Tanger Inc. (SKT) Q3 2025 Earnings Call Transcript
Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
Overview
The earnings call summary indicates strong operational execution and strategic initiatives like 'Every Day is Black Friday' and F&B enhancements. Guidance is raised for Core FFO and NOI growth, indicating optimism. The Q&A reveals positive sentiment from analysts, despite some vague responses on ROI metrics. Institutional interest and strategic acquisitions support growth. No negative catalysts were highlighted, suggesting a positive stock reaction, especially given the company's market cap.
Key Financial Performance
Core FFO per share $0.60, an 11% increase year-over-year, driven by solid same-center NOI growth of 4%.
Same-center NOI growth 4%, reflecting the success of leasing and operational strategies across the portfolio and contributions from external growth activity.
Leasing volume More than 600 transactions totaling 2.9 million square feet over the trailing 12 months, contributing to a quarter-end occupancy of 97.4%, an 80 basis point sequential increase.
Sales productivity $475 per square foot, an all-time high, driven by strategic tenant replacements and enhanced merchandise assortments.
Blended rent spreads Over 10%, marking the 15th consecutive quarter of positive rent spreads, with increased lease term durations for renewals and new deals.
Re-tenanting activity 50% increase over the trailing 12 months ended September 30 compared to the prior year period, driven by limited retail development and strategic tenant replacements.
Kansas City acquisition Legends Outlets acquired for $130 million, expected to deliver an 8% return in the first year, funded through available liquidity and a $115 million CMBS loan.
Net debt to adjusted EBITDA 5x at the end of the third quarter, benefiting from strong EBITDA growth and retention of free cash flow after dividends.
Liquidity $581 million at quarter-end, including $21 million in cash and $560 million available on lines of credit.
Weighted average interest rate 4.1%, with 97% of debt at fixed rates and a weighted average term to maturity of 3.1 years.
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Operating Highlights
AI technology: Leveraged to optimize customer service, enhance data and analytics predictive functionality, and enable more efficient use of resources.
Kansas City acquisition: Acquired Legends Outlets for $130 million, rebranded as Tanger Kansas City at Legends. This is the only outlet center in Kansas, located in a premier entertainment district with strong residential and economic fundamentals.
Youth sports partnership: Partnered with Unrivaled Sports to be the exclusive shopping center partner in shared markets, targeting young athletes and their families.
Leasing performance: Achieved record leasing volume with over 600 transactions totaling 2.9 million square feet in the last 12 months. Occupancy reached 97.4%, with blended rent spreads over 10%.
Sales productivity: Portfolio sales productivity reached an all-time high of $475 per square foot.
Re-tenanting activity: Increased by 50% over the trailing 12 months, focusing on replacing underperforming tenants and diversifying merchandise assortments.
External growth strategy: Added 6 open-air centers over the past 2 years, including 3 outlets, focusing on well-located retail centers with strong market fundamentals.
Demographic-driven evolution: Shifted focus to suburban markets due to outward population migration, adding more service, F&B, and entertainment uses to shopping centers.
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Risk or Challenges
Forward-looking statements: The call contains forward-looking statements subject to numerous risks and uncertainties, which could result in actual results differing materially from projections.
Economic and market conditions: Potential risks from economic uncertainties, including tariff impacts on product pricing and availability, which could affect consumer behavior and sales.
Lease roll and re-tenanting: Challenges in managing lease roll and re-tenanting activities, with a focus on maintaining high occupancy and rent spreads.
Acquisition risks: Risks associated with the acquisition of Legends Outlets, including integration challenges and achieving projected returns.
Debt and financial leverage: Dependence on fixed-rate debt and potential risks from debt maturities, including a significant unsecured bond maturity in September 2026.
Competition and market dynamics: Competitive pressures in the retail environment and the need to continuously attract new retailers and shoppers.
Operational efficiency: Challenges in achieving operational efficiencies and maintaining NOI growth amidst rising costs.
