Tanger Reports First Quarter Results and Raises Full-Year 2024 Guidance
Tanger reported strong first-quarter results with a 9th consecutive quarter of positive rent spreads. They raised full-year 2024 guidance and increased dividends by 6%. Operating metrics improved, and leasing activity was robust. Balance sheet and liquidity metrics strengthened, and guidance for 2024 was increased.
Strong first-quarter results with positive rent spreads for 9 consecutive quarters
Raised full-year 2024 guidance
Increased dividends by 6%
Robust leasing activity with positive blended rental rates
Improved balance sheet and liquidity metrics
- None.
Insights
Observing the performance metrics from Tanger Outlets, their announcement of a net income of $22.2 million represents a growth trajectory, albeit slightly lower than the previous year's $23.3 million. However, the increase in Funds From Operations (FFO) and Core FFO signifies better operational efficiency and a solid grasp on core business activities. FFO and Core FFO are critical indicators for real estate investment trusts (REITs) because they provide a clearer picture of operating performance by eliminating the effects of real estate depreciation.
The growth in Same Center Net Operating Income (NOI) of 5.2% is an encouraging sign that existing properties are generating more income. Investors often prize same-center growth as it indicates organic strength in the business rather than growth through acquisition. Simultaneously, the improvement in unsecured lines of credit suggests that Tanger is not only managing to negotiate better credit terms but is also strengthening its balance sheet, which is paramount for future growth and can positively impact their credit ratings and borrowing costs.
The dividend increase of 5.8% will likely be seen as a vote of confidence in the company's financial health and future prospects, which could bolster investor sentiment. A healthy dividend can also be indicative of a stable cash flow position, making the stock potentially more attractive to income-focused investors.
For potential stakeholders, the management's upward revision of the full-year 2024 guidance implies confidence in the company's strategic initiatives and expected business performance. However, it's important for investors to stay attuned to macroeconomic conditions that could affect occupancy rates and consumer spending at outlet centers.
Analyzing the retail real estate market, particularly the outlet sector, Tanger's strategy to diversify its tenant mix and enhance portfolio quality is a move to differentiate and attract a broader customer base. The higher re-tenanting rate expected for 2024, along with a 38.9% increase in leased square footage, reflects active management of the property portfolio and a robust leasing activity, signaling market demand and an aggressive approach to tenant turnover.
The positive 12.9% blended average rental rates on a cash basis for comparable space show that Tanger is successfully negotiating rent increases, which is a significant achievement in a competitive retail environment. However, the slight decrease in average tenant sales per square foot year over year, from $447 to $434, might raise questions about consumer spending trends or tenant sales performance within the outlets. Investors should monitor whether this is an early sign of sales stagnation or merely a fluctuation in a generally positive trajectory.
The Occupancy Cost Ratio (OCR) inching up from 8.8% to 9.3% indicates tenants are experiencing higher costs relative to sales. While still within a reasonable range for healthy retail operations, it's a metric that warrants attention to ensure it remains in line with industry standards, avoiding pressure on tenants which could eventually affect occupancy rates.
Investors should appreciate the impact of the balance sheet optimization on long-term sustainability. The extension of the credit facility maturity and the increased borrowing capacity provide Tanger with a cushion to navigate market uncertainties and engage in development or redevelopment projects that could further drive value.
From an investment standpoint, the improvement in Net debt to Adjusted EBITDAre from 5.8x to 5.7x suggests Tanger is effectively managing its leverage and potentially improving its financial solvency. A lower ratio is preferred as it indicates that a company has more earnings relative to its debt and is generally viewed as less risky by investors.
The maintained interest coverage ratio of 4.6x indicates that earnings are sufficiently covering interest expenses, which is reassuring for the sustainability of debt payments. The addition of properties to the portfolio should be seen positively, provided that they contribute to the overall earnings without disproportionately increasing the debt burden.
Investors considering REITs like Tanger should value the high percentage of unencumbered assets at 89% of the portfolio’s square footage. This indicates a large portion of the company's assets are free of debt, which provides flexibility should the company need to raise capital or weather any economic downturns.
The FAD payout ratio of 54% is indicative of a conservative payout model. It shows that the company is retaining almost half of its funds available for distribution, which could be reinvested for growth or to cushion against future uncertainties. However, investors looking for high dividend yields might seek a lower FAD payout ratio for a higher immediate return.
Grows Same Center Occupancy by 60 Basis Points Year Over Year
Achieves 9th Consecutive Quarter of Positive Rent Spreads
Increases, Extends and Improves Pricing of Unsecured Lines of Credit
"We are pleased to announce another quarter of strong financial and operating results along with a recent
Mr. Yalof continued, "In early April, we also increased the capacity, extended the term, and improved the pricing of our unsecured lines of credit, further strengthening our balance sheet and liquidity, positioning the Company to continue to execute on its long-term growth strategies and unlock additional value for all of our stakeholders."
First Quarter Results
- Net income available to common shareholders was
$0.20 $22.2 million $0.22 $23.3 million - Funds From Operations ("FFO") available to common shareholders was
$0.51 $58.6 million $0.47 $52.0 million - Core Funds From Operations ("Core FFO") available to common shareholders was
$0.52 $60.1 million $0.46 $51.2 million $0.01 $0.01
FFO and Core FFO are widely accepted 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 Core FFO, if applicable, and further information regarding these non-GAAP measures can be found later in this release. Per share amounts for net income, FFO and Core FFO are on a diluted basis.
