Tanger Outlets(US:SKT)2023-08-04 15:54Financial Data and Key Metrics Changes - The company reported core FFO of $0.47 per share for Q2 2023, up from $0.45 in the prior year period [20] - Same center NOI increased by 4.3% for the quarter and 5.9% year-to-date, driven by occupancy gains and strong rent spreads [20][13] - Blended average rental rates increased by 13.2% for the trailing 12 months ending June 30, 2023 [14] - The occupancy rate stood at 97.2% as of June 30, up 230 basis points year-over-year [32] Business Line Data and Key Metrics Changes - The company executed or was in the process of renewing 64% of leases expiring this year, consistent with last year [7] - The occupancy cost ratio increased by 50 basis points from 8.5% to 9%, still one of the lowest in the industry [8] - The company focused on enhancing portfolio NOI by reducing underperforming tenants and optimizing productive brands [8] Market Data and Key Metrics Changes - Traffic was largely in line with the prior year quarter, but there was a slight decline in average tenant sales [8] - The company noted that shoppers gravitated towards brands offering better promotions and everyday value pricing [34] Company Strategy and Development Direction - The company aims to elevate and diversify its tenant mix, drive total rents, and leverage its platform for growth [13] - The new digital-first loyalty program aims to enhance customer experience and retailer engagement [16] - The company is focused on organic growth through monetizing peripheral land and expanding select centers [36] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the ability to sustain growth despite macroeconomic pressures [36] - The company is optimistic about the second half of the year, expecting positive sales impacts [55] - Management highlighted the importance of maintaining a low watch list for bad debt and being mindful of the overall environment [45] Other Important Information - The company received an investment-grade BBB rating from Fitch, which will improve its cost of debt [22] - The Nashville shopping center is set to open on October 27, 2023, with 95% of leases executed [9] Q&A Session Summary Question: Factors driving Tanger to the top or bottom end of the guidance range - Management indicated that the majority of the range is driven by same-store guidance and other elements like G&A and interest [44] Question: Expected initial yield for Nashville and path to achieving full stabilized yield - The initial yield is expected to be in the 6% range, with a stabilized yield of 7.5% to 8% anticipated [46] Question: Ability to push rents despite sales being down - Management noted that they continue to see growth in re-tenanting and rent spreads, indicating room to push rents [85] Question: Sustainability of higher expense recovery income - Management expects the expense recovery rate to be lower in the second half of the year due to variable operating expenses [76] Question: Opportunities for external growth initiatives - Management is actively looking at various transactions and believes there is room to grow the outlet business across the country [80] Question: Impact of higher occupancy cost ratio on rent pushing - Management believes there is still headroom to push rents despite the occupancy cost ratio being at 9% [56] Question: Status of temporary tenants and their conversion to permanent - Management indicated that a significant portion of occupancy growth has come from converting temporary tenants to permanent ones [118]