Tanger Reports Year End Results for 2009
17.0% Increase in Adjusted Total FFO
3.4% Increase in Adjusted FFO per share
GREENSBORO, N.C., Feb. 23, 2010 (GLOBE NEWSWIRE) -- Tanger Factory Outlet Centers, Inc. (NYSE:SKT) today reported its financial results for the quarter and year ended December 31, 2009. Funds from operations available to common shareholders ("FFO"), a widely accepted supplemental measure of REIT performance, for the three months ended December 31, 2009, was $32.8 million, or $0.71 per share, as compared to FFO of $26.4 million, or $0.71 per share, for the three months ended December 31, 2008. For the year ended December 31, 2009, FFO was $114.0 million, or $2.71 per share, as compared to FFO of $88.1 million, or $2.36 per share, for the year ended December 31, 2008.
Steven B. Tanger, President and Chief Executive Officer, commented, "2009 was a challenging year in the retail real estate industry. Fortunately the majority of our tenants have remained financially strong during these difficult economic times and are showing increased profits and improved sales. We are pleased with the strides that we made during the year. Our balance sheet remains conservatively positioned and our dividend is well covered by our operating cash flow."
FFO for all periods shown was impacted by a number of non-recurring charges as described in the summary below ($'s and shares in thousands):
Three Months Years
Ended Ended
December 31, December 31,
2009 2008 2009 2008
-------- ------- -------- -------
FFO as reported $32,788 $26,449 $113,958 $88,066
As adjusted for:
US Treasury lock settlements -- -- -- 8,910
Prepayment premium -- -- -- 406
Abandoned due diligence costs 797 3,336 797 3,923
Impairment charge -- -- 5,200 --
Gain on early extinguishment
of debt -- -- (10,467) --
Executive severance -- -- 10,296 --
Gain on sale of outparcel -- -- (3,292) --
Termination fees (99) (1,747) (1,529) (2,904)
Impact of above adjustments
to the
allocation of earnings to
participating securities (5) (22) (11) (137)
-------- ------- -------- -------
FFO as adjusted $33,481 $28,016 $114,952 $98,264
Diluted weighted average
common shares 46,110 37,324 42,079 37,287
-------- ------- -------- -------
FFO per share as adjusted $ .73 $ .75 $2.73 $2.64
-------- ------- -------- -------
Excluding these charges, adjusted FFO for the fourth quarter and year ended December 31, 2009 would have been $0.73 and $2.73 per share respectively, while FFO for the fourth quarter and year ended December 31, 2008 would have been $0.75 and $2.64 per share respectively.
Net income available to common shareholders for the three months ended December 31, 2009 was $10.0 million, or $0.25 per share, compared to $7.3 million, or $0.23 per share for the three months ended December 31, 2008. Net income available to common shareholders for the year ended December 31, 2009 was $51.7 million, or $1.44 per share, compared to $19.4 million, or $0.62 per share for the year ended December 31, 2008.
Net income available to common shareholders for certain periods in 2008 and 2009 were also impacted by the non-recurring charges described above. Net income available to common shareholders for the year ended December 31, 2009 also includes a non-recurring 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.
Highlights of Achievements for 2009
-- Dividend increase approved by Board of Directors to raise the quarterly
common share cash dividend from $0.38 to $0.3825 per share, $1.53 per
share annualized, representing the 16th consecutive year of increased
dividends
-- Successfully completed exchange offer related to 3.75% Exchangeable
Senior Notes, which reduced outstanding debt by $142.3 million, in
exchange for approximately 4.9 million common shares
-- Successfully completed 3,450,000 common share offering at a price of
$35.50 per share, with net proceeds amounting to approximately $116.8
million
-- Received an upgrade from Moody's Investor Service from Baa3 stable to
Baa3 positive
-- 23.7% debt-to-total market capitalization ratio, compared to 34.5% last
year
-- 5.17 times interest coverage ratio for the three months ended December
31, 2009 compared to 3.84 times last year
-- 9.7% average increase in base rental rates on 1,218,000 square feet of
signed renewals
-- 30.9% average increase in base rental rates on 305,000 square feet of
re-leased space
-- 1.4% increase in same center net operating income for the year
-- 96.0% occupancy rate for wholly-owned properties, up 0.4% from September
30, 2009
-- $339 per square foot in reported same-space tenant sales for the rolling
twelve months ended December 31, 2009
Successful Financing Activities in 2009 Provide Additional Liquidity
On April 9, 2009, Tanger's Board of Directors approved an increase in the annual cash dividend on its common shares from $1.52 per share to $1.53 per share. Tanger has increased its dividend each year since becoming a public company in May of 1993.