Operating Metrics
Key portfolio results for the total stabilized portfolio, including the Company's pro rata share of unconsolidated joint ventures, were as follows:
- Occupancy was
96.5% on March 31, 2024, compared to97.3% on December 31, 2023 and96.5% on March 31, 2023. On a same center basis (excluding Tanger Outlets Asheville and Bridge Street Town Centre inHuntsville, AL , which were acquired in the fourth quarter of 2023), occupancy was97.1% on March 31, 2024,97.9% on December 31, 2023 and96.5% on March 31, 2023. - Same center net operating income ("Same Center NOI"), which is presented on a cash basis, increased
5.2% to$87.9 million $83.6 million - Average tenant sales per square foot was
$437 $436 $447 - On a same center basis, average tenant sales per square foot was
$434 $433 $447 - The occupancy cost ratio ("OCR"), representing annualized occupancy costs as a percentage of tenant sales, was
9.3% for the twelve months ended March 31, 2024 compared to9.3% for the twelve months ended December 31, 2023 and8.8% for the twelve months ended March 31, 2023. - Lease termination fees (which are excluded from Same Center NOI) for the total portfolio totaled
$262,000 $13,000
Same Center NOI is a supplemental non-GAAP financial measure of operating performance. A complete definition of Same Center NOI and a reconciliation to the nearest comparable GAAP measure can be found later in this release.
Leasing Activity
Leasing activity in the Company's portfolio continues to be robust. For the total domestic portfolio, including the Company's pro rata share of domestic unconsolidated joint ventures, total renewed or re-tenanted leases (including leases for both comparable and non-comparable space) executed during the twelve months ended March 31, 2024 included 542 leases, totaling over 2.3 million square feet, compared to 414 leases, totaling nearly 1.7 million square feet, during the twelve months ended March 31, 2023, a
Blended average rental rates were positive for the ninth consecutive quarter at
Relative to 2023, the Company continues to expect a higher re-tenanting rate in 2024 as it focuses on portfolio enhancement and further elevating and diversifying its retailer mix. As part of this strategy, as of April 30, 2024, Tanger has renewals executed or in process for
Dividend
On April 10, 2024, the Company's Board of Directors approved a
Balance Sheet and Liquidity
As previously announced, on April 12, 2024, Tanger's operating partnership, Tanger Properties Limited Partnership, amended, increased and extended its unsecured lines of credit. Key elements of the amendments include extending the maturity date to April 2028, with options to extend for an additional year to April 2029. Borrowing capacity was increased to
The following balance sheet and liquidity metrics are presented for the total portfolio, including the Company's pro rata share of unconsolidated joint ventures. As of March 31, 2024:
- Net debt to Adjusted EBITDAre (calculated as net debt divided by Adjusted Earnings Before Interest, Taxes, Depreciation and Amortization for Real Estate ("Adjusted EBITDAre")) improved to 5.7x for the twelve months ended March 31, 2024 from 5.8x for the year ended December 31, 2023. Management estimates that Net debt to Adjusted EBITDAre would be in a range of 5.2x to 5.3x for both periods assuming a full twelve months of Adjusted EBITDAre for Tanger Nashville, Tanger Asheville, and Bridge Street Town Centre, which were added to the portfolio during the fourth quarter of 2023.
- Interest coverage ratio (calculated as Adjusted EBITDAre divided by interest expense) was 4.6x for the first quarter of 2024 and 4.8x for the twelve months ended March 31, 2024.
- Cash and cash equivalents and short-term investments totaled
$23.0 million $474.0 million $520.0 million $100.0 million - Total outstanding debt aggregated
$1.6 billion $112.2 million 7% of total debt outstanding and2% of total enterprise value. - Weighted average interest rate was
4.1% , including executed swaps, and weighted average term to maturity of outstanding debt, including extension options, was approximately 4.4 years. - Approximately
89% of the total portfolio's square footage was unencumbered by mortgages with secured debt of$223.4 million 14% of total debt outstanding. - Funds Available for Distribution ("FAD") payout ratio was
54% for the first quarter of 2024.
Adjusted EBITDAre, Net debt and FAD are supplemental non-GAAP financial measures of operating performance. Definitions of Adjusted EBITDAre, Net debt and FAD and reconciliations to the nearest comparable GAAP measures are included later in this release.
Guidance for 2024
Based on the Company's results to date and its outlook for the remainder of 2024, management is increasing its full-year 2024 guidance with its current expectations for net income, FFO and Core FFO per share for 2024 as follows:
For the year ending December 31, 2024: | Revised | Previous | ||||
Low | High | Low | High | |||
Estimated diluted net income per share | $ 0.84 | $ 0.92 | $ 0.83 | $ 0.91 | ||
Depreciation and amortization of real estate assets - consolidated and the | 1.18 | 1.18 | 1.18 | 1.18 | ||
Estimated diluted FFO per share | $ 2.02 | $ 2.10 | $ 2.01 | $ 2.09 | ||
Executive severance costs | 0.01 | 0.01 | 0.01 | 0.01 | ||
Estimated diluted Core FFO per share | $ 2.03 | $ 2.11 | $ 2.02 | $ 2.10 | ||
Tanger's estimates reflect the following key assumptions (dollars in millions):
For the year ending December 31, 2024: | Revised | Previous | ||||
Low | High | Low | High | |||
Same Center NOI growth - total portfolio at pro rata share | 2.25 % | 4.25 % | 2.0 % | 4.0 % | ||
General and administrative expense, excluding executive severance | ||||||
Interest expense - consolidated | ||||||
Other income (expense) (1) | $— | $— | ||||
Annual recurring capital expenditures, renovations and second generation tenant | ||||||
(1) Includes interest income. | ||||||
Weighted average diluted common shares are expected to range from approximately 109 million to 110 million for earnings per share and 114 million to 115 million for FFO and Core FFO per share. The estimates above do not include the impact of the acquisition or sale of any outparcels, properties or joint venture interests, or any additional financing activity.
