Tanger Reports Second Quarter 2010 Results
Second Quarter Adjusted Funds From Operations Increases 9.1%
Second Quarter Tenant Sales Increase 4.8%
GREENSBORO, N.C., July 27, 2010 (GLOBE NEWSWIRE) -- Tanger Factory Outlet Centers, Inc. (NYSE:SKT) today reported its financial results for the quarter and six months ended June 30, 2010. Funds from operations ("FFO") available to common shareholders, a widely accepted supplemental measure of REIT performance, for the three months ended June 30, 2010 was $22.1 million, or $0.48 per share, as compared to FFO of $32.5 million, or $0.80 per share, for the three months ended June 30, 2009. For the six months ended June 30, 2010, FFO was $51.1 million, or $1.11 per share, as compared to FFO of $57.2 million, or $1.47 per share, for the six months ended June 30, 2009.
Steven B. Tanger, President and Chief Executive Officer, commented, "Tanger Outlet Centers continued its strong performance through the second quarter, with adjusted funds from operations increasing by 9.1% for the quarter and 14.2% for the first six months of 2010. Same center net operating income increased 2.4% for the quarter while tenant sales increased 4.8%. We received an upgrade from Moody's Investors Service from Baa3 to Baa2 in May and took the opportunity to further strengthen our balance sheet in June when we closed on a public offering of $300 million, 6.125% senior notes due 2020. The net proceeds from the sale of the notes were used to repay a $235 million unsecured term loan, to pay the costs to terminate two interest rate swap agreements associated with the term loan, and to repay borrowings under our unsecured lines of credit."
FFO for all periods shown was impacted by a number of charges as described in the summary below (in thousands, except per share amounts):
Three Months Ended Six Months Ended
June 30, June 30,
2010 2009 2010 2009
---------------------------------- -------- -------- -------- --------
FFO as reported $ 22,106 $ 32,481 $ 51,115 $ 57,184
As adjusted for:
Termination of interest rate swap
derivatives 6,142 -- 6,142 --
Impairment charge -- 5,200 735 5,200
(Gain) loss on early
extinguishment of debt 563 (10,467) 563 (10,467)
Gain on sale of outparcel -- -- (161) --
Demolition costs Hilton Head I,
South Carolina 641 -- 699 --
Abandoned due diligence costs 365 -- 365 --
Impact of above adjustments to
the allocation
of earnings to participating
securities (60) 70 (69) 70
---------------------------------- -------- -------- -------- --------
FFO as adjusted $ 29,757 $ 27,284 $ 59,389 $ 51,987
FFO per share as adjusted $ .64 $ .68 $ 1.29 $ 1.34
---------------------------------- -------- -------- -------- --------
Excluding these charges, adjusted FFO for the second quarter and six months ended June 30, 2010 would have been $0.64 and $1.29 per share respectively.
Net income available to common shareholders for the three months ended June 30, 2010 was $3.3 million or $0.08 per share, as compared to net income of $10.2 million, or $0.30 per share for the second quarter of 2009. For the six months ended June 30, 2010 net income available to common shareholders was $4.5 million or $0.11 per share, as compared to net income of $39.1 million, or $1.19 per share for the six months ended June 30, 2009. Net income available to common shareholders for the above periods were also impacted by the charges described in the table above. Net income available to common shareholders for the six months ended June 30, 2009 also includes a gain of $31.5 million related to the acquisition of our partner's interest in a shopping center previously held in a joint venture.
Net income and FFO per share amounts above are on a diluted basis. FFO is a supplemental non-GAAP financial measure used as a standard in the real estate industry to measure and compare the operating performance of real estate companies. A complete reconciliation containing adjustments from GAAP net income to FFO is included in this release.
Second Quarter Highlights
-- Dividend increase approved by Board of Directors to raise the quarterly
common share cash dividend from $0.3825 to $0.3875 per share, $1.55 per
share annualized, representing the 17th consecutive year of increased
dividends
-- Received an upgrade from Moody's from Baa3 to Baa2
-- Closed on public offering of $300 million 6.125% senior notes due 2020;
net proceeds to the company of $295.5 million
-- 23.2% debt-to-total market capitalization ratio as of June 30, 2010
compared to 32.8% last year
-- 4.68 times interest coverage for the second quarter ended June 30, 2010
compared to 3.98 times last year
-- 2.4% increase in same center net operating income during the quarter
-- 8.6% increase in average base rental rates on leases renewed during the
quarter
-- 22.0% increase in average base rental rates on released space during the
quarter
-- 96.9% period-end wholly-owned portfolio occupancy rate at June 30, 2010,
up from 94.8% at March 31, 2010
-- Reported tenant comparable sales increased by 4.6% to $345 per square
foot for the rolling twelve months ended June 30, 2010
Portfolio Operating Results
During the first six months of 2010, Tanger executed 294 leases, totaling 1,222,000 square feet throughout its wholly-owned portfolio. Lease renewals during the first six months accounted for 899,000 square feet, generated an 8.7% increase in average base rental rates and represented 60.5% of the square feet originally scheduled to expire during 2010. Base rental increases on re-tenanted space during the first six months averaged 22.4% and accounted for the remaining 323,000 square feet.