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Guidance & Outlook
Full Year Core FFO Guidance: The company has raised its full-year guidance for core FFO per share to a range of $2.28 to $2.32, representing growth of 7% to 9%.
Same-Center NOI Growth: The company has increased its same-center NOI growth guidance to 3.5% to 4.25%, up from the previous range of 2.5% to 4%.
Kansas City Acquisition: The acquisition of Legends Outlets in Kansas City is expected to deliver an 8% return in the first year, with potential for additional investment and growth over time.
Leverage Metrics: Pro forma leverage is estimated at approximately 4.7x net debt to adjusted EBITDA at quarter end, providing financial flexibility for future growth.
Operational and Strategic Growth: The company plans to continue pursuing selective external growth opportunities while investing in its existing portfolio.
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Shareholder Return Plan
Dividend Payout Ratio: The growing dividend represents 58% of the funds available for distribution.
Dividend Growth: The company has retained free cash flow after dividends, indicating a sustainable dividend policy.
Share Repurchase Program: No specific share repurchase program was mentioned in the transcript.
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Key Q&A
Q:Can you discuss the opportunities from shifting temporary space as occupancy is now at 97.4%?
A:Stephen Yalof explained that temporary tenancy is strategic in their portfolio. The company has increased its short-term leasing representatives from 2 to 40, making it a significant part of their business. Temporary tenants often transition to long-term leases, and the strategy helps maintain cash flow and introduce new brands to their platform. The focus remains on growing net operating income and sales performance per square foot.
Q:What does the acquisition pipeline look like, and how do you view using term debt to finance deals?
A:Stephen Yalof stated that their acquisition strategy is not programmatic but focused on adding value. The market remains active, and capital markets are supportive. With low leverage, they have various capital sources to deploy accretively. The focus is on leveraging their operating, leasing, and marketing platforms to drive value.
Q:Can you elaborate on your platform initiatives, marketing, and data initiatives, and any new developments for 2026?
A:Stephen Yalof emphasized the importance of marketing in driving traffic to their shopping centers. Initiatives like early back-to-school shopping and 'Every Day is Black Friday' have been successful in generating traffic and sales. They plan to continue these strategies in 2026 and beyond. Data analytics are being used to measure dwell time and inform future decisions, though specific ROI metrics are not yet available.
Q:Are you evaluating the 80% renewal target for retenanting and considering adjustments?
A:Stephen Yalof stated that the 80% renewal target is effective, with retenanting activity up 150%. They are being more selective due to limited new retail space and department store contraction. The focus is on bringing in retailers that drive traffic and sales, which supports long-term NOI growth.
Q:What are your expectations for 2026 lease expirations and potential non-renewals?
A:Stephen Yalof mentioned that leasing volume remains strong at 2.9 million square feet. They are focused on driving total NOI growth through remerchandising and renewing leases. Justin Stein added that they have limited exposure to Carter's store closures and are proactively replacing underperforming stores.
Q:Can you quantify the impact of food and beverage (F&B) enhancements on dwell time and customer spend?
A:Stephen Yalof shared anecdotal evidence that F&B enhancements are increasing dwell time and creating destinations for customers. However, specific ROI metrics are not yet available as they are in the early stages of data collection.
Q:Are you seeing more institutional capital interested in retail assets, and how does this affect your strategy?
A:Michael Bilerman noted increased institutional interest in retail assets, which is a positive sign for the sector. Tanger focuses on leveraging its operating platform to create value, and institutional interest supports their growth strategy.
Q:What are your thoughts on selling lower-tier assets in the portfolio?
A:Stephen Yalof stated that all assets are cash-flowing, and they focus on leveraging their platform to create value. While they have sold assets in the past, the goal is to grow the portfolio strategically.
Q:What are the early results of the 'Every Day is Black Friday' campaign?
A:Leslie Swanson reported positive retailer partnerships and strong inventory levels. The campaign is expected to drive traffic and sales, similar to its success last year.
