Tanger Q2 2025 Earnings Report

Tanger EPS Results

• Actual EPS: $0.58
• Consensus EPS: $0.56
• Beat/Miss: Beat by +$0.02
• One Year Ago EPS: $0.53

Tanger Revenue Results

• Actual Revenue: $133.44 million
• Expected Revenue: $132.02 million
• Beat/Miss: Beat by +$1.41 million
• YoY Revenue Growth: +9.20%

Tanger Announcement Details

• Quarter: Q2 2025
• Date: 8/4/2025
• Time: After Market Closes
• Conference Call Date: Tuesday, August 5, 2025
• Conference Call Time: 8:30AM ET

Tanger (NYSE:SKT) (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 Canada. A publicly traded REIT since 1993, Tanger continues to innovate the retail experience for its shoppers with over 3,000 stores operated by more than 700 different brand name companies. Tanger is furnishing a Form 8-K with the Securities and Exchange Commission ("SEC") that includes a supplemental information package for the quarter and year ended December 31, 2023.

Tanger Q2 2025 Earnings Call Transcript

Key Takeaways

• Positive Sentiment: Raised full-year guidance for core FFO per share to $2.24–$2.31, reflecting 5.2%–8.5% growth and exceeding prior outlook.
• Positive Sentiment: Delivered Q2 core FFO of $0.58/share (up 9.4% YoY), driven by 5.3% same-center NOI growth, 96.6% occupancy and 12% blended leasing spreads.
• Positive Sentiment: Our merchandising strategy brought in new brands like Sephora and expanded high-performing tenants, lifting tenant sales 6.2% to $465/sq ft and boosting traffic.
• Positive Sentiment: Maintained a strong balance sheet with 5× net debt/EBITDA, 95% fixed-rate debt and $614 million liquidity, enabling selective acquisitions and portfolio investments.
• Positive Sentiment: Enhanced digital marketing and loyalty programs (Tanger Club) drove higher engagement and supported targeted campaigns such as Summer of Savings and early Black Friday messaging.

Presentation

[Ashley Curtis, AVP - IR at Tanger]

Good morning. I'm Ashley Curtis, Vice President of Investor Relations, and I would like to welcome you to Tanger Inc. Second quarter twenty twenty five conference call. Yesterday evening, we issued our earnings release as well as our supplemental information package and investor presentation. This information is available on our IR website, investors.tangoer.com.

[Ashley Curtis, AVP - IR at Tanger]

Please note this call may contain forward looking statements that are subject to numerous risks and uncertainties, and actual results can differ materially from those projected. We direct you to our filings with the Securities and Exchange Commission for a detailed discussion of these risks and uncertainties. During the call, we will also discuss non GAAP financial measures as defined by SEC Regulation G. Reconciliations of these non GAAP measures to the most directly comparable GAAP financial measures are included in our earnings release and in our supplemental information. This call is being recorded for rebroadcast for a period of time in the future.

[Ashley Curtis, AVP - IR at Tanger]

As such, it is important to note that management's comments include time sensitive information that may only be accurate as of today's date, 08/05/2025. At this time, all participants are in listen only mode. Following management's prepared comments, the call will be opened for your questions. We request that everyone ask only one question and one follow-up question. If time permits, we are happy for you to re queue for additional questions.

[Ashley Curtis, AVP - IR at Tanger]

On the call today will be Steven Yaloff, President and Chief Executive Officer and Michael Bilerman, Chief Financial Officer and Chief Investment Officer. In addition, other members of our leadership team will be available for Q and A. I will now turn the call over to Steven Yaloff. Please go ahead.

[Stephen Yalof, President, CEO & Director at Tanger]

Thank you, Ashley, and good morning. I'm pleased to report another quarter of great results driven by our internal and external growth initiatives, and we have raised our full year guidance. Core FFO was $0.58 per share, a 9.4% increase over the prior year, which was driven by robust same center NOI growth of 5.3. Operating metrics for the quarter were strong with occupancy increasing sequentially to 96.6% and blended leasing spreads of 12% over the trailing twelve months. We also delivered a solid increase in tenant sales, which were up 6.2% to four sixty five dollars per square foot on a trailing twelve month basis and traffic to our centers was up for the quarter compared to last year.

[Stephen Yalof, President, CEO & Director at Tanger]

This performance reflects the fundamental strength of our platform as well as the effectiveness of our differentiated and proven leasing, marketing and operational strategies and our successful external growth initiatives. Our merchandising strategy is yielding impressive results with our open air outlet and newly acquired lifestyle centers. We continue to attract brands and retail categories that are new to our portfolio while expanding store counts with our most productive existing tenants. This thoughtful approach to merchandising is attracting a younger demographic while maintaining our core value seeking shopper base. Across our portfolio, we're seeing our shoppers visit more frequently, stay longer when they visit and ultimately spend more.

[Stephen Yalof, President, CEO & Director at Tanger]

We continue to maximize value through peripheral land activation, merchandising optimization and investments in our centers. Population shifts and residential densification in many of our core markets have created the need for more restaurants, service uses, health clubs and entertainment venues and the land adjacent to our traffic generating shopping centers has proven to be a destination of choice for many of these national and local businesses. Our digital capabilities and marketing initiatives are driving strong engagement and delivering meaningful results. As I mentioned earlier, traffic to our centers was up in the quarter compared to last year, driven by a balanced marketing plan aimed at deepening connections with our core customers, attracting new and younger demographics and engaging our local markets as we see these populations grow. Further, participation in our enhanced loyalty program continues to expand, supported in great part by our retailer partners.

[Stephen Yalof, President, CEO & Director at Tanger]

Our proprietary loyalty program, Tanger Club, enables us to deliver more targeted and compelling offers to our customers. These programs are driving results as we continue to see meaningful improvements to both traffic and sales. Our strategic summer of savings campaign and early back to school value messaging, which we rolled out last quarter took aim on tariff uncertainty and provided a messaging opportunity to inspire customers to shop early and take advantage of favorable pricing and product availability. These initiatives with strong support from participating retailers inspire targeted ad campaigns that appear in print, digital and social channels and have proven to be particularly effective. These proactive marketing programs will continue as we plan to reintroduce our Black Friday Everyday messaging this fall where we celebrate the holiday shopping introduce throughout November.

