Tanger Inc (SKT) 2005 Q4 法說會逐字稿

Good morning and welcome to the Tanger Factory Outlet Center's year end 2005 financial results conference call.

Please note that during this conference call, some of the management's comments may be forward-looking statements regarding the Company's property operations, leasing, tenant sales trends, development, acquisition, expansion 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, March 1st, 2006.

At this time, all participants are in a listen-only mode. Following management's prepared comments, the call will be opened up for your questions.

I will now turn the call over to Mr. Stanley Tanger, the Company's Chairman and Chief Executive Officer. Please go ahead, sir.

Thank you and good morning, everyone. With me today is Frank Marchisello, Executive Vice President, Chief Financial Officer. Steve Tanger electronically is with us in our New York office. Steve is our President, Chief Operating Officer.

The outlet industry continues to be a very profitable channel of distribution for our tenants. We are excited to be a major player in the growing industry. We had a great fourth quarter and a terrific 2005. Santa Claus was good to our shareholders and they have been rewarded with outstanding returns on their investment. During 2005, our shareholders received a 14.3% total return and for those who then chose for longer period a time, a 30% annual compounded rate over the last five years.

Frank will take us through our financial results and Steve electronically will follow with a summary of operating performance and future developments and then we'll have time for any questions you may have.

I'll now turn the call over to Frank.

Thank you, Mr. Tanger and good morning, everyone.

Details on our fourth quarter and year end 2005 results are included in our press release and supplemental information that we filed with our form 8K, so I'll just focus on a few key points. For the year ended December 31st, 2005, net income available to common shareholders was $0.16 per share as compared to net income available to common shareholders of $0.26 per share in 2004. Net income available to common shareholders in 2005 was impacted by a previously announced $9.9 million non-recurring charge for the early extinguishment of debt which has been presented as part of our interest expense in the fourth quarter of 2005. Excluding this charge, net income available to common shareholders for the year ended December 31st, 2005, would have been $0.50 per share resulting in an increase of 92.3% over the previous year.

Funds from operations for the year ended December 31, 2005, was $1.73 per share compared to $1.89 per share in 2004. Excluding the land parcel gains in the fourth quarter of 2005, our FFO for the year would have been $1.69 per share which was at the high end of the $1.66 to $1.70 per share guidance range that we issued back on November 23 of 2005, when we closed on the Blackstone's two-thirds interest in the Charter Oak portfolio. At the time of that press release we announced our belief that the acquisition would be accretive to net income and funds of operations during the calendar year 2006 and beyond; however, we expected the accretion generated from acquisition during the fourth quarter of 2005 would be offset by the short-term diluted nature of the offerings of debt and equity which I will summarize later on our call that related to the timing of the closing on the acquisition.

Our FFO was also impacted by $9.9 million non-recurring charge for the early extinguishment of debt in the fourth quarter of 2005. Excluding this charge, FFO for the year would have been $2.01 per share resulting in an increase of 6.3% over the previous year. This increase in FFO per share is attributable to a 20% increase in percentage rental income, the opening of approximately 68,000 square feet of expansion space, our successful buyout of Blackstone's interest in Charter Oak and our continued ability to increase rental rates on renewal and releasing of space during both 2004 and 2005. These positive results were achieved despite nearly a 200 basis point increase in short term interest rates which effectively reduced our FFO and net income for 2005 by estimated $0.04 to $0.05 per share.

Our FFO pay out ratio for 2005 was 74% and adjusted to exclude the early extinguishment of debt charge with 64% compared to 66% in 2004. Our FAD pay out ratio remains constant at 86% in both 2005 and 2004. The ratios for both years were aided by out parcel sales gains amounting to 1.6 million in 2005 and 1.5 million in 2004. We currently believe we can maintain an FFO payout ratio in the low 60% range and FAD payout ratio in the mid-80% range during 2006.

As of December 31st, 2005, we now have an equity market capital of over $1.1 billion and a total market capital of approximately $1.8 billion resulting in a debt to total market capital ratio of 37%. This represents a 26% increase in our equity market capital and a 30% increase in our total market capital since December 31st, 2004. We have limited our variable rate debt exposure to 17% as of year end 2005, and 15% if we pro forma the impact of the 800,000 additional class C preferred shares we chose in February 2006.

