Tanger Inc (SKT) 2012 Q4 法說會逐字稿

Good morning, everyone. I'm Cyndi Holt, Vice President, Finance and Investor Relations, and I would like to welcome you to the Tanger Factory Outlet Centers' fourth-quarter and year-end 2012 conference call. Yesterday, we issued the quarter's earnings release, as well as our supplemental package and investor presentation. This information is available on our website under the Investor Relations tab.

Please note that during this conference call, some of Management's comments will be forward-looking statements, including statements regarding the Company's property operations, leasing, tenant sales trends, developments, acquisitions, expansion and disposition activity, as well 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.

During the call, we will also discuss non-GAAP financial measures as defined by SEC Regulation G. Reconciliations of these non-GAAP measures to the comparable GAAP financial measures are included in our earnings release and in our supplemental information. This call is being recorded for rebroadcast for a period of time in the future. As such, it's important to note that Management's comments include time sensitive information that may be accurate only as of today's date, February 13, 2013.

At this time, all participants are in listen-only mode. Following Management's prepared comments, the call will be opened up for your questions. We ask you to please limit your questions to two so that all callers will have the opportunity to ask questions.

On the call today will be Steven Tanger, President and Chief Executive Officer, and Frank Marchisello, Executive Vice President and Chief Financial Officer. I will now turn the call over to Steven Tanger. Please go ahead, Steve.

Thank you, Cindy, and good morning, everyone. I'm delighted to report that Tanger generated a 19.8% total return for our shareholders in 2012, comparing favorably to both the NAREIT All Equity REIT index and the S&P 500. Solid operating performance results and adjusted funds from operation above the high end of our previous and initial guidance. We achieved significant milestones in the fourth quarter.

With occupancy at 98.9% within our consolidated portfolio, December 31, 2012 marked Tanger's thirty-second consecutive year of reporting year-end consolidated occupancy of 95% or greater. Our fourth-quarter 2012 same center net operating income growth of 4.7% extends our streak of positive, same center NOI growth to 32 consecutive quarters, dating back to the first quarter of 2005 when we began tracking this metric.

Also driving our 2012 growth was the year-end -- the full-year impact of the five consolidated properties and one joint venture property that we added to the Tanger portfolio in 2011, which resulted in a 15% expansion of our footprint. In the fourth quarter of 2012, we expanded our total gross leasable area by another 8% when we delivered through joint venture arrangements, two newly developed outlet centers in the United States and acquired two existing outlet centers in Canada.

We are proud of achieving this significant portfolio expansion while maintaining a balance sheet that is a fortress. Tanger's low leverage at December 31, 2012 was best in the mall sector according to KeyBanc's leadership report in terms of debt to total market capitalization, total debt to recurring EBITDA and recurring EBITDA to interest expense.

I know that many of you want to learn more about the progress of our various development projects, but first, let me turn the call over to Frank, who will take you through our financial results. I will then follow-up with a discussion of our operating performance, our development pipeline and our current expectations for 2013.

Thank you, Steve, and good morning, everyone. Our reported year-end funds from operations or FFO of $1.63 per share was at the top end of our guidance range of $1.61 to $1.63 per share and increased 13.2% from $1.44 per share in 2011. Adjusted FFO for 2012 increased 12.2% to $1.65 per share, compared to $1.47 per share for 2011. This year-over-year increase is a direct result of our ability to continue to drive rental rates and grow same center NOI, as well as the accretive impact of the acquisitions made during 2011.

On a consolidated basis, our total market capitalization at December 31, 2012 was approximately $4.5 billion, up 14.5% from $3.9 billion last year. Our debt to total market capitalization was approximately 24.4% at December 31, 2012, compared to 26.3% last year. We also maintained a strong interest coverage ratio of 4.18 times for 2012, up from 4.07 times for 2011.

As of December 31, 2012, approximately 60.8% of our debt was at fixed rates. Our balance sheet strategy continues to be conservative, targeting minimal use of secured financing and a manageable secured -- schedule of debt maturities. In fact, we have no significant maturities on our balance sheet before November of 2015.

Our Board of Directors declared a dividend of $0.21 per share for the quarter ended December 31, 2012, payable this Friday to shareholders of record on January 30. The annualized dividend equates to $0.84 per share. We have paid a cash dividend each quarter over the past 19 consecutive years since becoming a publicly traded entity in May of 1993.

We are one of only a handful of REITs that has raised their dividend each year since going public. Our dividend is well covered; our FAD payout ratio for 2012 was approximately 56%. At these levels, we are able to significantly -- generate significant incremental cash flow over our dividends, which we plan to use to help fund our growth and, or to reduce amounts outstanding under our lines of credit. I will now turn it back over to Steve.

Thank you, Frank. Although our portfolio was spared any significant property damage and did not experience any prolonged center closings related to Hurricane Sandy, the storm did have a negative impact on shopping patterns in the affected areas during the fourth quarter of 2012. This impacted eight of our consolidated properties, totaling 2.7 million square feet or 25% of the consolidated portfolio.

