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Operator
Good morning, my name is Alesha, and I will be your conference operator today. At this time, I would like to welcome everyone to the Tanger Factory Outlet Center's fourth-quarter and year-end 2010 conference call. On the call this morning is Steven Tanger, President and CEO; Frank Marchisello, CFO; and Mona Walsh, Vice President of Corporate Communications.
I would now like to turn the call over to Mona Walsh. Please go ahead.
- VP Corporate Communications
Thank you. Good morning, this is the Tanger Factory Outlet Center's fourth-quarter and year-end 2010 conference call. Please note that during this call, some of management's comments will 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. 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 23, 2011.
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 Steven Tanger. Please go ahead, Steve.
- President and CEO
Thank you, Mona, and good morning, everyone.As we entered the 2010 holiday shopping season, and subsequently closed the year, our operating results were strong and at the top of our guidance range. Much of our success in 2010 was a result of our careful positioning and planning over the past five years.
I am delighted to report that as of December 31, 2010, Tanger ranked number one of all retail REITs in total return to shareholders in the 3-, 5-, and 10-year categories, with a 53.4%, 117%, and 705% total cumulative return, respectively. Obviously, this is a tough act to follow, but I'm convinced that we have the right group of battle-tested senior executives. We have made significant investments in our properties, and put the right tenants in the right spaces. We have also reinvested in our properties to provide a beautiful, shopper-friendly environment. All of these parts are coming together, which leads me to be optimistic about our continued future growth.
Tanger's portfolio of properties were strong as we entered 2010. The addition of our extraordinarily successful center in Mebane, North Carolina, in November, made the portfolio even stronger. This $65 million, 319,000 square-foot center opened just in time for the holiday shopping season, 100% occupied. Mebane was jam-packed with shoppers from the opening day through the end of the year. Sales far exceeded most initial estimates, leading several tenants to call and say that it was really nice to have a positive result to celebrate after a couple of tough years.
We also added significant talent during the year to both our management team and our Board of Directors. Tom McDonough, with close to 30 years of REIT management, leasing, acquisition and development experience, joined Tanger in August in the new role of Executive Vice President of Operations. Tom Reddin, a 30-year consumer marketing and e-commerce veteran, was appointed to our Board of Directors in July.
Recognizing the importance of mobile communications and keeping the lines of communications open with our shoppers, Tanger launched a highly interactive mobile consumer website in October. In January of this year, we expanded on this offering with the launch of a Tanger Outlets mobile app, the first in the outlet market. The mobile app highlights our brands, so our retail partners are delighted that we have made the investment in this technology. Designed for easy viewing on today's most popular smartphones, the Tanger mobile site and mobile app gives our on-the-go consumers access to key information while at the Tanger outlet center of their choice.
From an operational perspective, same-center NOI increased by 3.7% for the fourth quarter, and 2.6% for the year ended December 31, 2010, as compared to 1.4% in 2009, well ahead of our initial expectations. Tenant comparable sales for the rolling 12 months ended December 31, 2010, increased 6.6% to $354 per square foot. Comparable sales for the fourth quarter increased 5.9% compared to the fourth quarter of 2009. Our tenant average sales during 2010 have now surpassed their annual levels in 2007, a peak sales year for Tanger by 3.5%.
I know that many of you want to learn more about the progress we are making on the re-opening of our Hilton Head One Center, our development pipeline, and our recent announcement on Tanger's Canadian joint venture with RioCan, which I will address later in the call. But first let me turn the call over to Frank, who will take you through our financial results for the quarter and year-end 2010, and then I will follow with a summary of our operating performance and our current expectations for the year 2011.
- EVP, CFO and Secretary
Thank you, Steve, and good morning, everyone.Before I start, let me remind our participants today that Tanger completed a 2-for-1 split of our common shares on January 24, 2011, whereby shareholders of record on January 13, 2011, received one additional common share for each share outstanding.The last time we split the stock was December 2004. In the past six years since that split, we have paid $4.30 per share in dividends, and more than doubled the price of our stock. Our stakeholders have received a total return of 148% since the split in 2004. Past performance is not a guarantee of future success, however, our strategic plan is focused on continuing to create significant long-term value for our stakeholders. While the stock split occurred in January of 2011, the accounting rules require us to present our results for 2010 on the split-adjusted basis. As such, I may often refer to split-adjusted numbers in my remarks, where applicable.
Our reported year-end funds from operations, or FFO, of $2.43 per share on a pre-split basis, was at the top of our guidance range of $2.40 to $2.43. Total adjusted funds from operations for the year ended December 31, 2010, increased 6.1% to $122.8 million compared to $115.7 million last year. As expected, adjusted FFO per share was $1.33 per share on a split-adjusted basis, compared to $1.37 per share for the 12 months ended December 31, 2009, primarily due to the issuance of 8.3 million additional common shares associated with two successful equity transactions we completed during 2009. More information on these transactions may be found in our form 10-K for the year ended December 31, 2009, and 2010 when it's available.
