5/1/2025

speaker
Ashley Curtis
Assistant Vice President of Investor Relations

Good morning. I'm Ashley Curtis, Assistant Vice President of Investor Relations, and I would like to welcome you to TANGR, Inc.'s First Quarter 2025 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 website, TANGR.com. Please note that the 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 fileings with the Securities and Exchange Commission for a detailed discussion of these risks and uncertainties. During the call, we will also discuss our non-GAP financial measures as defined by SEC Regulation G. Reconciliation of these non-GAP measures to the most directly comparable GAP 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 1, 2025. 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 question. If time permits, we are happy for you to re-queue for additional questions. On the call today will be Stephen Yaloff, 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 Yaloff. Please go ahead.

speaker
Stephen Yaloff
President and Chief Executive Officer

Good morning. I'm pleased to report that TANGR has started 2025 with continued positive momentum, delivering a robust first quarter that builds on our outstanding performance from last year, and we are reaffirming our full year same-center NOI growth and core FFO guidance. Our first quarter core FFO increased to 53 cents per share, driven by a .3% rise in same-center NOI. Strong revenue growth was partially offset by higher snow expense in the quarter and certain expense refunds that benefited our results in the first quarter of 2024. Traffic, particularly over the past two months, has been strong and we are encouraged by this positive momentum leading into our very important summer selling season. Sales for the trailing 12-month period averaged $455 per square foot for the total portfolio, up from the prior quarter and year, due in part to the execution of our strategy of merchandising, replacing less productive tenants at evolving our portfolio. We ended the quarter with occupancy of 95.8%, which reflects an anticipated seasonal decline from year end and further reflects our strategy to add new in-demand retailers and uses, replacing poorer performers. Much of this modest decline in occupancy is the result of timing between old tenants leaving and new tenants taking possession. We continue to expand into new categories and welcome new brands as we diversify our offerings and create environments that encourage more frequent visits, extended stays, and drive increased spend across a broader customer profile and age range. Our strategy is resonating with our widening shopper demographic. Although executing this strategy may yield lower near-term occupancy, we are delivering solid same center NOI growth while positioning our portfolio for continued growth in coming years. Leasing activity remains solid. We executed 2.5 million square feet over the trailing 12-month period representing nearly 550 transactions. Renewals executed or in process through April 30th of 2025 totaled 57% on space scheduled to expire during 2025 compared to 47% over the same period last year. With our 13th consecutive quarter of positive rent spreads, our brand partners continue to show confidence and invest in expanding their presence within our Tanger Centers. Ancillary revenues continue to grow as our tenants and other national consumer brands see the value of utilizing our platform to reach sought after shoppers. Additionally, as we continue to optimize our digital capabilities, we are gaining enhanced customer insights and analytics that enable us to partner with our retailers to deliver targeted, real-time promotions that best resonate with shoppers ultimately driving increases in both traffic and sales performance. We continue to execute on our external growth strategy. As previously announced, during the first quarter, we acquired Pinecrest, a lifestyle center in Cleveland which followed the purchase of the Promenade at Chanel in Little Rock in December. In recent years, we've made significant strides in differentiating our platform to maximize growth potential within our existing portfolio while capitalizing on value creating opportunities through strategic expansion. Our first quarter results reflect the ongoing execution of this strategy to elevate and diversify our centers with the retailers, restaurants, and entertainment that shoppers want. As uncertainty grows within the broader macro environment, we remain confident in Tanger's positioning and our differentiated model. First and foremost, we've established a field-led organization that we believe provides for the ideal combination of scale and flexibility. We prioritize how we show up every day for our retailers and our shoppers, and by staying close to them, we remain nimble against an evolving consumer landscape. Additionally, Tanger's value positioning continues to resonate with consumers. Today, we will launch our Tanger Deal Days campaign. In partnership with our retailers, this marketing initiative will reinforce the value and great brand messaging at Tanger Centers leading to our Summer of Savings launch in June where every day of summer offers -to-school sales encouraging our guests to shop earlier in the season. Our high-quality assets are strategically located in metropolitan areas that serve both tourist destinations and local communities which continue to benefit from demographic tailwinds and employment growth, validating our market positioning, value proposition, and expansion strategy. We maintain unwavering confidence in our ability to deliver compelling value to both retailers and consumers. Our well-positioned, conservatively leveraged balance sheet, combined with our consistent generation of strong, free cash flow, provides stability and the flexibility to pursue opportunistic growth. On behalf of the entire Tanger team, I want to thank Dave Henry for his nearly ten years of service on the Tanger board, including his time spent as our lead director. Dave will be retiring from the Tanger board after our annual meeting next week. I also want to extend my sincere appreciation to our dedicated Tanger team members, retail partners, loyal shoppers, and financial stakeholders for your ongoing support and confidence. I'd now like to turn the call over to Michael.