First Quarter 2024 Conference Call
Tanger will host a conference call to discuss its first quarter 2024 results for analysts, investors and other interested parties on Wednesday, May 1, 2024, at 8:30 a.m. Eastern Time. To access the conference call, listeners should dial 1-877-605-1702. Alternatively, a live audio webcast of this call will be available to the public on Tanger's Investor Relations website, investors.tanger.com. A telephone replay of the call will be available from May 1, 2024 at approximately 11:30 a.m. through May 15, 2024 at 11:59 p.m. by dialing 1-877-660-6853, replay access code #13745043. An online archive of the webcast will also be available through May 15, 2024.
Upcoming Events
The Company is scheduled to participate in the following upcoming events:
- A tour of Tanger Outlets Savannah on May 7, 2024 in connection with Wells Fargo's 27th Annual Real Estate Securities Conference held at the Ritz Carlton in Amelia Island, FL from May 8 through May 9, 2024
- BMO's 19th Annual Real Estate Conference held at the InterContinental Barclay Hotel in
New York, NY on May 8, 2024, including a panel discussion with Stephen Yalof, President and Chief Executive Officer, at 10:15 a.m. Eastern Time - ICSC Las Vegas held at the
Las Vegas Convention Center inLas Vegas, NV from May 20 through May 21, 2024 - Nareit's REITweek: 2024 Investor Conference held at the New York Hilton Midtown in
New York, NY from June 4 through June 6, 2024, including a company presentation on June 4, 2024 at 10:15 a.m. Eastern Time. Additional details about the presentation, including a live audio webcast, will be available to the public on Tanger's Investor Relations website, investors.tanger.com
About Tanger®
Tanger Inc. (NYSE: SKT) is a leading owner and operator of outlet and open-air retail shopping destinations, with over 43 years of expertise in the retail and outlet shopping industries. Tanger's portfolio of 38 outlet centers, one adjacent managed center and one open-air lifestyle center comprises over 15 million square feet well positioned across tourist destinations and vibrant markets in 20 U.S. states and
The Company uses, and intends to continue to use, its Investor Relations website, which can be found at investors.tanger.com, as a means of disclosing material nonpublic information and for complying with its disclosure obligations under Regulation FD. Additional information about the Company can also be found through social media channels. The Company encourages investors and others interested in the Company to review the information on its Investor Relations website and on social media channels. The information contained on, or that may be accessed through, our website or social media platforms is not incorporated by reference into, and is not a part of, this document.
Safe Harbor Statement
Certain statements made in this earnings release contain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. We intend such forward-looking statements to be covered by the safe harbor provisions for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995 and included this statement for purposes of complying with these safe harbor provisions. Forward-looking statements, which are based on certain assumptions and describe our future plans, strategies, beliefs and expectations, are generally identifiable by use of the words "anticipate," "believe," "can," "continue," "could," "designed," "estimate," "expect," "forecast," "goal," "intend," "may," "might," "plan," "possible," "potential," "predict," "project," "should," "target," "will," "would," or similar expressions. Such forward-looking statements include the Company's expectations regarding future financial results and assumptions underlying that guidance, long-term growth, trends in retail traffic and tenant revenues, development initiatives and strategic partnerships, the anticipated impact of the Company's newly acquired assets in
Other important factors that may cause actual results to differ materially from current expectations include, but are not limited to: our inability to develop new retail centers or expand existing retail centers successfully; risks related to the economic performance and market value of our retail centers; the relative illiquidity of real property investments; impairment charges affecting our properties; our acquisitions or dispositions of assets may not achieve anticipated results; competition for the acquisition and development of retail centers, and our inability to complete the acquisitions of retail centers we may identify; competition for tenants with competing retail centers; the diversification of our tenant mix and our entry into the operation of full price retail may not achieve our expected results; environmental regulations affecting our business; risks associated with possible terrorist activity or other acts or threats of violence and threats to public safety; risks related to the impact of macroeconomic conditions, including rising interest rates and inflation, on our tenants and on our business, financial condition, liquidity, results of operations and compliance with debt covenants; our dependence on rental income from real property; the fact that certain of our leases include co-tenancy and/or sales-based provisions that may allow a tenant to pay reduced rent and/or terminate a lease prior to its natural expiration; our dependence on the results of operations of our retailers and their bankruptcy, early termination or closing could adversely affect us; the impact of geopolitical conflicts; the immediate and long-term impact of the outbreak of a highly infectious or contagious disease on our tenants and on our business (including the impact of actions taken to contain the outbreak or mitigate its impact); the fact that certain of our properties are subject to ownership interests held by third parties, whose interests may conflict with ours; risks related to climate change; increased costs and reputational harm associated with the increased focus on environmental, sustainability and social initiatives; risks related to uninsured losses; the risk that consumer, travel, shopping and spending habits may change; risks associated with our Canadian investments; risks associated with attracting and retaining key personnel; risks associated with debt financing; risks associated with our guarantees of debt for, or other support we may provide to, joint venture properties; the effectiveness of our interest rate hedging arrangements; our potential failure to qualify as a REIT; our legal obligation to pay dividends to our shareholders; legislative or regulatory actions that could adversely affect our shareholders, our dependence on distributions from the Operating Partnership to meet our financial obligations, including dividends; the risk of a cyber-attack or an act of cyber-terrorism on our systems; the uncertainties of costs to comply with regulatory changes (including potential costs to comply with proposed rules of the SEC to standardize climate-related disclosures); and other important factors which may cause actual results to differ materially from current expectations include, but are not limited to, those set forth under Item 1A - "Risk Factors" in the Company's and the Operating Partnership's Annual Report on Form 10-K for the year ended December 31, 2023.