Same center net operating income increased 2.4% for the second quarter of 2010 and 1.7% for the first six months of 2010, while reported tenant comparable sales for Tanger's wholly owned properties for the rolling twelve months ended June 30, 2010 increased 4.6% to $345 per square foot. Tenant comparable sales for the three months ended June 30, 2010 increased 4.8%. Tenant comparable sales exclude the Company's Commerce I center, which was held for sale as of June 30, 2010 as well as its Hilton Head I center currently under redevelopment.
Development Update
Scheduled to open on November 5, 2010, the company's 317,000 square foot outlet center in Mebane, North Carolina now has leases signed or out for signature on 90.5% of the leasable square feet. Tanger field personnel are already in place in a temporary headquarters trailer as construction crews work towards completion of this $65 million outlet shopping center. This new addition to the company's portfolio is located on Interstate 85/40 between the major North Carolina metropolitan markets of Raleigh/Durham/Chapel Hill and Greensboro/High Point/ Winston-Salem.
Demolition is now complete and a redevelopment is in process on the company's Hilton Head I center in Bluffton, South Carolina. Currently, this center has leases signed or out for signature on 53.6% of the leasable square feet. When completed, the new 176,000 square foot center, with an additional four outparcel pads, will be the first LEED certified green shopping center in Beaufort County. The company's $50 million redevelopment in Hilton Head is projected to open during the second half of 2011. The company's other property on Highway 278, Hilton Head II, remains open during the construction and redevelopment of Hilton Head I.
$300 Million Offering of 6.125% Senior Notes Due 2020 Successfully Closed
On June 7, 2010, Tanger announced that its operating partnership, Tanger Properties Limited Partnership, had completed a $300 million public offering of 6.125% senior notes due 2020 in an underwritten public offering with Banc of America Securities LLC, Wells Fargo Securities, LLC and BB&T Capital Markets, a division of Scott & Stringfellow, LLC, as joint book-running managers.
The notes were priced at 99.310% of the principal amount to yield 6.219% to maturity. The notes will pay interest semi-annually at a rate of 6.125% per annum and mature on June 1, 2020. The net proceeds from the offering, after deducting the underwriting discount and offering expenses, were approximately $295.5 million. Tanger used the net proceeds from the sale of the notes to repay its $235 million unsecured term loan due in June 2011, to pay approximately $6.1 million to terminate two interest rate swap agreements associated with the term loan and to repay borrowings under its unsecured lines of credit and for general working capital purposes.
Balance Sheet Summary
As of June 30, 2010, Tanger had a total market capitalization of approximately $2.6 billion including $605.2 million of debt outstanding, equating to a 23.2% debt-to-total market capitalization ratio. As of June 30, 2010, 91.6% of Tanger's debt was at fixed interest rates and the company had $50.8 million outstanding on its $325.0 million in available unsecured lines of credit. During the second quarter of 2010, Tanger continued to maintain a strong interest coverage ratio of 4.68 times, compared to 3.98 times during the second quarter of last year.
Updated 2010 FFO Per Share Guidance
Based on Tanger's recent public offering of $300 million of 6.125% senior notes due 2020, along with its internal budgeting process, the company's view on current market conditions, and the strength and stability of its core portfolio, the company currently believes its net income available to common shareholders for 2010 will be between $0.63 and $0.71 per share and its FFO available to common shareholders for 2010 will be between $2.39 and $2.47 per share.
