Tanger Inc (SKT) 2003 Q4 法說會逐字稿

Welcome to Tanger Factory Outlet Centers' fourth-quarter 2003 conference call.

Please note that during this conference call some of management's comments may be forward-looking statements regarding the company's property operations, leasing, tenant sales trends, development, acquisitions, expansions and disposition activities, as well as their comments regarding the company's funds from operations, funds available for distribution, and dividends.

These forward-looking statements are subject to numerous risks and uncertainties, and actual results could differ materially from those projected due to factors including, but not limited to, changes in economic and real estate conditions, the availability and cost of capital, the company's ongoing ability to lease, develop, and acquire properties, as well as potential tenant bankruptcies and competition.

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

This call is being recorded for rebroadcast for a period of time in the future.

As such, it is important to note that management's comments include time-sensitive information that may be accurate only as of today's date, February 24, 2004.

At this time all participants are in a listen-only mode.

Following management's prepared comments, the call will be open for your questions.

I will now turn the call over to Stanley Tanger, the company's Chairman and Chief Executive Officer.

Please go ahead, sir.

Thank you, Amanda.

Thanks and good afternoon to everyone.

With me today are Steven Tanger, President and Chief Operating Officer;

Frank Marchisello, our Executive Vice President and Chief Financial Officer;

Rochelle Simpson, Executive Vice President of Finance and Administration; and Virginia Summerell, Treasurer.

We are pleased to report another great year of growth for the Company.

In 2003 our funds from operations increased 12.8 percent in total and by 1.5 percent per share.

Also, 6.5 cents per share in dividends were distributed to our common shareholders during the fourth quarter, representing our 42nd consecutive quarterly dividend paid since beginning a public company over ten years ago.

Our financial performance was the result of our strong portfolio of fundamentals.

Through 2003 tenant sales increased 2.3 percent, and we again achieved positive rent growth with our re-leasing activity.

Furthermore we acquired a 29,000 square foot expansion located contiguous with our center in Sevierville, Tennessee, and also developed and built our seventh expansion in six years at a highly successful center which will now be 417,000 square feet.

We also completed a second phase of our center in Myrtle Beach, South Carolina; and we have begun construction on a third phase at this location scheduled for later this year.

When completed this center will be over 403,000 square feet.

On December 19, we announced that our company and an affiliate of Blackstone Real Estate Advisers formed a limited liability company and acquired through the joint venture the Charter Oak Partners portfolio of nine factory outlet centers totaling approximately 3.3 million square feet.

We own one-third and Blackstone owns two-thirds of the joint venture.

A fee is paid to us to provide operating, management, leasing, and marketing services for the properties.

The purchase price of this transaction was $491 million including the assumption of approximately 186 million of cross-collateralized debt with a 6.59 interest rate that matures July of 2008.

The existing mortgage represents a 38 percent loan to value ratio.

We finance our share of the required equity through the issuance of 2,645,000 common shares generating approximately 101.2 million in net proceeds, and allowing us to maintain a strong balance sheet and our financial flexibility.

The transaction should be accretive to our operating results in 2004.

The Charter Oak centers are large, with an average size of 364,000 square feet.

As of December 31, 2003, they were 94 percent occupied, and generate average sales of $290 per square foot.

Our plan is to increase the return on our investment by filling some of the existing vacancies, adding new sources of miscellaneous income, and enhancing the marketing of the centers to increase traffic and sales.

Over time we expect that synergies should provide additional profitability for our company.

This portfolio was an excellent geographic fit for us and it's in line with our strategy of creating an increase presence in a high-end resort location.

Adding the Tanger brand to these outstanding properties takes us to the next level, as we increase our portfolio that we own and operate to 40 centers in 23 states totaling 943 million square feet.

This is a very exciting opportunity for our company.

The Tanger team of professionals has worked very hard on the successful integration of these properties into our system.

The increased size of the Tanger portfolio allows us to diversify our geographic platform, build on our management skills, solidify our position in the outlet industry, and enhance our shareowners value.

This is, to our knowledge, the last remaining high-quality portfolio in our industry, with eight of the nine properties located in high-volume resort locations.

At closing the portfolio had approximately 6 percent or about 200,000 square feet of vacant space producing no income.

Our leasing team is focused on filling the vacant space and re-merchandising various properties that are included (ph) to increased cash flow.

We were pleased to find that 37 tenants in the Tanger portfolio did not have a single store in the Charter Oak portfolio; and 19 centers only have one store throughout the nine properties.