speaker
Michael Billerman
Chief Financial Officer and Chief Investment Officer

Thank you, Steve. Today I'm going to discuss our first quarter financial results and balance sheet, and then provide an update on our outlook for the remainder of the year. The first quarter we delivered core FFO of 53 cents a share, compared to 52 cents a share in the first quarter of the prior year. Stain Center NOI increased .3% for the quarter, driven by higher rental revenues from the continued strong retailer demand and leasing activity, as well as the ancillary revenues that we derived from our portfolio and platform. As we had anticipated and discussed in our last call, our first quarter Stain Center NOI growth was impacted by higher snow expenses this year, and certain expense refunds that we received in the first quarter of last year. In February, we completed the acquisition of Pinecrest in Cleveland for $167 million, using cash on hand and draws in our line of credit. We've also further improved our portfolio through the recent sales of non-core center in Howell, Michigan, in April for $17 million. In conjunction with this sale, we recognized a non-cash impairment charge of $4.2 million in the first quarter. Our balance sheet remains well positioned for stability and funding of our internal and external growth initiatives with low leverage, largely fixed rate debt, ample liquidity through our lines of credit and undrawn forward equity, and the additional free cash flow we produce after dividends. At quarter end, our net debt to adjusted EBITDA RE was 5.2 times, and it was even lower with a full 12 months of EBITDA from the recent acquisitions and sale of Howell. From a liquidity perspective, we ended the quarter with $16 million of cash, $481 million available on our unsecured lines of credit, and $70 million of proceeds that are available from the potential settlement of our forward ATM agreements. Additionally, in April, we refinanced the mortgage of Tanger Outlets Memphis, increasing the borrowings by $10 million and extending the maturity date from October 2026 to April 2030 with no change to the interest rate. Our next significant debt maturity is in September of 2026. We also continue to manage our interest rate exposure, entering into $75 million of new forward starting swaps that will begin next February when $75 million of swaps expire. These new swaps fixed SOFR at 3.3%, which is downed 20 basis points from the maturing swaps at 3.5%. These new swaps will expire in April of 2028. In April of 2025, the Board of Directors approved a .4% increase in the dividend from $1.10 to $1.17 per share on an annualized basis. The dividend remains well covered with a 53% dividend payout ratio as a percentage of our funds available for distribution in the first quarter. Turning to our guidance for 2025, we are updating the EPS outlook to account for the non-cash payment charge that I discussed earlier related to the Howell Center disposition. From a core FFO perspective, we continue to expect core FFO of $2.22 to $2.30 per share, which represents growth of 4 to 8%. We continue to expect same center and a wide growth to be in a range of interest expense, G&A, and catbacks. For additional details on our key assumptions, we see our release issues last night. We are also excited to continue to engage with our financial stakeholders at conferences and property tours. As there is no better way to get an appreciation for TANGR and how we are executing on our strategy than by touring our centers and meeting with our teams. We will be hosting a tour of TANGR Outlets Charleston on May 8 in connection with Wells Fargo's real estate security conference. We are attending BMO's North American real estate conference in New York on May 13. We will be touring Rift Street Town Center in Huntsville tomorrow. Recent lifestyle acquisitions on May 14 in connection with Ever4i's size multi-reach property tour. We will also be at ICSC from May 19 through May 20. We will be hosting a tour of TANGR Outlets National Harbor on May 28 as part of B of A's D.C. retail tour. We will be presenting at New Year's Sweet Week in New York from June 3 to the 5th. And finally, we will be touring TANGR Nashville on June 11 with BMO. And we hope to see many of you over the next few months. With that, operator, we can take our first question.

speaker
Operator
Conference Call Moderator

Thank you. You'll now be conducting a question and answer session. If you would like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star 2 if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment, please, while we poll for questions. Thank you. Our first question comes from the line of Andrew Reel with Bank of America. Please proceed.

speaker
Andrew Reel
Bank of America

Hi. Good morning. Thanks for taking my questions. It would be helpful to hear your thinking on what the impact to temp occupancy could look like if this macro uncertainty persists. So maybe can you just talk about how temp tenants behave during previous downturns or periods of uncertainty?

