Tanger Inc (SKT) 2002 Q1 法說會逐字稿

Good afternoon and welcome ladies and gentlemen, to the Tanger Factory Outlet Center, Inc. First quarter 2002 earnings conference call. Please be aware that this conference may concern certain forward-looking statements regarding our re-merchandising strategy, the renewal and retenanting of space, retenant sales, sales trends, interest rates, funds from operations, the development of new centers, the opening of ongoing expansions, coverage of the current dividend, and the impact of sales and land parcels.

These forward-looking statements are subject to risks and uncertainties.

Actual results could differ materially from those projected due to various factors including but limited to, the risks associated with general economic and local real estate conditions, the availability and cost of capital, our ability to lease our properties, our inabilities to collect rent due to bankruptcy or insolvency of tenants or otherwise in competition.

We direct you to the company's various filings with the Securities and Exchange Commission for a detailed discussion of risks and uncertainties.

This call may be webcast for a period of time in the future, and we believe it is important to note that today's call includes time sensitive information that may be acquired only as of today, April 30th, 2002.

At this time I would like to inform you that this conference is being recorded for a rebroadcast and that all participants are in a listen-only mode.

At the request of the company, we will open up the conference for questions and answers after the presentation. I will now turn the conference over to Mr. Stanley K Tanger. Please go ahead, sir.

Good afternoon, ladies and gentlemen.

I am Stanley K. Tanger Chairman of the Board and Chief Executive Officer of Tanger Factory Outlets Incorporated. Welcome to our first quarter 2002 earnings conference call. The earnings release was sent over newswire services early this morning, I have here with me today Steven Tanger, President and Chief Operating Officer, along with Frank Marchisello Senior Vice President and Chief Financial Officer, along with Rochelle Simpson, Executive Vice President Administration, and Virginia Summerell our Treasurer.

I will now turn the call over to Steven Tanger.

Hello, everyone, and thank you for joining us today.

As a result of management's ability to stay focused on our conservative long-term strategy we are pleased to report the following financial and operational results for the first quarter of 2002, which compare favorably to the results for the prior year. FFO for the first quarter of 2002 was $8 million 900 thousand dollars or 76 cents per share, compared to $8 million 200 thousand dollars or 70 cents per share in the year 2001.

An increase of approximately 9%. Our first quarter FFO beat the street's consensus estimate by one cent per share. Base rental and total revenues increased 2% for the first quarter compared to last year. Percentage rentals increased by 70% in the first quarter reflecting strong sales in our Riverhead, New York, Sevierville, Tennessee, Branson, Missouri, Lancaster, Pennsylvania, and Gonzales, Louisiana, shopping centers. EBITDA increased by 1% for the quarter, same space sales were up 10% for the three months ending March 31, 2002.

And 6% for the rolling 12 months, to an average of $300 per square foot. Same store sales were up 5% in the first quarter. There were no land sales in the first quarter of either 2001 or 2002. Through March 31, 2002, 404,000 square feet or 43% of the space that comes up for renewal in 2002 has already been renewed with existing tenants at a 5% higher average rental rate.

We have also re-tenanted 94,000 square feet at a 9% increase in average base rent.

Traffic at Tanger Centers was up 7% in the first quarter.

Occupancy, at quarter end was 95%, which is the same as last year. We were able to achieve a strong first quarter performance as a result of the financial and operational strategies that we implemented several years ago.

Specifically, we reduced operational and overhead costs where appropriate, we continued to monitor the market demographics of the areas surrounding our shopping centers.

In addition, we are continuing our strategy to add high volume, brand name tenants such as Polo Ralph Lauren, Tommy Hilfiger, The Gap, Coach Leather Wear, and others to our shopping centers.

Our successful leasing strategy and conservative development strategy lessened our exposure to excess space inventory. We maintain high occupancy levels, and at the same time we are successful in increasing our base rental revenue in total and on an average square foot basis. Our capital expenditures are anticipated to be approximately $3 million or 25 cents per share in 2002.