Our goal is to fill at least half of the vacant space and bring the Charter Oak portfolio average occupancy up to the Tanger portfolio average occupancy of 97 percent as soon as possible.

The Tanger marketing team has already produced marketing plans for each of the newly acquired Charter Oak properties.

Our proven marketing techniques should increase traffic to the properties.

Better merchandising and more traffic and less vacancy in the Charter Oak portfolio should result in increasing sales productivity from $290 per square foot to close to the Tanger average of $307 a square foot.

With that, I'll turn the call over to Frank to take you through our financial results.

Please note all per-share net income and FFO calculations are on a diluted basis.

For the year ended December 31, 2003, net income totaled $12 million or $1.17 per share compared to $9.2 million or $1.08 per share.

For the quarter ended December 31, 2003, net income was $4.8 million or 43 cents per share, as compared to $4.7 million or 51 cents per share in 2002.

Comparable net income results were impacted by gains on the sale of real estate totaling $1.7 million which were included in discontinued operations during 2002.

As a result income from continuing operations for the year actually increased 53.5 percent in total, and 51.9 percent per share.

In the fourth quarter it increased 11.2 percent in total and 5.4 percent per share.

Total funds from operations for the year ending December 31, 2003, increased by 12.8 percent to $47 million, compared to $41.7 million in 2002.

On a per-share basis, FFO for the year increased by 1.5 percent to $3.45 a share as compared to $3.40 cents per share in 2002.

For the fourth quarter of 2003 FFO totaled $13.9 million or 98 cents per share, as compared to FFO of $13.1 million or $1.01 per share in the fourth quarter of 2002.

Our comparable FFO results were impacted by a lack of gains on the sale of land parcels during 2003, compared to 728,000 of such gains representing 6 cents per share during 2002.

Excluding these gains, FFO per share increased 3.3 percent for the year and 1 percent for the fourth quarter of 2003 respectively.

Our FFO payout ratio for 2003 was 71 percent as compared to 72 percent in 2002; and our FAD payout ratio for 2003 was 86 percent as compared to 78 percent in 2002, primarily as a result of higher second-generation tenant allowances during 2003 in connection with our remerchandising program at our center in Barstow, California.

The occupancy in Barstow has increased from 62 percent on December 31, 2002, to 87 percent as of December 31, 2003.

The new stores include Polo, Ralph Lauren, Tommy Hilfiger, Coach, Leatherware (ph) and Nautica just to name a few.

Turning to our balance sheet at December 31, 2003, on a consolidated basis our debt to total market capitalization was approximately 45 percent and our total market capitalization was approximately $1.2 billion, representing a 60.5 percent increase on our total market cap from a year ago.

This increase is a result of the issuance of additional common shares and the consolidation of the Charter Oak assets onto our balance sheet as of December 31, 2003.

In addition our interest coverage improved to 23.1 times for the fourth quarter of 2003, as compared to 2.7 times interest coverage for the same period last year.

Looking at our debt profile on a consolidated basis at December 31, 2003, approximately 85.6 percent of our debt outstanding was fixed-rate long-term debt, with no debt maturing until October 2004, when our unsecured notes totaling $47.5 million and bearing interest at 7.85 percent will mature.

With respect to our unsecured credit lines, we currently have $14.8 million outstanding our lines that have a total capacity of $100 million.

I will now turn the call over to Steve Tanger.

Thank you, Frank, and good afternoon, everyone.

As of December 31, our portfolio consists of 40 factory outlet shopping centers which we own or operated, diversified across 23 states, totaling 9.3 million square feet.

I am pleased to report that significant positive rent spreads continued in 2003.

The average (indiscernible) base rental rate for new stores that opened the Tanger portfolio during 2003 was $18.83 per square foot, which is 11.7 percent higher than the average rent being paid by stores that closed during 2003.

During 2003 our leasing activity was very productive, as we renewed 80 percent of the 1,070,000 square feet associated with tenants whose leases were scheduled to expire in 2003.

Part of the square feet not renewed was due to our decision to not renew certain tenants in order to upgrade the tenant mix at a number of locations.

While our leasing activity has continued to be positive and our overall occupancy rate remains very high, averaging 97 percent in the original Tanger portfolio and 94 percent in the Charter Oak portfolio, for an overall average occupancy of 96 percent at year end 2003.

This completes the 22nd consecutive year that we have achieved at least 95 percent occupancy at the end of the year.