In fact, let me take a moment to summarize all the financial transactions we were able to complete during the fourth quarter of 2005. The catalyst for all these transactions was our decision to buy out Blackstone's two-thirds interest in the Charter Oak portfolio which Steve will discuss later on in our call. I'm very proud of what our finance team was able to accomplish. Due to their hard work and dedication, our Company raised over $381 million in debt and equity which was comprised of the following -- 3 million shares of common stock at $27.09 per share, 2.2 million 7.5% class C preferred shares at $25 per share and 250 million of 10 year 6.15% senior unsecured notes. In addition on October 3, 2005, we prepaid in full our mortgage debt outstanding with John Hancock Real Estate Finance, totaling approximately $77.4 million with a weighted average interest rate of 7.9% and an original maturity date of April 1, 2009.

As a result of the early prepayment we incurred the non-recurring charge that I mentioned earlier. This charge consisted of a prepayment premium of approximately 9.4 million and a write-off of deferred loan fees totaling approximately 0.5 million. Following the early repayment of the John Hancock mortgage debt, Standard and Poor's rating service announced an upgrade of our senior unsecured debt rating to an investment grade rating of triple B minus, citing our progress in unencumbering a number of our properties resulting in over half of our fully consolidated net operating income now being generated by unencumbered properties. Moody's Investor service had previously announced on June 27th, 2005, their upgrade of our senior unsecured debt rating to an investment grade rating of BAA3. Obtaining an investment grade rating has been an important goal and part of our long-range financial plan for many years. For the terms of our various debt securities, the attainment of the investment grade will save us approximately 45 basis points on our lines of credit, which currently have a balance outstanding of approximately 47 million, and approximately 60 basis points on our $53.5 million unsecured term loan. Having an investment grade rating from both agencies should be beneficial in obtaining a better execution and lower long term cost on any future public, fixed income securities we may choose to issue.

I'll now turn the call over to Steve Tanger to bring you up to date on our operating results and the new development sites. Steve?

Thank you, Frank, and good morning, everyone.

As of December 31, 2005, our portfolio of owned, partially owned and managed properties consisted of 33 factory outlet shopping centers diversified across 22 states, totaling 8.7 million square feet. I am pleased to report that the same center net operating income for our wholly owned portfolio increased 3.8% for the year ended December 2005, compared to 2004. This compares to a 1.2% increase during the year that ended December 2004 compared to a like period in 2003. The 3.8% increase in same center NOI during 2005 is the largest percentage increase that we have seen in many, many years. Average tenant occupancy costs as a percentage of tenant sales for 2005, increased to 7.5% from 7.3% in 2004.

As discussed in previous conference calls, we have been successful in increasing rents as sales increased and a percentage of our portfolio no longer has renewal options each year. During the last couple of years, we have renovated several of our centers and upgraded the overall co-tenancy in our portfolio. We are now seeing an acceptable return on these investments, as tenant sales increase and as we continue to increase rents accordingly. Rents on renewal and re-leased space on a cash basis in 2002, increased 1.7%. In 2003, increased 1.3% and in 2004, increased 5.5%. During 2005, this trend continued as we executed 460 leasing transactions representing over 1.9 million square feet of space throughout our portfolio, and achieved a positive rent spread on renewal and re-lease space of 6.3% on a cash basis. We executed renewals with existing tenants for 84% of the 1.8 million square feet of leases scheduled to come up for renewal during the year with an average increase on the executed renewals of 6% on a cash basis. This compares with last year when we executed approximately 88% of the 1.8 million square feet of leases expiring with an average increase on the executed renewals of 5.6% on a cash basis. Approximately 144,000 square feet of space not renewed with the existing tenants was at our option so that we could upgrade our co-tenancy and expand existing tenant stores at a number of locations. Excluding this space, we actually renewed well over 90% of the space that came up for renewal during 2005.