These centers, which were closed for one or more days, included Atlantic City, New Jersey; Kittery, Maine; Nags Head, North Carolina; Ocean City, Maryland; Rahoboth Beach, Delaware; Riverhead, New York; Tilton, New Hampshire; and Westbrook, Connecticut. Including these properties, consolidated comparable tenant sales increased 2.9% to $376 per square foot for the 12 months ended December 31, 2012, and decreased 0.9% for the fourth quarter. This annual growth rate is consistent with Tanger's long-term tenant sales compounded annual growth rate of approximately 3%. Excluding the storm affected properties, consolidated comparable tenant sales increased 3.4% for the 12 months and 1.4% for the three months ended December 31, 2012.

Our initial reaction to the severe weather experienced in the Northeast and the Midwest over the last several days is that it impacted our portfolio -- that the impact on our portfolio will not be as significant as that of Hurricane Sandy, in terms of either the number of centers affected, or the extent of the impact. We are hopeful this weather event will result in delayed, not reduced retail spending in these regions.

I am pleased to report that we continue to see positive base rent rate spreads for space renewed and released through the end of the fourth quarter. A 31.7% blended straight line rental rate spread on the renewal and re-leasing of space throughout the consolidated portfolio during the quarter boosted our rental rate increase for the year to 25.5%. The year-to-date rent spread was 24.9% through September 30, 2012. This 2012 full-year blended straight line rental rate spread represents a 210 basis points increase over the prior-year spread of 23.4%.

Through December 31, 2012, we executed 458 leases, totaling 1.986 million square feet. Lease renewals during the year accounted for 1.536 million square feet, or about 89.7% of the space coming up for renewal during 2012. These leases yielded an increase in average base rental rates of 16.3%, up from 13.1% for lease renewals executed during 2011.

In addition, during 2012, we re-tenanted approximately 450,000 square feet with an increase in average base rental rates of 54%, up from 35.3% for 2011. Leasing spreads like these, together with contractually embedded rental rate increases, have resulted in same center net operating income growth for 32 consecutive quarters.

During 2012, same center NOI increased 6%, compared to 5.3% increase in 2011. This growth resulted from both continued increases in rental rates and from higher average occupancy rates in 2012 compared to 2011. For the thirty-second consecutive year since the Company was formed in 1981, we have achieved year-end consolidated occupancy of 95% or greater.

Our overall occupancy rate for our consolidated stabilized properties continued to climb, and was at 98.9% as of December 31, 2012, compared to 98.8% the prior-year and 98.6% the prior quarter. There is high demand from the tenant community for space in Tanger centers and virtually no excess supply. Tanger's low cost of occupancy, which was 8.4% for 2012, and our tenants' increasing sales over the long-term, have allowed us the opportunity to continue to drive up rents, while maintaining a very profitable distribution channel for our tenant partners. Consequently, we anticipate that demand for space at favorable rents may continue as our properties continue to perform well.

Tanger pioneered the concept of a ground-up outlet center in 1981 and has developed a reputation within the industry for having refined a skill set for developing, leasing, operating and marketing high quality outlet centers. The high demand for outlet space, coupled with our reputation within the industry, has afforded Tanger a robust external growth pipeline throughout the United States and Canada.

Through joint venture arrangements, we added four properties to the Tanger portfolio in the fourth quarter of 2012, and will realize the full-year impact in 2013. These properties include two newly developed outlet centers in the United States located in the Houston, Texas and Phoenix, Arizona markets, and two newly acquired outlet centers in Canada, both located in the greater Montreal market.

In the Houston market, through a 50/50 joint venture with Simon Property Group, Tanger Outlets Texas City opened 97% leased on October 19, 2012. Over 85 brand name and designer outlet stores are featured, including American Eagle, Banana Republic, Brooks Brothers, Coach, Columbia, GAP, J.Crew, Kenneth Cole, Levi's, Michael Kors, Nike, Nine West, Puma, Sketchers, Under Armour and many, many more.

The center is located approximately 30 miles south of Houston and 20 miles north of Galveston on the highly traveled Interstate 45. Houston is the fourth largest city in the United States, and the beaches and resort hotels in Galveston host over 5 million tourists a year. The center is approximately 353,000 square feet, with ample room to expand to a total build-out of approximately 470,000 square feet.

In the Phoenix market, Tanger Outlets Westgate opened to 92% leased on November 15, 2012, just in time for the holiday shopping season. Tanger's ownership interest in the project is approximately 58%. Located in the Western Phoenix market in Glendale, Arizona, the center is just off of I-10 and adjacent to the Westgate City Center; Jobbing.com Arena, home of the NHL's Phoenix Coyotes; University of Phoenix Stadium, home of the NFL's Arizona Cardinals; Cabela's and the Renaissance Hotel and Spa.

