GREENSBORO, N.C., Feb. 11, 2014 /PRNewswire/ -- Tanger Factory Outlet Centers, Inc. (NYSE:SKT) today reported its financial results for the quarter and year ended December 31, 2013.  Funds from operations ("FFO") available to common shareholders, a widely accepted supplemental measure of REIT performance, increased 16.8% to $52.3 million, or $0.53 per share, for the three months ended December 31, 2013, compared to FFO of $44.7 million, or $0.45 per share for the three months ended December 31, 2012.  For the year ended December 31, 2013, FFO increased 19.4% to $192.0 million, or $1.94 per share, as compared to FFO of $160.9 million, or $1.63 per share, for the year ended December 31, 2012.

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"Strong tenant demand for space was the key driver for our growth in 2013, both internally and externally, which resulted in another year of solid financial performance for Tanger," commented Steven B. Tanger, President & Chief Executive Officer. "Retailers are attracted to the outlet industry by its low relative cost of occupancy and a desire to connect with an increasing value-driven consumer.  They partner with Tanger as an industry leader with a 33 year track record of developing, operating, and marketing high-quality outlet centers," he added.

FFO for all periods shown was impacted by a number of charges as described in the summary below (in thousands, except per share amounts):

 

 

Excluding these charges, adjusted funds from operations ("AFFO") increased 15.2% to $0.53 per share for the three months ended December 31, 2013, compared to $0.46 per share for the three months ended December 31, 2012. For the year ended December 31, 2013, AFFO per share increased 13.9% to $1.88 per share, compared to $1.65 per share for the year ended December 31, 2012.

Net income available to common shareholders for the three months ended December 31, 2013 increased 21.6% to $21.7 million, or $0.23 per share, as compared to net income of $17.8 million, or $0.19 per share for the three months ended December 31, 2012.  For the year ended December 31, 2013, net income available to common shareholders increased 102.9% to $106.4 million, or $1.13 per share, as compared to net income available to common shareholders of $52.4 million, or $0.57 per share, for the year ended December 31, 2012. In addition to the charges described above, net income available to common shareholders for the year ended December 31, 2013 was also impacted by a $26.0 million gain on fair value measurement related to the acquisition of an additional one-third interest in the Deer Park property, and the consolidation of Deer Park into Tanger's financial statements as of August 30, 2013.

Net income, FFO and AFFO per share are on a diluted basis. FFO and AFFO are supplemental non-GAAP financial measures used in the real estate industry to measure and compare the operating performance of real estate companies. Complete reconciliations containing adjustments from GAAP net income to FFO and to AFFO are included in this release.

Highlights for 2013

• Same center net operating income increased 3.5% during the quarter, and 4.3% for the year, marking the 36th consecutive quarter of same center net operating income growth
• Blended increase in average base rental rates on space renewed and released throughout the consolidated portfolio of 24.1%
• Period-end consolidated portfolio occupancy rate of 98.9% at December 31, 2013, marking the 33rd consecutive year with occupancy of 95% or greater at year end
• Comparable tenant sales for the consolidated portfolio increased 3.2% for the three months ended December 31, 2013, and 2.6% to $387 per square foot for the year ended December 31, 2013
• Debt-to-total market capitalization ratio of 29.4% as of December 31, 2013
• Interest coverage ratio of 4.36 times
• Total market capitalization increased to $4.5 billion at December 31, 2013
• Raised quarterly common share cash dividend by 7.1% on April 4, 2013, marking the 20th consecutive year of increased cash dividends
• Completed an expansion on Tanger Outlets Gonzales in Gonzales, Louisiana in April 2013
• Credit ratings upgraded by both Moody's and Standard & Poor's in May 2013
• Commenced construction of Tanger Outlets Ottawa on May 15, 2013
• Commenced construction to expand Tanger Outlets Cookstown on May 16, 2013
• Completed mortgage financing of Tanger Outlets Texas City on July 1, 2013
• Acquired a controlling interest in Tanger Outlets Deer Park, located in New York on Long Island on August 30, 2013
• Commenced construction in Charlotte, North Carolina on September 20, 2013
• Commenced construction of Tanger Outlets at Foxwoods in Mashantucket, Connecticut on September 26, 2013
• Completed recast of unsecured lines of credit on October 24, 2013, extending the maturity, reducing the overall borrowing costs, and improving the related debt covenants
• Completed a 10-year, 3.875% coupon, $250 million Senior Notes offering on November 25, 2013

North American Portfolio Drives Operating Results

During 2013, Tanger executed 495 leases totaling 2,085,000 square feet throughout its consolidated portfolio. Lease renewals accounted for 1,574,000 square feet, which generated a 19.3% increase in average base rental rates and represents 80.7% of the space originally scheduled to expire in 2013. Base rental rate increases on space re-tenanted during 2013 averaged 37.8% and accounted for the remaining 510,000 square feet.