We qualify all of our forward-looking statements by these cautionary statements. The forward-looking statements in this earnings release are only predictions. We have based these forward-looking statements largely on our current expectations and projections about future events and financial trends that we believe may affect our business, financial condition and results of operations. Because forward-looking statements are inherently subject to risks and uncertainties, some of which cannot be predicted or quantified, you should not rely on these forward-looking statements as predictions of future events. The events and circumstances reflected in our forward-looking statements may not be achieved or occur and actual results could differ materially from those projected in the forward-looking statements. Except as required by applicable law, we do not plan to publicly update or revise any forward-looking statements contained herein, whether as a result of any new information, future events, changed circumstances or otherwise.
Investor Contact Information | Media Contact Information | |||
Doug McDonald | KWT Global | |||
SVP, Treasurer and Investments | ||||
336-856-6066 | ||||
TANGER INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (in thousands, except per share data) (Unaudited) | |||
Three months ended | |||
March 31, | |||
2024 | 2023 | ||
Revenues: | |||
Rental revenues | |||
Management, leasing and other services | 2,278 | 1,914 | |
Other revenues | 3,284 | 3,447 | |
Total revenues | 123,371 | 108,943 | |
Expenses: | |||
Property operating | 35,465 | 33,148 | |
General and administrative (1) | 19,490 | 17,434 | |
Depreciation and amortization | 33,860 | 25,893 | |
Total expenses | 88,815 | 76,475 | |
Other income (expense): | |||
Interest expense | (14,353) | (12,343) | |
Other income (expense) | 587 | 2,800 | |
Total other income (expense) | (13,766) | (9,543) | |
Income before equity in earnings of unconsolidated joint ventures | 20,790 | 22,925 | |
Equity in earnings of unconsolidated joint ventures | 2,516 | 1,935 | |
Net income | 23,306 | 24,860 | |
Noncontrolling interests in Operating Partnership | (973) | (1,071) | |
Noncontrolling interests in other consolidated partnerships | 80 | (248) | |
Net income attributable to Tanger Inc. | 22,413 | 23,541 | |
Allocation of earnings to participating securities | (231) | (199) | |
Net income available to common shareholders of Tanger Inc. | |||
Basic earnings per common share: | |||
Net income | |||
Diluted earnings per common share: | |||
Net income | |||
(1) The 2024 period includes | |||
TANGER INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (in thousands, except share data) (Unaudited) | |||
March 31, | December 31, | ||
2024 | 2023 | ||
Assets | |||
Rental property: | |||
Land | |||
Buildings, improvements and fixtures | 2,944,077 | 2,938,434 | |
Construction in progress | 39,249 | 29,201 | |
3,286,931 | 3,271,240 | ||
Accumulated depreciation | (1,347,011) | (1,318,264) | |
Total rental property, net | 1,939,920 | 1,952,976 | |
Cash and cash equivalents | 8,137 | 12,778 | |
Short-term investments | 7,739 | 9,187 | |
Investments in unconsolidated joint ventures | 71,701 | 71,900 | |
Deferred lease costs and other intangibles, net | 86,436 | 91,269 | |
Operating lease right-of-use assets | 77,082 | 77,400 | |
Prepaids and other assets | 110,151 | 108,609 | |
Total assets | |||
Liabilities and Equity | |||
Liabilities | |||
Debt: | |||
Senior, unsecured notes, net | |||
Unsecured term loan, net | 322,537 | 322,322 | |
Mortgages payable, net | 62,772 | 64,041 | |
Unsecured lines of credit | 46,000 | 13,000 | |
Total debt | 1,471,619 | 1,439,203 | |
Accounts payable and accrued expenses | 77,922 | 118,505 | |
Operating lease liabilities | 85,757 | 86,076 | |
Other liabilities | 86,145 | 89,022 | |
Total liabilities | 1,721,443 | 1,732,806 | |
Commitments and contingencies | |||
Equity | |||
Tanger Inc.: | |||
Common shares, | 1,094 | 1,088 | |
Paid in capital | 1,073,313 | 1,079,387 | |
Accumulated distributions in excess of net income | (497,330) | (490,171) | |
Accumulated other comprehensive loss | (21,280) | (23,519) | |
Equity attributable to Tanger Inc. | 555,797 | 566,785 | |
Equity attributable to noncontrolling interests: | |||
Noncontrolling interests in Operating Partnership | 23,926 | 24,528 | |
Noncontrolling interests in other consolidated partnerships | — | — | |
Total equity | 579,723 | 591,313 | |
Total liabilities and equity | |||
TANGER INC. AND SUBSIDIARIES CENTER INFORMATION (Unaudited) | ||||
March 31, | ||||
2024 | 2023 | |||
Gross Leasable Area Open at End of Period (in thousands): | ||||
Consolidated | 12,692 | 11,352 | ||
Unconsolidated | 2,113 | 2,113 | ||
Pro rata share of unconsolidated | 1,056 | 1,056 | ||
Managed | 758 | 457 | ||
Total Owned and/or Managed Properties (1) | 15,562 | 13,922 | ||
Total Owned Properties including pro rata share of unconsolidated JVs (1) | 13,748 | 12,408 | ||
Centers in Operation at End of Period: | ||||
Consolidated | 32 | 29 | ||
Unconsolidated | 6 | 6 | ||
Managed | 2 | 1 | ||
Total Owned and/or Managed Properties | 40 | 36 | ||
Ending Occupancy: | ||||