We have already made great progress on our 2006 renewals. As of the end of January, as we have obtained executed renewals for 856,000 square feet or 47% of the space coming up for renewal during 2006 with an average increase in base rental rates of 7.7% on a cash basis. Beginning this year, we will also be calculating our rental rate increases on a GAAP basis which would equate to about 11.3% increase in base rental rates on the 856,000 square feet of renewals completed as of January 31, 2006. Computing our rental rate increases on a GAAP basis will allow analysts and investors to compare our increase in rental rates with other retail REITs which may calculate rental increases in this fashion.

We have also re-tenanted over 419,000 square feet at an average increase in base rent on a cash basis of 7.1% over the rent that was being paid by the previous tenant to their vacating the space compared to 427,000 square feet at an average increase in base rent on a cash basis of 5.1% in 2004. Our overall occupancy rate at the end of the year was 97% marking the 25th consecutive year that we have achieved the year-end occupancy rate at or above 95%. Looking forward to 2006, we expect continued stability in our core portfolio, driven by increasing sales for existing tenants and a growing list of new tenants seeking space in the Tanger portfolio.

With respect to tenant productivity across our consolidated portfolio, comparable traffic counts during the fourth quarter of 2005 were up over 3% compared to 2004. As a result, same-space sales increased 6.2% for the three months ended December 31, 2005 as compared to the three months ended December 2004. It was a very merry Christmas for the tenants in the Tanger Outlet Centers in 2005. Sales increased 3.4% for the 12 months ended December 31, 2005 to $320 per square foot. Reported same-store sales for the three months ended December 31 increased 3.9% compared to the same period in 2004 and we're up 1.2% for the entire year. The percentage increase in sales during the fourth quarter is the highest fourth quarter increase we have seen in at least the last five years. The trend appears to be continuing as comparable traffic counts for January 2006 were up over 8% and comparable tenant sales in January of 2006 were up over 12%.

Over the past 10 years, our tenant sales have grown at a compounded average rate of 3.5% while inflation has averaged closer to 2.5%. This tells us that in spite of the ever-increasing options consumers have for shopping, the outlet concept continues to attract more of the customers' retail dollars. The outlet industry continues to be a very profitable channel of distribution for our tenants and demand for space continues to be strong. In fact, the financial strength of our tenants continues to be at the very best. During 2005, we did not have a single tenant file for bankruptcy protection beating the previous year when we only had two tenants file. As an industry leader, we also take pride in our ability to introduce new manufacturers and brand-name retailers to the outlet concept, as well as work with existing tenants to extend their brand names through new concept stores. For example, we recently opened the very first Polo Ralph Lauren children store in our successful center in Lancaster, Pennsylvania. During 2005, we also added 27 new tenants, such as Gap Kids, Alfred Dunner, Zumiez, Sony, Epic Jeans, Journeys Kidz, Gymboree and many others.

We're also very proud of our ability to be the dominant outlet center in our markets particularly where there are multiple outlet centers owner by multiple developers. For example, our center in Branson, Missouri received the Best of the Ozarks award for the second year in a row as the favorite outlet center in southern Missouri. These types of awards just don't happen. Great tenants, great marketing, a great-looking property and great customer service are all the result of many hard hours of work by our entire team, both in our corporate office and in the field.

As many of you are aware, on December 25th, 2005, we announced the closing on our acquisition for $282.5 million of the remaining two-thirds interest in the Charter Oak portfolio, owned by an affiliate of Blackstone Real Estate Advisors. The Charter Oak portfolio comprised of nine outlet centers totaling 3.3 million square feet was originally acquired in December 2003 by a joint venture company owned one-third by Tanger and two-thirds by Blackstone. During this time we have provided for a fee operating, management, leasing and marketing services for the properties. As a result of acquiring the remaining two-thirds interest from Blackstone, the total amount of wholly owned square footage in our real estate portfolio has increased by 66% from 5 million to 8.3 million square feet. The purchase price of $282.5 million involved an all cash payment which was financed in the public markets through a mixture of long-term unsecured debt and equity transactions which Frank laid out earlier in the call. From a strategic and financial perspective our timing could not have been better and we expect this transaction to be accretive to our future financial results.