speaker
Stephen Yaloff
President and Chief Executive Officer

Good morning, Andrew. Thanks for the question. Um, you know, look, for Tanger, temp occupancy is a strategy and it always has been. So I think some of the best examples of temp occupancy, particularly in our portfolio, is our pop-up stores. These are stores, you know, understanding the outlet business, which is our primary business, outlet retailers, there's a lot of barriers to entry before you get into the outlet business. First of all, a lot of it's strictly as a clearing model. They're going to make sure that they pop up first, try to see how much velocity there is, how much product they can move, how long it's going to take before they'll sign up for a long-term lease. So in the case of temp tenants in the pop-up arena, we've been speaking to a number of retailers that are very interested in being in the outlet business or speaking to us about possibly going in on a short-term basis to understand what the outlet business is, how it can help their brand, how it could get their shoppers to convert into their ecosystem, get to understand their brand and their price point that they can afford going in. And, you know, it's just a great tool, a great strategy. We've used it and we've talked about it for a number of quarters in the past. I have Vineyard Vine started that way, UG started that way, and turn those into long-term retailers across our portfolio today.

speaker
Andrew Reel
Bank of America

Okay, thank you. And maybe just as a follow-up, just curious if you've had any recent conversations with retailers about inventory expectations for the second half of the year. Just curious if they've, you know, shared any thoughts or if you have any thoughts on their ability to source inventory for back school or the holidays. Thank you.

speaker
Stephen Yaloff
President and Chief Executive Officer

Yeah, you know, we're, as you probably are aware, we're in front of all of our retailers on a regular basis. We're speaking to our top retailers. Inventory so far, what we're hearing is that there has not been much of an inventory issue. Again, in the outlet channel, we'll see a lot of that excess inventory will flow through our channel as new inventory will go into the full price arena. So, you know, what we're doing, though, this summer is in anticipation of perhaps some retailers who might, you know, consider getting their sales going earlier in the season, we're promoting our back to school sales starting with June 1st. So we, as we said earlier, today we launched, you know, summer deals, new promotion across our channel, but, you know, we're starting with a campaign starting as early as June 1st, much like, you know, our November Black Friday sales started on November 1st this year, just to get the customer who's thinking about getting into the stores earlier and starting to build their baskets much earlier. We're also doing the same thing with back to school shopping, which is typically an event that we host at the end of the summer. We're going to start to pull that forward to the beginning of the summer so that if folks are concerned that there might be less inventory or less choice and selection available to them, later they can stock up and buy those products earlier.

speaker
Andrew Reel
Bank of America

Okay, thank you.

speaker
Stephen Yaloff
President and Chief Executive Officer

Thank

speaker
Operator
Conference Call Moderator

you. Our next question comes from the line of Todd Thomas with Key Bank Capital Markets. Please proceed.

speaker
Todd Thomas
Key Bank Capital Markets

Hi, thanks. Good morning. First, I wanted to ask about occupancy. I realize the occupancy impact from seasonality is largely a one-queue phenomenon, but do you anticipate an additional impact related to proactive re-merchandising or any additional vacate activity in the second quarter that you can speak about, or should we expect occupancy to begin building back next quarter from here? And do you have a target for year-end occupancy that's embedded in the guidance?

speaker
Stephen Yaloff
President and Chief Executive Officer

If you think about our current run rate of occupancy, a lot of that, to your point, is definitely in the re-merchandising. We were just talking earlier about LEGO, which is going to take... We have a legacy tenant in our Huntsville, Alabama shopping center that's shut. LEGO opens up in two weeks. We had our first Marc Jacobs. We've done a number of Marc Jacobs deals. Our first Marc Jacobs store just opened up in an old legacy tenant location in Washington, D.C. And I think one of the bigger impacts is main event, which will be taking over a space that was recently vacated by Wayfair in Deer Park. So I think there's a lot of that timing, noise in those numbers, I think, as we continue to merchandise, and that's re-merchandise. And I think that's an important part of our strategy. I mean, if you take a look at our rent spreads, Todd, we're over 30% on re-tenanting. We're over 10% on renewal. And a lot of instances where we have the opportunity to play a support performing retailer with a much better somebody new to the portfolio, somebody that will grow with us across our portfolio, we're going to take advantage of that. I think the fact that there's very little new retail space coming online in the United States right now, particularly in the outlet space, we have a unique opportunity to take advantage of the fact that there's retailer demand for our space, and we're going to try and reposition as much of that space as we can to set ourselves up for the long game and for the future.

speaker
Todd Thomas
Key Bank Capital Markets

Okay. Are you able to provide an update for Forever 21 or any updates around timing to recapture some of that space? And are you able to share any backfill plans and timeline for that?