On May 11, 2009, Tanger successfully closed the offer to exchange common shares of the company for any and all of the outstanding 3.75% Exchangeable Senior Notes of Tanger Properties Limited Partnership due 2026. In the aggregate, the exchange offer resulted in the retirement of approximately $142.3 million principal amount of the notes and the issuance of approximately 4.9 million common shares of the company. For each $1,000 principal amount of exchangeable notes validly tendered, note holders received 34.21 common shares, or $987.58, a 1.2% discount to par, based on Tanger's May 7, 2009 closing share price. This offer represented one of the most successful convertible debt for equity exchanges in recent market history based on its 95% success rate.
On August 14, 2009, Tanger successfully completed a public offering of 3,450,000 common shares at a price of $35.50 per share, including 450,000 common shares issued and sold upon the full exercise of the underwriters' overallotment option. The net proceeds to the company from the offering, after deducting underwriting commissions and discounts and estimated offering expenses, were approximately $116.8 million. The company used the net proceeds from the offering to repay borrowings under its unsecured lines of credit and for general corporate purposes.
On September 22, 2009, Moody's Investors Service affirmed its Baa3 senior unsecured rating for Tanger Properties Limited Partnership, the operating partnership of Tanger Factory Outlet Centers, Inc., and revised the rating outlook for Tanger to positive from stable. This rating action incorporates Tanger's stable performance throughout the economic downturn to date, overall defensive nature of outlet retailing, as well as the REIT's strong credit metrics in its rating category.
As of December 31, 2009, Tanger had a total market capitalization of approximately $2.5 billion including $584.6 million of debt outstanding, equating to a 23.7% debt-to-total market capitalization ratio. As of December 31, 2009, 90.0% of Tanger's debt was at fixed interest rates and the company had $57.7 million outstanding on its $325.0 million in available unsecured lines of credit. During the fourth quarter of 2009, Tanger continued to maintain a strong interest coverage ratio of 5.17 times, compared to 3.84 times during the fourth quarter of last year.
National Platform Continues to Drive Operating Results
Tanger's broad geographic representation and established brand name within the factory outlet industry continues to generate solid operating results. The company's portfolio of properties had a year-end occupancy rate of 96.0%, representing the 29th consecutive year since the company commenced operations in 1981 that it has achieved a year-end portfolio occupancy rate at or above 95%.
During 2009, Tanger executed 359 leases, totaling 1,523,000 square feet relating to its existing, wholly-owned properties. For the year, 1,218,000 square feet of renewals generated a 9.7% increase in average base rental rates, and represented 81.1% of the square feet originally scheduled to expire during 2009. Average base rental rates on re-tenanted space during the year increased 30.9% and accounted for the remaining 305,000 square feet.
Tanger continues to derive its rental income from a diverse group of national brand name manufacturers and retailers with no single tenant accounting for more than 8.4% of its gross leasable area and 5.3% of its total base and percentage rentals.
Same center net operating income increased 0.3% for the fourth quarter and 1.4% for the year ended December 31, 2009 compared to the same periods in 2008. This follows same center annual net operating income increases of 4.1% in 2008, 5.3% in 2007, 3.1% in 2006, 3.8% in 2005 and 1.2% in 2004.
Reported tenant comparable sales for the company's wholly owned properties for the rolling twelve months ended December 31, 2009 increased 0.6% to $339 per square foot. Reported tenant comparable sales for the three months ended December 31, 2009 increased 4.1%. Reported tenant comparable sales numbers exclude our centers in Foley, Alabama and on Highway 501 in Myrtle Beach, South Carolina, both of which underwent major renovations during last year. Tanger's average tenant occupancy cost as a percentage of average sales was 8.5% for 2009 compared to 8.2% in 2008, 7.7% in 2007, 7.4% in 2006, 7.5% in 2005 and 7.3% in 2004.