On a consolidated basis, our total market capitalization at December 31, 2010, was approximately $3.1 billion, including $714.6 million of debt outstanding, equating to a debt to total market capitalization of approximately 23.2%. We also maintained a strong interest coverage ratio of 4.64 times for 2010, compared to 4.16 times last year. As of December 31, 2010, approximately 77.6% of our debt was at fixed rates.
In June of 2010, we successfully closed on a $300 million, 10-year senior bonds offering, with a 6.125% coupon, priced at 99.3% of par, to yield 6.219%. The proceeds of the offering were used to repay a $235 million unsecured term loan with an effective interest rate of 5.25%, terminate two underlying interest rate swap agreements, and pay down outstanding balances under our unsecured revolving lines of credit. In November of 2010, we closed on $400 million in revolving unsecured credit facilities that matured on November 29, 2013, and include an option to extend the maturities for one additional year. These lines currently bear interest at a rate of LIBOR plus 190 basis points on balances outstanding, and require the payment of an annual 40 basis point facility fee on the total commitment amount. While we experienced great execution with regards to these two transactions, the impact of the higher interest costs will reduce earnings by approximately $0.05 per share in 2011, which is reflected in our 2011 earnings guidance.
We also completed the redemption of our Class C preferred shares on December 9, 2010, for a total redemption price of $25.198 per preferred share. When the preferred shares were issued in October of 2005, we incurred approximately $2.5 million in issuance costs, and recorded such costs as a reduction in shareholders' equity. At the time of the redemption, and in accordance with GAAP, we recognized the $2.5 million of issuance costs as a reduction to net income, to arrive at net income available to common shareholders for the fourth quarter and for the year 2010.
Following our recent senior notes offerings, the refinancing of our lines of credit, and the redemption of our preferred shares, we have no significant debt maturities now until November of 2013 and 2015. As of December 31, 2010, our wholly-owned portfolio of properties was 100% unencumbered, and we had $106 million outstanding on our unsecured lines of credit.
Our Board of Directors declared a dividend of $0.19375 per share, $0.3875 on a pre-split adjusted basis, for the fourth quarter ended December 31, 2010, payable on February 15 to shareholders of record on January 31. On a split-adjusted basis, the annualized cash dividend currently equals $0.775 per share.
We have paid cash dividends each quarter over the past 17 years since becoming a publicly traded entity in May of 1993. And we are one of a handful of REITs who have raised their dividend each year since going public. Our FAD payout ratio is expected to be approximately 71% by year-end 2011, so our dividend is well covered. We will generate incremental cash flow over our dividends, which we will plan on using to help fund our new developments, and reduce amounts outstanding on our lines of credit. We've maintained a conservative approach to every aspect of our business, which continues to build value for all of our stakeholders over time.
I will now turn the call back over to Steve.
- President and CEO
Thank you, Frank.I'm pleased to report that through the end of the fourth quarter, we continued to see positive rent spreads on the renewal and releasing of space within our portfolio. As of the end of December, we executed 416 leases, totaling 1,649,000 square feet throughout our wholly-owned portfolio. New tenants to Tanger in 2010 included outstanding brands such as PS by Aeropostale, Ed Hardy, New Balance, Jos, A, Bank, Coach Men's, Hurley's, Soma, and New York & Company.
Lease renewals for 2010 accounted for 1,217,000 square feet, or about 83.4% of the square footage coming up for renewal in 2010, and generated an increase in average base rental rates on the executed renewals of 9.2%. In addition, during the year we re-tenanted approximately 432,000 square feet, with an increase in average base rental rates of 25.9%. The blended rent increase on lease renewals and re-tenanted space was 13.8%.
2011 rent spreads continue to be strong. Through the end of January 2011, we have signed renewals, and renewals in process, totaling 57% of the space coming up for renewal in 2011, at an average increase in base rents of 18%. This compares to January 2010, when we had signed renewals, and renewals in process, totaling 38% of the space coming up for renewal in 2010, at an average base rental increase of 8.8%.
Through January 2011, we re-tenanted approximately 207,000 square feet, with an average base rental increase of 39.7%. This compares to the same period in January 2010, re-tenanting activity of 164,000 square feet, with an average base rental increase of 22.4%. Tanger's low cost of occupancy, and our tenant's increasing sales, allow us the opportunity to continue to drive up rents while maintaining a very profitable distribution channel for our tenant partners. We have upgraded our tenant mix, and new brand names such as Polo Ralph Lauren, American Eagle, and Chico's have recently opened in Charleston, along with Ann Taylor Loft, Polo Ralph Lauren and Saks Fifth Avenue OFF 5th, who have opened in our Pittsburgh center.