The company's estimates do not include the impact of any additional rent termination fees, potential refinancing transactions, the sale of any additional out parcels of land or the sale or acquisition of any properties. The following table provides the reconciliation of estimated diluted net income per share to estimated diluted FFO per share:
For the twelve months ended December 31, 2010:
Low High
Range Range
----- -----
Estimated diluted net income per share $0.63 $0.71
Noncontrolling interest, gain/loss on acquisition of
real estate, depreciation and amortization uniquely
significant to real estate including noncontrolling
interest share and our share of joint ventures 1.76 1.76
----- -----
Estimated diluted FFO per share $2.39 $2.47
----- -----
Second Quarter Conference Call
Tanger will host a conference call to discuss its second quarter results for analysts, investors and other interested parties on Wednesday, July 28, 2010, at 10:00 A.M. eastern time. To access the conference call, listeners should dial 1-877-277-5113 and request to be connected to the Tanger Factory Outlet Centers Second Quarter 2010 Financial Results call. Alternatively, the call will be web cast by Thomson Reuters and can be accessed at Tanger Factory Outlet Centers, Inc.'s web site under the News Releases section at http://www.tangeroutlet.com/investorrelations/news. A telephone replay of the call will be available from July 28, 2010 starting at 1:00 P.M. Eastern Time through August 6, 2010, by dialing 1-800-642-1687 (conference ID #86718953). Additionally, an online archive of the broadcast will also be available through August 6, 2010.
About Tanger Factory Outlet Centers
Tanger Factory Outlet Centers, Inc. (NYSE:SKT) is a publicly-traded REIT headquartered in Greensboro, North Carolina. As of June 30, 2010 the company operated and owned, or had an ownership interest in, a portfolio of 33 upscale outlet shopping centers in 22 states coast to coast, totaling approximately 10 million square feet leased to over 2,000 stores operated by 360 different brand name companies. More than 150 million shoppers visit Tanger Factory Outlet Centers annually. Tanger is filing a Form 8-K with the Securities and Exchange Commission that includes a supplemental information package for the three and six months ended June 30, 2010. For more information on Tanger Outlet Centers, call 1-800-4TANGER or visit the company's web site at www.tangeroutlet.com.
Estimates of future net income per share and FFO per share are by definition, and certain other matters discussed in this press release regarding the renewal and re-tenanting of space, tenant sales and sales trends, interest rates, funds from operations, the development of new centers, and coverage of the current dividend may be forward-looking statements within the meaning of the federal securities laws. 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 local real estate conditions, the company's ability to meet its obligations on existing indebtedness or refinance existing indebtedness on favorable terms, the availability and cost of capital, the company's ability to lease its properties, 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, 2009.
TANGER FACTORY OUTLET CENTERS, INC AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)
Three months
ended Six months ended
June 30, June 30,
2010 2009 2010 2009
-------------------------------------- ------- ------- -------- --------
REVENUES
Base rentals (a) $43,968 $43,218 $87,465 $85,894
Percentage rentals 1,048 940 2,353 2,248
Expense reimbursements 18,429 18,321 37,948 37,491
Other income 1,850 1,921 3,571 3,618
-------------------------------------- ------- ------- -------- --------
Total revenues 65,295 64,400 131,337 129,251
-------------------------------------- ------- ------- -------- --------
EXPENSES
Property operating (b) 22,123 20,660 44,472 42,270
General and administrative 5,963 5,817 11,429 11,752
Impairment charge -- -- 735 --
Depreciation and amortization 17,109 19,422 43,583 39,588
-------------------------------------- ------- ------- -------- --------
Total expenses 45,195 45,899 100,219 93,610
-------------------------------------- ------- ------- -------- --------
Operating income 20,100 18,501 31,118 35,641
Interest expense (7,951) (9,564) (15,899) (20,774)
Gain (loss) on early extinguishment of
debt (c) (563) 10,467 (563) 10,467
Gain on fair value measurement of
previously held
interest in acquired joint venture
(d) -- -- -- 31,497
Loss on termination of interest rate
swaps (e) (6,142) -- (6,142) --
-------------------------------------- ------- ------- -------- --------
Income before equity in earnings
(losses) of
unconsolidated joint ventures and
discontinued
operations 5,444 19,404 8,514 56,831
Equity in earnings (losses) of
unconsolidated joint
ventures (51) (517) (119) (1,414)
-------------------------------------- ------- ------- -------- --------
Income from continuing operations 5,393 18,887 8,395 55,417
Discontinued operations (f) (1) (5,300) -- (5,362)
-------------------------------------- ------- ------- -------- --------
Net income 5,392 13,587 8,395 50,055
Noncontrolling interest in Operating
Partnership (524) (1,833) (734) (7,531)
-------------------------------------- ------- ------- -------- --------
Net income attributable to
Tanger Factory Outlet Centers, Inc. 4,868 11,754 7,661 42,524
Preferred share dividends (1,407) (1,407) (2,813) (2,813)
Allocation of earnings to
participating securities (143) (179) (312) (616)
-------------------------------------- ------- ------- -------- --------
Net income available to common
shareholders
of Tanger Factory Outlet Centers,
Inc. $3,318 $10,168 $4,536 $39,095
-------------------------------------- ------- ------- -------- --------
Basic earnings per common share:
Income from continuing operations $.08 $.43 $.11 $1.33
Discontinued operations -- (.13) -- (.14)
Net income $.08 $.30 $.11 $1.19
Diluted earnings per common share:
Income from continuing operations $.08 $.43 $.11 $1.33
Discontinued operations -- (.13) -- (.14)
Net income $.08 $.30 $.11 $1.19
Funds from operations available to
common shareholders (FFO) $22,106 $32,481 $51,115 $57,184
FFO per common share -- diluted $.48 $.80 $1.11 $1.47
-------------------------------------- ------- ------- -------- --------
(a) Includes straight-line rent and market rent adjustments of $894 and $855
for the three months ended and $1,804 and $1,530 for the six months ended
June 30, 2010 and 2009, respectively.