From a development standpoint, during 2005 we completed a 46,400 square foot expansion to our center in Locust Grove, Georgia, south of Atlanta. Tenants in this expansion included Polo Ralph Lauren, Sketchers, Children's Place, and others. We also completed a 21,000 square foot expansion to our center in Foley, Alabama, where stores opened during the fourth quarter of 2005. Tenants in this expansion included Ann Taylor, Sketchers, Tommy Hilfiger and several others. We're under construction in our new projects in Charleston, South Carolina and Wisconsin Dells, Wisconsin. We currently have executed leases and lease commitments for 85% of the 265,000 square feet of gross leasable area in Wisconsin Dells. In Charleston we have executed leases and lease commitments for about 70% of the 352,000 square feet of GLA. In addition, we have lease proposals out on most of the remaining space in both locations. Our leasing group continues to do a tremendous job in converting additional tenant commitments into signed leases. We expect to have most of the space in both centers leased by the time construction is completed and for stores to be opened during the fourth quarter of 2006. Both of these projects are located in high-traffic, tourist destinations and we anticipate that they will be very successful centers for us.

As for our site south of Pittsburgh, we have commented on previous calls that Bass Pro Shops controls the option on the land adjacent to our site. We continue to meet with the senior management of Bass Pro to coordinate site plans with us in order to maximize the potential for both our companies. In addition, Bass Pro has been actively participating with us in the TIF approval process. Bass Pro has announced plans for a 200,000 square foot Bass Pro Shop, a 200 room lodge surrounding the store, a spa, 26 cabins and a driving range. The Bass Pro Shops site is about 211 acres and also has room for restaurants and an aquarium. Since our last earnings conference call we have seen some head way on the TIF approval process. All three local taxing authorities, the school board, the county commissioners and the township board of supervisors have voted in favor of the TIF to fund certain infrastructure necessary to develop the site. While we were very pleased with this outcome, there has been an appeal filed which challenges the taxing authorities approval of the TIF. Tenant interests in this site remains robust and subject to our ability to successfully defend the TIF approval, we're still targeting a fourth quarter 2007 opening.

With regard to our site in Deer Park, Babylon Township, New York, we continue to work our way through the permitting process which should be completed by year end. Based on advanced previews of the property, we have received commitments from several key magnet tenants. Once the development and permitting process is complete, we will announce the turnover date to our tenants. At that time, we expect to receive signed leases and to begin construction. We remain comfortable with our previously announced opening in the fourth quarter of 2007.

New ground of development is a phenomenal value creation opportunity for our Company. Over the past 25 years we have learned the skill set to manage the risk associated with this type of development. We are currently negotiating an option for land on which to develop additional new Tanger Outlet Centers that are in the very early stages of determining the viability and therefore are not prepared to announce the locations at this time. We continue to explore other new development sites, potential acquisitions and disposition opportunities.

With respect to earnings guidance, based on current market conditions, the strength and stability of our core portfolio, we currently believe our estimated diluted net income per share will be between $0.74 and $0.78 and our FFO for 2006 will be between $2.18 and $2.22 per share. The midpoint of this range represents an increase in FFO over 2005 of approximately 27%. On a quarterly basis as a percentage of our annual estimate, we currently expect our FFO in the first quarter will be approximately 23%, for the second quarter 24%, the third quarter 26%, and the fourth quarter 27%.

Our earnings guidance for 2006, includes the issuance of an additional 800,000 class C preferred shares on February 16, 2006, the sale of our small center in Pigeon Forge, Tennessee on January 23, 2006, and the potential sale of another non-core outlet center. While these three transactions are expected to cause a $0.03 dilution in 2006 earnings, we believe all three transactions are the right long-term decision for our Company, as they allow us to recycle capital and provide incremental equity for future investment.