As I mentioned earlier, same-center NOI growth increased 2.6% for the year 2010, and 3.7% during the fourth quarter of 2010. This was well ahead of the 1% increase, which was the mid-point of our initial guidance. The overall occupancy rate for our wholly-owned stabilized properties was 98.4% at the end of the fourth quarter, up from 98.1% at the end of September 2010, and 96% at the end of 2009. This is Tanger's 30th consecutive year since the Company was formed in 1981, that we have achieved a year-end portfolio occupancy rate at or above 95%. This long-term consistent performance is unmatched by any other REIT. There is a lot of demand for space in Tanger's centers, and virtually no excess supply. Consequently, our view is that pricing power is rapidly returning to the landlord, as our properties continue to perform well.
Reported tenant comparable sales within our wholly-owned portfolio increased 6.6% for the rolling 12 months ended December 31, 2010, to $354 per square foot. Sales for the fourth quarter increased 5.9% compared to the fourth quarter of 2009. While many of our retail REIT peers have not yet regained tenant sales at levels reported prior to the recession, our 2010 tenant sales have now surpassed to the peak in 2007 by 3.5%.
Our Hilton Head 1 center, currently in the midst of the final stages of redevelopment in Beaufort County, South Carolina, will re-open on March 31. Grand re-opening activities are planned for the entire weekend of April 1 through April 3. Currently the center has leases signed, or out for signature, on 91.5% of the leasable square footage. Upon completion, Hilton Head One will be approximately 176,000 square feet, plus four restaurant land parcels facing Highway 278. Panera Bread, Olive Garden and Longhorn Steakhouse will occupy three of these parcels.
A quick line-up of stores our shoppers in the Hilton Head area are anxiously awaiting to open are Brooks Brothers, Chico's, The Children's Place, Donna Karan, Hugo Boss, J.Crew, Jockey, Jones New York, Kay Jewelers, Kenneth Cole, Lane Bryant, Levi's, New Balance, Nine West, Polo Ralph Lauren, Saks Fifth Avenue OFF 5th, Talbots, Theory, Tommy Hilfiger, Under Armour, White House Black Market and many more. Our expected $43 million incremental investment will create the first LEED-certified green shopping center in Beaufort County, South Carolina. Hilton Head 2, just down the road on Highway 278, continues to service our customer base in this upscale tourist location. This center features brand name and designer stores such as Abercrombie & Fitch, American Eagle, Banana Republic, Carter's, OshKosh B'Gosh, Gap, Nike, Lucky Brand Jeans, Johnson & Murphy, Crocs, just to name a few.
We are continuing the process of building our shadow pipeline of potential new developments in several markets across the country, where we intend to develop or acquire properties well-suited for outlet shopping. These markets are currently either under-served or not served at all by the outlet industry.Currently, we are leasing and developing new sites in the west Phoenix and Scottsdale, Arizona, markets, along with the League City, just outside of Houston in the Texas market. These sites have received enthusiastic support from our tenant base, and each one has an excellent market potential for an outlet center. When Tanger achieves the minimum pre-leasing phase 1 threshold of at least 50% on these projects, we will break ground and proceed with construction. Grand opening activities will take place a year after the start of construction, which is currently anticipated to begin in late 2011.
We remain very excited about the growth prospects for our Company and for our industry, as the tenant community continues to indicate the desire to expand into new markets in the United States and Canada, which leads me to our most recent news. On January 17, 2011, we announced that Tanger has entered into a letter of intent with RioCan real estate investment trust to form an exclusive joint venture for the acquisition, development and leasing of sites across Canada for Tanger Outlet Centers. RioCan is Canada's largest REIT, focused on retail real estate, and will provide Tanger with the necessary on-the-ground experience needed for our successful expansion into the growing Canadian marketplace.
The sites need to be suitable for development or re-development as outlet shopping centers, similar to the design of our existing US portfolio, and will be branded Tanger Outlet Centers. The Tanger RioCan joint venture intends to develop as many as 10 to 15 outlet centers in large Canadian urban and tourist markets over a 5 to 7 year period. The projects developed will be co-owned by Tanger and RioCan on a 50/ 50 basis. Tanger's top retailers are looking to Canada for growth, and we are pleased to build outlet centers for them to occupy and prosper.
I have an update today for you on our progress with the exit of Liz Claiborne from the outlet business. Tanger has had a long and successful relationship with Liz Claiborne, and we are delighted that they decided to continue to own and operate outlet stores for their Juicy Couture, Lucky Brand Jeans, Kenzie, and Kate Spade brands.In July 2010, when Liz Claiborne announced their intention to transition out of their Liz Claiborne branded outlet stores, their footprint in Tanger centers was approximately 233,409 square feet. Our portfolio had 22 Liz Claiborne stores, which represented just 2.6% of our total portfolio. The combined annualized base and percentage rent revenue to Tanger from these Liz Claiborne branded outlet stores represented less than 1.5% of Tanger's total base and percentage rent revenues.