speaker
Stephen Yaloff
President and Chief Executive Officer

Sure. You know, we'll sort of…forever 21 store closures, we'd anticipated for quite some time. We've been in constant communication with that brand. When we knew that they were going to be closing stores, we had already had lined up some temp replacement for most of those spaces. Now, as you probably know, those retail stores, there were nine of them, about 100,000 square feet. But from a rent point of view, they're relatively low rent payers. So our temp rent replacements will not be a material decline in what they were currently paying. And we think that there's a tremendous amount of upside in all of those boxes. As I said to you earlier, I mean, there's not a lot of new space available on the market right now. There is increased demand, particularly from retailers that are not only willing to pay much higher rents, but also doing much better sales performance.

speaker
Todd Thomas
Key Bank Capital Markets

Okay. If I could just sneak one more in here. I understand the value proposition of the outlet channel. But I think you mentioned that some of your retailers, they clear access merchandise. I think you were referencing a lot of the pop-ups, and I know a bunch of others do too. But a lot of retailers, I think some of the bigger apparel chains in particular, I believe have separate made for outlet channels. And I was just wondering, if you have a sense for that product, whether they plan to pass through higher prices to customers at the outlets. And I was just wondering if you could talk about that a little bit as we move further into the year and the impact from tariffs might change sort of the pricing or value proposition dynamic a little bit at some of your centers.

speaker
Stephen Yaloff
President and Chief Executive Officer

Yeah. Well, I think the retailers, particularly in the outlet space, use those stores for a number of different reasons. So if you take a look at the biggest athletic footwear player in the marketplace, every product in that store is excess inventory. There's no manufacturer for that business. Then there are other brands that do do some manufacturing for that business. And change pricing relatively quickly. So where in their full price businesses, their plans are probably far more set to meet budgets during the course of the year. In the outlets, if they have excess inventory flowing into their channel, they can move those goods by quick price and promotion. So I'm not familiar with all the retailers' pricing strategy as it relates to outlet and going into the next quarter and the back half of the year. But I do know that they are going to be using that business extremely strategically because it's going to be the opportunity for them to move through excess inventory. If goods aren't flowing into the stores right now, goods are going to be late hitting some of their full price businesses. They're going to want to turn that inventory into cash. And the best way to do it is in front of a consumer that wants to shop value. And that's who the 125 million people that shop Tanger Outlets, that's who that customer is.

speaker
Todd Thomas
Key Bank Capital Markets

Okay, thank you.

speaker
Operator
Conference Call Moderator

Thank you. Our next question comes from the line of Steve Sackwa with Evercore ISI. Please proceed.

speaker
Steve Sackwa
Evercore ISI

Yeah, thanks. I guess I just wanted to ask maybe on Nashville, it's the most recent center you've opened that was built. Maybe a little surprised that it ranks, call it middle of the pack, if you will, within the portfolio. So just curious, any thoughts you've had on that center since it's opened as you think about the merchandise mix and maybe what's worked and maybe what's been disappointing?

speaker
Stephen Yaloff
President and Chief Executive Officer

I think a lot of shopping centers take a couple of years to build. Even the best centers in the country have taken 10 or 15 years to get to the sales productive volumes where they are right now. We always say when we open a center, we don't build it for opening day, we build it for the generation. And the important part of that is we learn. We put a number of retailers in that right off the bat, some local. It just didn't work. But we also have replaced a number of retailers. We just opened a Kate Spade store and they were one of the most recent retailers to come into that shopping center. They're doing a great business there. We've merchandise that center with a number of food retailers as well. You think the national food is doing extraordinarily well, but one of our best food performers is a local restaurant chain that has several stores in the Nashville area. I think we have the opportunity to move some of these retailers around. I think we also, one of the things that we did was some of the stores are just a little bit too big. In a 300,000 square foot shopping center where we have about 65 stores, we probably could have had 75 to 80 stores in that shopping center. If that were the case, we'd be far more dense and the sales productivity for each of the stores would be much greater because of it. So I think that those are sort of the early reads on Nashville. We're extraordinarily pleased with the business. We think the local community is definitely shopping that center. We're starting to see that tourism traffic pick up with our tourist traffic initiatives. And we're in this for the long game. So we think that center will be a really important part of our business as we go forward. And the center, if you've made it, beautiful looking shopping center, it is definitely the model for what centers will and should look like going

speaker
Steve Sackwa
Evercore ISI

forward. Okay, thanks. Maybe secondly, you guys obviously sold Howell, probably not high dollar value. I don't know if you have provided a cap rate on that, but just how do you think about the kind of lower tiered part of the portfolio today? I guess I'm thinking centers 28 to 33 and just ultimate monetization of those and redeploying that capital.