In our guidance we also assume tenant sales remain stable in 2006 at approximately the same level as during 2005. We also assume we will continue to renew leases at higher rental rates; however, as is the case historically, a tenant sales break point for percentage rental calculations is typically increased at the time the base rent increases. This results in our replacing variable rate percentage rent revenue with a more stable fixed-rate rent revenue stream. Because of these two assumptions, our forecast will tend to reflect the decrease in percentage rental revenue the largest part of which occurs in the fourth quarter of each year. It is our hope that as in the past tenant sales increase by an amount high enough to offset the increase in tenant sales break point, but again, we have not made this assumption in our current forecast in an attempt to be conservative. Our earnings guidance also excludes the impact of any potential gains on the sale of land parcels and the impact of any sales or acquisition of properties beyond the two previously mentioned.

We continue to thoughtfully use our resources and to maintain a conservative financial position. We are very excited and proud of our team's ability to execute our long-term strategy for growth during 2005 and look forward to another great year in 2006.

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

[OPERATOR INSTRUCTIONS]

Your first question comes from Michael Bilerman with Citigroup.

Good morning. Jon Litt's on the phone with me as well. Steve, I was wondering if you could review with us, now that Charleston and Wisconsin are fully moving forward, the cost expectations, your yield, and when you actually think it will start to hit your earnings?

Good morning, Michael and Jon. Our cost estimates in Charleston are funding requirements and, again, we own Charleston 100%. We estimate to be somewhere around $65 million, and that's a little bit up from our previous cost estimates; however, we've been able to generate higher rental incomes from our tenants, and we still expect a cash on cash return of about 11% to 12%. In Wisconsin Dells, we have local partner, a 50% partner who is the land owner and a local resident. Our funding requirement or our share is only going to be close to around $7 million and we're still looking in Wisconsin on a cash on cash basis, somewhere around 10.5% to 11%. Obviously, based on our return on capital, since we only have a 50% increase, it's going to be considerably more.

And the timing as to when those projects actually open and start to flow through the income statement?

We expect them as previous--as previously reported, to be open during the fourth quarter, and stores will be opening sequentially as we move through the construction process, so I suspect that in '07 you'll get the full impact of both of these transactions.

Just on Charleston, the last cost that you had was $45 million. You said now it is $65?

Well, we're up to $65 million. That of course includes tenant allowances, we're able to get some high-profile tenants to come in and the construction costs have gone up. So we've revised our estimates accordingly. However, we're still able to get returns from our tenants that are appropriate. Also there have been some construction increases in costs for concrete, steel, et cetera.

And then on Madison, what is the total project cost 100% share including debt?

We're looking at $37 to $40 million total cost in Wisconsin.

And then moving towards Pittsburgh and Long Island, how are those costs changing with increasing construction costs with increased -- I guess increased legal and ongoing trying to push those projects through, and, you know, what's going to be the tipping point to move these from '07 to a later point?

Obviously the costs are going to be higher than we estimated a year or two ago. We have not updated until we're really ready to go out for construction, the cost, but they will be higher, however. We're able to drive rents and our tenants' sales are increasing around the country and they can justify paying higher rents. So we're still estimating the cost, returns cash on cash between 11% and 12% on both of these transactions. The tipping point, you know, in both of these, is now in the legal process. We expect the litigation in Pittsburgh to be dismissed. The anti-TIF group is challenging the legislative authority of the local taxing authorities to issue a TIF. We don't think it has any merit; however, we hope that the judge agrees with us. If it is not dismissed and we have to go through the whole process, it may delay things. It's really out of our control right now. With regard to Deer Park, we have successfully moved through most of the process, and unless there's some issue that we're not aware of, we're hopeful that we'll be able to meet the deadline.

Okay. Just turning to guidance, you gave out the break-out by quarter which shows about a $0.02 bump from Q3 to Q4. If you look back the last few years, adjusted for land sales and all the charges, you've basically been up $0.05 to $0.06. This year you have the two projects that are going to come on line, I'm just trying to reconcile why Q4 looks a little light relative to the other quarters.