[Stephen Yalof, President, CEO & Director at Tanger]

Our marketing partnerships and paid media sponsorships business continue to grow our other revenues. These programs leverage our shopper traffic and offer participating brands the opportunity to reach highly engaged consumers throughout our centers and social channels. We are leveraging AI technology across our business to optimize customer service, enhance our data and analytics predictive functionality and enable more efficient use of resources across our enterprise. Our strong balance sheet, conservative leverage profile and ample liquidity provide us with flexibility to pursue selective external growth opportunities while continuing to invest in our existing portfolio. Our disciplined approach to capital allocation remains focused on generating long term shareholder value through both internal and external growth initiatives.

[Stephen Yalof, President, CEO & Director at Tanger]

Our recent acquisitions and Nashville Development have assimilated quickly into the Tanger portfolio and in addition to growing NOI, they've provided the opportunity to engage new retailers, restaurants, grocery, service and entertainment uses, which will prove to be a valuable source of new business as we introduce them to the balance of our portfolio. In today's uncertain macroeconomic environment characterized by persistent inflation and shifting consumer sentiment, Hanger's value proposition is a constant that continues to resonate strongly with both shoppers and retailers. We remain confident in our strategic approach to leasing, marketing and operations combined with our strong balance sheet and proven track record of execution, which provide us with multiple opportunities to pursue growth over time. I want to thank our dedicated Tanger team members, retail partners, shoppers and shareholders for your continued support. I'll now turn the call over to Michael to discuss our financial results, capital markets activities and updated guidance in more detail.

[Michael Bilerman, Executive VP, CFO & Chief Investment Officer at Tanger]

Thank you, Steve. For the second quarter, core FFO was $0.58 per share compared to $0.53 a share in the prior year period driven by our strong internal and external growth. Same center NOI increased 5.3% driven by higher rental revenues from the continued strong leasing activity, which is leading to higher base rents and higher tenant reimbursements as we continue to drive total rents. We also saw continued growth in other revenues. For the first half of the year, same center NOI was up 3.8%.

[Michael Bilerman, Executive VP, CFO & Chief Investment Officer at Tanger]

Our balance sheet remains well positioned with low leverage, ample liquidity and a largely fixed rate debt structure. At the end of the quarter, our net debt to adjusted EBITDA was at five times, benefiting from the strong EBITDA growth and the retention of free cash flow after dividends with our growing dividend only representing about 60% of our funds available for distribution or FAD. Outside of the leverage capacity, from a liquidity perspective, we had approximately $614,000,000 of total liquidity at quarter end, including $17,000,000 of cash, dollars $528,000,000 available in our lines of credit and $70,000,000 of proceeds still available from the forward equity that we issued late last year. During the quarter, we also continued to proactively manage and further strengthen our debt profile through a couple of refinancings, which increased proceeds, lowered rates and extended duration, and we continued to execute on our interest rate hedging strategies. At quarter end, 95% of our debt was at fixed rates, and our weighted average interest rate stands at 4% with a weighted average term to maturity of three point four years.

[Michael Bilerman, Executive VP, CFO & Chief Investment Officer at Tanger]

The next significant maturity will be our unsecured bonds next September 2026. In terms of interest rate swap activity during and post quarter end, we entered into interest rate swaps on the Memphis and Houston refinancings, fixing the interest rate on these loans through 2029. We have also now addressed $125,000,000 of the $150,000,000 of interest rate swaps which are due to expire in 2026 with the new forward starting swaps fixing SOFR at a weighted average rate of 3.2%, which represents a 40 basis point reduction from the expiring swaps at various points next year. The new swaps run through '27 and '28 as detailed in the supplemental. Based on our strong performance year to date and a positive outlook, we are raising our full year guidance and we now expect core FFO per share of $2.24 to $2.31 representing core FFO growth of 5.2% to 8.5%.

[Michael Bilerman, Executive VP, CFO & Chief Investment Officer at Tanger]

And we've lifted same center NOI growth to 2.5% to 4%, up from 2% to 4% previously. Our guidance reflects our continued strong operational execution and does not assume any additional acquisitions, dispositions or financing activities. For additional information and assumptions, please see our release issued last night. We've greatly enjoyed having you at our centers through all of the tours, and we do hope you'll stop by and shop at Tanger Center before the summer ends. And we look forward to seeing and speaking to many of you in the fall at Evercore's Real Estate Conference, BofA's Global Real Estate Conference, Jefferies Real Estate Conference, NAREIT as well as a number of tours.

[Michael Bilerman, Executive VP, CFO & Chief Investment Officer at Tanger]

Operator, we will now like to turn the call over for questions.

[Operator]

Thank you. We will now be conducting a question and answer session. The first question is from Jeff Spector from Bank of America. Please go ahead.

[Jeffrey Spector, Managing Director at Bank of America]

Great. Good morning, everyone. I guess my first question, let's focus on the merchandising strategy. I know that's been a big effort to upgrade the tenancy and bring in different mix. Stephen, I know you talked about higher traffic.

[Jeffrey Spector, Managing Director at Bank of America]

I guess, you just talk a little bit more about that effort and how that's tied to the improvement in sales Thank you.

[Stephen Yalof, President, CEO & Director at Tanger]

Good morning and thanks for the question. So I just want to you is macroeconomically there's not a lot of new development happening in the retail space. And as a company, we consider our retail space to be more valuable every day. That being said, there's a lot of retailers that are actively looking for space in our shopping centers, both in our popular top markets and our mid tier markets. And we see a lot of expansion from retailers in both of those in those shopping centers, from our lifestyle popular lifestyle centers to our outlet shopping centers.