speaker
Stephen Yaloff
President and Chief Executive Officer

Sure. Well, first of all, we'll take Howell separately. All of our centers cash flow positively. And all of our centers, particularly the outlet shopping centers, are filled with national credit retailers. So Howell was built a long time ago. It was built at a time when outlet shopping centers were 50 or 75 miles away from regional malls. In many of our geographies, those markets have grown up and have become extraordinarily important to those communities. Population has built, demographics have built, other uses have developed around it. So in the case of Howell, that was slow to come. And so a lot of the retailers that have since replaced

speaker
Justin
Unknown

national

speaker
Stephen Yaloff
President and Chief Executive Officer

outlet retailers are more local in nature, perhaps not the same credit. That's not the business that we're in. So we elected to sell Howell because that center is definitely going to take on a different life under new ownership. But as an outlet center, that's our focus. And we're in the national tenant, high credit, high rent paying, fixed rent business. And I think Howell moved away from that. As far as other shopping centers, there are very few centers that actually fit the Howell bill. We think that a number of our centers are really important in the communities, and we think there's great upside in that part of the portfolio. That doesn't mean if there's an opportunity to sell a center because it's a deal we can't pass up. But currently, there's nothing on our list that we're looking to dispose of. And I think we've got a lot of upside in our portfolio going forward.

speaker
Steve Sackwa
Evercore ISI

Thanks.

speaker
Stephen Yaloff
President and Chief Executive Officer

Operator, if there's a follow up, we can't hear the question.

speaker
Operator
Conference Call Moderator

Please, your line is unmuted. It looks like you lost him there.

speaker
Stephen Yaloff
President and Chief Executive Officer

Okay. He can read too if he's got a follow up question.

speaker
Operator
Conference Call Moderator

All right. Our next question comes to the line of Emily Barish with BMO. Please proceed.

speaker
Emily Barish
BMO

Good morning, and thank you for taking my questions. I wanted to ask you on the Howell asset, what was the cap rate on the disposition? And was this removal already contemplated in the prior guidance? And can you please speak to its impact on your same store results this quarter? Thank you.

speaker
Michael Billerman
Chief Financial Officer and Chief Investment Officer

Thanks, Emily. So the Howell sale in the original guidance wasn't contemplated. It's currently in the updated range that we've maintained. You know, Steve talked about it's really not a cap rate type of transaction. You know, it's embedded in the non-same center pool. So there's a certain amount of NOI that comes out when we deploy the cash proceeds to repay our line. That's sort of where we are. And the second part of your question, Emily, I missed. I'm just repeating.

speaker
Emily Barish
BMO

Yes, I wanted to ask you about the impact on your same store results this quarter of the decision of the Howell asset.

speaker
Michael Billerman
Chief Financial Officer and Chief Investment Officer

So Howell is in the non-same center pool. So that is the same center NOI. Howell was our smallest asset, less than 1% of NOI. That NOI has been trending down and certainly our view towards the future was, you know, where the contraction was. And so we had .3% same center NOI. If Howell were to include it, it would drop less than 10 basis points to 2.2.

speaker
Emily Barish
BMO

Thank you. And same store NOI, do you feel more comfortable at the lower end of the guidance range for 2025? Or should we expect the same store NOI to accelerate through the rest of the

speaker
Michael Billerman
Chief Financial Officer and Chief Investment Officer

year? So, you know, our guidance is 2 to 4%. We talked a lot when we provided that guidance, that the range has differing assumptions related to credit, our downtime, our rent spread, sales. So there's a lot of variables that go into it. We continue to feel comfortable with that 2 to 4% range. And there's a number of things that can help us as we move through the year, as we report our second quarter, less of the uncertainty will be removed and we'll be able to update that guidance over time.

speaker
Emily Barish
BMO

Okay, thank you.

speaker
Operator
Conference Call Moderator

Thank you. Our next question comes from the line of Craig Malmon with Citi. Please proceed.

speaker
Craig Malmon
Citi

Hey, good morning. Just wanted to circle back. I know you guys mentioned timing lags as a driver of the accuracy decline. Specifically, you know, Huntsville saw an accuracy dip. I know Steve, you had mentioned Lego is going to open there. But could you guys just talk about what drove the sequential decline? And, you know, what the backfill timing is going to be? And then just more broadly, on that asset, I know you guys bought an 8 cap going in, it talked about yield upside over time. With the re-merchandising you guys have done so far, where are you in the process of that? Like, where does the yield today sit pro forma? Maybe some leases you have on the cum versus the initial 8 cap?