Michael, this is Frank. Part of that is the point that Steve made earlier on the call and that is that when we look at our forecast we tend to assume tenant sales will remain constant. But what happens is that we also assume tenants will renew and at higher rental rates. Typically when that happens, the tenants' break point for percentage rent is moved up accordingly. So our conservative assumption that sales will remain flat tends to bring in a percentage rent number that actually is going to look lower than the previous year. Historically, we'll be able to make that up because tenant sales have gone up but that is not where we like to start our number. And because a lot of percentage rent numbers comes into the fourth quarter that will be the quarter that gets impacted the most by that conservative assumption. So I suspect $0.02 to $0.03 of that number that you're looking at is just too conservative for percentage rent calculation.

Okay. I think John has a question as well.

Yes, question on the Bass Pro Shop deal. Can you talk about roughly the economics that they typically get?

John, the good news for our Company is that Bass Pro decided to locate directly contiguous with our site in Pittsburgh. The really good news is that they're developing it themselves and we don't have to pay for it. I can't speak to the economics of a Bass Pro transaction because we have never done one as a ground-up development with Bass Pro.

What is your sense of what it cost to put one up and what the sales they might do?

I think you'd have to ask Bass Pro. I'm not qualified to answer that.

Do you think it is a draw to your center? Or do you think it's a destination?

I think the more traffic that comes to the area, we all benefit. This site is located across the street from one of the two locations in the Pittsburgh area designated by the governor as a site for parimutuel betting. We expect the casinos to be open sometime in the next year. With the road system that's currently in place, and Bass Pro and a Tanger outlet center, it's going to be a huge regional shopping destination. There will be hotels, appropriate food service, appropriate entertainment, and we expect that this will generate a tremendous amount of tourism from both West Virginia and western Pennsylvania.

Thank you.

Your next question comes from Craig Schmidt with Merrill Lynch.

Good morning.

Good morning, Craig.

Two questions that may be related. I was just wondering, you know, given the year to date 6.3% increase in re-tenanting and renewed space leases, the fourth quarter was low at 1.9%, if there's any reason for that. And, two, why the re-tenanting seemed to be so light in the fourth quarter relative to the prior three quarters. In terms of activity.

All right. Well, typically, and you talk about the renewal rates for rent increases in the fourth quarter.

Well, I guess I'm just noticing we had 42 spaces re-tenanted in the first quarter, and 32 in the second and we shoot to the fourth quarter we had six deals and I'm just noticing that your rents measures all north of 5.7% in the first three quarters and then we're at 1.9 in the fourth quarter, for the combined--

It is just basically our ability in relationships with our tenants to get the bulk of the tenants to renew early in the year.

Okay.

The increases are just a mix of whichever tenants and whichever centers but I think the square footage is much less in the fourth quarter. So one or two deals might impact the average.

I can expect maybe that same sort of pattern to continue in '06?

I would suspect that. As we just reported, close to 50% of the entire year of 2006 renewals have already been completed by the end of January.

Right. Okay. And then the second question, just I noticed the Van Heusen CEO stepped down. I wonder if that had any impact for Tanger or your dealings with them had changed lately?

We know both Mark Weber and Manny Chirico. We have an outstanding long term 25 year relationship with the Phillips-Van Heusen corporation and all of their different brands. Candidly, I don't know what the situation -- what caused the situation to occur. We feel that the management's long-term view on the outlet distribution channel for their products remains very strong. We've met with Manny and the rest of the senior management team within the last month and we expect to continue to increase our long standing, very profitable relationship with the Phillips-Van Heusen Company.

I noticed they upped their guidance. Have -- realizing that there's many components to their business, but has their outlet business been stronger as well?

Again, you would have to ask them and rely on their public statements. The Van Heusen group of companies performance in the Tanger portfolio was up considerably last year in the fourth quarter and the sales in the January period continue that very positive trend.

Great. That's what I wanted to hear. Thanks.

Your next question comes from Ross Nussbaum with Banc of America Securities.

Hi, good morning.

Hey, Ross.

Couple questions -- first, Steve, on the Pittsburgh development has a hearing date been set for the dismissal of the appeal?

The oral -- written responses have been submitted to the court. Oral argument appeared -- oral argument occurred within the last week. So it is in the judge's hands right now. We expect in the next 60 or 90 days that there will be some decision with regard to the dismissal or non-dismissal of the litigation.