Consolidated portfolio same center net operating income increased 4.3% in 2013.  For the fourth quarter of 2013, consolidated portfolio same center net operating income increased 3.5%. Comparable tenant sales for the consolidated portfolio increased 3.2% for the three months ended December 31, 2013.  For the year ended December 31, 2013, consolidated portfolio comparable tenant sales increased 2.6% to $387 per square foot.

Investment Activities Provide Potential Future Growth

During 2013, Tanger opened one new outlet center, expanded two of its existing properties, and acquired a controlling interest in a property that had previously been held within an unconsolidated joint venture.  The company currently has five development projects under construction. Tanger commenced construction on four of these projects during 2013, and in January 2014 announced its ownership interest in a joint venture developing a new outlet center, the construction of which commenced in September 2013.

In early April 2013, Tanger hosted grand opening festivities for a small expansion of Tanger Outlets Gonzales in Gonzales, Louisiana. Originally developed by Tanger in 1992, this fully-leased expansion added approximately 40,000 square feet, bringing the property's total gross leasable area to approximately 319,000 square feet.

In May 2013, Tanger and its 50/50 co-owner broke ground on two Canadian development projects. On May 15, 2013, construction commenced on Tanger Outlets Ottawa, the first ground up development of a Tanger Outlet Center in Canada.  Ottawa is the nation's capital and its fourth largest city, with 1.2 million residents and 7.5 million annual visitors. Located in suburban Kanata off the TransCanada Highway (Highway 417) at Palladium Drive, the 303,000 square foot center will feature approximately 80 brand name and designer outlet stores and is currently expected to open in time for the 2014 holiday shopping season.

On May 16, 2013, the co-owners broke ground on a major expansion and renovation of Tanger Outlets Cookstown. Cookstown is on the northern end of the Greater Toronto Area. The center is directly off Highway 400 at Highway 89, the gateway to the highest concentration of vacation homes in Southern Ontario's cottage country. The project will expand the 156,000 square foot property, which was acquired in December 2011, to nearly double its size to approximately 310,000 square feet when complete. Currently expected to be a holiday 2014 opening, the project will expand the property's tenancy by approximately 35 new brand name and designer outlet stores, while creating an updated exterior for the existing space consistent with that of the expansion.

On August 30, 2013, Tanger acquired an additional one-third ownership interest in Tanger Outlets Deer Park, located in New York on Long Island. Following the acquisition, Tanger and the minority owner restructured certain aspects of the company's ownership of the property, whereby Tanger receives substantially all of the economics generated by the property and has substantial control over the property's financial activities. The center offers over 90 outlet stores, approximately 10 restaurants, and a 16 screen movie theater which serve the 18 million people that reside within a 60 mile radius. Tanger has had an ownership interest in the property, which opened in October 2008, since the development stage. The total consideration consisted of cash, debt, and Class A limited partnership units of Tanger Properties Limited Partnership and represented a cap rate of approximately 5.6%. As a result of the acquisition of a controlling interest, the property is now consolidated for financial reporting purposes.

On September 20, 2013, Tanger and its 50/50 joint venture partner broke ground on a new outlet center in the Charlotte, North Carolina market.  The center will be located eight miles southwest of uptown Charlotte at the interchange of I-485 and Steele Creek Road (NC Highway 160), the two major thoroughfares for the city. The approximately 400,000 square foot project will feature approximately 90 brand name and designer stores and is expected to open during the third quarter of 2014.

On September 26, 2013, the company broke ground at Foxwoods Resort Casino in Mashantucket, Connecticut on Tanger Outlets at Foxwoods. Tanger owns a controlling interest in the project, which will be consolidated for financial reporting purposes. The center will feature approximately 80 brand name and designer tenants.  The approximately 314,000 square foot project will be suspended above ground to join the resort's two casino floors, which attract millions of visitors each year. The company currently expects the property to open in the second quarter of 2015.

A small expansion of Tanger Outlets Sevierville in Sevierville, Tennessee opened in September 2013.  Originally acquired in 1997, the property's gross leasable area was expanded by approximately 20,000 square feet to approximately 438,000 square feet.