[Stephen Yalof, President, CEO & Director at Tanger]

The brands that are looking to get in are brands that are new to outlet. So we're growing some we talked about Sephora last quarter and the proliferation of support across our shopping centers, which has been a great brand, not only attracting their core consumer, but bringing a much younger consumer into our shopping centers. We're also going after a lot of food and beverage as the populations begin to shift to some of those markets that were typically tourist driven markets that are now primary resident markets. We're seeing the need for food and beverage, more service orientation and some entertainment type uses that were either are taking space in line or on our peripheral land. I think the combination of all those has caused a lot more traffic to our shopping centers, far more a lot more frequency particularly from our local customer base.

[Stephen Yalof, President, CEO & Director at Tanger]

And ultimately that's where we see a lot of pop in our sales.

[Jeffrey Spector, Managing Director at Bank of America]

Great. Thank you. And then my follow-up question, I know last quarter you talked about starting back to school early with concerns over tariffs and inventory. You put that strategy into place. I guess was did that help in the quarter?

[Jeffrey Spector, Managing Director at Bank of America]

And how are you now thinking about inventory for back to school in the holiday season? Thank you.

[Stephen Yalof, President, CEO & Director at Tanger]

Yes. Thanks for asking that question, Jeff. As far as the early back to school, yes, we think that's resonating. We've seen a lot of traffic growth where we've seen a lot of pop most recently is also in tax free days. And a lot of the centers that we have in the South have just experienced tax free day.

[Stephen Yalof, President, CEO & Director at Tanger]

And with back to school shopping being the second biggest shopping holiday of the retail calendar, our early initiative to get folks out as early as June resonated with a lot of the consumers that we're looking to who might have had some uncertainty with regard to the tariff impact or macroeconomic impact. We want to get consumers out earlier, get them shopping so they can find the brands they wanted at the best possible value. We saw tremendous traction. Some of that was attributable based on some of the social and digital initiatives that we put in front of our customers. So we're able to actually see the data in real time. And going into Q3, I think there was far less impact, particularly from a traffic point of view than we had thought. I think most of our retailer partners are well inventoried. There's a lot of product in the store. In our value channel, we still see pricing very compelling, incenting customers to come and shop with us. And I remind you, I think I said it in my opening comments, we continue to anniversary our every day of November is Black Friday sale this year.

[Stephen Yalof, President, CEO & Director at Tanger]

So keeping the selling theme in front of our core shoppers as we get into the holiday selling season.

[Jeffrey Spector, Managing Director at Bank of America]

Great. Thank you.

[Operator]

The next question is from Greg MacInnis from Scotiabank. Please go ahead.

[Greg Mcginniss, Director at Scotiobank]

Hey, good morning. I wanted to touch on this remerchandising a bit more. As you bring in more differentiated tenants into your outlet centers and you've increased traffic and stay time. I'm curious how far along this remerchandising process you feel that Tanger has come and if you'd give us some context for this portfolio evolution, whether that's percent of non apparel and footwear from a few years ago versus today and where you're expecting to go? Or any commentary with regards to what you expect to happen on the remerchandising effort long term?

[Stephen Yalof, President, CEO & Director at Tanger]

Yes, sure. Look, again, I think remerchandising is a process that goes on in perpetuity. There's no end to remerchandising. There's always going to be brands that have stopped investing or just are losing a little bit of their market share to other newer brands. And we've got a great leasing team that's out there every day speaking to tenants, maybe a year, a year and a half out that haven't necessarily, done deals in the outlet space.

[Stephen Yalof, President, CEO & Director at Tanger]

They're direct to consumer brands. They're specialty store brands that think one day the outlet business might be something that they'd, they'd invest in. So we're constantly a year, year and a half out talking to brand new retailers. You know, like, I talked about Sephora with with Jeff. I I use that as an example because they only recently discovered the outlet business and that's a brand that's been in business for years and years.

[Stephen Yalof, President, CEO & Director at Tanger]

So as we I guess, the transition is really, it's on the it's on us to make sure that the brands understand that there is great value in the outlets. But in addition, there's also a lot of customers that shop. There are over 125,000,000 customers a year come through Tanger Centers. I think that's a lot of folks for brands to get their customers in front of. And so we'll continue to remerchandise our centers, I would say, for many, many years to come.

[Greg Mcginniss, Director at Scotiobank]

I guess to follow-up on that in the near term, have your tenants or new potential tenants, I guess, become more hesitant to sign leases until the tariff situation gets maybe more resolved?

[Stephen Yalof, President, CEO & Director at Tanger]

I don't think we've seen that. I think that there's a tremendous amount of activity in our space. This past year, we've done more leasing than we have in almost any other year at Tanger over 2,800,000 square feet of leasing. So there's a lot of activity that's going on in our portfolio right now. I think retailers are making long term decisions.

[Stephen Yalof, President, CEO & Director at Tanger]

I think the tariff uncertainty that they're facing is probably it's a little bit more lumpy with regard to whether how it's going to affect them in the near term. The long term leasing decisions haven't been affected. And in fact, I'll go back to what I said to Jeff, not a lot of new retail development happening in The United States because of that retail space is becoming more and more valuable.

[Greg Mcginniss, Director at Scotiobank]

Okay. Thanks, Steve.

[Operator]

The next question is from Craig Mailman from Citi. Please go ahead.

[Craig Mailman, Director & Equity Research Analyst at Citigroup]

Hey, good morning everybody. We've been getting some questions about the growth algorithm here for you guys over the next couple of years given the success you've had kind of early on in Steve in your tenure, I guess, it's almost half a decade at this point. But one of the things I noticed, OCR is still at 9.7%, but your average price your average sales per square foot continue to go up. That's just one metric. But can you kind of give us a sense of the organic opportunity in the portfolio from OCRs, from the mark to market, to kind of give us a sense of what however you guys want to look at AFFO growth, same store growth could look like relative to peer average here over the next few years?