Over 80 brand name and designer outlet stores are featured including American Eagle, Banana Republic, Brooks Brothers, Charlotte Russe, Chico's, Coach, Cole Haan, the GAP, Guess, H&M, J.Crew, Levi's, Michael Kors, Nike, Talbots, Under Armour, White House Black Market and many, many more. The center currently totals 332,000 square feet with ample room to expand to a total build-out of 410,000 square feet.

And in the Montreal and Quebec market, Tanger and RioCan Real Estate Investment Trust completed the acquisition of two existing outlet centers in early November 2012, through our 50/50 co-ownership agreement. The acquisition of these centers will enable the co-owners to expand beyond the greater Toronto area and to enhance our outlet center strategy immediately by expanding Tanger Outlet Centers' presence into this new, vibrant Canadian market.

Les Factoreries Saint-Sauveur is located approximately 35 miles northwest of Montreal, adjacent to Highway 15 in the town of Saint-Sauveur, Quebec, and is approximately 116,000 square feet with the potential to expand to approximately 136,000 square feet. Bromont Outlet Mall is located approximately 50 miles east of Montreal near the eastern townships adjacent to Highway 10 in the town of Bromont, Quebec.

The property was built in 2004 and expanded through 2011, and is approximately 163,000 square feet. The average total purchase price was approximately $94.8 million, including the assumption of in-place financing of $18.7 million at Les Factoreries Saint-Sauveur, which carries a weighted average interest rate of 5.7%, and matures in 2015 and 2020.

Tanger is providing leasing and marketing services and RioCan is providing development and property management services. The co-owners intend to add value by expanding the properties, rebranding them under the Tanger Outlets flag, implementing the co-owner's operational and marketing programs, and over time, improving the tenant mix through the utilization of Tanger's strong outlet retailer relationships.

Turning now to our development pipeline. We commenced construction during the fourth quarter 2012 on a new development that we plan to complete in time for a holiday 2013 grand opening. Originally announced in May 2011, Tanger and its 50/50 joint venture partner, the Peterson Companies, broke ground on Tanger Outlets National Harbor on November 29, 2012.

Located within the National Harbor waterfront resort in the Washington, DC metropolitan area, the site is accessible from I-95, I-295, I-495 and the Woodrow Wilson Bridge. The nation's capital welcomes approximately 33 million visitors annually. When complete, the center will include approximately 340,000 square feet and will feature approximately 80 brand name and designer stores.

Also on the fourth quarter of 2012, Tanger and Simon Property Group announced plans to develop two additional outlet centers through a pair of proposed 50/50 joint ventures. In the Charlotte, North Carolina market, the partners plan to build an outlet center at Tanger's previously announced site, located 8 miles southwest of uptown Charlotte, at the interchange of two major thoroughfares to the city, I-485 and Steele Creek Road, also known as North Carolina Highway 160. When complete, the center will include approximately 400,000 square feet. The partners also intend to develop in the Columbus, Ohio market, located off the highly traveled I-71, 20 miles north of Downtown and 11 miles north of I-270.

When complete, the center will include approximately 350,000 square feet with ample space to expand to a total build-out of approximately 400,000 square feet. For the Chicago project, Tanger will -- I'm sorry -- for the Charlotte project, Tanger will provide site development and construction supervision services, Simon will provide management and marketing services, and the center will be branded Charlotte Premium Outlets.

In Columbus, Tanger will provide marketing and management services, Simon will provide site development and construction supervision services, and the center will be branded Tanger Outlets Columbus. Both partners will jointly provide leasing services to the projects, which currently are expected to open in 2014.

We have previously announced several other development sites. Domestic projects include Foxwoods Resorts Casino in Mashantucket, Connecticut and Scottsdale, Arizona, as well as a few small expansion projects. Canadian projects include Kanata, Ontario in the Ottawa market and Mississauga, Ontario in the Western Toronto market, as well as expansions of our existing Canadian centers in Cookstown, Saint-Sauveur and Bromont.

Our efforts are ongoing in each of these three development stage projects. We remain optimistic about the growth prospects of our Company and for our industry. As shoppers continue to seek branded value, and we believe the tenant community continues to indicate its desire to expand into new markets in the United States and Canada and continue to choose Tanger as a preferred partner.

With respect to earnings guidance for 2013, based on positive trends in 2012 and our current view of market conditions, we currently believe our estimated diluted net income for 2013 will be between $0.76 and $0.81 per share. And our FFO for 2013 will be between $1.76 and $1.81 per share. Our estimates do not include the impact of any rent termination fees, any potential refinancing transactions, the sale of any out parcels of land or the sale or acquisition of any properties.

Our 2013 guidance includes a projected increase in same center net operating income of approximately 4%. This projection is based on our expectation that tenant sales will remain stable or increase modestly, and takes into consideration the difficult comparable benchmarks established as a result of our portfolio being essentially fully occupied in 2012. Our guidance is based on average general and administration expenses of approximately $9.5 million to $10 million per quarter. The two major drivers of this relative increase over 2012 are increased headcount and increased equity-based compensation.