Consolidated (2) | 96.5 % | 96.4 % | ||
Unconsolidated | 97.4 % | 97.8 % | ||
Total Owned Properties including pro rata share of unconsolidated JVs (2) | 96.5 % | 96.5 % | ||
Total | 20 | 20 | ||
(1) Amounts may not recalculate due to the effect of rounding. | ||||
(2) Metrics for March 2024 include the results of Tanger Outlets Asheville and Bridge Street Town Centre, both of which were acquired in the fourth quarter of 2023, and exclude the results of Tanger Outlets Nashville, which opened during the fourth quarter of 2023 and has not yet stabilized. | ||||
(3) The Company also has an ownership interest in two centers located in | ||||
TANGER INC. AND SUBSIDIARIES RECONCILIATION OF GAAP TO NON-GAAP SUPPLEMENTAL MEASURES (1) (in thousands, except per share) (Unaudited) | ||||
Below is a reconciliation of Net Income to FFO and Core FFO: | ||||
Three months ended | ||||
March 31, | ||||
2024 | 2023 | |||
Net income | ||||
Adjusted for: | ||||
Depreciation and amortization of real estate assets - consolidated | 33,052 | 25,172 | ||
Depreciation and amortization of real estate assets - unconsolidated joint ventures | 2,540 | 2,670 | ||
FFO | 58,898 | 52,702 | ||
FFO attributable to noncontrolling interests in other consolidated partnerships | 80 | (248) | ||
Allocation of earnings to participating securities | (418) | (424) | ||
FFO available to common shareholders (2) | ||||
As further adjusted for: | ||||
Executive departure-related adjustments (3) | 1,554 | (806) | ||
Impact of above adjustments to the allocation of earnings to participating securities | (10) | 6 | ||
Core FFO available to common shareholders (2) | ||||
FFO available to common shareholders per share - diluted (2) | ||||
Core FFO available to common shareholders per share - diluted (2) | ||||
Weighted Average Shares: | ||||
Basic weighted average common shares | 108,369 | 104,088 | ||
Effect of notional units | 731 | 693 | ||
Effect of outstanding options and restricted common shares | 923 | 741 | ||
Diluted weighted average common shares (for earnings per share computations) | 110,023 | 105,522 | ||
Exchangeable operating partnership units | 4,708 | 4,738 | ||
Diluted weighted average common shares (for FFO and Core FFO per share | 114,731 | 110,260 | ||
(1) Refer to Non-GAAP Definitions beginning on page xv for definitions of the non-GAAP supplemental measures used in this release. | ||||
(2) Assumes the Class A common limited partnership units of the Operating Partnership held by the noncontrolling interests are exchanged for common shares of the Company. Each Class A common limited partnership unit is exchangeable for one of the Company's common shares, subject to certain limitations to preserve the Company's REIT status. | ||||
(3) For the 2024 period, represents executive severance costs. For the 2023 period, represents the reversal of previously expensed compensation related to a voluntary executive departure. | ||||
Below is a reconciliation of FFO to FAD (1): | ||||
Three months ended | ||||
March 31, | ||||
2024 | 2023 | |||
FFO available to common shareholders | ||||
Adjusted for: | ||||
Corporate depreciation excluded above | 808 | 721 | ||
Amortization of finance costs | 832 | 808 | ||
Amortization of net debt discount | 174 | 144 | ||
Amortization of equity-based compensation | 3,497 | 2,271 | ||
Straight-line rent adjustments | 511 | 680 | ||
Market rent adjustments | 95 | 133 | ||
Second generation tenant allowances and lease incentives | (4,283) | (2,030) | ||
Capital improvements | (5,357) | (6,340) | ||
Adjustments from unconsolidated joint ventures | (103) | (47) | ||
FAD available to common shareholders (2) | ||||
Dividends per share | ||||
FFO payout ratio | 51 % | 47 % | ||
FAD payout ratio | 54 % | 50 % | ||
Diluted weighted average common shares (2) | 114,731 | 110,260 | ||
(1) Refer to page ix for a reconciliation of net income to FFO available to common shareholders. | ||||
(2) Assumes the Class A common limited partnership units of the Operating Partnership held by the noncontrolling interests are exchanged for common shares of the Company. Each Class A common limited partnership unit is exchangeable for one of the Company's common shares, subject to certain limitations to preserve the Company's REIT status. | ||||
Below is a reconciliation of Net Income to Portfolio NOI and Same Center NOI for the consolidated portfolio and total | |||||
Three months ended | |||||
March 31, | |||||
2024 | 2023 | ||||
Net income | |||||
Adjusted to exclude: | |||||
Equity in earnings of unconsolidated joint ventures | (2,516) | (1,935) | |||
Interest expense | 14,353 | 12,343 | |||
Other income | (587) | (2,800) | |||
Depreciation and amortization | 33,860 | 25,893 | |||
Other non-property income | (395) | (48) | |||
Corporate general and administrative expenses | 19,489 | 17,426 | |||
Non-cash adjustments (1) | 609 | 819 | |||
Lease termination fees | (262) | (6) | |||
Portfolio NOI - Consolidated | 87,857 | 76,552 | |||
Non-same center NOI - Consolidated | (7,256) | 146 | |||
Same Center NOI - Consolidated (2) | |||||
Portfolio NOI - Consolidated | |||||