[Stephen Yalof, President, CEO & Director at Tanger]

Look, the guidance is in the release. I can give you some generalizations based on the question that you asked. I think if you look at our spreads, you'll see our mark to market. We've had 14 or 15 quarters of positive rent spreads, which speaks to the fact that we think there's tremendous amount of upside in rent. I think as poor performing retailers get replaced by better performing retailers, retailers that are doing more than all average sales on a per square foot basis.

[Stephen Yalof, President, CEO & Director at Tanger]

I think we'll see an opportunity for us to continue to push our rents forward. Do have anything you want to add to that?

[Michael Bilerman, Executive VP, CFO & Chief Investment Officer at Tanger]

Craig, I mean, look, when we think about the value creation and driving, you know, ultimately cash flow is driven by the internal growth and, you know, our external growth activities and continuing to invest in our asset base and intensify and activate our peripheral land. And that's wrapped in a balance sheet that is in the best position relative to our industry at five times debt to EBITDA with significant amount of free cash flow. So our job is there's enough levers that we have to drive NOI, leverage our balance sheet to create long term growth for our stakeholders.

[Craig Mailman, Director & Equity Research Analyst at Citigroup]

Okay. That's helpful. And then I noticed there was an article about some additional leasing at Huntsville. Could you just run through maybe where that asset could be leased by year end and maybe the economic uptick from some of those leases?

[Justin Stein, EVP - Leasing at Tanger]

Hey, Craig, it's Justin. How are you? And appreciate you calling out our full priced assets. Yes, so last week we announced I mean, in addition to announcing early in the year, the Apple expansion and the Warby deal, Starbucks opened earlier this year and late last week we announced that Madewell will be joining us in Huntsville. L.

[Justin Stein, EVP - Leasing at Tanger]

L. Bean will be coming taking a significant portion of the old Bed Bath and Beyond box. Rowan will be joining us and Crocs just opened. Additionally, at Pinecrest, we opened up a great new food and beverage tenant called Tostik that opened up about two weeks ago and Tocobus will be opening up later this year. So we have a lot of activity in our full price assets.

[Justin Stein, EVP - Leasing at Tanger]

We're really bullish on it. As these tenants open up later this year, they'll annualize then in 2026 and that's where we're going to see the financial impact of those brands.

[Craig Mailman, Director & Equity Research Analyst at Citigroup]

Awesome. Can I slip one third one in there? It's quick. On your occupancy, you guys have Deer Park in there, but main event doesn't really commence for a few more months. Is the occupancy number just to clarify, is that a leased occupancy or commenced occupancy that 96.6%?

[Michael Bilerman, Executive VP, CFO & Chief Investment Officer at Tanger]

Hey, Craig, it's Doug. We quote physical occupancy. So when a tenant takes possession of the space, they're in physical occupancy and main event has possession, they're building out their space right now. They'll open in the first quarter, but they're in our physical occupancy right now.

[Stephen Yalof, President, CEO & Director at Tanger]

Well, thank you.

[Operator]

The next question is from Michael Griffin from Evercore ISI. Please go ahead.

[Michael Griffin, Director at Evercore]

Great. Thanks. It seems like the national retailer concepts probably have maybe more certainty or clarity around their footprint needs despite the tariff uncertainty. But Steve, maybe you can give some context around the demand you're seeing from those regional and local tenants. I imagine that tariffs could crunch the mom and pop budget a little bit more than the bigger guys.

[Michael Griffin, Director at Evercore]

So maybe talk a little bit about the demand from that cohort within your portfolio.

[Stephen Yalof, President, CEO & Director at Tanger]

First of all, I understand it's a very small population of retailers that you're talking about and very, very even smaller population of our NOI. But it's still a very important part of our business. I think local retailers, particularly in some of our full price lifestyle shopping centers are really important to the communities that they serve, draw great traffic from from that local population. As far as my visits to shopping centers, have been, you know, I've spent the last couple of weeks out visiting our centers, I haven't seen any impact to shelves. There's there's lots of inventory and and a lot of supply.

[Stephen Yalof, President, CEO & Director at Tanger]

So I think a lot of the retailers or manufacturers and distributors, I would suppose that the third quarter and fourth quarter inventory is really already cleared in the warehouse and sitting here in The United States for distribution. So I can't really report much issue as it relates to that group of tenants in our portfolio.

[Michael Griffin, Director at Evercore]

Thanks. Appreciate the color there. And you've highlighted the continued resilience of the consumer at your centers. I'm curious if you've seen maybe a shift in customer demo. Do you have any sense if consumers who may have traditionally shopped at full price retailers are trying to find a value at your centers?

[Michael Griffin, Director at Evercore]

Just trying to get a sense about what the kind of customer profile looks like these days.

[Stephen Yalof, President, CEO & Director at Tanger]

I would say anecdotally that people are actually we're seeing new customers to the outlet centers. And I think part of the reason why is because the localization of those centers. So we built Nashville only nine miles away from Downtown Nashville. A lot of our other centers have seen significant population shift where secondary homes or second homes have become primary residences. A lot of that driven by just the people moving out of cities and moving into different markets post COVID.

[Stephen Yalof, President, CEO & Director at Tanger]

So what we've decided from a merchandising point of view is the more uses we can bring into one of our shopping centers, better chance we have getting a car to park in one of our parking lots. And whether that's the customer or core customer that's coming to shop value every day or it's a new customer that might be coming for the restaurant, the grocery store, the health club, service, or the amenities that we offer on this on center, you if we can bring them in for one of those uses and get them to stay for the shopping, I think we're winning a new customer every day.

[Michael Griffin, Director at Evercore]

Great. That's it for me. Thanks for the time.

[Michael Bilerman, Executive VP, CFO & Chief Investment Officer at Tanger]

Thanks, Chris.

[Operator]

The next question is from Caitlin Burrows from Goldman Sachs. Please go ahead.