As I have previously stated, occupancy rates and leasing spreads were positive and strong. Even though the apparel business had actual price deflation, and the inflation rate in the United States was at the lowest level in more than 40 years, the tenant sales in Tanger Outlet Centers were up.

In the beginning of 2002, like the start of each of the past 21 years that we have focused on this business, presented our company with unique leasing and operational challenges.

10 tenants filed bankruptcy in 2001, representing approximately 221,000 square feet in our shopping centers.

Thus far, in 2002 only four tenants have filed bankruptcy representing about 103,000 square feet.

In general the outlet industry has not been the cause of the problems resulting in these bankruptcies, but has provided an ongoing viable distribution channel for the sale of excess inventory during the reorganization period.

We believe that the resiliency of the outlet business and our aggressive leasing efforts minimize the effects of store closings during the first quarter.

By design, our portfolio is highly diversified and does not have a large concentration with any single tenant.

In fact, no single tenant represents more than 6.3% of the square footage in our portfolio.

The shift in consumer priorities favors brands that deliver authenticity and integrity.

Brands that are genuine and recognized. Most of our tenants are established brands with clear vision and longstanding consumer confidence that meets these priorities.

We have a strong balance sheet with an appropriate amount of liquidity. While our average debt outstanding has increased, the average interest rate on our outstanding debt has decreased from 8.95% in the first quarter of 2001, to 7.95% in the first quarter of 2002. Because of our ability to finance long-term assets with long-term debt, 68% of our total outstanding debt matures after 2005. Approximately 59% of our portfolio and 51% of our debt is unsecured and over 84% of our current debt is at fixed interest rates.

As of today, we have approximately $47 million dollars available in unsecured lines of credit.

We were fortunate to have renewed our blanket portfolio wide general liability and property insurance policies on October 2nd, 2001.

We do however anticipate that the premiums will increase significantly for the upcoming renewals in August 2002.

While our current policy covers terrorism, any renewals of terrorism insurance will have to be negotiated and in some cases may require excess policy coverage. Substantially, all of our insurance expense is reimbursed by our tenants. Construction on our 400,000 square foot Tanger Outlet Center in Myrtle Beach, South Carolina, is currently ahead of schedule.

Stores in the first phase which totaled 260,000 square feet are expected to open in July 2002.

Tenants from the first phase include Polo Ralph Lauren, Coach Leather Wear, Liz Claiborne, [INAUDIBLE], Nautica, Old Navy, Reebok, Tommy Hilfiger, and many others.

For the first phase is currently 91.5% leased with additional leases anticipated to be signed prior to the July 5th opening. The property is being developed as a joint venture of which we own a 50% interest. However, we control the leasing, management, and operation of the center, and will be paid management and leasing fees for our services.

The total cost of the first phase is budgeted at $34.6 million dollars with a $26 million construction loan.

The $8.6 million dollars in equity was contributed equally by both partners. Upon stabilization in 2003, we expect this project will generate approximately a 20%, unleveraged, cash on cash return on our investment.

The accounting for this project is fully disclosed in our 10-K. Consistent with our long-term strategy not to build on speculation, we believe that strong business fundamentals must be in place for us to consider future new developments.

We are currently studying whether or not to expand a couple of our successful centers.

Any expansion of course will be based upon our tenant's needs and the execution of leases for at least 50% of the expansion space. In addition, we are currently studying several new markets where we believe there are opportunities to introduce a Tanger Outlet Center.

At this point, we are not ready to announce any new sites, although we are actively looking.

As we continue to manage our assets and look for ways to add shareholder value, we may consider re-positioning or selling certain properties that do not meet our long-term investment criteria.

This would provide additional capital that we could reinvest into other attractive investment opportunities.

We continue to explore potential acquisitions that would fit into our current investment strategy and leverage our existing human resources. We are also exploring opportunities to add revenues without incurring any significant outlay of capital or additional expenses by performing third party leasing and management services for other property owners. Based on current economic conditions and forecasts, we believe we can increase our FFO per share in 2002 by 2 to 4% to a range of $3.30 to $3.38 per share.