Q:What are your expectations for operating margins and expense recovery in 2026?
A:Michael Bilerman stated that they aim to grow margins through revenue growth and operational efficiency. Expense recovery is expected to remain in the high 80s, with opportunities to increase CAM recovery.
Q:What is the revenue potential from billboard and marketing partnerships?
A:Stephen Yalof highlighted opportunities to grow revenue through off-site billboards and on-site retailer partnerships. The focus is on creating elegant and effective marketing strategies to enhance customer experience and drive traffic.
Q:What are the seasonal impacts on revenue and expenses in Q4?
A:Stephen Yalof noted that Q4 typically sees higher expenses due to increased traffic, marketing, and security needs. Recovery income is straight-lined, but overage rent and expense recovery rates may vary.
Q:What are the details of the Kansas City acquisition and its upside potential?
A:Stephen Yalof explained that the Kansas City deal was an off-market transaction. The asset is 93% occupied, with opportunities to grow occupancy and intensify real estate. Peripheral land offers additional development potential.
Q:What is the exposure to co-tenancy clauses tied to off-price stores?
A:Stephen Yalof stated that there is very limited exposure to co-tenancy clauses in the outlet channel, minimizing the impact of potential store closures.
Q:What are the trends in occupancy and the impact of temporary tenants?
A:Michael Bilerman explained that occupancy typically troughs in Q1 and builds throughout the year. Temporary tenants help maintain vibrant shopping centers, and the strategy supports long-term revenue growth.
Q:What is the revenue opportunity from marketing and partnership initiatives?
A:Michael Bilerman noted that marketing and partnership revenues are growing at an above-average pace, contributing to enhanced revenue and same-center growth. These revenues are reflected in the 'other revenues' line item.
Q:Review of Unclear Management Responses
A:Management avoided providing specific ROI metrics for F&B enhancements and data initiatives, citing early stages of data collection. Additionally, they did not provide detailed guidance for 2026 earnings, stating that it would be shared in February. The response to seasonal impacts on Q4 revenue and expenses was also somewhat vague, with no precise figures offered.
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Earnings Word Cloud
The most frequently occurring keywords in this quarter's earning call
Baseball stadium
Buc ee
City Kansas
City Legends
City market
City outlet
Club loyalty
Curtis
Kansas City
League
Tanger Kansas
Tanger member
Unrivaled Sports
air outlet
area
campaign
center Kansas
destination
development
experience
lease roll
leasing marketing
marketing platform
merchandise
million
momentum
outlet center
record
school
service
state
strength
summer
traffic driver
trailing month
youth sport
SKT Transcript
Tanger Inc. (SKT) Q3 2025 Earnings Call Transcript
Positive11-5
The earnings call summary indicates strong operational execution and strategic initiatives like 'Every Day is Black Friday' and F&B enhancements. Guidance is raised for Core FFO and NOI growth, indicating optimism. The Q&A reveals positive sentiment from analysts, despite some vague responses on ROI metrics. Institutional interest and strategic acquisitions support growth. No negative catalysts were highlighted, suggesting a positive stock reaction, especially given the company's market cap.
Tanger Inc. (SKT) Q2 2025 Earnings Call Transcript
Positive8-5
The earnings call summary and Q&A session reveal a generally positive outlook. Key positives include a strong occupancy rate, strategic acquisitions, a dividend increase, and optimistic guidance for Core FFO and same-center NOI growth. Additionally, the company is actively engaging with new retailers and has a plan for re-tenanting former spaces, which should drive future growth. The market cap indicates a moderate reaction to these factors, leading to a positive stock price prediction of 2% to 8% over the next two weeks.
Tanger Inc. (SKT) Q1 2025 Earnings Call Transcript
Neutral5-1
Tanger Inc. (SKT) CEO Stephen Yalof Presents at Citi's 30th Annual Global Property CEO Conference (Transcript)
Neutral3-3
SKT Slides
SKT Report
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