Tanger and its 50/50 joint venture partner hosted the grand opening of Tanger Outlets National Harbor on November 22, 2013, just in time for the holiday shopping season.  Located within the National Harbor waterfront resort in the Washington D.C. metropolitan area, the center is accessible from I-95, I-295, I-495, and the Woodrow Wilson Bridge. The nation's capital welcomes approximately 33 million tourist visitors annually. The center includes approximately 336,000 square feet and features approximately 80 brand name and designer outlet stores. The property's upscale mix of retailers includes Banana Republic, Brooks Brothers, Calvin Klein, Coach, Diane von Furstenberg, Elie Tahari, Halston Heritage, Hugo Boss, J. Crew, Peter Millar, and many other brand names.

On January 23, 2014, Tanger announced its plans to develop Tanger Outlets Savannah through a 50/50 joint venture agreement. In September 2013, the partner commenced construction on the property, which will include approximately 385,000 square feet and feature approximately 90 upscale brand name and designer outlet stores. The highly visible site is located on I-95, just north of I-16 in Pooler, Georgia, adjacent to the City of Savannah, and near the Savannah International Airport, which welcomes 1.6 million travelers per year.  The company expects the center's location to capitalize on the Tanger Outlets brand equity in the region and to provide marketing and management synergies with our centers in Charleston, Hilton Head, and Myrtle Beach, South Carolina; and Commerce and Locust Grove, Georgia.

The company also intends to develop an approximately 350,000 square foot wholly-owned outlet center in the Grand Rapids, Michigan market. The site is located 11 miles south of downtown Grand Rapids at the southwest quadrant of US-131 and 84th Street in Byron Center, Michigan with visibility from both roads.  The center will be located approximately 30 miles east of Lake Michigan and its lakeside communities that are frequented by vacationers. Currently, Tanger estimates the property will open in the second half of 2015.

In addition, Tanger intends to expand Tanger Outlets Westgate in Glendale, Arizona by approximately 65,000 square feet and to expand Tanger Outlets Branson by approximately 25,000 square feet.  Currently, both expansions are expected to open in time for the 2014 holiday season.

Tanger has a robust pipeline of additional development sites for which current predevelopment activities are ongoing, some of which the company has not yet announced. Previously announced projects include planned new developments in Columbus, Ohio; and Scottsdale, Arizona; as well as a planned expansion of its existing asset in Park City, Utah.

Balance Sheet Summary

During 2013, Tanger's investment grade credit ratings were upgraded by both Moody's Investor Service and Standard & Poor's.  Moody's upgraded its rating to Baa1 with a stable outlook on May 23, 2013, and on May 29, 2013, Standard & Poor's upgraded its rating to BBB+ with a stable outlook.

On July 1, 2013, the Tanger Outlets Houston joint venture closed on a mortgage loan secured by the property. Construction of the property was initially funded with equity contributions by the partners. The 50/50 joint venture received total loan proceeds of $65 million and distributed the proceeds equally to the partners. Tanger used its share of the proceeds to reduce amounts outstanding under its unsecured lines of credit. The mortgage loan requires interest-only payments at 150 basis points over LIBOR and matures July 1, 2017, with the option to extend the maturity for one additional year.

On October 24, 2013, the company closed on amendments to its unsecured lines of credit, including extending the maturity, reducing the overall borrowing costs, and improving the related debt covenants. Maturity of these facilities was extended from November 10, 2015 to October 24, 2017, with the ability to further extend the maturity for an additional year at the company's option. The annual commitment fee, which is payable on the full $520 million in loan commitments, was reduced from 17.5 basis points to 15.0 basis points, and the interest rate spread over LIBOR was reduced from 110 basis points to 100 basis points.

On October 28, 2013, Tanger entered into interest rate swap agreements to reduce the company's floating rate debt exposure by locking the interest rate on the $150 million Deer Park mortgage. The loan bears interest at LIBOR plus 150 basis points and matures in August 2018. The interest rate swap agreements fix the base rate at an average of 1.3%, creating an effective interest rate for the loan of 2.8% through August 2018.

On November 25, 2013, Tanger completed a $250 million Senior Notes offering. The Notes mature December 1, 2023, bear interest at 3.875% and were priced at 98.36% of the principal amount to yield 4.076%. The net proceeds were used to repay borrowings under the company's unsecured lines of credit.