speaker
Michael Billerman
Chief Financial Officer and Chief Investment Officer

Thanks, Craig. So it was an 8 and a half cap going in. And, you know, we talked about the additional growth over time. And a lot of that growth is coming from that re-merchandising activity that you're starting to see coming through and that we're talking about. So we mentioned that Lego store, but the big part of the occupancy was that former Bed Bath and Beyond Box, which was 30,000 square feet. Now, that 30,000 square feet we had temped for a bit. We have some leases out for that space. And we'll be really excited to tell you once those are signed and what those bar. And so that 30,000 square feet was 625 basis points of Huntsville's occupancy and almost 25 basis points of that sequential occupancy decline combined with that main event that Steve talked about at Deer Park. And so our expectation is we're going to continue to bring a newness and we're really excited about the retailers that are coming into Huntsville, both from a specialty perspective as well as a average entertainment perspective.

speaker
Craig Malmon
Citi

And I didn't mean to shave off 50 basis points there, but I guess just the other part of the question, like where's that eight and a half going to go pro forma kind of what you guys are underwriting for the Bed Bath, Backville plus the Lego and some other things that I've gone on? Like what's the uplift you've seen so far versus what you think could happen over the next, you know, in the medium term as other leases roll?

speaker
Michael Billerman
Chief Financial Officer and Chief Investment Officer

What we talk about a lot in our acquisitions is we want those acquisitions to be greater growth than what our core portfolio is. Otherwise, we're not creating value. And so, you know, we had a first year, which we talked about being eight and a half. And, you know, as these things come in, we'll continue to see growth in this year or after and the year after that. And we're very optimistic about what type of yield on cost as we also invest some capital that this asset will be able to drive very solid return for our stakeholders.

speaker
Craig Malmon
Citi

Okay. And then just maybe a second question here. You know, we've seen the discount channel kind of influx of higher income consumers. Have you guys tracked that or seen any of that trade down in sort of the core tendency that or core client base that you guys have had over the last, you know, three, six, 12 months, whatever timeframe you would look at it?

speaker
Stephen Yaloff
President and Chief Executive Officer

We're definitely paying attention to the customer. As you're aware, we have a loyalty program that we continue to build and continue to sign up new members. And we continue to communicate with those customers. They opt in for the program. So they share with us their purchasing activity. So we're seeing where they're coming from and we're seeing what they're buying. So we're tracking that customer. We are seeing a new customer. I think a lot of that has to do with the fact that we're also trading up our tenant base. So some of these older legacy brands that have lost the market share or haven't reinvested in their business get replaced with new brands to the channel. We're bringing out a new customer for that too. And I think that that higher demographic, wealthier customer that's finding the products that they like in the outlet channel and everyday value pricing is a great draw. But let's not forget the Generation Alpha, that young consumer that's now coming to our center also for a number of brands that we've merchandised for them. I think immediately of Sephora, which is a brand that this younger customer is lining up for. Brands like Miso, who we've done a number of stores with them as well, a younger customer is seeking those brands too. So we look to merchandise our shopping centers for the consumer to make sure that they come and visit us more frequently, stay longer when they're there, and when they do, obviously they build bigger baskets and we get better sales.

speaker
Craig Malmon
Citi

Great. Thank you.

speaker
Operator
Conference Call Moderator

Thank you. Our next question comes from the line of Kaylin Burrows with Goldman Sachs. Please proceed.

speaker
Kaylin Burrows
Goldman Sachs

Hi. Good morning, everybody. Maybe following up on some of the previous points from earlier in the call, I think one concern is that there won't be enough excess inventory to then bring product to outlet centers. So I was wondering, do you know how much of your tenant product is made for outlet, how that might have changed over time? Is that a concern of yours and do you hear anything about this from your retailers yet?

speaker
Stephen Yaloff
President and Chief Executive Officer

We haven't heard any concern yet. I think that the retailers are probably thinking that they're going to rely far more heavily on that than perhaps you're suggesting. If you go back to the COVID case, just as an example, the post-COVID 2021, Angers saw the highest sales performance on a per square foot basis than we've ever seen in our portfolio. As we're moving back towards those numbers, I think a lot of the reason was because lack of inventory flow and the timing of when that started to flow, it missed the full price selling season and therefore found itself into the outlet channel. So I think we're far more optimistic about the flow of inventory to the outlet channel. And as we've been speaking to our retailers, I think they echo that they're not as concerned either.

speaker
Kaylin Burrows
Goldman Sachs

Got it. So you're saying kind of like there might be uncertainty in the near term on those flow of inventory, but like eventually it will come, maybe the timing will be wrong then for full price and that will benefit outlets?

speaker
Justin
Unknown

I think so.