[Caitlin Burrows, Vice President at Goldman Sachs]

Hi, good morning. Maybe just in the press release you guys went to how you've renewed about 65% of the space set to expire in 2025. So was wondering if you could comment on your latest thoughts on renewals versus retenanting and then what the status is of that other 35% of '25 expirations?

[Michael Bilerman, Executive VP, CFO & Chief Investment Officer at Tanger]

Okay, Lynn. We quote the renewed percentage, that's that's 65. If you layer in the space that we've already re tenanted or certain tenants that are relocating, we're at about 80% of the expiring population is addressed. And with the remaining 20%, we have active conversations and think that majority of that space is going to renew.

[Caitlin Burrows, Vice President at Goldman Sachs]

Got it. Okay. And then, maybe just on the acquisition side. So I feel like we continue to hear that the competition for acquisition deals is high. Wondering if you guys could comment on maybe the volume of deals you looked at in either 2Q or the first half and more broadly how hard it's gotten to be the winning bidder on a deal or are you able to identify off market or lightly marketed deals?

[Michael Bilerman, Executive VP, CFO & Chief Investment Officer at Tanger]

Thanks, Caitlin. We've been extraordinarily active across both of those fronts in terms of marketed transactions as well as negotiated off market transactions. We feel where we're going to lean in is where we can really add value, to what we buy. And I think that has been evidenced through Pinecrest, Little Rock, Asheville, and Huntsville. And we're pretty unique and differentiated being able to look at both outlets as well as open air lifestyle centers.

[Michael Bilerman, Executive VP, CFO & Chief Investment Officer at Tanger]

And given our geographical footprint and boots on the ground that, you know, every one of our assets, you know, we feel that that gives us a competitive advantage in looking at the entire marketplace. And we're have deals when we close them. The balance sheet sitting in really good shape to be able to execute, running at five times debt to EBITDA today and still having the $70,000,000 of forward equity, that we issued late last year.

[Caitlin Burrows, Vice President at Goldman Sachs]

Thanks. That sounds encouraging.

[Operator]

The next question is from Todd Thomas from KeyBanc Capital Markets. Please go ahead.

[Todd Thomas, MD & Equity Research Analyst at KeyBanc Capital Markets]

Hi, thanks. Good morning. You touched on the increase in occupancy during the quarter, but same store base rent growth was higher by only 1.8% year over year. And I heard the comments about main event, but I was wondering if you could comment on the portfolio's signed, not occupied pipeline in total, what that looks like today or whether there was anything you can share regarding the timing of some of the lease signings in the quarter that was reflected in the occupancy metric, but that was not rent paying during the quarter? Just trying to get a sense of the trajectory of base rent growth throughout the remainder of the year.

[Michael Bilerman, Executive VP, CFO & Chief Investment Officer at Tanger]

Thanks, Todd. So one part of it is when we're signing new leases, we're getting both an increase on the base and we're getting our share fixed TAM. And so depending on, the type of activity, we're looking to grow our total rent. So when you look at the P and L, you really have to look at both of those line items to be able to think about our total revenue growth, which is leading to NOI growth with our expense load. In terms of sign not open, given the fact that our portfolio is pretty small tenant, we've talked about, you know, our average tenant size is 4,700 square feet across 3,000 stores.

[Michael Bilerman, Executive VP, CFO & Chief Investment Officer at Tanger]

And the speed at which a tenant, when we turn over to open, is pretty short. We don't have a large sign on open pipeline. In fact, main event is probably the biggest component right now of 30 basis points that's been turned over. That's not cash paying today that will, you know, become open next year. And then the rest is pretty small, between quarter to quarter, just given the short time frame, sixty to ninety days between, turning over and the store opening.

[Todd Thomas, MD & Equity Research Analyst at KeyBanc Capital Markets]

Okay. And then noticed that the straight line rent in the quarter was up significantly. I was wondering if there was any one time or non recurring impact either related to the leasing or otherwise that we should consider moving into the third quarter?

[Michael Bilerman, Executive VP, CFO & Chief Investment Officer at Tanger]

Sure. Our straight line typically gets a little bit higher in the second and third quarters. Relates partly to the cadence of our occupancy. We've talked about dropping in the first quarter, building back up throughout the year, peaking in the fourth quarter. When tenants take over and Michael talked about the sixty to ninety day build out period, the straight line occurs when they take possession, the cash rent starts when they open.

[Michael Bilerman, Executive VP, CFO & Chief Investment Officer at Tanger]

And so there's a little bit more straight line rent typically in the second and third quarters of the year and we would expect that again this year.

[Todd Thomas, MD & Equity Research Analyst at KeyBanc Capital Markets]

Okay. Got it. So that'll burn off a little bit moving throughout the balance of the year. And one more if I could. Steve, you talked a little bit about the centers that you consider primary or that sort of fit into localization bucket and have been benefiting from a broader use of tenants.

[Todd Thomas, MD & Equity Research Analyst at KeyBanc Capital Markets]

And, I was wondering how many of your centers do you consider to be in that bucket, if you will? What percentage of ABR or GLA or just number of centers would you consider to fit that criteria? And then looking out longer term, are the centers that do not have that support from a primary population or that local market impact that you're discussing, would they be considered non core?

[Stephen Yalof, President, CEO & Director at Tanger]

Yes, I think where we are right now, all the centers in our portfolio are definitely core centers. It's just we address them differently. So we have a shopping center in Sevierville, Tennessee, actually home of Dollywood, was voted the number one amusement park in The United States this month. That shopping center benefits from tourist traffic 100%. It's one of our top producing assets.

[Stephen Yalof, President, CEO & Director at Tanger]

So it's really hard to sort of rationalize which ones do better from local trade, which ones do better from that tourist trade. We definitely market our centers a little bit differently. We have a far wider catchment as it relates to those centers that rely a little bit more on tourist destination or tourist population. The shopping centers position closer to the casinos, things of that nature, think definitely benefit from more tourist driven traffic. When Myrtle Beach and Hilton Head and Daytona were built ten, fifteen, twenty years ago, they were built for tourists for tourism and now are some of the fastest growing permanent population markets in the country.