With respect to tenant productivity across our portfolio, in spite of severe weather in December that forced some of our higher volumes centers to close early or open late on weekend days during the peak holiday shopping period, same-space sales increased 2.4 percent for the three months ending December 31, 2003, as compared to the three months ended December 2002, and increased 2.3 percent for the year.

Reported 2003 same-space sales in the Charter Oak portfolio equaled to $290 per square foot compared to the original Tanger portfolio average same-space sales during 2003 of $307 per square foot, resulting in an overall average of $301 per square foot for the year.

These continued strong tenant sales have contributed to our total occupancy cost to tenants for 2003 remaining at an industry low of 7.4 percent of tenant sales.

Turning to our investment activities during the year, we acquired a 29,000 square foot expansion located contiguous with our center in Sevierville, Tennessee, in January of 2003 for $4.7 million.

Tenants in the acquired building include Nike and Casual Corner.

In addition, we opened a 35,000 square foot 100 percent leased expansion at that center in July of 2003.

The cost of the expansion was $4 million with an expected return on our investment in excess of 13 percent.

Tenants in the expansion include Coldwater Creek, Jockey, Samsonite, and Sketchers.

The Sevierville center, which had 122,684 square feet when we originally purchased it in 1997, now contains a total of approximately 419,000 square feet.

In addition, in May of 2003 we completed a 64,000 square foot second phase and our currently underway with a 79,000 square foot third phase at our highly successful outlet center in Myrtle Beach, South Carolina.

The center, which has been developed and is managed and leased by us, is owned through a joint venture of which we own a 50 percent interest.

Accordingly our capital investment in the second and third phases, which have already been contributed to the joint venture, totaled approximately $2.8 million with an expected return on our investment in excess of 20 percent.

Upon completion of the third expansion the Myrtle Beach Center will total approximately 403,000 square feet.

Including the Charter Oak property we control the only two outlet centers in the Myrtle Beach market, totaling approximately 830,000 square feet.

These projects should be accretive to earnings in 2004 and provide additional profitability for our shareholders.

Looking ahead, we are always seeking new development and expansion opportunities.

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 development and expansion.

In terms of new development opportunities, we have started the early development and leasing of a site located on Interstate 79 at Pittsburgh, Pennsylvania, and a site located in Deer Park, New York, on Commack Road about five miles south of exit 52 on the Long Island Expressway.

We currently expect the Pittsburgh site to be about 420,000 square feet at total buildout, with the initial phase schedule for delivery in the fourth quarter of 2005; and the Deer Park site to be about 790,000 square feet at total buildout, with the initial phase scheduled for delivery in the fourth quarter of 2006.

We also continued to explore other potential acquisition opportunities as well as opportunities to add revenue without incurring any significant outlay of capital or additional expenses, by performing leasing and management services for third-party owners.

As mentioned in previous calls, John Hancock Life Insurance Company retained us to manage their property in Vero Beach, Florida, in September 2002.

John Hancock was then successful in closing on the sale of this property during the third quarter of 2003.

The new owners have entered into a management agreement with our company to continue the management and leasing of this property.

With respect to FFO guidance, based on current market conditions, the strength and stability of its core portfolio, the successful integration of the Charter Oak portfolio, and our development, acquisition, and disposition strategy we currently believe our net income available to the common shareholders for 2004 will be between 62 cents and 70 cents per share; and our FFO for 2000 will be between $3.68 and $3.76 per share, representing an increase in FFO over the prior year of approximately 7 to 9 percent.

Again, let me say how pleased we are that we were able to finance our share of the equity in the Charter Oak venture with virtually 100 percent common equity and that the transaction should be very accretive to our earnings in 2004.

By financing it this way we have further improved our balance sheet, our interest and dividend coverage ratios, and our liquidity.

Some of the estimates currently published by analysts that follow our company do not reflect our decision to fund 100 percent of our equity in the Charter Oak venture with the issuance of 2,645,000 common shares of Tanger.

Once those adjustments are made, consensus estimates will most likely fall within the guidance range that we have given today.

I believe that our core business fundamentals remain solid and that we are properly positioned for a successful 2004.

With that, we would be happy to answer any questions that you may have.

(OPERATOR INSTRUCTIONS) David Fick, Legg Mason.

Can you review the expected equity investment requirement at Pittsburgh, as well as the timing of the planned opening, and the expected yields there?

The Pittsburgh investment is at least a year to 18 months out.

I think we are still in the early development stages.

There is quite a bit of site work as you probably know.

The Pittsburgh area is topographically challenged.