As of today, we have re-tenanted 188,149 square feet, or 81% of the space vacated by Liz Claiborne across our portfolio of centers, with successful brands such as Donna Karan, Talbots, Chico's, Jos. A. Bank, American Eagle, Forever 21 and Ann Taylor Loft. These brands will invigorate each center with their fresh offerings, and they will give our shopper a new reason to visit the Tanger Outlet Centers of their choice. We feel confident that we will re-tenant the remaining 45,206 square feet very soon, as we are currently in the process of negotiating leases with fabulous brands, who will re-tenant approximately 36,000 square feet this year.
With respect to earnings guidance for 2011, based on the positive trends in 2010 and our current view of market conditions, we believe our estimated diluted net income per share for 2011 will be between $0.53 and $0.59 per share, and our FFO for 2011 will be between $1.35 and $1.41 per share. Our earnings guidance includes a projected increase in same-center net operating income of between 2% and 3%.This guidance also assumes that the Company's general and administrative expenses will average approximately $6.5 million per quarter, tenant sales will remain stable, and year-end 2011 occupancy is budgeted at approximately 97%. Our 2011 earnings estimates do not include any rent termination fees, the impact of any potential future refinancing transactions, the sale of any outparcels of land, or the sale or acquisition of any properties.
We have over 2,000 leases with good credit, brand-name tenants who provide a continuous and predictable cash flow in good times and in challenging times. In 2010, we had three tenant bankruptcies, which represented less than 0.5% of the square footage in our entire portfolio. We plan to continue to thoughtfully use our resources and to maintain a conservative financial position. Our solid balance sheet, with no significant debt maturities until November 2013, and no mortgages encumbering any of our wholly-owned assets, puts us in a very strong position for 2011 and many years to come.
2010 was a good year. The entire Tanger team worked extremely hard and achieved extraordinary results. We have continued to re-invest in our assets to upgrade their appearance and tenant mix. I would like to also thank our talented and committed group of Directors, who have helped us formulate our long-term strategic plan. We are all passionate about our successful business model, and look forward to continued growth.
I would now like to open the call for questions, operator, please.
Operator
(Operator Instructions) Quentin Velleley, your line is open.
- Analyst
Good morning, I'm here with Michael Bilerman as well. Just a couple of quick questions on the Canadian joint venture with RioCan. Firstly, Steve, can you just talk a little bit more about what retailers you've had discussions with, and as you look at these developments, what proportion of the development do you think will be anchored by US retailers?
- President and CEO
Well, as you might imagine, we've been looking at Canada for some time, and have had extensive conversations with most of our top 25 retailers. They have virtually all expressed an interest in either entering or expanding their footprint in Canada. Based upon that, we were delighted to meet Ed Sonshine and be able to form a joint venture with RioCan, which we think not only is the largest, but may well be the best REIT in the Canadian market, certainly the best REIT focusing on retail. And we are optimistic that these positive conversations with our large tenants will result in leases. Second, we expect that well in excess of 50% of the GLA will be with American brand names and designer names, either expanding or entering the Canadian market.
- Analyst
Okay. And then just in terms of funding the joint venture, your 50% share, what kind of leverage level are you looking at? And also, I assume you will use the secured debt Canadian denominator, is that correct?
- President and CEO
We are in the process now of identifying sites. We have not gotten to the point yet of determining the appropriate amount of leverage or the type of leverage we want to place on the assets. As you know, RioCan is liquid and large. Tanger is liquid and large. And when we have identified sites, and a pro forma that we're comfortable with, and ready to start construction, we will announce the way it will be financed.
- Analyst
Okay. Thank you.
Operator
Craig Schmidt, your line is open.
- Analyst
Thank you. Steve, are you able to take down the land for your League City project?
- President and CEO
I think you're referring to the bankruptcy proceeding. The seller entered bankruptcy over a year ago, and we have a valid contract. There was a hearing yesterday, which has been adjourned. The judge has made no decision; the bankruptcy judge has made no decision. We have a valid contract; we can buy the land at any time. The amount of our contract is close to the amount of the mortgage debt on the asset. So, we have lots of flexibility with regard to the asset, and we have control of our site.
- Analyst
Great. And on your Scottsdale site, have you had any discussions with retailers in terms of how approximate you can be to say the traditional retail that's in downtown Scottsdale.
- President and CEO
There is fabulous retail in Scottsdale because it's such a popular tourist market. We intend to capture that tourist market with outlet shopping, which is a different type of shopping experience than currently there. Most of our retailers are comfortable with that, and we are in the process of lining up both out-parcel restaurant users and anchored tenants for that parcel, and when we are ready to announce, we would be happy to.
- Analyst
Great, and then just looking at the renewals in the fourth quarter of 2010, the new initial base rent per square foot was about $17.50. That was the lowest of the quarter, but the prior rents weren't the lowest. Was there anything explaining why that rent fell down there?