On April 11th, 2002, we increased the dividend to our shareholders for the 9th year in a row while maintaining a conservative estimated 2002 payout ratio of 73% and a FAD payout ratio of approximately 79%. Based on current economic conditions, we believe that our dividend will be secure, based on the estimated cash flow from our portfolio. At yesterday's closing price of $26.39 per share our dividend provides investors with a yield of approximately 9.3%.

In addition, 78% of the dividend was classed as a return of capital in 2001.

Since going public in May 1993, we have focused exclusively on the business we know, developing, managing and operating outlet centers.

Since -- we conduct our business with rigorous attention to detail, candor, and integrity.

Before we open the line for questions and answers, let me summarize by saying that we are very pleased with our company's overall performance in the first quarter and believe that the Tanger team of experienced professionals is poised to meet this year's challenges successfully.

Operator we are now ready to receive questions.

Thank you.

The question and answer session will now begin. If you are using a speaker phone, please pick up the hand set before pressing any numbers.

Should you wish to ask a question you may do so by pushing star 1 on your push

button phone. Should you wish to withdrawn your question, you may do so by pressing star 3.

Your questions will be taken in the order they are received. Please stand by for your first question. Your first question comes from Joel Goodman Please state your affiliation followed by your question.

Legg Mason. Good afternoon.

Hi, Joel.

How are you?

Great.

The question relates to same store sales.

It looked like you were reversed a trend this quarter, had very positive numbers.

What's your sense as to how that's going to play out for the remainder of the year?

We've been trending up for several quarters, and we're very pleased with the consumer's responded to our tenants' offering of brand name products at great prices every day, our traffic continues to increase each month.

Obviously I can't guess as to what the same space or same stores are going to be going forward.

But the merchandising mix in our centers we feel is appropriate and strong.

The presentation by our tenants and their inventory levels we feel are appropriate and well done. All the pieces are in place to

have a great year.

Ok. Great quarter.

Thank you.

Again, ladies and gentlemen, just a reminder, should you wish to ask a question, you may do so by pressing star 1 on your push button phone.

Your next question comes from Hall Jones. Please state your affiliation followed by your question.

Affiliation is AEW Capital Management.

I just have one quick question. Steve, when we met, you talked last year about some unique

projects like in Pittsburgh and I think maybe one or two other places and I wanted to know what your thoughts were there or if those have been put on the back burner just if you could discuss for a minute, you know, why and sort of how that process is going.

Well, we continue to look for unique projects.

The particular one in Pittsburgh was being done as a joint venture with another group and unfortunately they were not successful in getting the zoning.

We had no capital investment and really no investment in time. We are working on several

projects that will be unique and very exciting. At this point we're not able to announce anything, but we are aggressively and actively looking.

Ok. Thank you very much.

Ladies and gentlemen, one more reminder, should you have a question you may press star 1 on your push button phone.

At this time I am showing no further questions. I will turn the conference back to Stanley Tanger to conclude.

Ladies and gentlemen, that concludes our conference call today. Thank you all for participating and for your interest in our company. Beginning with this quarter, we will be filing a form 8-K with the Securities and Exchange Commission which includes a supplemental information package for the quarter.

This and all of our other public filings are available at our website located at www.tangeroutlet.com.

We hope the conference call and the supplemental information package we hope will be helpful to all of you to better understand our company and financial results. At this time I would also like to invite all of you to our annual shareholders meeting Friday, May 17, 10:00 a.m., O'Henry Hotel, in Greensboro, North Carolina. Also we'd like to invite all of you to our July 5th grand opening of our Myrtle Beach, South Carolina, shopping center.

Myrtle Beach is a great family resort area. Have a good day and God bless you and thanks for being with us.

Ladies and gentlemen, that concludes your conference call for today.

Should you wish to access a rebroadcast of this call you may do so by dialing 1-800-428-6051, and for international 973-709-2089.

With a user ID Of 239402.