[Stephen Yalof, President, CEO & Director at Tanger]

So the shift is happening rapidly. We're embracing the shift, but we'll continue to remerchandise our centers accordingly as that shift takes place.

[Todd Thomas, MD & Equity Research Analyst at KeyBanc Capital Markets]

Okay. Thank you.

[Operator]

The next question is from Hong Zhang from JPMorgan. Please go ahead.

[Hong Zhang, Analyst at JP Morgan]

Yes. Hey, good morning. I guess my first question is just on thinking about same store NOI growth in the second half of the year. You were 3.8% year to date and it seems like the guidance implies some deceleration at the midpoint. Just wondering what's driving that?

[Michael Bilerman, Executive VP, CFO & Chief Investment Officer at Tanger]

Thanks, Hong. We are very pleased to be able to increase our full year guidance, bringing up the low end to 2.5%. And we think about the back half of the year, we still have a certain amount of uncertainty related to the macroeconomic environment and in credit, sales environment, our operational expense cadence. So there's nothing specific in the second half relative to the first half and that's why we have a range that's still producing very healthy same center NOI forecast for the year with a midpoint at 3.25%.

[Hong Zhang, Analyst at JP Morgan]

Got it. And I guess I think you still have around $70,000,000 of forward equity to settle for the remainder of the year. Guess, I'm curious what you would you would use the proceeds for if acquisition doesn't shake out?

[Michael Bilerman, Executive VP, CFO & Chief Investment Officer at Tanger]

Yes. We have time on that forward equity. We don't need to pull it down right away. And so, you know, we have that there to be able to fund any of our internal or external investments in addition to the balance sheet capacity that we have being at five times levered. Great. Have a great day.

[Stephen Yalof, President, CEO & Director at Tanger]

Thanks a lot, Tom.

[Operator]

The next question is from Floris van Dijkum from Ladenburg Thalmann. Please go ahead.

[Floris van Dijkum, MD & Equity Research at Ladenburg Thalmann & Co. Inc]

Hey, thanks guys. I guess could you maybe talk a little bit about the internal growth prospects regarding your 10% estimated 10% tenancy? And also how much more fixed CAM can you increase your portfolio by over the next call it six quarters?

[Michael Bilerman, Executive VP, CFO & Chief Investment Officer at Tanger]

Floris, I'll take the second one first. I wouldn't be focused just on the expense reimbursement side because when we're negotiating with a tenant, we're looking to drive total rent. And if that means higher fixed CAM with the expensive base, we'll just do that because we're driving our total NOI growth at the end of the day. So there's not a specific formula to look at and there's a wide variety of types of leases as well, some that don't pay us fixed CAM. So it really depends on the leasing activity that we're doing.

[Michael Bilerman, Executive VP, CFO & Chief Investment Officer at Tanger]

In relation to the tenancy, that's one part of the NOI growth that we could see over time, whether that's driving rents on our existing permanent base and continuing to retenant, but also continuing to use the temp business as a strategy because the consumers that come shop with us, they don't know the difference between a temp tenant and a permanent tenant, but they do know the difference between an open store and a closed store. And so we want to keep our assets vibrant and be able to continue to drive NOI over the long term and that's one source of potential upside that we could see over time.

[Floris van Dijkum, MD & Equity Research at Ladenburg Thalmann & Co. Inc]

Just to make sure that I understand correct, Michael, because I don't obviously the temp tenants don't pay fixed CAM. What is your fixed CAM percentage today on your overall tenancy? Where do you think you can push that? And then do you expect as the retailer demand continues to be really strong, I think historically your temp percentage was closer to 5%. Do you think how quickly do you think that 10% goes back to the historical norms?

[Floris van Dijkum, MD & Equity Research at Ladenburg Thalmann & Co. Inc]

I guess that was what I was getting at in my question.

[Michael Bilerman, Executive VP, CFO & Chief Investment Officer at Tanger]

Yes. I wouldn't focus too much on the fact that temp doesn't give us six cam. I look at it more we look at it more what is the total rent that we can get for that space from a permanent tenant relative to a temp tenant. We talked about anywhere from two to three to 4x the rent. In terms of the cadence of that, you are right.

[Michael Bilerman, Executive VP, CFO & Chief Investment Officer at Tanger]

Historically, we've operated in the five to 600 basis point range in terms of tenancy. We are higher than that today. But we don't have a time that we want to bring it down. We're trying to drive our total NOI growth and continue to diversify and remerchandise our centers. And it provides us a pool of pieces that we think that there's upside and we'll continue to see that upside over the next few years.

[Floris van Dijkum, MD & Equity Research at Ladenburg Thalmann & Co. Inc]

Thanks. And maybe the second question I have is maybe more of a Steve question. But Steve, you talked about bringing new retailers to the outlets. Can you talk you mentioned Sephora. How are those discussions going?

[Floris van Dijkum, MD & Equity Research at Ladenburg Thalmann & Co. Inc]

Are you seeing increased demand from retailers for the outlet space in particular? And how much growth do you think you could get over the next couple of years from new retailers to the outlet format?

[Stephen Yalof, President, CEO & Director at Tanger]

Well, as you know, I but we we're out in front of we're out in front of retailers all day every day. So we have a team just thinking about new business and their their sole mission is to go out and speak to brands. They just haven't discovered us yet. And there's plenty of those brands enough to keep a couple people occupied, a full time job. It's exciting when new brands want to enter.

[Stephen Yalof, President, CEO & Director at Tanger]

We just recently did our first Marc Jacobs deals in the outlet space. And their performance has been amazing. They're drawing a customer. They've got fans of that brand. There's a lot of things that new brands do for us.