- President and CEO
Craig, as you know, the fourth quarter was an extremely small sample, and it's probably not appropriate to draw any conclusions from a tiny sample. I think you may be best to focus on the year-end leasing results, which I think were best-in-class on our leasing spreads, and also to review through January our leasing spreads and the percentage of leases we've renewed for 2011 compared to 2010. Those are much larger universes, and probably more indicative of our future success.
- Analyst
Okay. Thank you.
Operator
David Lebowitz, your line is open.
- Analyst
Good morning. A few unrelated items. First, did you indicate on the Liz Claiborne re-rentals whether or not these rentals are at higher rates than what you had been collecting?
- President and CEO
We did not indicate, David. And the Liz Claiborne leases have been assigned by Liz Claiborne directly, with our approval, to these new tenants. This is a seamless transaction where we did not lose a single day's worth of rent, and we did not have to contribute any tenant allowance to install new tenants. So it is seamless, and the economic impact will be the same. However, these new tenants, we expect to produce significantly higher sales per square foot than the Liz Claiborne branded stores.
- Analyst
And the second question, in the Canadian joint venture, is this going to be denominated in Canadian dollars or US dollars, and do you go into the currency market to hedge if it's Canadian dollars?
- President and CEO
You are a bit ahead of the curve. We are studying right now whether to proceed in Canadian dollars. Our instinct is, it's probably the right way to go, but we haven't gotten that far yet. We are in the process of tying up sites, and those decisions are yet to be made.
- Analyst
In terms of the tying up sites, are there differences in Canadian real estate laws, and getting all the necessary permits, et cetera, than in the United States?
- President and CEO
Absolutely, there are differences in Louisiana than in the other United States. So we are thrilled to partner with RioCan, who has over 30 years experience in the Canadian market. They will be handling the site selection, development, permitting and construction of the Tanger Outlet Centers in Canada. We will be focused on the leasing and the marketing of these centers.
- Analyst
And the management fees will be split 50/ 50, or will they be going to your partner?
- President and CEO
They will be split, in a yet-to-be-determined basis.
- Analyst
Thank you very much.
Operator
Rich Moore, your line is open.
- Analyst
Steve, staying with Canada for a second, I think you were going to announce some management of the joint venture that was going to be specific for the joint venture, is that right?
- President and CEO
That's correct. We are in the process of finalizing an agreement with a well-known REIT industry senior executive to be the senior managing director of the partnership. We hope to have that announcement, certainly in the next week or so.
- Analyst
So would he be by himself with help from both organizations, or would he have a whole separate team that works strictly for the JV?
- President and CEO
He will access both RioCan and Tanger in the beginning. And as these centers evolve and the success of our centers in Canada is proven out, we will determine the amount of staffing necessary to continue our growth.
- Analyst
Okay, good. Thank you. And then on the Liz Claiborne, is there any more lease termination income coming from that, or has that all been recognized at this point?
- President and CEO
To my knowledge, we did not receive any lease termination income from Liz Claiborne.
- Analyst
Okay, very good. And you won't be receiving any, is that right?
- President and CEO
It's not anticipated. As I mentioned before, we have worked closely with the senior management of Liz Claiborne to have a seamless transition to the newer tenants without any loss of rent, and I expect the balance of the space that we are negotiating will be similar to the previous amount we identified in the call.
- Analyst
Okay, good. Thank you. And then on the line of credit, you guys have, I think, about $160 million on the line. Are there any plans to take that out with an unsecured note at this point, or any other form of financing?
- President and CEO
As in the past, when we get up to north of $250 million or $300 million, we will certainly study the markets and make that determination. But at this size, it's probably not large enough to do an appropriate -- to get an appropriate pricing on a 10-year note.
- Analyst
Okay, good. Thank you. And last thing for me is, the lower operating expense recovery ratio in the quarter, I know that bounces around a bit, but was there anything unique in the fourth-quarter ratio that might flow forward into 2011?
- EVP, CFO and Secretary
This is Frank. I don't think so. We did expand additional dollars in marketing and such in the fourth quarter as part of our overall initiative plan to enhance the Tanger brand, and some of those costs are not recoverable from the tenant. So, to a certain extent, we had some of that going on, but I think overall, around the 86%-ish recovery rate is probably reasonable going forward.
- Analyst
Okay, very good. Thank you, guys.
Operator
Christy McElroy, your line is open.
- Analyst
Hi, good morning. Just wanted to follow up on the Canadian JV. How do you think about allocating investment capital in Canada versus the US over the next several years. And what kind of yields are you projecting in Canada? And also, what markets specifically in your site selection -- what markets are you looking in?
- President and CEO
Christy, let me see if I can answer one question at a time. As I mentioned, we are looking at the top urban markets in Canada, and the top tourist markets in Canada. For competitive reasons, we're not going to announce any specific markets until we have sites tied up. Until we have the sites tied up, and pro formas that we're comfortable with, we're not prepared to give guidance or discuss answers to any of the other questions that you had.