I suspect that it will fall within our investment range of 11 to 12 percent return on equity; and right now we have no joint venture partner in that transaction.

How is leasing going there?

The tenant community is excited about the prospect of an outlet center in the Pittsburgh market.

As you know, this will be located about 15, 20 miles south of Pittsburgh on Interstate 79.

The only other outlet center currently in existence is a very successful property owned by a Prime Retail, about 70 miles north of Pittsburgh in Grove City.

How do you think this will compete with the mills project?

I don't know enough about the mills project to make an intelligent comment on that.

The tenant community is excited about coming to the Tanger project, and that is really all I know.

How are you thinking about 2004 acquisitions?

I know you have got a lot on your plate with the integration of Charter Oak; and not implying that you should have a lot more going on.

But I am wondering what you see as you look out, both in '04 and beyond, now that (technical difficulty) is largely consolidated.

David, as you know there's, to my knowledge, not another high-quality private portfolio in the marketplace.

We have nothing under contract, although we're constantly looking for accretive opportunities to increase our platform with high-quality properties where we feel we can add value.

There may be one or two that come down the road; but right now we have nothing on our plate.

How do you view your forward business plan terms of earnings growth, given that your core portfolio is driven 1 or 2 percent, maybe 3 percent annual growth profiles; and you are benefiting from a onetime bump in a large acquisition.

What are you going to do for an encore, I guess is the question, as you look out into '05 and '06?

I think we can add significant value to the Charter Oak portfolio.

The portfolio was well run, but we purchased it with approximately 200,000 square feet of vacant space and some additional land that we are in the early stages of looking to see if we can develop.

If we can drive traffic and fill the vacancies and increase the sales per square foot productivity to the Tanger average, I think that that will be pretty accretive growth in the next two to three years.

That is a pretty mixed portfolio, which from a sales perspective doesn't perform to the same level as the Tanger portfolio overall.

It is dominated by two really large assets, in North Carolina and in Delaware.

Particularly in North Carolina it is competing with one of your newer projects.

What are you seeing in terms of tenant commitment to (technical difficulty) beach for example?

To my knowledge there is no property in North Carolina.

I'm sorry; obviously.

Any portfolio as you well know has got some properties that are at the top and some properties that are not.

Once again, I believe that with our marketing expertise and our leasing relationships we have a very powerful portfolio.

I believe that we can drive the productivity of the middle of the road properties in the Charter Oak portfolio, as we have shown we are able to do in the Tanger portfolio.

Can you comment on the Myrtle Beach leasing comparison, now that you dominate that market?

We have only had the properties now for about 60 days.

And the original Tanger property on 17 is I think 100 percent leased.

And we have had terrific reaction in the Charter Oak property on 501.

Liz Claiborne will be opening within the next 30 days with a 10,000 foot store, and the reaction in the tenant community is terrific.

This is probably a question for Frank.

What should we assume about management fees from the Charter Oak portfolio?

We are earning a dollar per foot management and leasing fee, which equates out to about $3.3 million.

(multiple speakers) not be able to recognize all of that, though, right?

No.

We have budgeted a little over $1 million of additional G&A cost.

The other thing to remember is in consolidation that number is not going to show up anywhere.

Because it is an expense on Charter Oak and an income on Tanger; and it will net to zero in consolidation.

However it does come out first in the allocation of profits from the Charter Oak portfolio.

I'm a little confused.

Aren't you able to recognize those fees to the extent of the outside partner interest in Charter Oak?

That is what I mean.

It will be allocated to us first within the Charter Oak partnership.

So yes, in essence we will recognize it.

Okay.

You address the G&A question.

The run rate going forward will be about $1 million higher?

It will be about $1 million higher; plus Charter Oak has its own items that hit the G&A line, if you will, David.

Such as they will have their own legal fees; will have accounting fees.

Because of the way it is structured it will have a separate audit for the lender.

And then allocation for bad debt expense and all.

So we are looking at about 5 to 700,000 within the JV for G&A; again because of consolidation it is all going to fall on our books when you start looking at our consolidated operating statements.

You said something that raises another question.

That is, physically how are you structuring the Charter Oak administration?

Is this going to be integrated into Greensboro?

Is it maintaining a completely separate identity?

We have bought assets; we did not buy the corporate entity.

The office that was formerly Charter Oak in the Washington area I believe is now closed or down to a skeletal staff.

All of the functions have been consolidated into our Greensboro headquarters.

We have retained most of the folks in the field that were part of the original Charter Oak team.