Although headcount is now stabilized, 2013 will reflect the full year of expense impact for new positions filled during 2012 to better facilitate development of our growth pipeline and administration of the growing number of joint ventures. In addition, we continued to focus on and have implemented a new long-term equity-based compensation plan for our Management team, which we believe aligns Management's interest with those of our shareholders.

A summary of the plan was included in an eight file -- an 8-K filed with the SEC yesterday. We have over 2,700 leases with good credit, brand name tenants who have historically provided a continuous and predictable cash flow in good times and in challenging times. No single account -- no single tenant accounts for more than 8.3% of our base and percentage rental revenues, or 7.9% of our gross leasable area. In addition, approximately 90% of our total revenues are expected to be derived from contractual base rents and tenant expense reimbursements.

2012 was another record year for Tanger. Our team is passionate about our successful business model and looks forward to continuing to grow the Company.

We plan to continue to thoughtfully use our resources and to maintain a conservative financial position. We expect our solid balance sheet with no significant maturities until November 2015 and approximately 92% of our consolidated GLA, unencumbered by mortgages, will provide the platform to execute our growth strategy in 2013 and beyond. And now, I'd like to open the call to your questions.

(Operator Instructions).

Your first question comes from Christy McElroy with UBS. Your line is open.

Hi, good morning, guys. Just wanted to ask a couple of follow-up questions on guidance. You saw some good growth in percentage rents last year. What kind of growth are you budgeting in your 2013 guidance, and what kind of releasing spreads are assumed in that 4% same-store line growth forecast?

From a releasing spread standpoint, we are forecasting similar spreads to 2012. But as we typically have done in the past, our percentage rent-wise, we are forecasting relatively stable percentage rents. Certain tenants that renew breakpoints are increased; therefore, sometimes we lose some of the percentage rents on those guys, hopefully, making it up somewhere else. And if sales trends upward, we certainly think there is some upside to the percentage rent line.

Okay, and then on the development pipeline, I appreciate the additional disclosure in the supp. You have several big projects set for completion in the second half of '14. Is it possible that any of those get pushed out into 2015, and can you discuss your plans for financing development spend over the next two years?

Well, we are under construction in National Harbor, which is the larger project of about 340,000 feet, we expect to deliver in the fourth quarter, around November 2013. The other small expansions in Gonzales, Park City and Sevierville, we are still comfortable meeting those deliveries. So unless there is really severe weather in the Washington, DC market, we are comfortable that we will meet the delivery of the National Harbor project.

Well, I am talking about, really, the second half '14 deliveries. There's several big projects here, a couple small ones, but just wondering -- I mean, you've got a lot going on there. Wondering if any of those might get pushed out?

We have not broken ground on any of those yet; we have not met our minimum leasing thresholds to break ground. We anticipating breaking ground sometime in the second- to third-quarter of 2013, but I'd be happy to give you an update on our every quarter -- on an updated delivery schedule once we break ground.

Great. And then on the development spend, are you planning on getting any constructions loans for any of these projects? Or would you consider maybe using ATM to sort of match fund some of your investment?

Christy, this is Frank. At National Harbor, we've already funded our equity, and we are using a construction loan. You can pretty much assume that if it is a joint venture project, we will use some type of project financing, at roughly 60% of the project being funded through the construction loan and then the remaining 40% would be equity contributed from Tanger and the partner.

A lot of our funding requirements will be met with internally generated cash flow and supplemented by lines of credit. So at this point, we don't think there will be any need for an ATM or anything similar to that.

Okay.

Just to clarify, Christy, we do not have an ATM in place.

Right.

And at this point, we have no intentions of putting an ATM in place.

Okay. Thank you so much.

Your next question comes from Andrew Johns with Green Street Advisors. Your line is open.

Thank you. Hey, guys. I appreciate the disclosure on the development pipeline; it's helpful. I'm curious though, what are -- what's the criteria or maybe your internal benchmarks for adding a project to the summary?

Good morning, Andrew. We will add projects as they become real in our minds. We have a shadow pipeline that we continue to do our due diligence and study, that has not risen to a project that we feel is developable at this stage. When we feel they are developable, and we really start to exert leasing and -- efforts, then we will add it to this pipeline. Then we will add it to the schedule.

Okay, that's great. And then maybe switching topics, in the supplemental, the key performance metrics are generally reported for the consolidated portfolio only. Can you talk just a little bit about the performance of the unconsolidated portfolio and some of the key metrics, maybe sales per square foot, tenant sales growth and then your outlook for same property growth?

This is Frank. We have typically only included consolidated properties in the leasing stats. I will say that the statistics should not be unusually different for the joint venture projects. We've just, for various reasons, chosen not to selectively disclose those. I think, given the location of the properties, you can expect that sales trends and leasing trends are very similar to our core portfolio.

Okay, great. Thanks.

Your next question comes from Todd Thomas with KeyBanc Capital Markets. Your line is open.