And what can you do if the appeal is actually successful? Is that the end of the project for you? Or do you have other actions you can take at that point?

Well, this is not an appeal. This is the actual first motion, and our motion was to dismiss. If the judge decides that he wants to have a hearing and go to a full-blown process, then that hearing will be scheduled and evidence will be presented and the judge will make a decision going forward. Ours was just a preemptive motion just to dismiss.

So it really amounts to at least initially what would be a delay in the project into '08 if in fact it is not dismissed?

That probably will be the state.

Other question, I don't know if Frank or Steve or which wants to take this. Do you give the same store NOI growth for the fourth quarter? I heard it for the full year.

It was around 3%.

Okay and embedded in your guidance for 2006, did you give that number? In same center NOI growth? Yes.

I believe it is going to be in our numbers at around between 2% and 3%.

Okay. And out parcel sales are obviously a part of your business and you have a couple of projects under way here. What can we expect in terms of out parcel sales in 2006, what are you currently marketing or you expect to be marketing throughout the year?

Ross, as you know, out parcel sales are variable and very tough to predict when they will actually close. Our plan with Wisconsin Dells and Charleston, there are no out parcels we control in the Dells. In Charleston we have a couple. It has proven to be a good long term strategy to let the center open, mature a little bit and add more value to the out parcels and that is our plan in Charleston. With regard to the existing portfolio at Tanger Centers, we have a full-time senior person constantly marketing and working with appropriate users, hotel and food service people, for the out parcels in our existing portfolio. Those transactions take quite a long time to actually from initial commitment to opening for business, and it's tough to predict when they will occur. So that's why we don't give guidance on those.

[OPERATOR INSTRUCTIONS]

Your next question comes from [Audi Hibald] with Millennium Partners.

Good morning, gentlemen. Just one clarification, Steven, on the 850,000 square feet that you've already leased in January, I think that is about 47% of the '06 expirations. The renewals there, what was the cash rent spread?

Frank, do you have the number off the top of your head? Give me just a second, okay?

Sure.

It was 7.7% on the cash basis.

That's just the renewals or that's renewals and re-tenanting?

Just renewals.

Okay. And then new leases?

Just one second that was a cash basis. It was close to 11% on the GAAP basis.

Okay. So that's a substantial jump over what you saw in the fourth quarter at around, I think what Craig was saying 1% plus.

That is as I mentioned earlier, based on the mix of tenants and the locations of the stores.

I think if you go back and look at our annual supplement for 2004 and 2005 you will see a similar trend in when we do the initial renewals early in the year, they come through and they're the ones that we tend to get the higher increase on and as the year goes by and we're negotiating the tougher ones, the increase tends to get a little less. But I think that both in '04 and '05 you will notice the increases in overall rental rates has been substantially higher than in previous years.

And the sales continued to increase from our tenants.

Yes. And is it in terms of if I look at your page 9 in the supplemental where you actually show the renewal spreads, very strong in the first quarter, little bit less in the second quarter and then it decreases in third and fourth, is that a seasonal effect that we can expect in '06, or you can't really read into any seasonality in these numbers?

I think it's reasonable to expect the same trend to occur in '06 which is the same trend in '05 and '04 and '03.

Okay. Thank you very much.

Yes.

Your next question comes from Alan Calderon with European Investors.

Yes. Good morning, guys. Just building on Ross Nussbaum's line of questioning here, I guess other income was about $0.20, $0.21 in '04 and '05 of your FFO. And I guess it is about $5.7 million of other income other than land sales. What were you guys kind of budgeting in your range of guidance you gave for '06 for other income?

Our guidance for other income for '06 would be -- hold on just one second. Would be an increase of about 5% excluding out parcel sales.

Okay. Thank you very much.

At this time there are no further questions. I would like to turn it back over to management for closing remarks.

Thank you for participating today and for your interest in Tanger Outlets. Steve, Frank and I are always available to answer any questions you might have. Thank you and God bless you and have a great day. Bye now.

Ladies and gentlemen, this concludes today's Tanger Factory Outlet Centers' year end 2005 financial results conference call. You may now disconnect.