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?