Hi, it's Jordan Sadler, here with Todd. Good morning. Can you maybe just give us a little bit on the merit and the strategy behind the joint ventures with your largest competitor in the space? Charlotte and Columbus being the second and third joint ventures with Simon?

Good morning, Jordan. We have a successful partnership with Simon in Houston where the two companies worked together in all the various disciplines of the corporate entities to deliver a successful, fully leased property. Based upon that success, and in the markets in Charlotte and Columbus, we decided it best to jointly develop in those markets, as opposed to the distraction of the leasing battle and the mall wars, or whatever you folks want to call it.

We felt that it was an appropriate use of our human resources and our skill sets to jointly develop, as opposed to a prolonged battle where the yields were greatly reduced and the timing of the opening of the center was -- would probably be delayed. It proved to be the correct strategy in Houston. Based upon the tenants embracing our joint venture sites in Columbus and Charlotte, it appears that we will have two more very successful joint ventures in both of those markets.

It's -- in essence, it's easier to go -- to sort of partner up with another strong player who is well capitalized, rather than go head-to-head with them, not terribly far apart in the same market or a similar market.

Jordan, you can draw whatever conclusions you want.

Okay. In that context, Andrew asked a question earlier about a pre-development pipeline, some of the stuff that hasn't yet obviously made it onto the list, obviously; the development pipeline has shaped up nicely. I'm curious, also, about the pre-development pipeline.

One, would you expect the pace that you are able -- that we see here on page 17 of the supplemental, thank you for that, to be maintained into 2015 and '16? I know that's a long time away, but obviously, you are working on it.

Well, first of all, thank you for complimenting us on our robust pipeline; I appreciate that. We are a growth Company in a growth sector with a balance sheet that's a fortress, and that allows us to make plans to continue to develop successful outlet centers.

We have disclosed the properties that we are currently leasing in -- for delivery in 2013 and 2014. As I mentioned to Christy earlier, we will continue to update this as appropriate, each quarter, and happy to continue to update you and the other fine analysts that cover our Company as we go forward. But right now, Jordan, for competitive reasons, as you highlighted in your first two questions, we want to keep the shadow pipeline as a shadow pipeline until we are ready to announce appropriate leasing.

Great, that's helpful. Thank you.

Thank you.

Your next question comes from Quentin Velleley. Your line is open.

It's Michael Bilerman; I'm here with Manny Korchman. Quentin will be very happy about how his name was pronounced.

Steve, I just wanted to go first on just the comp plan that was introduced. I guess it has both an absolute and a relative metric, with the absolute returns sort of driving that 70% of the value anywhere from a minimum of 25% up to over 35%, and then 30% of it being a relative measure, in terms of peers getting above fiftieth percentile, 60% and 70%. I guess how did you and the comp committee and the Board, sort of come to that split? Was there discussions at all about making it fully an absolute and relative combined -- I'm sorry, thinking about going through the thought process a little bit.

This is Frank. We -- the comp committee hires a comp consultant to address issues of compensation; this is a topic that came up this year. We had a long-term plan, which was basically maturing at the end of '13. We had additional executive officers that were not in that plan, and the comp committee felt like it was a reasonable time to implement a new plan.

With help from the advisers, it was determined how to split that pie, if you will, up between relative performance and the like, so, there was a lot of thought put into the overall plan. In lieu of that, our senior team will be getting less base salary increases, if you will, and we are focused more on long-term equity incentive plans. So this was just part of our overall strategy and the strategy that was presented by the consultants to our comp committee.

And how does the total value, the maximum payout of $13.25 million, how does that compare to previous plans in terms of amount?

It's about a fourth of the original plan, which was put in place in -- I guess, four years ago at this point.

The first plan was put in place January 1, 2010, and the measuring period ends December 31 of this year of the original plan.

With a one-year vest on that -- beyond that.

Good morning, Michael, by the way, it's Steve.

Yes.

We want to shift, and both for our senior management, our executive leadership team, short-term current compensation to long-term performance based compensation. One of the features of the plan, which I don't know if you've mentioned, but if there's not a minimum of 25% growth in shareholder value, we get nothing, and the plan only kicks in between 25% growth and 35% growth.

Does that, in terms of the split on the relative, does that 30% so that -- the shares are split 70% absolute return with a minimum threshold of 25%; 30% is based on where you rank. I thought the 30%, you could still have a below 25% total return, but still earn those shares if your return is better than your peers', better than the fiftieth percentile.

That would be correct. But the value of this could be anything from zero to the --

-- maximum amount you see.

Right, right, right. Just thinking, going back to Jordan's question in terms of the relationship with Simon, I'm just curious as you are now getting involved, you had the successful project in Houston and two more. I guess what are you learning -- considering you are both the largest in the industry, what are you learning about what you do, what they do?

And interesting, both projects -- all of your projects, you have one that's going to be -- two that are going to be Tanger and one is going to be Premium -- a Simon Premium Outlet. What are your learning about how they operate, how they build, what they do, and what are they learning from you? What have been the similarities and what have been the differences?