Investment Activities Provide Potential Future Earnings Growth
On October 14, 2009, Tanger closed on its development site in Mebane, North Carolina and immediately began construction of the center which will total approximately 317,000 square feet. Currently, Tanger has signed leases, or leases out for signature for approximately 73% of the total gross leasable area. With an estimated total cost of approximately $64.9 million, and an anticipated return on cost of between 10.0% and 10.5%, the company expects the center to be open in time for the 2010 holiday season.
During the fourth quarter of 2009, Tanger engaged in due diligence activities associated with a potential acquisition, which ultimately did not come to fruition. As a result, the company recorded a $797,000 charge relating to the net costs incurred associated with these due diligence activities.
Tanger Expects Solid FFO Per Share In 2010
Based on Tanger's 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 $0.82 and $0.92 per share and its FFO available to common shareholders for 2010 will be between $2.57 and $2.67 per share. The company's earnings estimates reflect $2.0 million in lost net operating income and demolition costs associated with its plans to redevelop one of its two properties located in Hilton Head, South Carolina beginning in April of 2010. The earnings estimates also assume general and administrative expenses will average $6.0 million per quarter and include incremental expenses associated with a number of long-term strategic initiatives which the company will be announcing throughout the year, as well as the estimated compensation expense associated with the company's new multi-year performance plan. As a result of the common equity transactions during 2009, Tanger's earnings estimates for 2010 assume there will be 46.2 million diluted weighted average common shares outstanding. The company's estimates do not include the impact of any rent termination fees, potential refinancing transactions, the sale of any 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:
Low High
Range Range
Estimated diluted net income per common share $0.82 $0.92
Noncontrolling interest, gain/loss on the sale of real estate, depreciation and
amortization uniquely significant to real estate including noncontrolling
interest share and our share of joint ventures 1.75 1.75
Estimated diluted FFO per share $2.57 $2.67
Year End Conference Call
Tanger will host a conference call to discuss its year end 2009 results for analysts, investors and other interested parties on Wednesday, February 24, 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 fourth quarter and year end 2009 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 at http://www.tangeroutlet.com/investorrelations/news/ under the News Releases section. A telephone replay of the call will be available from February 24, 2010 starting at 11:00 A.M. Eastern Time through 11:59 P.M., March 9, 2010, by dialing 1-800-642-1687 (conference ID # 51774519). Additionally, an online archive of the broadcast will also be available through March 9, 2010.
About Tanger Factory Outlet Centers
Tanger Factory Outlet Centers, Inc.(NYSE:SKT), a fully integrated, self-administered and self-managed publicly traded REIT, presently owns and operates 31 outlet centers in 21 states coast to coast, totaling approximately 9.2 million square feet of gross leasable area. Tanger also manages for a fee and owns an interest in two outlet centers containing approximately 950,000 square feet. Tanger is filing a Form 8-K with the Securities and Exchange Commission that furnishes a supplemental information package for the quarter ended December 31, 2009. For more information on Tanger Outlet Centers, 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 our re-merchandising strategy, the renewal and re-tenanting of space, the development of new centers and redevelopment of existing centers, tenant sales and sales trends, interest rates, funds from operations 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, 2008 (and December 31, 2009, when available).