speaker
Kaylin Burrows
Goldman Sachs

Okay, got it. And then I guess in light of the new uncertainty that feels like it would be impacting your business, but happy to hear if that's not the case, could you guys just go through how leasing was in one queue? The earnings release showed that was pretty good, but then more importantly how it progressed over April and kind of your outlook for ICSC.

speaker
Stephen Yaloff
President and Chief Executive Officer

Yeah, you know, I think our leasing is, we're optimistic about leasing. You know, I mentioned earlier in the call, there's not a lot of new space being developed in the country and there's a lot of demand from retailers. So there's a couple of ways to facilitate the demand. One is to replace older, less performing retailers with new retailers that want to be in the space, or when leases roll, asking retailers to downsize and optimize. You know, I mentioned earlier as we talked about Nashville, I was asked what mistakes we might have made in Nashville and I said, I don't think we densified that 300,000 square foot shopping center enough. I think one of our team strategies right now is to right size stores, maximize productivity and create more space in our existing productive shopping centers that ultimately will drive more rent, drive more variety, drive more types of uses and give us the opportunity to bring in the brands that are looking to get into our channel.

speaker
Kaylin Burrows
Goldman Sachs

Got it. Any other details you or I don't know if Justin's can give about the April leasing?

speaker
Justin
Unknown

Sure. Thank you, Aileen. The bottom line is the fundamentals of our business are strong and the open advice are there. We talked last quarter about all the tenants that have the open advice and they're looking out not only in 25 and 26 but 27. All of our deal committees that we've had in the first quarter and including April were amazing. You may notice that we're way ahead of our renewals. This time we're about 56, 57% complete. The reason we jumped out ahead is because of all these open advice and new brands that are looking to come into our portfolio. So we can focus on that new business. The April committee was strong, both from a renewal standpoint and a new business standpoint. So we're really optimistic about the of 25 and looking into 26.

speaker
Operator
Conference Call Moderator

Thank you. Thank you. Our next question comes from the line of Hong Zhang with JP Morgan. Please proceed.

speaker
Hong Zhang
JP Morgan

Yeah, hey, I guess you talked about moving the back to school sales to June. I was wondering if there's anything seasonal to call out in terms of revenues or expenses from the shift?

speaker
Stephen Yaloff
President and Chief Executive Officer

I'll talk about Michael. You want to talk about the revenue especially. I'll just address the campaign because I think it was a really smart idea on behalf of our marketing department. There's a lot of noise in the marketplace. As Caitlin mentioned, perhaps the back half of the year, if there was going to be some shift in terms of product delivery, we thought it would just be smart if we had a call to action, particularly to drive customers into our centers far more early as far as any sort of financial shift. Yeah,

speaker
Michael Billerman
Chief Financial Officer and Chief Investment Officer

if you think about the impact, a lot of our revenues are fixed and growing. And that's where we talk about on a quarterly basis where our operating expenses, given that they're highly variable, will impact that year over a year. We saw that obviously in the first quarter with the snow expenses and last year having the expense refunds. We saw that in the fourth quarter where we had larger marketing spend in the fourth quarter of 24 relative to 23. There may be some timing of that marketing spend throughout the year as we promote different strategies. It doesn't have a meaningful impact overall to that year range that we've given of 2 to 4 percent, which obviously started the year lighter just given that comp from last year where we continue to be optimistic about our same center range. We're cognizant of the macro factors, but all of that's embedded into our guidance.

speaker
Hong Zhang
JP Morgan

Got it. And I guess on the marketing spend, so it sounds like you wouldn't necessarily be more lean on the marketing channel more this year, just given the economic uncertainty around tariffs and everything.

speaker
Michael Billerman
Chief Financial Officer and Chief Investment Officer

I mean, it's not a significant driver. I mean, it's an important aspect of our business that we drive traffic. And it's our teams that are coming up and creating the creative and all of the programs that we have drive traffic and sales for our retail partners and for the consumers.

speaker
Hong Zhang
JP Morgan

Thank you.

speaker
Operator
Conference Call Moderator

Thank you. Our next question comes from the line of this T-bone with Green Street. Please proceed.

speaker
T-Bone
Green Street

Hi. Good morning. Could you discuss trends in foot traffic since the tariff uncertainty heightened on April 2nd and consumer confidence took a hit? I'm just curious if you noticed any material changes in consumer behavior or shopping patterns in the past few weeks?

speaker
Stephen Yaloff
President and Chief Executive Officer

Well, yeah. What's interesting is January and February traffic could largely impart to weather. And January being a relatively slow month for shopping as it is, we're a little bit more lackluster. We saw the build of traffic start to occur towards the end of March. And consistent with the announcement of traffic, our April traffic numbers have been extraordinarily positive. I've heard another of peer reads in their reporting earlier this week, echo the same thing. April traffic to our centers has been extraordinarily strong.