We have learned that Simon Property Group is well-run, with very thoughtful, seasoned executives, and I hope they have learned the same thing about our Company. That's about all I really want to say.

Is there anything that's come out at least in the tenant side? I mean, you have been competitors for a very long time. I'm just curious if you've sort of come to realize, well, maybe you do something a little bit different or what sort of benefits could it bring to the Tanger organization in doing these projects with Simon?

The tenant community has embraced the partnership. They are excited about the delivery of successful, well leased, well-constructed, well operated, well marketed centers in the Houston, Columbus and Charlotte markets. So we respond to what our customers ask and they have asked for that type of -- mature type of development. And really, Michael, that's all I want to say about it.

Okay. Just last question on -- just going to the balance sheet, but I do agree with your comments, in terms of overall debt levels relative to asset value and your fixed charge. All those are extremely strong, and positioning you to be able to fund the development. But I'm just curious, your mix of fixed versus floating.

Clearly, it's benefiting you dramatically today given where the rate environment is, but just as you fund developments, either on the line, especially on the joint venture side with floating debt, how are you thinking about the split between fixed and floating rate debt? Because obviously, at some point, as you term out those financings, you will have some dilution from that.

Well, right now, just as a data point for you, our floating rate debt is about $437 million, and our enterprise value is about $4.75 billion. So our percentage of floating rate to our enterprise value is only 9.2%, which I believe you will find is either the lowest or at the very low-end of the mall REITs. We've only have -- we have a line utilization today of $178 million on our line of $520 million, so we have lots of capacity there.

We also internally generate about the $60 million or so of free cash flow over dividends, which is used to fund -- internally fund without increasing our line in our equity share of the joint ventures, or to pay down the line. So we have no acquisitions in the immediate horizon that would require a large chunk of cash. So we are very comfortable with our current position on the floating rate debt, utilization of our line of credit and don't expect short-term, any, as you say, terming out or utilization of the bond markets to add more to long-term debt.

So there is nothing in guidance right now for terming out or fixing any of the floating rate debt at all in '13?

That's correct.

Okay, and your 430 is just your consolidated, because your unconsolidated debt is predominantly all floating rate; that's another $100 million, which would de facto, be an increase. I agree with you conceptually because you are lower leveraged, even though you have high floating rate debt relative to your debt stack, that percentage is lower.

But I think that at some point, there would probably be some level, especially when you include the unconsolidated joint ventures, that as you fix that debt, and it's an unbelievable time to go long-term on debt today. I'm just curious why the Company wouldn't do that to build in that capacity?

We don't have the need today, Michael. We monitor the debt markets constantly, but if we do reach a point where there is a need, we certainly will execute as we have in the past.

Okay, thank you.

Thank you, Michael.

Your next question comes from Tayo Okusanya with Jefferies. Your line is open.

Good morning, everyone. Two questions; first of all, with the guidance numbers and the same-store NOI guidance of 4%, which is slowing down materially from where you were in 2012. Could you talk a little bit just about why the slowdown, just kind of given strong fundamental, you are talking about the mark to markets still looking very similar in 2013 versus 2012, and leasing capacity remaining pretty strong.

Well, I guess that proves everybody has a point of view that's relative to the marketplace. I think that 4% comp NOI growth is terrific, and certainly compares very favorable to the other mall REITs as a comp NOI growth, considering that we've been growing on a comp basis, our NOI for the past 32 quarters. So we are satisfied with that and that's our current thinking today. You may realize that at 98.8% or 98.9% occupancy, we are at virtual statistical full occupancy, so we have not provided any income on a comp basis from filling vacancies in this number.

Okay.

Okay? So that's how we derive the number; that's our best thinking as of today.

Okay, that's helpful. Then, again, I just wanted to add my thoughts of thanks for the extra disclosure on the upper pipeline. Could we get a sense, at this point, just how much you have spent pipeline-wise and also, what you estimate capitalized interest will be in 2013?

Well, like I mentioned earlier, we have funded our capital in National Harbor. We haven't broken ground on the other projects, so the funding in those has been fairly minimal. The expansion projects are relatively small and I believe, right now, the only one under construction is Gonzales, and then, in Canada, we have not begun construction on any of those, so there's very little funded there.

Okay.

That kind of gives you an idea. I don't have the capitalized interest number expectation for '13. But I think you should be able to back into that; if not, feel free to give us a call back and we can discuss it.

Okay. But is the basic idea -- the basic assumption in your modeling is that you start to break ground on a lot of these things in the back half of 2013, correct?

Second half of '13.

That's correct.

Great. Okay, thank you very much.

Your next question comes from Steve Sokwa with ISI Group. Your line is open.

Thanks, good morning. Steve, I wondered if you could just go back on the sales point. I don't want to draw too much out of one quarter, and I know that the storm impacted sales a bit. But it still seems even if you adjust for the sales from Sandy, sales of 1.4% was a pretty slow number.