We have, where there were some holes, filled those holes I believe almost completely now.

So it is now like we have always owned them.

There is nine shopping centers; that is it.

Great.

Lastly, you have given the same-space sales comps.

Can you review the same-store numbers?

Sure.

It is in all the public disclosures.

We achieved a 1.3 percent increase in base rental revenues per square foot on a cash basis, associated with the space that was renewed and re-tenanted during 2003. as compared to the same period a year ago.

Those are rent numbers.

I'm sorry, I asked for the sales numbers.

I'm sorry, David.

We have never broken out that number.

Well, you have historically; you are not doing that now?

Last year we announced that that would not be a number we would do going forward.

Because it tends to not be a number that other outlet center REITs are disclosing.

There is only one other, and I can tell you that virtually all of your other retail peers do provide regular same-store sales numbers.

Ross Nussbaum, with Smith Barney.

I am here with Jonathan Litt.

Can you go over your Van Heusen exposure in terms of the stores that are closing there and what your lost revenues will be?

we have just met with the senior management of Phillips-Van Heusen.

To our knowledge we are only talking about five or six stores this year that expire by their term on December 31, that will not be renewed.

There may be two or three stores in '05 and we are still talking with them about that.

As an offset we are in discussions with the Van Heusen group about continuing to expand our relationship by opening Calvin Klein stores.

The stores that were closing averaged around 3000 to 3500 square feet.

The Calvin Klein stores should be almost a comparable amount, average about 8000 square feet.

So you're not anticipating a loss of revenues from these closings?

No, we're not anticipating any loss from revenue.

I believe that we have minimal exposure there.

We value our relationship with the Van Heusen group; and they went through this type of process about four or five years ago where they closed 300 stores.

Okay.

Frank, you reported on your balance sheet you have got about a $12 million premium on the Charter Oak debt, because it is above market rate.

You should have in your income statement then a positive offset to interest expense for the amortization of that premium.

That is right.

What was that amount in the fourth quarter?

In our supplement, not to refer to it, because I know not everybody may have seen it; but on page 12 in our FAD calculation we have a line called market rate interest adjustment.

It was 149,000 for the fourth quarter.

So if I gross that up for what it is going to be for the full year of '04, what should that be roughly?

For the full year of '04, it is probably going to be a couple of million dollars, actually.

That is included in your earnings guidance?

Yes; but it won't be in an FAD number.

But it is in your FFO.

Yes.

What are the plans for the 48 million of notes coming due in October?

Are you to issue more notes or put it on your line?

Fortunately we have tremendous financial flexibility after the issuance of the 2,645,000 shares to fund the Charter Oak acquisition.

We have about $86 million of unused lines of credit at about 160 basis points over LIBOR, or 2.6,2. 7 all-in cost.

We have access to the public unsecured note market; and we will just assess the best way to refinance those notes, which are only about $47.5 million, within the time period immediately preceding that.

Can you help me understand on your re-leasing spreads, if you do the analysis on openings versus closings the spread was just under 12 percent for the year.

But on a same-space basis it was around 1 percent.

Why the difference?

Those are kind of two different universes of numbers.

We want to put both of them out there just so you can see them.

The store opening, store closing just represents just that.

Stores that close during the year had an average base rent of 1686.

Stores that opened during the year had an average base rent of 1883.

What that means is when we look at GAAP productivity per foot, our average revenue per foot should be increasing based on those numbers.

If you look at it on a per-foot basis, our average base rent went from 1479 up to 1502.

So it is attributable to stores that closed having a lower rental rate than stores that opened.

That said, we also want you to be aware of how we are doing on a renewal and a retenanting basis, on an apples-to-apples if you will, square footage comparison.

We think they are both important numbers and that is why we put them both out there.

Final question, Steve, can you address what your expected development costs are for the first phase of both Deer Park and Pittsburgh?

I think it is a little premature right now.

We don't know all of the site work necessary and we don't know the full scope of both projects.

So if you don't mind I'm going to defer that for a couple of quarters, until we have a better number for you.

Let me see if I can get to it this way.

In terms of the size of this project what percentage of the space would open up in phase one, roughly?

I suspect in Pittsburgh we will probably open half of it as the first phase.

And in Deer Park which is much larger we will open at least half, maybe even more.

Deer Park is owned with two other equal partners; we own a third of it.

Great, thanks very much.

Barb Zugolin (ph) with Greenstreet Advisers.

Most of my questions have been answered, but I was wondering if I could get an update on your asset sales program.