Pro rata share of unconsolidated joint ventures (3) | 7,331 | 6,878 | |||
Portfolio NOI - Total portfolio at pro rata share (3) | 95,188 | 83,430 | |||
Non-same center NOI - Total portfolio at pro rata share (3) | (7,256) | 146 | |||
Same Center NOI - Total portfolio at pro rata share (2) (3) | |||||
(1) Non-cash items include straight-line rent, above and below market rent amortization, straight-line rent expense on land leases, and gains or losses on outparcel sales, as applicable. |
(2) Centers excluded from Same Center NOI: |
October 2023 | New Development | Consolidated | |
November 2023 | Acquired | Consolidated | |
November 2023 | Acquired | Consolidated |
(3) Pro rata share metrics are presented on a constant currency basis. Constant currency is a non-GAAP measure, calculated by applying the average foreign exchange rate for the current period to all periods presented. |
Below are reconciliations of Net Income to Adjusted EBITDA: | ||||
Three months ended | ||||
March 31, | ||||
2024 | 2023 | |||
Net income | ||||
Adjusted to exclude: | ||||
Interest expense, net | 14,151 | 9,779 | ||
Income tax expense (benefit) | (335) | (200) | ||
Depreciation and amortization | 33,860 | 25,893 | ||
Executive departure-related adjustments (1) | 1,554 | (806) | ||
Adjusted EBITDA | ||||
Twelve months ended | ||||
March 31, | December 31, | |||
2024 | 2023 | |||
Net income | ||||
Adjusted to exclude: | ||||
Interest expense, net | 42,521 | 38,149 | ||
Income tax expense (benefit) | (543) | (408) | ||
Depreciation and amortization | 116,856 | 108,889 | ||
Executive departure-related adjustments (1) | 1,554 | (806) | ||
Adjusted EBITDA | ||||
(1) For the 2024 period, represents executive severance costs. For the 2023 period, represents the reversal of previously expensed compensation related to a voluntary executive departure. | ||||
Below are reconciliations of Net Income to EBITDAre and Adjusted EBITDAre: | ||||
Three months ended | ||||
March 31, | ||||
2024 | 2023 | |||
Net income | ||||
Adjusted to exclude: | ||||
Interest expense, net | 14,151 | 9,779 | ||
Income tax expense (benefit) | (335) | (200) | ||
Depreciation and amortization | 33,860 | 25,893 | ||
Pro rata share of interest expense, net - unconsolidated joint ventures | 2,169 | 2,131 | ||
Pro rata share of depreciation and amortization - unconsolidated joint ventures | 2,540 | 2,670 | ||
EBITDAre | ||||
Executive departure-related adjustments (1) | 1,554 | (806) | ||
Adjusted EBITDAre | ||||
Twelve months ended | ||||
March 31, | December 31, | |||
2024 | 2023 | |||
Net income | ||||
Adjusted to exclude: | ||||
Interest expense, net | 42,521 | 38,149 | ||
Income tax expense (benefit) | (543) | (408) | ||
Depreciation and amortization | 116,856 | 108,889 | ||
Pro rata share of interest expense, net - unconsolidated joint ventures | 8,817 | 8,779 | ||
Pro rata share of depreciation and amortization - unconsolidated joint ventures | 10,384 | 10,514 | ||
EBITDAre | ||||
Executive departure-related adjustments (1) | 1,554 | (806) | ||
Adjusted EBITDAre | ||||
(1) For the 2024 period, represents executive severance costs. For the 2023 period, represents the reversal of previously expensed compensation related to a voluntary executive departure. | ||||
Below is a reconciliation of Total Debt to Net Debt for the consolidated portfolio and total portfolio at pro rata share: | ||||||
March 31, 2024 | ||||||
Consolidated | Pro Rata Share of | Total at Pro Rata Share | ||||
Total debt | ||||||
Less: | ||||||
Cash and cash equivalents | (8,137) | (7,094) | (15,231) | |||
Short-term investments (1) | (7,739) | — | (7,739) | |||
Total cash and cash equivalents and short-term investments | (15,876) | (7,094) | (22,970) | |||
Net debt | ||||||
December 31, 2023 | ||||||
Consolidated | Pro Rata Share of | Total at Pro Rata Share | ||||
Total debt | ||||||
Less: | ||||||
Cash and cash equivalents | (12,778) | (7,020) | (19,798) | |||
Short-term investments (1) | (9,187) | — | (9,187) | |||
Total cash and cash equivalents and short-term investments | (21,965) | (7,020) | (28,985) | |||
Net debt | ||||||
(1) Represents short-term bank deposits with initial maturities greater than three months and less than or equal to one year. | ||||||
NON-GAAP DEFINITIONS
Funds From Operations
Funds From Operations ("FFO") is a widely used measure of the operating performance for real estate companies that supplements net income (loss) determined in accordance with generally accepted accounting principles in
FFO is intended to exclude historical cost depreciation of real estate as required by GAAP which assumes that the value of real estate assets diminishes ratably over time. Historically, however, real estate values have risen or fallen with market conditions. Because FFO excludes depreciation and amortization of real estate assets, gains and losses from property dispositions and extraordinary items, it provides a performance measure that, when compared year over year, reflects the impact to operations from trends in occupancy rates, rental rates, operating costs, development activities and interest costs, providing perspective not immediately apparent from net income (loss).