I'm just wondering if you have any thoughts about regional performance, and if this is just kind of a broader concern you have over things like the payroll tax kind of kicking back in and kind of taking a bite out of people's wallets. It sounded like from your comments, you are little more cautious on sales growth in '13, and I was just trying to take all that and reconcile, given the sharp slowdown that you saw on sales from Q3 to Q4.

Hi Steve, and good morning. We are cautious, as we usually are, until we get more information on the consumer spending, particularly this year. We -- obviously, the increase in the payroll tax and the uncertainty that's being caused in Washington weighs on people's minds.

We will not raise the guidance on our sales until we see more clarity, and I don't know what else to tell you. I think, still people want value and they want to shop in outlets and get the best value on brand names. But until we see more clarity, both from Washington and consumer spending, we are going to keep our guidance where it is.

Is there anything you can kind of give us as you look at the geography of the sales increases or lack thereof, or maybe by product category? Are there things that, by region, look much weaker than others, or product categories that did much better than others?

Steve, unfortunately, we have a small portfolio, as you are aware. I don't think that we would be a proxy to give appropriate information with regard to geographic or any sort of product line that would be useful to you.

Okay, thank you.

Your next question comes from Andrew Rosivach with Goldman Sachs. Your line is open.

This is actually Caitlin Burrows. This is kind of similar to maybe the question that was just asked, but I know it was only a slight decline and Sandy was during the fourth quarter, but then again, Christmas also was. Can you describe what factors may have led to the sequential decline in sales per square foot from $381 in the third quarter to $376 in the fourth quarter?

I think you just answered your own questions. The storm had a major impact on 25% of our portfolio; of course, Christmas comes every year. But the impact was maybe greater than it might have been imagined, both in the run-up to Sandy and in the aftermath of Sandy. So it was a major event and it affected, based on the geography of our properties, 25% of our portfolio.

Okay, so then going forward in 2013, obviously, assuming that there is not another huge storm or as additional centers are added to the comparable sales portfolio, do you expect it to continue to go up then?

I think we've given guidance on our expectation for sales, and I think we will stick with that.

Okay, thank you.

Your next question comes from Rich Moore with RBC Capital Markets. Your line is open.

Hi, good morning, guys. I'd like to add my thanks for the new disclosure, as well, Frank, and Steve, thank you, as well for the kind comment about analysts, we don't usually hear those. I want to ask you, in terms of demand, Steve, what do think, as you look beyond 2014. How are retailers thinking about the long-term need for additional outlet center space? Has it changed at all in your mind?

Hi Rich, and good morning. We always love analysts, as we have, we are celebrating our twentieth year of a public company, and this is about our eightieth conference call. So, we have great love and affection for the analyst community.

Yes, we don't always hear that, so that's very nice of you to say.

People have different opinions on the stock, but the best news is our shareholders last year got close to a 20% total return. The crystal ball out beyond 2014 for our retailers is cloudy, as you might imagine. The CEOs of the -- of our tenant partners today, are still allocating tremendous capital to growing the outlet distribution channel; we have not seen that change.

We are working hard to get our fair share of their allocation of new stores in 2013. Several of them have not even announced their allocation for 2014 yet, let alone '15 and '16. So we are communicating with our customers on a daily basis, but really, Rich, it's tough for us to give you an answer on that beyond 2013.

Okay, but no slowdown in enthusiasm, Steve, at least in the near term?

No slowdown, if anything, more enthusiasm, as other distribution channels seem to slowdown.

Okay, good. Thank you. Frank, on the Other Income line, remind me what's in there and it bounced a little higher this quarter, and I'm curious how to think about that line as we look forward.

Other Income is basically -- a majority of that is vending-related income, coupon book income, things like that, as well as some of the net fee income that we earn. We are at about $10.5 million this year, and I think we projected to go up to maybe $1 million next year through additional Other Income and net fees.

Okay, is there -- I don't remember exactly, is there seasonality that you expect in that, that's unusual?

It's typically lowest in the first quarter and then ramps up quarter by quarter. It should be similar to what you saw into 2012, quarter to quarter.

All right, good. Thank you, guys.

We still have a few questions in queue, would like to take them?

Sure.

Okay, thank you very much. Your next question comes from Carol Kimball with Hilliard Lyons. Your line is open.

Good morning. Thanks for taking my question. I know earlier in the call, you all mentioned that you didn't have any acquisitions in the near-term. Did you all bid on the property in Kansas City? Can you talk about if you did the bidding environment for that; what kind of people were looking at the property? Were they public REITs, private or how that sale went?

Hi Carol. Yes, we were an active participant in the auction in Kansas City, the property name was The Legends; it was a fully marketed transaction. There was -- it was a property that was foreclosed upon, and this was -- the auction was run by the trustee.

There were highly sophisticated public REITs participating, highly sophisticated outlet developers participating, along with private equity funds. So it was an interesting process to go through. The winning bid, by our estimation, was very close to a 6% cap, which for a property that only generated what would have been at about our average sales per square foot, we felt the numbers just didn't work for us.