- Analyst
Okay. But just generally speaking, as you think about allocating investment dollars and development over the next five to seven years, how would you think about weighing US versus Canada?
- President and CEO
We think Canada is a growth market. As I mentioned, we feel that Canada can support 10 to 15 Tanger Outlet Centers. And as we go forward, we intend to prove that out. But it's really premature to talk about allocation of investment dollars starting two and three years out.
- Analyst
Sure. I just want to make sure that I heard you right. In an earlier comment, you talked about starting construction in late 2011; is that on all three of your potential projects in the pipeline?
- President and CEO
We have no financing issue. The gating -- and really, all the sites are either fully permitted, or as of right, can be permitted rapidly. There's no really development challenges on any of the sites. All three of the sites have, due to their geographic location, have a virtual 12-month building season. So the gating issue is the tenants signing leases. We do not intend to change the discipline that's served us well for the past 30 years. When we have 50% of the first phase with signed leases, and all non-appealable permits, we will go to our Board and probably buy the land and start construction. Construction of these sites, construction and opening, should take in the area of 12 months.
- Analyst
Okay. And then just lastly on Hilton Head, I know it's 91% pre-leased. How should we be thinking about the P&L impact through 2011 with regard to NOI as tenants take space, as well as any capitalized interest associated with the project?
- EVP, CFO and Secretary
The capitalization of interest will stop at opening. And as far as the NOI, although we have 90%-some of the leases signed, some of those tenants will not be open at grand opening; they'll be doing their build-out. And the remaining space will have temporary tenants. I would suspect from a revenue perspective, we would probably open at roughly 75% of what you would expect at stabilization. And maybe three to six months after that it would be at a 95% stabilized point.
- Analyst
Okay, thank you.
Operator
Ladies and gentlemen, to ensure all questions are addressed today, if you could please limit yourself to one question and one follow-up question, it would be appreciated. Jay Habermann, your line is open.
- Analyst
Steve, you're focused on obviously the returns, and at the same time, risk. Just following on Christy's question a bit more, as you think about the development opportunities, and as you talk about pricing power returning, obviously, to the landlord, can you give us a sense of perhaps development as a percentage of your enterprise value, or just how much risk you'd be willing to take on at this point in the cycle? Because it sounds like you certainly have several projects that could come into the pipeline, as well as what you're targeting in Canada?
- President and CEO
Jay, we have four legs to our growth story. One is the internally generated organic comp NOI growth, which I believe is best-of-class of the retail REITs, at least in the initial guidance that we can see. The second is new development opportunities. Our instinct right now is not to change the disciplines that we've used, and served us well for the past 30 years. So if you're suggesting or thinking that our risk profile with new development will change, I don't see a scenario today that would lead me to recommend that to the Board.
The third leg on the stool is our Canadian joint venture. We anticipate 2012, 2013 coming on-stream with at least one new development in Canada. And the fourth, of course, is if any acquisition opportunities present themselves, we have a fortress for a balance sheet, and a lot of liquidity, which would allow us to be competitive in any acquisition opportunity. So there are four legs to the stool. We're going to maintain the same risk profile that has served us well through all these years.
- Analyst
Okay. And can you talk about what you're seeing today in terms of acquisition? And just to clarify also, did you assume anything for the refinancing of Deer Park in 2011?
- President and CEO
Frank, I'll let you answer the Deer Park question. With regard to acquisition candidates, to our knowledge, and we are subject to confidentiality agreements, but I think it's known due to the FTC settlement, that the Jeffersonville project currently owned by Simon Property Group is being widely marketed, and to our knowledge, that's the only one that we know of.
- EVP, CFO and Secretary
With regard to the Deer Park refinancing, we have assumed in our forecast that the LIBOR spread would go up. The current spread on that loan is about 137 basis points. We feel like that will most likely increase, just given current market for secured financing. So the NOI at Deer Park is expected to go up, but the interest carry is expected to go up as well. So net FFO could be flat to slightly negative, just because of the refinancing assumptions we have used.
- Analyst
Okay, thank you.
Operator
Todd Thomas, your line is open.
- Analyst
Hi, good morning, I'm on with Jordan Sadler. First, just a point of clarification, were the 2011 renewal and re-tenanting spreads you mentioned, were they on a cash or straight-line basis?
- EVP, CFO and Secretary
Those were on a straight-line basis.
- Analyst
Okay. Do you know what those were on a cash basis?
- EVP, CFO and Secretary
I don't have that handy now.
- Analyst
Okay. And then, secondly, given the increased appetite by others to develop outlet centers here in the US domestically, I was just wondering if you could share with us how comfortable you are today with all the plans for development that you're seeing and hearing about from other REITs and developers, and what your thoughts are on how that may impact the supply of outlets over the next couple of years?