(b) Includes abandoned due diligence costs related to a project in Irving,
Texas of $365 for the three and six months ended June 30, 2010 and
demolition costs related to our outlet center redevelopment in Hilton Head,
South Carolina of $641 and $699 for the three and six months ended June 30,
2010, respectively.
(c) Includes the write-off of unamortized term loan origination costs
related to the repayment of our $235.0 million term loan facility in June
2010 for the three and six months ended June 30, 2010. For the three and
six months ended June 30, 2009, includes a gain on early extinguishment of
debt of $142.3 million of exchangeable notes which were retired through an
exchange offering for approximately 4.9 million common shares in May 2009.
(d) Represents gain on fair value measurement of our previously held
interest in the Myrtle Beach Hwy 17 joint venture upon acquisition on
January 5, 2009.
(e) Represents a loss on the termination of two interest rate swap
agreements that were utilized as hedge instruments in relation to the
variable interest rate payments from the $235.0 million term loan facility
mentioned in (c) above.
(f) Represents discontinued results of operations from our Commerce I, GA
Tanger town center. This property qualified for accounting treatment as
held for sale as of June 30, 2010 and thus its results of operations were
reclassified to discontinued operations for all current and prior periods.
In the 2010 periods, revenues and expenses were approximately equal. The
three and six month periods in 2009 included a $5.2 million impairment
charge which was taken to lower the recorded value to its approximate fair
value at the time.
TANGER FACTORY OUTLET CENTERS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands, except share data)
December
June 30, 31,
2010 2009
-------------------------------- ---------- ----------
ASSETS:
Rental property
Land $141,575 $ 143,933
Buildings, improvements and
fixtures 1,343,155 1,352,568
Construction in progress 39,883 11,369
-------------------------------- ---------- ----------
1,524,613 1,507,870
Accumulated depreciation (425,168) (412,530)
-------------------------------- ---------- ----------
Rental property, net 1,099,445 1,095,340
Cash and cash equivalents 3,453 3,267
Rental property held for sale 1,921 --
Investments in unconsolidated
joint ventures 7,570 9,054
Deferred charges, net 35,124 38,867
Other assets 31,627 32,333
-------------------------------- ---------- ----------
Total assets $1,179,140 $1,178,861
================================ ========== ==========
LIABILITIES AND EQUITY:
Liabilities
Debt
Senior, unsecured notes (net
of discount of $2,795 and
$858, respectively) $554,415 256,352
Mortgages payable (net of
discount of $0 and $241,
respectively) -- 35,559
Unsecured term loan -- 235,000
Unsecured lines of credit 50,800 57,700
-------------------------------- ---------- ----------
Total debt 605,215 584,611
Construction trade payables 30,829 14,194
Accounts payable and accrued
expenses 22,747 31,916
Other liabilities 17,286 27,077
-------------------------------- ---------- ----------
Total liabilities 676,077 657,798
Commitments
-------------------------------- ---------- ----------
Equity
Tanger Factory Outlet Centers,
Inc.