TANGER FACTORY OUTLET CENTERS, INC AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)
(Unaudited)
Three months Year
ended ended
December 31, December 31,
2008 2009 2009 2008
-------- -------- -------- --------
REVENUES
Base rentals (a) $44,405 $42,694 $174,917 $159,068
Percentage rentals 3,111 2,949 6,801 7,058
Expense reimbursements 22,027 20,557 78,689 72,004
Other income (b) 2,000 2,137 11,278 7,261
-------- -------- -------- --------
Total revenues 71,543 68,337 271,685 245,391
-------- -------- -------- --------
EXPENSES
Property operating 23,982 21,139 87,877 77,974
General and administrative 5,066 5,099 22,288 22,264
Executive severance (c) -- -- 10,296 --
Depreciation and amortization 20,239 16,736 80,501 62,329
Abandoned due diligence costs 797 3,336 797 3,923
Impairment charge (d) -- -- 5,200 --
-------- -------- -------- --------
Total expenses 50,084 46,310 206,959 166,490
-------- -------- -------- --------
Operating income 21,459 22,027 64,726 78,901
Interest expense (e) (8,217) (10,972) (37,683) (41,125)
Gain on early extinguishment of debt (f) -- -- 10,467 --
Gain on fair value measurement of
previously held interest in
acquired joint venture (g) -- -- 31,497 --
Loss on settlement of US treasury rate
locks -- -- -- (8,910)
-------- -------- -------- --------
Income before equity in earnings (losses) of
unconsolidated joint ventures 13,242 11,055 69,007 28,866
Equity in earnings (losses) of
unconsolidated joint ventures (166) (696) (1,512) 852
Net income 13,076 10,359 67,495 29,718
-------- -------- -------- --------
Noncontrolling interest in Operating
Partnership (1,538) (1,459) (9,476) (3,932)
-------- -------- -------- --------
Net income attributable to
Tanger Factory Outlet Centers, Inc. 11,538 8,900 58,019 25,786
Preferred share dividends (1,406) (1,406) (5,625) (5,625)
Allocation of earnings to participating
securities (121) (195) (701) (724)
-------- -------- -------- --------
Net income available to common shareholders
of Tanger Factory Outlet Centers, Inc. $10,011 $7,299 $51,693 $19,437
-------- -------- -------- --------
Basic earnings per common share:
Income from continuing operations $.25 $.23 $1.44 $.63
Net income $.25 $.23 $1.44 $.63
Diluted earnings per common share:
Income from continuing operations $.25 $.23 $1.44 $.62
Net income $.25 $.23 $1.44 $.62
Funds from operations available to common
shareholders (FFO) $32,788 $26,449 $113,958 $88,066
FFO per common share -- diluted $.71 $.71 $2.71 $2.36
(a) Includes straight-line rent and market rent adjustments of $513 and $627 for the three months ended and $2,734 and $3,551 for the years ended December 31, 2009 and 2008, respectively.
(b) Includes gain on sale of outparcel of land of $3,292 which occurred in the third quarter of 2009.
(c) Represents accelerated vesting of restricted shares and accrual of cash severance payment to Stanley K. Tanger who retired from the Company during September 2009.
(d) Represents charge for impairment of our Commerce I, Georgia center of approximately $5.2 million.
(e) In accordance with recent accounting guidance addressing "Convertible Debt Instruments That May Be Settled in Cash upon Conversion (Including Partial Cash Settlement)", the results of operations for all prior periods presented for which such instruments were outstanding have been restated. Also, includes prepayment premium of $406 for the year ended December 31, 2008 related to the repayment of a mortgage which had a principal balance of $170.7 million.
(f) Represents gain on early extinguishment of $142.3 million of exchangeable notes which were retired through an exchange offer for approximately 4.9 million common shares in May 2009.
(g) 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.