- President and CEO
I'll remind you that in 1993, when we went public, we were the first outlet developer to go public. Shortly thereafter in the next year, five other outlet developers also were listed on the New York Stock Exchange. They were new to the public markets, and somewhat did not have the same discipline that the current large REITs have. The plans that have been announced by some of our competitors are announced by large, well funded, highly sophisticated, disciplined investors who probably will not do anything emotionally, or on speculation.
But we've been through this cycle before, where other types of development probably cannot gain traction. To my knowledge, there has not been a new mall announced in the past couple of years, and I don't know of a new mall that's announced for delivery in the next two or three years. There's probably not going to be another lifestyle center built for a while, and there are very few power centers and very few grocery-anchored strip centers being built. So, for developers, the outlet market appears to be attractive. We'll see how it shakes out.
This is a market where we specialize. We don't own any other types of retail. The marketing, operations and leasing of these assets is different than other types of retail, and we'll see how it all shakes out.
- EVP, CFO and Secretary
To answer your question on the renewal spreads on a cash basis, January of this year, we are at roughly 10% compared to 5% the previous year, so twice as high.
- Analyst
Okay, great. Thank you.
Operator
Carol Kemple, your line is open.
- Analyst
Good morning. Congratulations on a nice quarter.
- President and CEO
Carol, thank you for being so gracious. We thought it was a pretty good quarter and a pretty good year.
- Analyst
Yes, definitely. I was just following up on the last question. I listened to several of the retail REITs conference calls, and it sounds like some of them might be interested in a possible joint venture to develop outlet centers. Is that something that you would look to do in the US with another publicly-traded REIT, or do you want to develop and own on your own here?
- President and CEO
We have tremendous respect for the other publicly-traded retail REITs, and would certainly welcome conversations with any of them about anything. So far, the phone hasn't rung. I will remind you that we have a joint venture in our Deer Park center on Long Island, and a joint venture with the land seller in Wisconsin. So, we do have experience with joint ventures.
- Analyst
Okay, thank you.
Operator
Michael Mueller, your line is open.
- Analyst
Hello, most things have been answered, but I wanted to just try to drill down on the 2011 NOI guidance, I think 2% to 3%, for a second. In the back half of this year, you're running up about 200 basis points of occupancy higher than last year. It looks like that is probably carrying into 2011. Your leasing spreads -- from what you're saying on the call, it sounds like you're expecting your blended cash leasing spreads to be better in 2011 than they were in 2010, and threw out some January data points that maybe backed that up. Can you talk about what the offsets are that maybe get you down toward the lower end of guidance? I think you mentioned year-end occupancy being down next year? Is that just something you were throwing in to be conservative, or something you see specifically that's going to happen?
- President and CEO
Well, with regard to occupancy, 97%, I believe, would be best-of-class. We were well above 98% this year. I think it's prudent to estimate 97%. Obviously, the 1.5 points or so increase in year-end occupancy would impact the comp NOI growth.
And Frank, I will let you answer the balance of it.
- EVP, CFO and Secretary
I think to a certain extent, while our NOI is expected to go up, as Steve mentioned, best-of-class, as I made mention on the call, we had the bond offering, which was at a relatively higher rate than the use of proceeds, which was used to pay down a 5.25% term loan on $235 million, and then to pay down line of credit debt that was at 60 basis points over LIBOR. So there was some dilution from the bond offering. And additionally, we re-did our lines of credit recently, and the LIBOR rate on that went from LIBOR plus 60 to LIBOR plus 190. So when you take those in consideration, it amounts to about a $0.05 dilution to 2011. A lot of what we are, or part of what we are producing in same-center NOI growth is obviously being taken up with the increased incremental interest cost.
- Analyst
Okay, and I guess one other question going to the development starts again. It sounds like you could have three potentially on the domestic side this year, and I think Steve, you mentioned you would be hopeful that you would get something open in 2012 and 2013 in Canada. You could potentially have -- is it safe to say you could potentially have four starts in 2011?
- President and CEO
You can draw whatever conclusions you want, Mike. We feel that the sites we have announced are fabulous sites for Tanger Outlet Centers, and we are working aggressively with our tenant partners to try to conclude conversations into signed leases. When those signed leases happen, we will start construction.
- Analyst
Okay, great, thank you.
Operator
Ben Yang, your line is open.
- Analyst
Hi, good morning. Steven, I'm curious why only the letter of intent with RioCan, as opposed to a signed deal with this partner? Because I do recall that they did back out of a joint venture with another REIT back in 2007. What terms of the venture need to be worked out at this point, because it sounds like you've already identified the key responsibilities for each partner?
- President and CEO
We have. There's a lot of issues with regard to partnering with a Canadian company and a US company that we're sorting out, that I really don't want to get into. It has really nothing to do with our relationship with RioCan. But we are close, and documents are going back and forth. I cannot speak to the 2007 event. I don't know much about it, and really not appropriate to speak about it. But we are highly confident that we will conclude the appropriate documents with RioCan to move forward.