We present FFO because we consider it an important supplemental measure of our operating performance. In addition, a portion of cash bonus compensation to certain members of management is based on our FFO or Core FFO, which is described in the section below. We believe it is useful for investors to have enhanced transparency into how we evaluate our performance and that of our management. In addition, FFO is frequently used by securities analysts, investors and other interested parties in the evaluation of REITs, many of which present FFO when reporting their results. FFO is also widely used by us and others in our industry to evaluate and price potential acquisition candidates. We believe that FFO payout ratio, which represents regular distributions to common shareholders and unitholders of the Operating Partnership expressed as a percentage of FFO, is useful to investors because it facilitates the comparison of dividend coverage between REITs. Nareit has encouraged its member companies to report their FFO as a supplemental, industry-wide standard measure of REIT operating performance.
FFO has significant limitations as an analytical tool, and you should not consider it in isolation, or as a substitute for analysis of our results as reported under GAAP. Some of these limitations are:
- FFO does not reflect our cash expenditures, or future requirements, for capital expenditures or contractual commitments;
- FFO does not reflect changes in, or cash requirements for, our working capital needs;
- Although depreciation and amortization are non-cash charges, the assets being depreciated and amortized will often have to be replaced in the future, and FFO does not reflect any cash requirements for such replacements; and
- Other companies in our industry may calculate FFO differently than we do, limiting its usefulness as a comparative measure.
Because of these limitations, FFO should not be considered as a measure of discretionary cash available to us to invest in the growth of our business or our dividend paying capacity. We compensate for these limitations by relying primarily on our GAAP results and using FFO only as a supplemental measure.
Core FFO
We present Core Funds From Operations ("Core FFO") as a supplemental measure of our performance. We define Core FFO as FFO further adjusted to eliminate the impact of certain items that we do not consider indicative of our ongoing operating performance. These further adjustments are itemized in the table above. You are encouraged to evaluate these adjustments and the reasons we consider them appropriate for supplemental analysis. In evaluating Core FFO you should be aware that in the future we may incur expenses that are the same as or similar to some of the adjustments in this presentation. Our presentation of Core FFO should not be construed as an inference that our future results will be unaffected by unusual or non-recurring items.
We present Core FFO because we believe it assists investors and analysts in comparing our performance across reporting periods on a consistent basis by excluding items that we do not believe are indicative of our core operating performance. In addition, we believe it is useful for investors to have enhanced transparency into how we evaluate management's performance and the effectiveness of our business strategies. We use Core FFO when certain material, unplanned transactions occur as a factor in evaluating management's performance and to evaluate the effectiveness of our business strategies, and may use Core FFO when determining incentive compensation.
Core FFO has limitations as an analytical tool. Some of these limitations are:
- Core FFO does not reflect our cash expenditures, or future requirements, for capital expenditures or contractual commitments;
- Core FFO does not reflect changes in, or cash requirements for, our working capital needs;
- Although depreciation and amortization are non-cash charges, the assets being depreciated and amortized will often have to be replaced in the future, and Core FFO does not reflect any cash requirements for such replacements;
- Core FFO does not reflect the impact of certain cash charges resulting from matters we consider not to be indicative of our ongoing operations; and
- Other companies in our industry may calculate Core FFO differently than we do, limiting its usefulness as a comparative measure.
Because of these limitations, Core FFO should not be considered in isolation or as a substitute for performance measures calculated in accordance with GAAP. We compensate for these limitations by relying primarily on our GAAP results and using Core FFO only as a supplemental measure.
Funds Available for Distribution
Funds Available for Distribution ("FAD") is a non-GAAP financial measure that we define as FFO (defined as net income (loss) available to the Company's common shareholders computed in accordance with GAAP, excluding (i) depreciation and amortization related to real estate, (ii) gains or losses from sales of certain real estate assets, (iii) gains and losses from change in control, (iv) impairment write-downs of certain real estate assets and investments in entities when the impairment is directly attributable to decreases in the value of depreciable real estate held by the entity and (v) after adjustments for unconsolidated partnerships and joint ventures calculated to reflect FFO on the same basis), excluding corporate depreciation, amortization of finance costs, amortization of net debt discount (premium), amortization of equity-based compensation, straight-line rent amounts, market rent amounts, second generation tenant allowances and lease incentives, recurring capital improvement expenditures, and our share of the items listed above for our unconsolidated joint ventures. FAD is useful in analyzing the portion of cash flow that is available for dividends to stockholders. Investors, analysts and the Company utilize FAD as an indicator of common dividend potential. The FAD payout ratio, which represents regular distributions to common shareholders and unitholders of the Operating Partnership expressed as a percentage of FAD, facilitates the comparison of dividend coverage between REITs.
We believe that net income (loss) is the most directly comparable GAAP financial measure to FAD. FAD does not represent cash generated from operating activities in accordance with GAAP and should not be considered as an alternative to net income (loss) as an indication of our performance or to cash flows as a measure of liquidity or our ability to make distributions. Other companies in our industry may calculate FAD differently than we do, limiting its usefulness as a comparative measure.
Portfolio Net Operating Income and Same Center Net Operating Income
We present portfolio net operating income ("Portfolio NOI") and same center net operating income ("Same Center NOI") as supplemental measures of our operating performance. Portfolio NOI represents our property level net operating income which is defined as total operating revenues less property operating expenses and excludes termination fees and non-cash adjustments including straight-line rent, net above and below market rent amortization, impairment charges, loss on early extinguishment of debt and gains or losses on the sale of assets recognized during the periods presented. We define Same Center NOI as Portfolio NOI for the properties that were operational for the entire portion of both comparable reporting periods and which were not acquired, or subject to a material expansion or non-recurring event, such as a natural disaster, during the comparable reporting periods. We present Portfolio NOI and Same Center NOI on both a consolidated and total portfolio, including pro rata share of unconsolidated joint ventures, basis.
