Tanger Inc (SKT) 2014 Q1 法說會逐字稿

Good morning. This is Cyndi Holt, Vice President, Finance and Investor Relations, and I would like to welcome you to Tanger Factory Outlet Centers' first quarter 2014 conference call. Yesterday we issued our earnings release as well as our supplemental information package and investor presentation. This information is available on our website under the Investor Relations link.

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, leasings, tenant sales trends, development, acquisition and expansion activities, as well as our comments regarding the Company's funds from operations, adjusted 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 these 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 is important to note that management's comments include time-sensitive information that may only be accurate as of today's date, April 30th, 2014.

At this time all participants are in listen-only mode. Following management 's prepared comments, the call will be open for your questions. We ask that you 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, Cyndi, and good morning, everyone. 2014 is off to a solid start for Tanger, with adjusted funds from operations per share of $0.45 for the first quarter, up 7.1% over last year and meeting our internal forecast.

Contributing to our AFFO growth were the incremental NOI from properties developed and acquired in 2013, and the internal NOI growth that we were able to generate during the quarter that was heavily impacted by adverse weather conditions. In the face of these extreme conditions, our first quarter same center net operating income growth was 3.3%. This extends our streak to 37 consecutive quarters of internal growth, dating back to the first quarter of 2005 when we first began tracking this method.

Our consolidated portfolio was closed nearly five times more hours in the first quarter of this year due to inclement weather than it was in the first quarter of last year. When weighted by the square footage of the specific properties, our consolidated portfolio was closed 3.3% of our total weighted operating hours. This does not include the impact of the days before or the days after a storm, wheneven though the center may have been open, traffic and sales were greatly reduced.

In addition, snow removal expense for the first quarter of 2014 was $2.9 million more than our internal forecast, which net of recoveries, negatively impacted AFFO per share by about $0.01.

Given the weather-related closures, we are pleased that our comparable tenant sales for the rolling 12 months ended March 31, 2014, were up 1.2% to $387 per square foot, which is equal to the sales for the rolling 12 months ended March 31, 2013. However, I want to stress that comparable tenant sales is a single metric and is not the best indicator of Tanger's ability to generate future cash flow and to continue building shareholder value.

We have a proven track record are growing our excess cash flow. In the three year period ending December 31, 2013, our excess cash flow over and above our common dividend increased 149%, which equates to a compounded annual growth rate of 36%. During the same period, we increased our common dividend per share by 17%, which represents a 5% compounded annual growth rate.

In the ten-year period ending December 31, 2013, our excess cash flow through from just over $1 million per month to over $100 million per year. Our ability to raise rents, to upgrade the tenant mix, and to grow the footprint of our portfolio are the key drivers which allow us to continue to increase the free cash flow for our business. We focus on related indicators of our growth, including our low cost of occupancy and high rent spreads, strong tenant demand for outlet space, our robust development pipeline, and our proven track record of disciplined development success.

Our tenant partners overwhelmingly tell us that sales in any quarter have virtually no impact on their long-term expansion plans within the outlet channel of distribution. Our tenant partners continue to grow their business by opening new, profitable outlet stores, since there are very few new malls being built.

Many of you are interested in and update on our development projects and the outlook for the remainder of 2014. But first I will turn the call over to Frank to take you through a discussion of our financial results for the quarter.

Thank you, Steve, and good morning, everyone. As Steve mentioned, AFFO per share increased 7.1% to $0.45 per share for the first quarter of 2014, from $0.42 per the for the first quarter of 2013.

Although we do not provide quarterly guidance, AFFO per share for the quarter was in line with our internal forecast. In spite of the negative weather impact, we are maintaining our initial annual guidance provided in February.

On a consolidated basis, our total market capitalization at March 31st, 2014, was $4.9 billion, up 4.6% compared to March 31st of 2013.

Our debt-to-total market capitalization of approximately 27.8% at March 31st, 2014, was best-in-class for the mall REIT group. We also maintained a strong interest coverage ratio of 3.76 times for the quarter.