- Analyst
So I guess the possibility of them, say, maybe, partnering up with another mall REIT is close to zero in your opinion?
- President and CEO
We are highly confident that we will conclude our agreement with RioCan.
- Analyst
Great, thank you.
Operator
Tayo Okusanya, your line is open.
- Analyst
Good morning. Going back to the question about same-store NOI guidance for 2011. Still we are looking at a break-out between expectations about same-store revenue growth and same-store expense growth.
- President and CEO
I'm sorry, I don't really understand your question?
- Analyst
The 2011 guidance, the same-store NOI assumption of 2% to 3% -- say we're looking at a break-out of that number of what the growth assumption is on the revenue side and the expense side?
- President and CEO
Frank, do you want to take that?
- EVP, CFO and Secretary
We basically just provide same-center NOI growth estimates, we don't break it out between revenue and expense. The majority of our expenses are reimbursed by the tenant, so it's not really relevant to the computation.
- Analyst
Okay, so the majority of it is on the revenue side. And then second question, just going back to the development projects, when I look at the sites that you guys have targeted, there's some of the public REITs talking about also doing developments not too far away, and I'm just wondering if you think the markets can sustain two or three outlet centers all showing up within a 12- to 18-month period? Or whether you see it more of the person who gets there first probably owns the market? Or how you eventually see competition shaking out in these markets that you've identified?
- President and CEO
Houston and Phoenix are the fourth- and seventh-largest markets in the country. The tenants will decide how many centers they are willing to support. We feel that we have the best real estate for an outlet center, and we are working with our tenants to get leases signed to be the first ones on the ground.
- Analyst
Okay, thank you very much.
Operator
Cedrik Lachance, your line is open.
- Analyst
Thank you. Just going back to the Canadian investment, in the US I think we've seen outlet centers moving closer and closer to the full-price retailers. How does it work in Canada, in terms of your ability to establish a center in relative proximity to where full-price retailers are located?
- President and CEO
We are in the process, as I mentioned before, of identifying and tying up appropriate sites in major markets in Canada. Once we have those sites under control, we will immediately start conversations with our key retailers, and after those conversations, I would be happy to answer your question.
- Analyst
Okay. And I think earlier you referred to Forever 21 starting to lease space in your outlets. Do you see them as a potential large outlet tenant?
- President and CEO
We are delighted to welcome Forever 21 into our portfolio. We are having conversations with them about expanding our relationship.
- Analyst
All right. Thank you, Steve.
Operator
Quentin Valleley, your line is open.
- Analyst
This is actually Michael Bilerman. Steve, on Canada, you mentioned that you would have a new executive focused on the joint venture to move it forward. Is that an executive that would come from either of the two companies, or it would be hired separately?
- President and CEO
He had no previous relationship with either RioCan or Tanger.
- Analyst
And is that individual -- is a Canadian REIT experience or US REIT experience? You mentioned that there was some -- ?
- President and CEO
He has both.
- Analyst
Okay. And then just thinking about development, can you talk a little bit about the potential conversion of retail to an outlet, and whether that is at all a threat, or are you seeing that out there as developers or owners try to shift the mix of their centers?
- President and CEO
We have for many years looked at C, D, and F malls, with the hope that we could convert them to outlets, and have come to the conclusion that for various reasons it would not work. And I think other sophisticated owners of outlets have come to the same conclusion. We've looked at lots of lifestyle centers that have been presented to us as opportunities, and for similar reasons have concluded that the conversion is difficult, if it can be accomplished at all. Obviously with our strong balance sheet, to be able to prove out a conversion would lead to significant immediate growth. We just haven't been able to make it happen, and to our knowledge, nobody else has.
- Analyst
Okay, great. And just last question, I think you had mentioned that your phone hasn't rung from any of the public guys, or others trying to do joint ventures with you. But I'm curious if your phone has been ringing on people wanting to merge, or to buy the whole company, to get access to the outlet business?
- President and CEO
The answer is no, the phone hasn't rung. We are not for sale. We are very excited about our future growth.
- Analyst
Thank you.
Operator
And this concludes the Q&A portion of today's call. I would now like to turn it over to Steve Tanger. Please go ahead, sir.
- President and CEO
Thank you, operator, and for all of you participating today, and for your interest in our Company. Tanger is the only public REIT with a pure outlet portfolio. We have a conservatively structured balance sheet, high brand recognition, and tenured senior management team. Tanger has always had, and will continue to maintain, a disciplined development approach. We currently have a strong portfolio of operating properties across the United States providing significant returns for our shareholders. Our pipeline of opportunities for development for outlet centers in the United States and Canada is enviable.
We are always available to answer any questions you may have. Again, thank you, and have a great day. Goodbye.
Operator
This concludes today's conference call. You may now disconnect.