We believe Portfolio NOI and Same Center NOI are non-GAAP metrics used by industry analysts, investors and management to measure the operating performance of our properties because they provide performance measures directly related to the revenues and expenses involved in owning and operating real estate assets and provide a perspective not immediately apparent from net income (loss), FFO or Core FFO. Because Same Center NOI excludes properties developed, redeveloped, acquired and sold; as well as non-cash adjustments, gains or losses on the sale of outparcels and termination rents; it highlights operating trends such as occupancy levels, rental rates and operating costs on properties that were operational for both comparable periods. Portfolio and Same Center NOI should not be considered an alternative to net income as an indication of our performance or to cash flows as a measure of our liquidity or our ability to make distributions. Other REITs may use different methodologies for calculating Portfolio NOI and Same Center NOI, and accordingly, our Portfolio NOI and Same Center NOI may not be comparable to other REITs.
Portfolio NOI and Same Center NOI should not be considered alternatives to net income (loss) or as an indicator of our financial performance since they do not reflect the entire operations of our portfolio, nor do they reflect the impact of general and administrative expenses, acquisition-related expenses, interest expense, depreciation and amortization costs, other non-property income and losses, the level of capital expenditures and leasing costs necessary to maintain the operating performance of our properties, or trends in development and construction activities which are significant economic costs and activities that could materially impact our results from operations. Because of these limitations, Portfolio NOI and Same Center NOI should not be viewed in isolation or as a substitute for performance measures calculated in accordance with GAAP. We compensate for these limitations by relying primarily on our GAAP results and using Portfolio NOI and Same Center NOI only as supplemental measures.
Adjusted EBITDA, EBITDAre and Adjusted EBITDAre
We present Earnings Before Interest, Taxes, Depreciation and Amortization ("EBITDA") as adjusted for items described below ("Adjusted EBITDA"), EBITDA for Real Estate ("EBITDAre") and Adjusted EBITDAre, all non-GAAP measures, as supplemental measures of our operating performance. Each of these measures is defined as follows:
We define Adjusted EBITDA as net income (loss) available to the Company's common shareholders computed in accordance with GAAP before net interest expense, income taxes (if applicable), depreciation and amortization, gains and losses on sale of operating properties, joint venture properties, outparcels and other assets, impairment write-downs of depreciated property and of investment in unconsolidated joint ventures caused by a decrease in value of depreciated property in the affiliate, compensation related to voluntary retirement plan and other executive officer severance, certain executive departure-related adjustments, gain on sale of non-real estate asset, casualty gains and losses, gains and losses on early extinguishment of debt, net and other items that we do not consider indicative of the Company's ongoing operating performance.
We determine EBITDAre based on the definition set forth by Nareit, which is defined as net income (loss) available to the Company's common shareholders computed in accordance with GAAP before net interest expense, income taxes (if applicable), depreciation and amortization, gains and losses on sale of operating properties, gains and losses on change of control and impairment write-downs of depreciated property and of investment in unconsolidated joint ventures caused by a decrease in value of depreciated property in the affiliate and after adjustments to reflect our share of the EBITDAre of unconsolidated joint ventures.
Adjusted EBITDAre is defined as EBITDAre excluding gains and losses on early extinguishment of debt, net, casualty gains and losses, compensation related to voluntary retirement plan and other executive officer severance, gain on sale of non-real estate asset, gains and losses on sale of outparcels, and other items that that we do not consider indicative of the Company's ongoing operating performance.
We present Adjusted EBITDA, EBITDAre and Adjusted EBITDAre as we believe they are useful for investors, creditors and rating agencies as they provide additional performance measures that are independent of a Company's existing capital structure to facilitate the evaluation and comparison of the Company's operating performance to other REITs and provide a more consistent metric for comparing the operating performance of the Company's real estate between periods.
Adjusted EBITDA, EBITDAre and Adjusted EBITDAre have significant limitations as analytical tools, including:
- They do not reflect our net interest expense;
- They do not reflect gains or losses on sales of operating properties or impairment write-downs of depreciated property and of investment in unconsolidated joint ventures caused by a decrease in value of depreciated property in the affiliate;
- Adjusted EBITDA and Adjusted EBITDAre do not reflect gains and losses on extinguishment of debt and other items that may affect operations; and
- Other companies in our industry may calculate these measures differently than we do, limiting its usefulness as a comparative measure.
Because of these limitations, Adjusted EBITDA, EBITDAre and Adjusted EBITDAre should not be considered in isolation or as a substitute for performance measures calculated in accordance with GAAP. We compensate for these limitations by relying primarily on our GAAP results and using Adjusted EBITDA, EBITDAre and Adjusted EBITDAre only as supplemental measures.
Net Debt
We define Net Debt as Total Debt less Cash and Cash Equivalents and Short-Term Investments and present this metric for both the consolidated portfolio and for the total portfolio, including the consolidated portfolio and the Company's pro rata share of unconsolidated joint ventures. Net debt is a component of the Net debt to Adjusted EBITDA ratio, which is defined as Net debt for the respective portfolio divided by Adjusted EBITDA (consolidated portfolio) or Adjusted EBITDAre (total portfolio at pro rata share). We use the Net debt to Adjusted EBITDA and the Net debt to Adjusted EBITDAre ratios to evaluate the Company's leverage. We believe this measure is an important indicator of the Company's ability to service its long-term debt obligations.
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SOURCE Tanger