Our balance sheet strategy continues to be conservative, targeting minimal use of secured financing and a manageable schedule of debt maturities. As of March 31st, 2014, there was $473.1 million of available capacity under our unsecured lines of credit, or 91% of the total $520 million of commitments. As of quarter end, approximately 86% of our consolidated square footage was unencumbered by mortgages, and we had no significant maturities on our balance sheet before November of 2015. Approximately 78% of our debt is now at fixed rates.

On April 10th, 2014, our Board of Directors approved a 6.7% increase in the annual cash dividend on our common shares, from $0.90 per share to $0.96 per share. Simultaneously, a $0.24 per share dividend was declared for the quarter ended March 31st, 2014, payable May 15th of 2014 to shareholders of record as of today. We have paid cash dividends each quarter and have raised our dividend each of the 21 years since becoming a public company in May of 1993.

At the current levels, we expect our AFFO to exceed our common dividend in the neighborhood of about $100 million annually, so our dividend is well covered. With an expected FAD payout ratio for 2014 of approximately 60%, we are able to generate significant incremental cash flow over our dividend, which we plan to use to reinvest in our business to help fund the developments of new properties and the expansion of successful properties.

I will now turn the call back over to Steve.

Thanks, Frank. I'm pleased to report that we continue to see positive base rental rate spreads into 2014 for space renewed and released within our consolidated portfolio. For the first quarter, straight-line blended rental rates increased 22.8%, compared to 21.2% for the first quarter of 2013.

Lease renewals accounted for 870,000 square feet or about 52.4% of the space coming up for renewal during 2014, and generated a 17.9% increase in average space rental rates.

The remaining 273,000 square feet was released at an increase in average base rental rates of 35.9%, compared to 32.2% for the first quarter of 2013, aswe continued to capture the embedded value in our portfolio. This growth was driven by positive leasing spreads, together with contractually embedded rental rate increases, and resulted in the 3.3% same center net operating income growth for the first quarter.

At quarter end our consolidated portfolio was 97.2% occupied. We continue to succeed in negotiating increased rental rates as a result of the low cost of occupancy per tenants doing business in Tanger Outlet Centers. With the lowest average tenant occupancy cost in our mall peer group at just 8.6% of our consolidated portfolio in 2013, our average occupancy cost ratio is well below market and nearly 300 basis points lower than any other mall REIT.

Under these conditions, we are able to continue to raise rents while maintaining a very profitable distribution channel for our tenant partners. Tenant demand for outlet space coupled with our reputation within the industry of having refined a skill set for developing, leasing, operating and marketing high-quality outlet centers has afforded us a robust external growth pipeline throughout the United States and Canada. In fact, we have three grand openings scheduled in 2014.

First up is a new 400,000 square foot outlet center located eight miles southwest of uptown Charlotte at the interchange of I-485 and Steel Creek Road. We and our 50-50 joint venture partner are preparing the project for the July 31, 2014 grand opening festivities, just in time for the back-to-school shopping season. The center will feature about 90 brand name and designer stores. Currently we expect the property will be greater than 90% leased at opening.

The other two 2014 new developments will open just in time for the holiday shopping season. Both of these projects are located in Canada and are being developed with our 50-50 co-owner. Our first ground-up development in Canada, Tanger Outlets in Ottawa, is located in suburban Ontario. Ottawa is the capitol and fourth largest city in the nation, with 1.2 million residentsand 7.5 million annual visitors. The center will feature 303,000 square feet and about 80 brand name and designer outlet stores when complete.

Our other Canadian project currently under construction is a major expansion and renovation of Tanger Outlets Cookstown. This successful center was originally acquired in December 2011 and is located on the northern end of the greater Toronto area, directly off Highway 400 at Highway 89, the gateway to southern Ontario's Cottage Country, known for its high concentration of vacation homes. The project will nearly double the size of the 155,000 square foot center by adding 35 new brand name and designer outlet stores and will create and upscale an updated exterior for the existing space consistent with the expansion space.