Preferred shares, 7.5% Class C,
liquidation preference $25 per
share, 8,000,000 shares
authorized, 3,000,000 shares
issued and
outstanding at June 30, 2010
and December 31, 2009 75,000 75,000
Common shares, $.01 par value,
150,000,000 shares authorized,
40,470,862 and 40,469,662
shares issued and outstanding
at June 30, 2010 and December
31, 2009, respectively 405 403
Paid in capital 599,270 596,074
Distributions in excess of
earnings (229,298) (202,997)
Accumulated other comprehensive
income (loss) 1,884 (5,809)
-------------------------------- ---------- ----------
Equity attributable to Tanger
Factory Outlet Centers, Inc. 447,261 462,671
-------------------------------- ---------- ----------
Equity attributable to
noncontrolling interest in
Operating Partnership 55,802 58,392
-------------------------------- ---------- ----------
Total equity 503,063 521,063
-------------------------------- ---------- ----------
Total liabilities and equity $1,179,140 1,178,861
-------------------------------- ---------- ----------
TANGER FACTORY OUTLET CENTERS, INC. AND SUBSIDIARIES
SUPPLEMENTAL INFORMATION
(in thousands, except per share, state and center information)
Three months
ended Six months ended
June 30, June 30,
2010 2009 2010 2009
------------------------------------------- ------- ------- ------- --------
FUNDS FROM OPERATIONS (a)
Net income $5,392 $13,587 $8,395 $50,055
Adjusted for:
Depreciation and amortization uniquely
significant to
real estate -- discontinued operations 34 230 87 461
Depreciation and amortization uniquely
significant to
real estate -- consolidated 16,984 19,300 43,343 39,347
Depreciation and amortization uniquely
significant to
real estate -- unconsolidated joint
ventures 1,280 1,223 2,545 2,389
Gain on fair value measurement of
previously held
interest in acquired joint venture -- -- -- (31,497)
------------------------------------------- ------- ------- ------- --------
Funds from operations (FFO) 23,690 34,340 54,370 60,755
Preferred share dividends (1,407) (1,407) (2,813) (2,813)
Allocation of earnings to participating
securities (177) (452) (442) (758)
------------------------------------------- ------- ------- ------- --------
Funds from operations available to common
shareholders $22,106 $32,481 $51,115 $57,184
------------------------------------------- ------- ------- ------- --------
Funds from operations available to common
shareholders per share - diluted $.48 $.80 $1.11 $1.47
------------------------------------------- ------- ------- ------- --------
WEIGHTED AVERAGE SHARES
Basic weighted average common shares 40,103 34,249 40,067 32,767
Effect of exchangeable notes 25 -- 25 --
Effect of outstanding options 43 78 49 80
------------------------------------------- ------- ------- ------- --------
Diluted weighted average common shares
(for earnings
per share computations) 40,171 34,327 40,141 32,847
Convertible operating partnership units
(b) 6,067 6,067 6,067 6,067
------------------------------------------- ------- ------- ------- --------
Diluted weighted average common shares
(for funds
from operations per share computations) 46,238 40,394 46,208 38,914
=========================================== ======= ======= ======= ========
OTHER INFORMATION
Gross leasable area open at end of period
--
Wholly owned 9,056 9,241 9,056 9,241
Partially owned -- unconsolidated 948 950 948 950
Outlet centers in operation --
Wholly owned 31 31 31 31
Partially owned -- unconsolidated 2 2 2 2
States operated in at end of period (c) 21 21 21 21
Occupancy at end of period (c) (d) 96.9 94.7 96.9 94.7
(a) FFO is a non-GAAP financial measure. The most directly comparable GAAP
measure is net income (loss), to which it is reconciled. We believe that for a
clear understanding of our operating results, FFO should be considered along
with net income as presented elsewhere in this report. FFO is presented because
it is a widely accepted financial indicator used by certain investors and
analysts to analyze and compare one equity REIT with another on the basis of
operating performance. FFO is generally defined as net income (loss), computed
in accordance with generally accepted accounting principles, before
extraordinary items and gains (losses) on sale or disposal of depreciable
operating properties, plus depreciation and amortization uniquely significant
to real estate and after adjustments for unconsolidated partnerships and joint
ventures. We caution that the calculation of FFO may vary from entity to entity
and as such the presentation of FFO by us may not be comparable to other
similarly titled measures of other reporting companies. FFO does not represent
net income or cash flow from operations as defined by accounting principles
generally accepted in the United States of America and should not be considered
an alternative to net income as an indication of operating performance or to
cash flows from operations as a measure of liquidity. FFO is not necessarily
indicative of cash flows available to fund dividends to shareholders and other
cash needs.
(b) The convertible operating partnership units (noncontrolling interest in
operating partnership) are not dilutive on earnings per share computed in
accordance with generally accepted accounting principles.
(c) Excludes the partially owned and unconsolidated properties in Wisconsin
Dells, Wisconsin which is operated by us through a 50% ownership joint venture
and in Deer Park, New York which is operated by us through a 33.3% ownership
joint venture.
(d) Excludes our wholly-owned center in Commerce I, Georgia for the 2010 periods
which was held for sale as of June 30, 2010. Excludes our wholly-owned,
non-stabilized center in Washington, Pennsylvania for the 2009 periods.
CONTACT: Tanger Factory Outlet Centers, Inc.
Frank C. Marchisello, Jr.
(336) 834-6834
Released July 27, 2010