[Stephen Yalof, President, CEO & Director at Tanger]

Aside from the fact that we get great productivity, they pay market rents. They also draw their own customer base to our centers. So as these new brands are discovering our product, so are some of the customers that are loyal to that brand. I think that's just a great win win for us. It's hard for me to sort of guide to how big that business can be.

[Stephen Yalof, President, CEO & Director at Tanger]

But if you go back thirty years, I've been in this business leasing outlets for a really long time. And outlet center of thirty years ago looks completely different than the outlet center of today because there's been constant evolution of brands discovering and replacing brands that have sort of performed, I guess, less than to their capabilities. So we're going to continue to grow newness. We're going to continue to bring in new brands, new uses, types of tenants. Food and beverage, you could say, in the last five years is relatively new to the outlet space.

[Stephen Yalof, President, CEO & Director at Tanger]

But as that customer becomes a little bit more localized, those are the things that they're demanding when they want to come and shop with us. And we think it's really smart for us to play into the demand and consumer base and possibly drive traffic into our centers. Thanks, Steve.

[Operator]

The next question is from Rich Hightower from Barclays. Please go ahead.

[Rich Hightower, MD - U.S. REIT Research at Barclays]

Hi, good morning guys. Thank you for taking the questions here. I think maybe just to put a little bit finer point on some of the occupancy, questions so far on the call. I think we understand Deer Park, we understand Huntsville, but maybe in the context of the guidance and the different swing factors, are there any other known move outs, move ins, cash versus straight line, any other elements you'd like to sort of call out that we should be aware of over the next couple of quarters?

[Stephen Yalof, President, CEO & Director at Tanger]

The big one was Forever twenty one, but we absorbed Forever twenty one. We've been able to place where we've got five of the nine Forever twenty one's already leased and we'll probably have the rest leased by the end of the year. So I think that speaks to high demand that retailers have the space in our shopping centers. It also speaks to the fact that we're going to be we're going to curate. We're not going after, just retailers just to fill space.

[Stephen Yalof, President, CEO & Director at Tanger]

We're looking for retailers that are really to bring a little bit more to the party. We want to drive customers. We want to be interesting. We want to be the shopping center of choice in the in the geographies that we serve. And because of that, we're gonna be real smart about how we curate centers and make sure that we're bringing in not only retailers that can pay the best rents, but also retailers that will do, the best volume and draw the most amount of shoppers to ourselves.

[Rich Hightower, MD - U.S. REIT Research at Barclays]

Okay. So I appreciate that. Just to be clear, so Forever twenty one would probably be the biggest swing factor to call out for the second half in that regard, Just to clarify.

[Stephen Yalof, President, CEO & Director at Tanger]

I would say, yes.

[Rich Hightower, MD - U.S. REIT Research at Barclays]

Okay, great. And then, more broadly and I think you addressed this maybe from a different angle before, but just as far as the double digit leasing spreads for the past many quarters and obviously a very overt remerchandising strategy that I think you've articulated very well. Is there a natural runway for that given sort of existing tenancy that's probably not leaving the center in the next several years? Is it I mean, can it go on for years and years? I mean, how would you sort of think about that runway going forward?

[Stephen Yalof, President, CEO & Director at Tanger]

Look, again, I mentioned earlier, we're creating our own demand. And I think demand is sort of a virtuous cycle in that the better retailers who bring it to the center, the better sales performance they execute to and then the more rents that we can ultimately charge. But as centers become more popular, sales continue to grow, more retailers take note and want to be part of that. So in this environment right now with very little new retail coming online, retailers are looking for places where they can they can do business. They're looking for voids in the market where they have distribution.

[Stephen Yalof, President, CEO & Director at Tanger]

Look, a lot of these brands, we could be competing with a department store business that may be contracting where retailers are looking for places to put their freestanding stores so they can execute and get their product in front of a customer. That I don't see an end to that in the foreseeable future. And as I mentioned earlier, with a team of people that are out of eighteen, twenty four months looking at new brands to bring in, there's a lot of interest in being part of what we're doing over here at Tanger. Great. Thank you.

[Operator]

The next question is from Tayo Ochusanya from Deutsche Bank. Please go ahead.

[Omotayo Okusanya, Managing Director - Head of US REIT Research at Deutsche Bank]

Yes, good morning. Solid results here. Wanted to follow-up on Hong's question around guidance. Again, low end of same store NOI raised to 2.5%. Curious if what's driving that is really more occupancy as you've kind of discussed some of the occupancy gains or whether there's an OpEx component to it, if there's a bad debt component to it?

[Michael Bilerman, Executive VP, CFO & Chief Investment Officer at Tanger]

Thanks, Tayo. I mean, you know, the range both at the high and the low end has got a variety of assumptions around a lot of the variables that impact both revenues and expenses. And so we give a range that we feel comfortable with. We are pleased at the midway through the year to be able to lift our FFO guidance as well as lift our same center guidance. And, you know, at both ends of the range, there's varying assumptions around occupancy or tenant credit, sales environment, our variable operating expenses, the downtime, the spread.

[Michael Bilerman, Executive VP, CFO & Chief Investment Officer at Tanger]

So there's, you know, and all that goes into it to arrange that we feel comfortable and as part is in ninety days, get to report again and see where our results are and update guidance again at that point.

[Omotayo Okusanya, Managing Director - Head of US REIT Research at Deutsche Bank]

Got you. And then a quick follow-up as it pertains to tenant credit, could you just talk a little bit about your exposure to like Torrid that I believe recently filed bankruptcy. Again, a lot of talks about Claire's may also do something. So how are thinking about some of those names and maybe possibly some other watch list tenants?

