10-K: Tanger Inc. Reports Strong 2023 Results, Driven by Increased Occupancy and Strategic Acquisitions

Tanger Inc., a leading owner and operator of outlet and open-air centers, announced strong financial results for 2023, marked by increased occupancy rates, new developments, and strategic acquisitions.

Summary

• Tanger Inc. reported net income of $103.9 million for 2023, an increase of $18.1 million compared to 2022.
• The increase in net income was primarily driven by a rise in average portfolio occupancy from 95% to 97%, higher property management and leasing responsibilities, increased other revenues, and higher investment income.
• These gains were partially offset by lower termination fees, a gain on sale of assets in 2022, and higher general and administrative expenses in 2023.
• Rental revenues increased by $17.5 million in 2023, primarily due to growth in occupancy and rental rates.
• The company opened a new 291,000 square foot outlet center in Nashville, Tennessee in October 2023.
• Tanger acquired a 382,000 square foot open-air outlet center in Asheville, North Carolina, and an 825,000 square foot open-air lifestyle center in Huntsville, Alabama in November 2023.
• During 2023, Tanger sold 3.5 million common shares under its at-the-market stock offering program, generating gross proceeds of $90.0 million.

Sentiment

Score: 8

Explanation: The document reflects a positive outlook with strong financial results, successful acquisitions, and a clear growth strategy. However, the score is not higher due to the inherent risks in the retail sector and the broader economic environment.

Positives

• Tanger Inc. experienced a significant increase in net income, reaching $103.9 million in 2023.
• The company achieved a higher average portfolio occupancy rate of 97% in 2023.
• Rental revenues grew by $17.5 million, reflecting positive growth in occupancy and rental rates.
• Successful opening of a new outlet center in Nashville, Tennessee, added 291,000 square feet to the portfolio.
• Strategic acquisitions in Asheville, North Carolina, and Huntsville, Alabama, expanded the company's presence in key markets.
• The company effectively utilized its at-the-market stock offering program to generate $90.0 million in gross proceeds.

Negatives

• The company experienced lower termination fees in 2023 compared to 2022.
• General and administrative expenses were higher in 2023.
• The 2022 results included a $3.2 million gain on the sale of the Blowing Rock, North Carolina center, which was not replicated in 2023.

Risks

• The company faces risks associated with debt financing, including the ability to refinance existing indebtedness on favorable terms.
• Changes in consumer spending habits, retail bankruptcies, and competition from e-commerce could adversely affect rental income and occupancy rates.
• The company is exposed to interest rate risk on its variable rate debt, although it uses hedging strategies to mitigate this risk.
• Failure to qualify as a REIT could have adverse tax consequences and affect distributions to shareholders.
• Cybersecurity breaches could disrupt operations and result in the loss of sensitive data.
• Climate change and severe weather events could impact the company's properties, particularly those located in coastal areas.

Future Outlook

The company anticipates that adequate cash will be available to fund operating and administrative expenses, regular debt service obligations, and the payment of dividends in accordance with REIT requirements in both the short and long-term. The company expects to maintain sufficient liquidity to fund existing capital expenditures.

Industry Context

Tanger's performance aligns with broader trends in the retail real estate sector, where outlet and open-air centers have shown resilience. The company's focus on strategic acquisitions and development of new centers positions it to capitalize on the continued demand for value-oriented retail experiences.

Comparison to Industry Standards

• Tanger's occupancy rate of 97% as of December 31, 2023, is higher than the average occupancy rate for regional malls in the United States, which was 95.4% as of Q4 2023 according to Cushman & Wakefield.
• Tanger's focus on outlet centers differentiates it from traditional mall operators like Simon Property Group and Brookfield Properties, which have a more diversified portfolio of retail properties.
• Compared to other outlet center operators like Simon Premium Outlets, Tanger's portfolio is smaller but geographically diverse, with a presence in 18 states and partial ownership in 2 centers in Canada.
• Tanger's 2023 acquisition of Bridge Street Town Centre, an open-air lifestyle center, reflects a strategic move to diversify its portfolio beyond traditional outlet centers, similar to the strategy employed by some other retail REITs like Kimco Realty, which has been investing in mixed-use and open-air centers.

Management Changes

Legal Proceedings

• The Company and the Operating Partnership are, from time to time, engaged in a variety of legal proceedings arising in the normal course of business.
• Although the results of these legal proceedings cannot be predicted with certainty, management believes that the final outcome of such proceedings will not have a material adverse effect on our results of operations or financial condition.

Stakeholder Impact

• Shareholders: The company's performance and growth strategy are aimed at increasing shareholder value through dividends and share price appreciation.
• Employees: The company focuses on attracting, developing, and retaining talent, providing various training programs and benefits.
• Customers: The company aims to provide a positive shopping experience through a curated mix of retailers and by adding non-traditional uses to its tenant mix.
• Tenants: The company works to maintain strong relationships with its tenants and offers support through re-sizing and re-location of retail space for maximum sales.
• Creditors: The company manages its capital structure to reflect a long-term investment approach and utilizes multiple sources of capital to meet its requirements.

Next Steps

• The company plans to continue its focus on increasing net operating income at existing centers, renovating and optimizing selected centers, and pursuing disciplined external growth.
• Tanger intends to retain the ability to raise additional capital, including public debt or equity, to pursue attractive investment opportunities.
• The company will continue to monitor the impact of supply chain and labor issues, inflationary pressures, changes in interest rates, and the overall macroeconomic environment on its business.

Key Dates

Keywords

outlet centers, open-air retail centers, REIT, real estate, retail, shopping centers, development, acquisition, leasing, occupancy, rental income, net operating income, capital strategy, debt financing, equity offering, Nashville, Asheville, Huntsville, Tanger Outlets