TANGER FACTORY OUTLET CENTERS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands, except share data)
(Unaudited)
December December
31, 31,
2009 2008
(Unaudited) (Unaudited)
----------- -----------
ASSETS:
Rental property
Land $143,933 $135,689
Buildings, improvements and
fixtures 1,352,568 1,260,243
Construction in progress 11,369 3,823
----------- -----------
1,507,870 1,399,755
Accumulated depreciation (412,530) (359,301)
----------- -----------
Rental property, net 1,095,340 1,040,454
Cash and cash equivalents 3,267 4,977
Investments in unconsolidated joint
ventures 9,054 9,496
Deferred charges, net 38,867 37,750
Other assets 32,333 29,248
----------- -----------
Total assets $1,178,861 $1,121,925
=========== ===========
LIABILITIES AND EQUITY:
Liabilities
Debt
Senior, unsecured notes (net of
discount of $858 and
$9,137 respectively) $256,352 $390,363
Mortgages payable (net of
discount of $241 and $0,
respectively) 35,559 --
Unsecured term loan 235,000 235,000
Unsecured lines of credit 57,700 161,500
----------- -----------
Total debt 584,611 786,863
Construction trade payables 14,194 11,968
Accounts payable and accrued
expenses 31,916 26,277
Other liabilities 27,077 30,914
----------- -----------
Total liabilities 657,798 856,022
Commitments
------------------------------------------------- -----------
Equity
Tanger Factory Outlet Centers, Inc. equity
Preferred shares, 7.5% Class C,
liquidation preference $25 per
share, 8,000,000 shares
authorized, 3,000,000
shares issued and outstanding at
December 31, 2009
and December 31, 2008 75,000 75,000
Common shares, $.01 par value,
150,000,000 shares authorized,
40,277,124 and 31,667,501 shares
issued and outstanding
at December 31, 2009 and December
31, 2008, respectively 403 317
Paid in capital 596,074 371,190
Distributions in excess of earnings (202,997) (201,679)
Accumulated other comprehensive loss (5,809) (9,617)
----------- -----------
Equity attributable to Tanger
Factory Outlet Centers, Inc. 462,671 235,211
----------- -----------
Equity attributable to
noncontrolling interest
in Operating Partnership 58,392 30,692
----------- -----------
Total equity 521,063 265,903
----------- -----------
Total liabilities and equity $1,178,861 $1,121,925
=========== ===========
TANGER FACTORY OUTLET CENTERS, INC. AND SUBSIDIARIES
SUPPLEMENTAL INFORMATION
(in thousands, except per share, state and center information)
(Unaudited)
Three Months Year
Ended Ended
December 31, December 31,
2009 2008 2009 2008
-------- ------- -------- -------
FUNDS FROM OPERATIONS (a)
Net income $13,076 $10,359 $67,495 $29,718
Adjusted for:
Depreciation and amortization uniquely
significant
to real estate -- consolidated 20,112 16,630 80,008 61,965
Depreciation and amortization uniquely
significant
to real estate -- unconsolidated joint
ventures 1,231 1,227 4,859 3,165
Gain on fair value measurement of previously
held
interest in acquired joint venture -- -- (31,497) --
Funds from operations (FFO) 34,419 28,216 120,865 94,848
-------- ------- -------- -------
Preferred share dividends (1,406) (1,406) (5,625) (5,625)
Allocation of earnings to participating
securities (225) (361) (1,282) (1,157)
-------- ------- -------- -------
Funds from operations available to common
shareholders $32,788 $26,449 $113,958 $88,066
-------- ------- -------- -------
Funds from operations available to common
shareholders per share -- diluted $.71 $.71 $2.71 $2.36
-------- ------- -------- -------
WEIGHTED AVERAGE SHARES
Basic weighted average common shares 39,958 31,160 35,916 31,084
Effect of exchangeable notes 19 -- 19 --
Effect of outstanding options 66 97 77 136
Diluted weighted average common shares
(for earnings per share computations) 40,043 31,257 36,012 31,220
-------- ------- -------- -------
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) 46,110 37,324 42,079 37,287
======== ======= ======== =======
OTHER INFORMATION
Gross leasable area open at end of period --
Wholly owned 9,216 8,820 9,216 8,820
Partially owned -- unconsolidated 950 1,352 950 1,352
======== ======= ======== =======
Outlet centers in operation --
Wholly owned 31 30 31 30
Partially owned -- unconsolidated 2 3 2 3
======== ======= ======== =======
States operated in at end of period (c) 21 21 21 21
Occupancy percentage at end of period (c) (d) 96.0% 96.6% 96.0% 96.6%
(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 Wisconsin Dells, Wisconsin and Deer Park, New York properties for the 2009 and 2008 periods which were operated by us through 50% and 33.3% ownership joint ventures, respectively. Excludes Myrtle Beach Hwy 17, South Carolina property for the 2008 period during which it was operated by us through a 50% ownership joint venture. We acquired the remaining 50% interest in January 2009. (d) Excludes our wholly-owned, non-stabilized center in Washington, Pennsylvania for the 2009 and 2008 periods.
CONTACT: Tanger Factory Outlet Centers, Inc.
Frank C. Marchisello, Jr.
(336) 834-6834
Released February 23, 2010