Tanger Outlets(US:SKT)2023-06-07 20:44Summary of Tanger Factory Outlet Centers, Inc. Conference Call Company Overview - Company: Tanger Factory Outlet Centers, Inc. (NYSE: SKT) - Industry: Real Estate Investment Trust (REIT) focused on outlet shopping centers - Management: - Stephen Yalof - President, CEO & Director - Michael Bilerman - EVP, CFO & CIO - Portfolio: 36 shopping centers in the U.S. and 2 in Canada, with a new center opening in Nashville, Tennessee in October 2023 [1][4] Key Points and Arguments Management Changes and Strategy - New management since 2020 has led to new strategies, including welcoming non-traditional retailers to increase tenant diversity [3][4] - The company is adapting to changing consumer preferences, particularly post-COVID, by enhancing food and beverage offerings to increase customer dwell time [5][6] Retailer Engagement - The profile of outlet centers has evolved; new brands like Nike and Polo Ralph Lauren are now essential tenants [7] - The Nashville center will feature 14 brands new to the outlet format, indicating a shift towards attracting diverse retailers [7][8] Temporary Leasing Strategy - Approximately 10% of the portfolio consists of temporary tenants, a strategy that has been in place for a long time [8][9] - Short-term leases allow flexibility and can lead to long-term relationships with brands that find success in the outlet format [10][14] Tenant Retention and Pricing Power - Tenant retention rates have improved to over 90%, with double-digit renewal spreads indicating strong demand and pricing power [16][17] - The company aims to optimize tenant mix by replacing less productive tenants with more profitable ones [17] Development Projects - The Nashville project represents a $146 million investment with expected yields of 7% to 7.5%, contributing to cash flow growth [25][29] - The company is exploring outparcel opportunities, such as restaurants and hotels, to enhance customer experience and increase revenue [24][26] Acquisition Strategy - The company is in a strong financial position with a net debt-to-EBITDA ratio of 5x and $242 million in cash, allowing for potential acquisitions [29][30] - The focus is on expanding into lifestyle or hybrid formats that align with the outlet business model [30][32] Market Conditions and Consumer Behavior - Sales per square foot have increased to approximately $450, reflecting a 15% rise since pre-COVID levels [47] - The company targets value-oriented consumers, positioning itself as a provider of branded products at competitive prices [49] Financial Health and Cost of Capital - The company received a BBB rating from Fitch, leading to reduced borrowing costs and an annual savings of about $1 million [40][41] - The balance sheet is robust, allowing for strategic capital deployment while maintaining a low payout ratio [34][41] Food and Beverage Opportunities - The company is shifting towards more bespoke food and beverage experiences, moving away from traditional food courts [55] - New partnerships with popular brands like Shake Shack are expected to drive traffic and enhance the shopping experience [56][59] Additional Insights - The company is actively monitoring tenant credit quality and has no significant issues with tenants on the watch list [51][52] - The addition of food and beverage options has positively impacted customer traffic and retention [59] This summary encapsulates the key insights and strategic directions discussed during the conference call, highlighting Tanger Factory Outlet Centers' adaptive strategies in a changing retail landscape.