By year-end we also plan to open a 65,000 square foot expansion of Tanger Outlets Rusty located in Glendale, Arizona; a 25,000 square foot expansion of Tanger Outlets in Branson, Missouri; and a 21,000 square foot expansion of Tanger Outlets in Park City, Utah. Our share of the total project cost to be invested in the new developments of expansion that we expect to open in 2014 is about $170 million, of which about $60 million has been funded through March 31, 2014.

In addition, our 2015 projects are well underway,with two of the four projects already under construction. Tanger Outlets in Foxwood in Mashantucket, Connecticut, at Foxwood Resort Casino will be unique within the Tanger portfolio. This project will be suspended above-ground and join the resort's two casino floors, which along with Foxwood's other various on-site entertainment venues, attract millions of visitors each year. The 314,000 square foot center will feature about 80 brand name and designer outlet tenants when complete. We currently expect the second quarter 2015 opening for this project which will be consolidated for financial reporting purposes as a result of our controlling ownership interest.

In Savannah, Georgia we and our 50-50 joint venture partner are developing a Tanger Outlet center located on the highly visible site on I-95 near the Savannah International Airport in Pooler, Georgia. Savannah welcomes 12 million visitors annually. We expect this location to capitalize on the popularity of the Tanger Outlet's brand in the region and to provide marketing and management synergies with our other seven centers in Georgia and South Carolina. When complete, the initial phase of the center will include approximately 385,000 square feet and will feature about 90 upscale brand-name and designer outlet stores. Currently, we expect the center to open in the second quarter of 2015.

Re-development and pre-leasing activities are on going for the other two projects we intend to open next year which are located in Columbus, Ohio and Grand Rapids, Michigan. Our share of the total project costs to be invested in the development projects that we expect to open in 2015 is about $270 million of which nearly $50 million has been funded through March 31, 2014.

Our most recently announced pre-development site is located in the Hartford market in Cheshire, Connecticut. Additionally, we have a deep shadow pipeline of other markets that are either un-served or under-served by the outlet industry.

During the quarter we made the decision to abandon two pre-development projects. We have decided to expand our successful Westgate Center in Glendale, Arizona rather than putting additional money at risk to continue to pursue our site in Scottsdale. Tenant demand for the expansion space in this proven asset has been strong. And as I mentioned, we currently expect to open it in time for the 2014 holiday season.

In Clarksburg, Maryland, we said from the beginning that we believe that the market would only support one outlet center. With the competitive site gaining full entitlements we have chosen to no longer pursue our project in this market. As a result of abandoning these two projects, we recorded a charge of $1.6 million during the first quarter of 2014.

This write-off represents less than one-half of 1% of our total three year development pipeline, including projects we delivered in 2013 or intend to deliver in 2014 and 2015. Excluding these projects, our pipeline remains quite robust, only about $440 million for our share of the cost at the high-end of the range we provided in our supplemental. We have always taken a very disciplined approach to development and we plan to continue to do so.

During our last earnings call in February, I mentioned that we were marketing the potential sale of a portfolio of five outlet centers. During the sales process, we identified a potential re-development and expansion opportunity at one of the properties that appears very promising and has generated significant tenant demand. Although we received substantial interest in this portfolio, we have decided to put any potential transaction on hold for now while we pursue the redevelopment project,which will add value whether we ultimately sell or continue to own this portfolio. We will reconsider divestiture of these or other assets in the future.

With respect to earnings guidance for 2014; based on our current view of market conditions and trends, we are affirming our previously-announced guidance. We expect our estimated diluted net income will be between $0.76 $0.82 per share, and our AFFO will be between $1.93 and $1.99 per share. Our estimates do not include the impact of any additional rent termination fees, any potential refinancing transactions, the sale of any out-parcels of land or the sale or acquisition of any properties.