But we will participate in any property due diligence process where we think we can add value. But at the price at 6% for that asset, we were not willing to go higher.

Okay, thank you.

Your next question comes from Todd Lukasik with Morningstar. Your line is open.

Hi, good morning. Thanks for staying a little longer and taking a few extra questions, I appreciate it. I just had a question on the US shadow pipeline, and whether or not you could share your expectation with regards to whether those will come on the balance sheet eventually as wholly owned entities or as joint ventures?

Good morning, Todd. I think it's premature to discuss, as I mentioned before, the shadow pipeline. Right now, it's a mix of both joint ventures and wholly-owned, but we will certainly provide complete disclosure, as the analysts have complimented us on, when we are ready to announce the addition of or the movement from the shadow pipeline to our development pipeline.

Okay, and then, just with regards to the returns in the US versus the returns in Canada. I think the range is slightly lower, still very good in Canada, but slightly lower than in the US, and I was just wondering if you could comment on that. In particular, I thought that maybe the sort of relative lack of supply of the outlet product there might provide some better return opportunities than in the US, but if you could comment on that, that would be great.

There is a scarcity of product in Canada; there also is a scarcity of developable land. The cost of the land, and the time involved, and the cost of the development process, and the entitlement process, and the construction in Canada due to the climate is greater than the States'. However, the value creation for our stakeholders is about the same because the resale cap rate in Canada is below the resale cap rate in the States. So we add significant value when we open new centers in Canada.

Okay, and is the expectation still for potentially around 10 over the longer term in Canada?

I think we have given guidance in the range of 8% to 10%.

In terms of the total number of Canada projects?

Oh, I'm sorry, I misunderstood your question, Todd. Yes, we are still looking -- what did you say for -- about 10 projects in Canada?

Yes.

I think that's a reasonable expectation over a 5 year to 7 year build-out.

Okay, great. Thanks again for taking my questions.

Your next question comes from Nathan Isby with Stifel Nicolaus. Your line is open.

Hi, good morning. Just going back to the same- store NOI guidance question, you did 6% and '12, clearly, a great number. While 4% is what I would call a solid number, at the end of the day, it is down from 6%. The 6% was done without really any benefit of occupancy lease up in '12, as well, so I'm just curious if you could give some sort of color as to why there might be a moderation in same-store in '13?

Hey, Nate, it's Frank. As Steve alluded to, we really don't expect a whole lot of -- we will release some space, but -- and get increases in rents, but we don't really see any movement in occupancy. Last year, we started our guidance at 4% to 5% and were able to increase that, mainly because sales productivity was higher than expectations. This year, we are at 4%, hopefully, we will be able to make adjustments to that, but at this point, we are not able or willing to do so. We expect same type of renewal rate increases, et cetera, last year, but really, just don't have a lot of additional space to lease. Our current expectation, like we said, is that sales will be stable to slightly up. If that changes, then we will be able to look at the guidance on same center NOI and possibly make some adjustments, but we are not ready to do that yet.

Do you have a fewer number of tenants that are maturing, you are choosing not to renew?

No, the -- as of today, that number is similar to last year. But again, it's very early in the year. We will monitor it as we go forward quarter to quarter, and update our guidance, just as we did last year. And as -- if we are fortunate to have a ramp-up in sales increases, obviously, that impacts on the NOI growth. So give us another quarter or two, and we will have a better picture for you as to what the year might be. But our current expectation, as we sit here in the middle of February, is a 4% growth. Which, by the way, I think, is amongst the highest in the mall REIT sector.

No, I agree; I said that. It is definitely up there. Then just moving to National Harbor. Just curious, has there been any change in the plans in terms of leasing, in terms of tenant and the overall scope of the project, given the recent introduction of and approval of a full-fledged casino?

Thank you for mentioning the casino; it should be another major draw to National Harbor. In addition to the 2,200 room convention hotel, and the Gaylord Hotel that's currently there, the casino, I believe, will come on stream in probably '14 or '15. But the tenant community is not basing their decision on the casino; that will be just an overlay of traffic. They are basing the decision that this is the closest outlet center to metropolitan Washington, DC, and we are going to go after the 33 million visitors that come to DC and try to capture that sales that's out there. And a lot of those 33 million people are coming from various parts of the world.

You might even get people driving up from Baltimore.

We might even get the Isby family driving up. (laughter).

All right, thanks.

Thank you, Nate.

There are no further questions at this time. I now turn the call back over to the presenters.

Well, thank you all for participating on the call 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 a tenured Management team with a disciplined development approach. Our strong portfolio of geographically diversified operating properties has historically provided significant returns for our shareholders, and our external growth pipeline is deeper than it ever has been. Frank and I are always available to answer any other questions you may have. Thank you, again. Have a great day and think outlets, think Tanger.

This concludes today's conference call. You may now disconnect.