As of December 31, 2013, Tanger had a total market capitalization of approximately $4.5 billion including $1.3 billion of debt outstanding, equating to a 29.4% debt-to-total market capitalization ratio.  The company had $16.2 million outstanding on its $520.0 million in available unsecured lines of credit and 79.4% of Tanger's debt was at fixed rates. For the year ended 2013, Tanger maintained an interest coverage ratio of 4.36 times.

Tanger Expects Solid FFO Per Share In 2014

Based on Tanger's internal budgeting process, the company's view on current market conditions, and the strength and stability of its core portfolio, management currently believes its net income available to common shareholders for 2014 will be between $0.78 and $0.84 per share and its FFO available to common shareholders for 2014 will be between $1.93 and $1.99 per share.

The company's earnings estimates reflect the incremental interest expense of approximately $0.07 per share related to the company's November 2013 Senior Notes offering, a projected increase in same-center net operating income of approximately 3%, and average general and administrative expense of approximately $10.5 million to $11.0 million per quarter. The company's same center net operating income projection takes into consideration a 500,000 square foot, or 23%, decrease in the amount of leased space expiring in 2014 compared to 2013.  

The projected increase in general and administrative expense compared to 2013 is primarily driven by an increase in long-term equity based compensation for our senior leadership team. Over time, our goal is to increase the percentage of overall compensation that is performance based equity rather than cash, further aligning the interests of management with those of the shareholders.

The company's estimates do not include the impact of any rent termination fees, any potential refinancing transactions, the sale of any out parcels of land, or the sale or acquisition of any properties. The following table provides a reconciliation of estimated diluted net income per share to estimated diluted FFO per share:

 

 

Year End Conference Call

Tanger will host a conference call to discuss its 2013 results for analysts, investors and other interested parties on Wednesday, February 12, 2014, at 10 a.m. Eastern Time. To access the conference call, listeners should dial 1-877-277-5113 and provide conference ID # 34690988 to be connected to the Tanger Factory Outlet Centers Year End 2013 Financial Results call. Alternatively, the call will be web cast by SNL IR Solutions and can be accessed at Tanger Factory Outlet Centers, Inc.'s web site by clicking the Investor Relations link at www.tangeroutlet.com. A telephone replay of the call will be available from February 12, 2014 at 1:00 p.m. through 11:59 p.m., February 27, 2014 by dialing 1-855-859-2056, conference ID # 34690988. An online archive of the broadcast will also be available through February 27, 2014.

About Tanger Factory Outlet Centers

Tanger Factory Outlet Centers, Inc. (NYSE:SKT), is a publicly-traded REIT headquartered in Greensboro, North Carolina that presently operates and owns, or has an ownership interest in, a portfolio of 44 upscale outlet shopping centers in 26 states coast to coast and in Canada, totaling approximately 13.3 million square feet leased to over 2,800 stores operated by more than 460 different brand name companies.  More than 180 million shoppers visit Tanger Factory Outlet Centers, Inc. annually. Tanger is filing a Form 8-K with the Securities and Exchange Commission that includes a supplemental information package for the quarter ended December 31, 2013.  For more information on Tanger Outlet Centers, call 1-800-4TANGER or visit the company's web site at www.tangeroutlet.com.

This news release contains forward-looking statements within the meaning of federal securities laws. These statements include, but are not limited to, estimates of future net income per share, FFO and AFFO per share, same center net operating income and general and administrative expenses, as well as other statements regarding plans for new developments and expansions, the expected timing of the commencement of construction and the openings of the current and new developments, the renewal and re-tenanting of space, tenant sales and sales trends, interest rates, synergies to be obtained from developing nearby existing properties, and management's beliefs, plans, estimates, intentions, and similar statements concerning anticipated future events, results, circumstances, performance or expectations that are not historical facts. 

These forward-looking statements are subject to risks and uncertainties. Actual results could differ materially from those projected due to various factors including, but not limited to, the risks associated with general economic and real estate conditions in the United States and Canada, the company's ability to meet its obligations on existing indebtedness or refinance existing indebtedness on favorable terms, the availability and cost of capital, whether projects in our pipeline convert into successful developments, the company's ability to lease its properties, the company's ability to implement its plans and strategies for joint venture properties that it does not fully control, the company's inability to collect rent due to the bankruptcy or insolvency of tenants or otherwise, and competition. For a more detailed discussion of the factors that affect our operating results, interested parties should review the Tanger Factory Outlet Centers, Inc. Annual Report on Form 10-K for the fiscal year ended December 31, 2012, and December 31, 2013 when available.

 

 

 

 

SOURCE Tanger Factory Outlet Centers, Inc.