap tax. So the dollars are all there.

Yeah, no, I appreciate that. Just some details on the projects would be appreciated. But just for the follow-up on the Huntsville occupancy, it seems like there's been a couple declines over the last few quarters. I'm just curious what's driving that, how Turing's going for that property, what you expected kind of on the long-term lease up, you know, and over the next few years, what kind of tenants you're trying to add in, and what might be happening on the occupancy front.

Sure. Well, we closed the deal with an occupied Bed Bath & Beyond that we knew was going to close. We had a number of retailers interested in that box. We're under contract with one right now. Initially, our strategy was re-tenanting where that location was, but we're moving forward with a deal that's currently in process, and that'll get the occupancy number up because that's really what that material decline that you're talking about. was really due to that one space, a pretty big space relative to the size of the shopping center. But with regard to leasing, we've added Warby Parker. We just executed a lease with Starbucks, and there's a number of new brands to come. That shopping center was a great buy for us at the going-in yield, but there's a lot of opportunity as spaces will start to turn over the next couple of years to re-tenant it and upgrade the retailer mix. There's a lot of... interest in the property. And as is our practice, we don't typically mention retailers until we've executed those leases. So there'll be some really good news stories coming out of Huntsville, Alabama in the next coming months and quarters.

Our next question is from Samir Canal with Evercore ISI. Please proceed.

Hey, good morning. Steve, can you comment on Maybe a little bit more on sales and traffic. I know you talked a little bit about in your commentary, but what have you seen in July sort of on a, for sales, maybe even traffic on a sequential basis given, you know, you hear about the consumer being pressured with inflation, you know, macro slowing, just trying to get a bit more color here. Thanks.

Yeah. Well, you know, we reported that our sales have grown sequentially the last two consecutive quarters. against relatively flat traffic numbers, anticipating July probably to follow the similar trend. The good news part of that story is with very little new retail development, we still have a very active queue of retailers that are lining up to take space in our shopping centers. There's been a lot of activity in the outlet business. all of which we think is really good for our industry. Alcaterton's investment in a European outlet company, the high occupancy at which Nashville opened, Tulsa, which is the premium center that will open in the coming weeks, we understand will open at a very high occupancy, really speaks to retailer interest in our space and the demand that's pushing the rent.

Okay. Thank you for that. And then I guess, Michael, just in terms of capital allocation, I know you spoke a little bit about sort of the potential opportunities out there in the open air side maybe, but are you seeing more opportunities come to market at this point given what interest rates have done over the last, let's call it 90 days?

I think that there's definitely from a retail fundamental perspective, which is really across all the different formats, There certainly is interest, and combined with the overall rate environment, I think that could unlock some opportunities. And we'll just be prudent and disciplined as we go about them and expect more stuff hopefully to be on the market, and we have a big, bold decision.

Our next question is from Caitlin Burrows with Goldman Sachs. Please proceed.

Hi, good morning. Maybe just some follow-ups on topics that we've broadly touched on, but given the focus on replacing or downsizing some underperforming tenants, I was surprised to see the leasing activity page showed the number of re-tenanted leases seemed pretty similar to a year ago, although the square footage was up, maybe parts that were just halfway through the year. But can you talk about what that year-to-date retention has been And actually, how does the downside fit into that? But then also the timeline of when you started taking a tougher stance on renewals, then you start signing those leases and the ultimate opening. Like, have we started to see that yet or not quite?

Well, we talked about our retention rates in 21, 22, going into 23, probably being around the 95% level. I mean, most retailers don't want to close a store that's cash flowing positively that they've already made that investment in the store. And if they have to take that positive cash flow and replace it someplace else, it's going to require capital in order to do so. Because of that, we've been very satisfied with a high retention rate because we're able to push our rents 10%, 12% from a lot of those retailers to stay. On the flip side, on a re-tenanting basis, where our spreads are significantly higher, we have a team here who's playing the long game has understood that from supply and demand point of view, there's not a tremendous amount of space and outlet centers available for leasing, that there's a number of tenants that are demanding space in our shopping centers, and because of that, we have a opportunity in time right now to really add exciting new tenants and brands to our centers, but do so at rents considerably higher than the retailers that they're replacing. With that said, we have a strategy now in mind of pushing new brands or requiring that existing brands who aren't as productive as they might have been in the past either invest in their stores, downsize because we believe a lot of brands that might be oversized in our portfolio, they're still very viable by downsizing their brand or their store footprint can be as productive if not more so in a much smaller footprint. So with our retention, are resizing, are replacing with necessary strategy. We're only going to increase the number of store opportunities for the customer to shop when they visit us, increase the variety of stores in our footprint, push rents, and grow productivity on an organic basis. And we think there's a lot of room for growth there.

Got it. And obviously the ability to do that depends on the leasing pipeline. And I feel like so far in the call, you guys have given a few points of commentary on making it seem like there is that opportunity. I know somebody asked if Sephora had prompted new leases and you said the answer, discussions at least, the answer was yes. But I guess, is there any other stats, Steve, that you or anybody else could provide to talk about the leasing pipeline? And when you do have a vacancy or a location that you're trying to backfill, like, is there necessarily... competition for that space? I get that it totally depends on the exact center in the space, but is there generally competition, or how are you seeking that new user, and how deep is that pool that you're going to, and who's receptive to that interest in the space?