speaker
T-Bone
Green Street

That's great to hear. And then somewhat related to that is how should we think about the sensitivity of NOI in your portfolio to changes in tenant sales? So percentage rents have been declining, but my sense is that's a function of you prioritizing fixed rates over, excuse me, fixed rents over variable rents during renewals. No issues with sales, but just given the uncertain backdrop here, tenant sales grew 2% in 25 versus, let's say, falling 2% in 25, for example. How much of that actually impact NOI for the full year?

speaker
Michael Billerman
Chief Financial Officer and Chief Investment Officer

Sure. Thanks, Vince. So when you look at our overage rents, what's been happening is we've been sweeping a lot of that overage rent and fixed rents as we prioritize. You look at the overage rent in totality, it's only running about 3% of our total revenues. And so that sensitivity in the current year, it's part of why we have a little bit of significant enough. And what we're finding is you can look at the overall sales productivity of the portfolio as we've executed re-merchandising strategy, portfolio up to $455 a square foot. All of that's driving higher rents, which is much more impactful to our NOI than changes in overage from changes in sales.

speaker
T-Bone
Green Street

No, I mean, I don't think there's any like quantify it. I mean, maybe not an exact example I laid out, but you see what I'm trying to get at just like, because there's operating leverage, if you will, with the overage rents, because, you know, if you hit the break point or don't, that could influence how much you receive. So not something I'm overly worried about, but just trying to understand kind of upside down side quantitatively to sales. But I understand it's hard to provide and it depends on the tenant and nuance.

speaker
Michael Billerman
Chief Financial Officer and Chief Investment Officer

And the range contemplates, you know, a range of outcomes relative to that overage rent piece, as you know, right? To get over the break point, they're like options, right? Because you don't get anything up until the break point. And then once you get over the break point, you move up. So we have a range for that line item relative to our numbers. You know, last year, you know, percentage rents were 17 and a half million in the consolidated portfolio.

speaker
T-Bone
Green Street

Okay, no, that's fair. Thank you.

speaker
Operator
Conference Call Moderator

Thank you, Vince. Thank you. Our next question comes from the line of Omotayo Okasanoa with Deutsche Bank. Please proceed.

speaker
Omotayo Okasanoa
Deutsche Bank

Yes, good morning, everyone. I wanted to talk a little bit just about the jewelry category, just a lot of conversation around, you know, diamond prices being down 30, 40%. I think Signet actually may have warned on earnings earlier on this year. It's kind of, how should we be thinking about, right? And like one of their biggest part, the pricing, one of their biggest products coming down so meaningfully.

speaker
Justin
Unknown

Hey, this is Justin. Thanks for the question. So jewelry, the jewelry category has been fairly strong for us. And we've been doing a lot more business with brands like Pandora. Signet is a player in our portfolio. They're thinking about their merchandising and how they're targeting their customers a little bit differently. And we're seeing positive trends in that category, and we're happy with what we see.

speaker
Omotayo Okasanoa
Deutsche Bank

That's helpful. And then, Michael, in terms of the swap, the Sonus that expired in August rather than the February swaps, how should we be kind of thinking about that? Just kind of given you do have this unique opportunity right now to get attractive pricing on swaps given the unusual shape of the forward curve.

speaker
Michael Billerman
Chief Financial Officer and Chief Investment Officer

Yeah, thanks, Ty, for the question. So when you look at our swap activity, page 16 of the sub, we have a $325 million term loan that we have swapped from floating to fixed using the swap strategy. Those swaps, we had $75 million that we're going to mature on February 1st of next year that we were able to effectively now put forward starting swaps that will reduce what we have fixed at SOFR at .5% down to 3.3. That August $75 million is currently at 3.7%. And we'll look at opportunities just to manage our interest rate exposure to push out those swaps to maintain that term loan is effectively fixed. And so we'll look at those opportunities over the course of the balance of the year to address any interest rate exposure that we have.

speaker
Hong Zhang
JP Morgan

Thank you.

speaker
Michael Billerman
Chief Financial Officer and Chief Investment Officer

Thanks, Ty.

speaker
Operator
Conference Call Moderator

Thanks, you. There are no further questions at this time. With that, this concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.

Disclaimer

This conference call transcript was computer generated and almost certianly contains errors. This transcript is provided for information purposes only.EarningsCall, LLC makes no representation about the accuracy of the aforementioned transcript, and you are cautioned not to place undue reliance on the information provided by the transcript.

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