I know you had a couple that you were marketing a while ago.

I was just wondering what the likely timing of those to be sold is?

Right now we have one asset under contract.

And we don't know if it is going to close or not, candidly.

Do you have any others that you're marketing?

From time to time we get interests and we do market properties that we consider noncore, or where we can reinvest the funds to a better return for our investors.

But we have no other properties under contract right now.

Your '04 FFO guidance, does that assume any land sales?

No, it does not.

Thank you.

Harvey Shore (ph), East West Investments.

I'm sorry;

I came in late.

Could you discuss the occupancy rate at the Barstow center?

And also what was the dividend payout for the entire year 2004?

Occupancy at the Barstow center was about 86 percent.

We have just gotten another executed lease, and we have one other lease out for negotiation.

There is a good chance that we will be able to move the occupancy in Barstow by the end of 2004 to 100 percent.

That is outstanding.

Thank you.

The dividend that was paid, are you asking for the payout ratio or the dollar amount of the dividend?

Both.

The dollar amount of the dividend paid in 2003 was $2.46 and the payout ratio was approximately 71 percent.

And going forward?

Based on our guidance for next year our FFO payout ratio will between 60 and 65 percent, assuming a constant dividend.

Could you clarify that?

Will that be up or down?

That will be an improvement to the payout ratio.

Harvey Shore;

Of it.

By the way, is that the first time that that Barstow project has been fully occupied?

I think it was fully occupied when we opened it; but it has been quite a turnaround.

Okay, thank you.

(OPERATOR INSTRUCTIONS) Fred Taylor (ph) with Fleet.

Most of my questions have been answered.

I guess one for Frank.

The question I have I think will probably be even more clarified when we see your first-quarter results.

But it is really a little bit of an accounting lesson.

You are going to own a third of this new venture; but you are going to fully consolidate it with a kind of large minority interest on both the balance sheet and, I guess, running through the income statement.

So it is almost a reverse.

If I am saying it, you are right, the expenses and dividend maybe net out.

But assume you will see the outflow of a dividend to Blackstone in this structure?

How do you envision the P&L and balance sheet looking now with this structure going forward?

What will happen is obviously the balance sheet will be fully consolidated assets; and the liabilities being the GMAC loan.

And there will be a second minority interest line as you see in the press release.

And that amount basically represents, and I don't want to get too technical, but on a hypothetical liquidation basis what our partners would receive.

That is how we will allocate the income to our partners and ourselves, as we will have to do a hypothetical liquidation of book value calculation.

And whatever number that comes up to be, they will get allocated a certain amount of net assets; and we will get a certain amount of net assets.

Then we will allocate net income correctly in order to keep that equilibrium in balance if you will.

However it is accounted for, what would you suspect the cash payout to the Blackstone entity would be, whether it's quarterly or annually?

Our agreement on a cash distribution from operating cash flow is that they will get a 10 percent return on their invested capital distributed; and then we're allowed to distribute 10 percent to ourselves, 10 percent of our invested capital.

If there is any operating cash flow above that, we actually would get two-thirds of that and they would get one-third, kind of a flip of the ownership interest, as a promote to us if you will.

But when we compute how much income is allocated to them we have to look as if we liquidated the portfolio.

Where that comes in is they get an additional 2 percent return upon, quote, liquidation.

So in that sense we're allocating a 12 percent return to them when we are calculating how we allocate it.

Then it is two-thirds one-third to you; and I read something, I don't have it all in front of me; are they capped out at 17 or 20 percent?

There is no cap.

It is just anything over 12 is two-thirds to us and one-third to them.

Thank you for that explanation.

I appreciate it and I am sure we will take a look at it again in the first quarter.

Thank you.

That this time I'm showing no further questions.

I will now turn the call over to Mr. Tanger to conclude.

Thank you for participating today and for your interest in Bangor.

We have filed a form 8-K with the Securities and Exchange commission which includes supplemental information for the fourth quarter of 2003.

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

In addition, Steve, Frank, and I are always available to answer any other questions you may have.

Thank you and have a great day.

Thank you for participating in today's Tanger Factory Outlet Centers fourth-quarter 2003 conference call.

This call will be available for replay beginning at 6:00 PM Eastern Standard Time through 11:59 PM Eastern Standard Time on February 27, 2004.

The conference number for the replay is 5355432. (OPERATOR INSTRUCTIONS) The number to dial for the replay is 1-800-642-1687 or 706-645-9291.