[Michael Bilerman, Executive VP, CFO & Chief Investment Officer at Tanger]

So it's just a step back from an overall, our watch list remains at pretty manageable levels. In regards to the tenants you talked about, they're not top 25 tenants for us. You know, I'd say, you know, the store size, specifically on the Clara size is pretty small. And so while there may be a number of stores, it's a relatively smaller part of our base rent. If I can add, I've said this on past calls, I'll say

[Stephen Yalof, President, CEO & Director at Tanger]

it again. Allen stores have tended to be very profitable for brands and some of the last stores that brands will close in a restructuring. So even though a brand may declare bankruptcy, guess, the case of Eau Claire's or the brand that you mentioned, I think that as they work through their population of stores they're going to keep and stores they're going to reject, my guess is very few will happen in the outlet space.

[Omotayo Okusanya, Managing Director - Head of US REIT Research at Deutsche Bank]

Appreciate it. Thank you.

[Operator]

The next question is from Vince Tybone from Green Street. Please go ahead.

[Vince Tibone, Managing Director and Head of US Industrial & Mall Research at Green Street Advisors, LLC]

Hi, good morning. Could you help quantify the near term outparcel opportunity in the portfolio in terms of how many you expect to be actionable and monetizable over the next one to two years? And then also kind of what do you anticipate being the most common structure here, whether it's selling the dirt, doing a ground lease or doing a full development that a tenant would ultimately release. Just trying to get a sense of how much capital will be committed here and then how much NOI could ultimately be generated too over the near term?

[Stephen Yalof, President, CEO & Director at Tanger]

We've said in the past that the value of our outparcel business is probably equivalent to one of our top shopping centers. I think that number continues to grow as we buy more shopping centers that give us more outparcel capacity. What's interesting from a capital allocation point of view as it relates to an outparcel deal, we're not looking to sell outparcels, we're looking to lease them. But typically, the investment that we're going to make in an outparcel, whether it's a built to suit or a ground lease deal, we don't make the investment until after the lease is executed. So it's a there's typically high teens to low double digit returns, but we've already had those deals executed before we we commit the capital from a risk profile.

[Vince Tibone, Managing Director and Head of US Industrial & Mall Research at Green Street Advisors, LLC]

No, that's super helpful. Maybe just to like, I mean, many of these have you completed over the last one to two years? And is that I'm just trying to get a sense of how many of these And could is this going to move the NOI needle?

[Justin Stein, EVP - Leasing at Tanger]

Yes, Vince, this is Justin. So, say over the last one to two years, we've had a handful come online and start rent paying, but we've really pinned our ears back and focused on this business. And what we can share with you is we have deals coming online over the next twelve eighteen months with brands like Portillo's and Seven Brews. We opened up a Chick fil A up in Ottawa. Shake Shack is opening up more stores with us on the peripheral land.

[Justin Stein, EVP - Leasing at Tanger]

We're doing deals with First Watch and one hundred fifty one Coffee. So we have a lot in the pipeline. We have a lot that are going to be coming and monetizing and cash flowing over the next year, year and a half and we're really excited about the prospects of this business.

[Vince Tibone, Managing Director and Head of US Industrial & Mall Research at Green Street Advisors, LLC]

No, thank you for all that detail. That's helpful. And then last question for me. Could you just discuss high level the re tenanting economics and ultimate NOI upside from the former 21 spaces? Know you comment in terms of how many were already leased.

[Vince Tibone, Managing Director and Head of US Industrial & Mall Research at Green Street Advisors, LLC]

I'm not sure if those are all permanent or temp deals, but I just know they paid so little rent prior to bankruptcy. Would imagine there's a pretty sizable mark to market opportunity there, but not sure that compares to the suite size and if you have to demise in certain cases. So yes, just love to kind of hear how you view the opportunity there with those boxes.

[Stephen Yalof, President, CEO & Director at Tanger]

Temp leasing those boxes quickly was a great trade for us because the rents being as cheap as they were, we were able to at least maintain or grow the rents on that near term basis as we're making those decisions that you just talked about. Do we replace the complete box or based on the positioning of the shopping center, do we break them in half and re demise them? We'll make those decisions based on the ability to generate rent and get exciting tenants into the space. We're working with a number of tenants and a lot of deals currently. You know, I think there's a lot more rent that you can get from smaller to lease smaller spaces.

[Stephen Yalof, President, CEO & Director at Tanger]

So where that makes sense, we'll make that trade. So, you know, we're I think we're in a pretty good position. You know, I've said it a couple of times on the call. I'll repeat it again. You know, I think our real estate is becomes more valuable every day as there's less new space being added to the market.

[Stephen Yalof, President, CEO & Director at Tanger]

And as there's retailer demand continues to increase to be in our portfolio, we're going to make sure not only that we choose the best retailers to fill the space, we're going make sure that they're going to be the most productive retailers and we're going bring in retailers that are going to draw up new traffic and new shoppers to our centers. I think all of those things together, all ships rise and ultimately that's how we're going to grow our value and NOI over time.

[Vince Tibone, Managing Director and Head of US Industrial & Mall Research at Green Street Advisors, LLC]

Great. Thank you.

[Operator]

There are no further questions at this time. This concludes the question and answer session and today's teleconference. You may disconnect your lines at this time. Thank you for your participation.

Participants

Executives

• Ashley Curtis, AVP - IR
• Stephen Yalof, President, CEO & Director
• Michael Bilerman, Executive VP, CFO & Chief Investment Officer
• Justin Stein, EVP - Leasing

Analysts

• Jeffrey Spector, Managing Director at Bank of America
• Greg Mcginniss, Director at Scotiobank
• Craig Mailman, Director & Equity Research Analyst at Citigroup
• Michael Griffin, Director at Evercore
• Caitlin Burrows, Vice President at Goldman Sachs
• Todd Thomas, MD & Equity Research Analyst at KeyBanc Capital Markets
• Hong Zhang, Analyst at JP Morgan
• Floris van Dijkum, MD & Equity Research at Ladenburg Thalmann & Co. Inc
• Rich Hightower, MD - U.S. REIT Research at Barclays
• Omotayo Okusanya, Managing Director - Head of US REIT Research at Deutsche Bank
• Vince Tibone, Managing Director and Head of US Industrial & Mall Research at Green Street Advisors, LLC