Yeah, well, again, if there's competition, there is. There's always going to be competition from the incumbent in the space who wants to stay, and it's going to be up to us and our leasing strategy to try and fill that space with either a better producing retailer that has a tremendous amount of variety. You know, as we look at the retailers that are available to choose from that want to be in our shopping centers, you know, we're in the past pure play outlet. We've now invited other uses, other brands, other types of tenancy into our centers, which dramatically expanded the addressable market for us to seek new tenants to come in. and that is in the entertainment categories, the food and beverage categories, and in the case of a Sephora or an Ulta, categories that really haven't been in this space before but bring not only a new shopper to our centers, increase the frequency of their visit, and even more importantly, to the earlier point that you made, bring other retailers that might not have considered our space before. As far as the stats are concerned, all I can share statistically is that we're seeing retailers come to our platform in numbers we haven't seen in quite some time. You know, we're being strategic about who we select to go where while continuing to drive our rent and drive our recovery numbers so that we can operate our shopping centers in this environment at the highest possible level while growing our NOI. And I think that we're executing on all of those fronts.

Our next question is from Mike Mueller with JP Morgan. Please proceed.

Yeah, hi. As it relates to acquisitions, you've talked about focusing on properties where you can add a lot of value with your platform. So out of curiosity, what are the types of centers that you don't think work well on the platform that you tend to pass on?

You know, Mike, obviously we're within the outlet sector. That's straight up for what we Our open air lifestyle centers, similar tenants, similar operations, that's a natural extension. As we think about our adjacencies, when we can expand the retail pie of what we already own, and that provides some ability to have attachment area. There are things like we're not going to do workouts. You know, we really want to drive value creation in anything that we buy. So, you know, we want to try to stick to the retailers that we do business with and try to find those opportunities where our platform can be driven overall.

Got it. Okay. And I apologize if I missed this. Are you working on any, I guess, higher probability development opportunities that we could be hearing about, say, in the next year or so?

We don't like to talk about our pipeline, but we are very active in the marketplace right now. In some interesting new markets that we think we can come in and add – We're an operating company. I think that that's pretty unique in this space. We're not coming in and then third-partying out our marketing or leasing our operations. We do all of that stuff ourselves. The fact that we've got such a strong team and such a great track record of operations over here at Tanger, there's a number of potential partners that we're in discussions of working with with the opportunity of not only the possibility of buying outright and owning or, in some instances, partnering in JV. So there's a number of opportunities that have been presented to us that we might not have seen several years ago had we not executed to the Palm Beach project that we're currently working with Clarion on or the Huntsville, Alabama Lifestyle Shopping Center, which was something that Certainly a first for us as a platform, but something that we absolutely know that this operating team could add tremendous value to.

And our next question is a follow-up from Floris Van Dyken with CompassPoint. Please proceed.

Thanks, guys. Just a couple of quick follow-ups. Your temp percentage historically has been around 10%. Is that still at those elevated or more elevated levels, or is it subsiding closer to the 5%, which I think is what your long-term historical average has been?

Look, temp leasing is a strategy for us. When we brought the temp leasing responsibility in-house to each one of our general managers and all of our shopping centers, we've increased the number of people that are thinking about temp leasing. embedded in those 10th leasing numbers, even at that 10% number, is frictional vacancy between a retailer leaving a space and when the new retailer is going to occupy that space. It's incumbent on that management team in each one of our shopping centers to keep that space occupied. And so whether it's a local retailer or one of the seasonal retailers that are national in scope, that travel our shopping centers from center to center or space to space, we're going to keep that space occupied. So if there's a one square foot of vacancy or opportunity in our center, we're going to try and keep that occupied by a temp retailer. And I would say we're doing a great job of increasing our permanent occupancy, but, again, there's always going to be some frictional vacancy, and we're always going to keep that occupied.

Right. That doesn't quite get to the answer I was hoping to get, but I understand the strategy. Another question, perhaps, in terms of how you define your 95% retention, which is very high, obviously. When you downsize a tenant, does that count as a retained tenant?

No. When we downsize a tenant and move them to another location, it's a new lease. It's a new

Our next question is a follow-up from Caitlin Burrows with Goldman Sachs. Please proceed.

Hi. This might be able to be answered when we go back to the transcripts, but in case it's not, I figured I'd ask again. But just in terms of Express, but I think it might actually be more related to Route 21, what you were talking about, it sounds like they had all the original stores in the portfolio. It sounds like you took a total of four back or got four back. But the other route stores, it sounds like maybe they closed and they're reopening. But can you just flush that out a little bit about where you started kind of in between and then the outcome later in the year, the moving pieces there?

Well, the express stores, all but one, remained open. The router stores all closed of the 20. Two, we took back. The other 18, over half of them have reopened already, the balance of which will open by the end of the year. Got it.

Thank you.

With no further questions in the queue, we will conclude today's conference. You may disconnect your lines at this time, and thank you for your participation.