Our 2014 guidance assumes a projected increase in same center net operating income of approximately 3%,that tenant sales will remain stable or increase modestly, and that general administrative expenses will average approximately $10.5 million to $11 million per quarter. It also assumes 99 million weighted average diluted shares.

We remain optimistic about the growth prospects for our Company and our industry as shoppers continue to seek brand name and designer name products direct from the (inaudible). The tenant community continues to indicate it's desire to expand into new markets in the United States and Canada with Tanger as a preferred partner. The resiliency of the outlet channel has been proven over the past 33 years through many economic cycles.

We have over 2,700 long-term leases with good credit, brand name tenants that have historically provided a continuous and predictable cash flow in good times and in challenging times. No single tenant accounts for more than 4.7% of our base and percentage rental revenue, or 7.9% of our gross lease (inaudible). In addition, approximately 90% of our total revenues are expected to be derived from contractual base rents and tenant expense reimbursements.

And now I would be happy to open our the call for any questions.

(Operator Instructions). And our first question comes from Craig Schmidt from Bank of America. Your line is open.

Good morning. Steve, I was wondering where you think the pace of new development will be into 2016 and beyond, particularly comparing it to sort of the last three years, in terms of new development?

Good morning, Craig. As you think will know, in 2014 as an industry, I think we'll deliver about maybe six or seven new centers totaling about 2.6 million square feet, which is about a little less than the 3% growth in our industry. We expect in 2015 that there will be maybe ten to 11 centers delivered. Of those ten to 11, we expect five will be Tanger, two will be Simon, and one will be a joint venture between Tanger and Simon. So basically eight of the ten or 11 will be between Tanger and Simon.

2016, we really haven't given any guidance for that yet. Just my guess is I think we will probably -- if the economic conditions still hold, I think the industry can deliver anywhere from seven to ten centers in 2016, 2017. I really don't want to go out any further than that.

And do you think that you can maintain the pace that you're showing in 2014 and 2015 in the outer years?

We have not given any guidance on that and I don't really want to give that guidance today. We have a deep shadow pipeline. We are, Craig, as you might imagine, in execution mode to deliver the assets that we have previously announced between now and the end of 2015. As these come to fruition and open, we intend to announce replacements. Again, depending upon economic conditions.

Okay. Thank you.

Our next question comes from Ross Nussbaum from UBS Securities. Your line is open.

Hi. Good morning. Its Jeremy Metz here with Ross. We appreciate the color on the development pipeline. You're obviously making good progress. You mentioned some of the pre-leasing going on in Charlotte, but can you give us a little more color and update on how the pre-leasing stands at your other properties opening in 2014 and early 2015?

We don't announce pre-leasing numbers, but you can assume that based on our long-standing practice that we have in excess of 50% of those committed by a great mix of outlet and designer tenants.

Okay. And then just going back when you were talking about the development potential over the next couple of years, how do you see the opportunity in Canada versus the US?

We have one or two new sites in early pre-development in Canada with our co-owner, RioCan. And in the United States, I think I answered that with Craig, we're looking at various markets that we feel are either not served or under served by outlets. And we will continue to announce those as we deliver the existing pipeline.

And so just to be clear, where you had previously said what you thought could deliver for the industry, that was more US versus -- US and Canada, as you look out?

I don't think I understand your question. Do you mind rephrasing it?

Yes. When you were just talking about ten to 11 centers could open in 2015, six or seven in 2014, you were speaking just on US at that point, right?

That's correct. Just US.

Great. Thank you.

Our next question comes from Christy McElroy from Citi. Your line isopen.

Hey. Good morning, guys. Steve, just wanted for the first quarter follow-up on your comments on the five assets that you are -- that you were looking to sell. You said that you identified one for re-development. Which center was that? And what sort of prompted that new vision for re-development that wasn't there before? Was there something that sort of happened during the sales process? And maybe on the other four, can you give a little bit of color on why not continue to market those other four if you were seeing good (inaudible)?

Hi Christy. One of the assets, which is located in California, is across the street from a potential casino site. And within the last month or so the casino -- the Indian tribe -- the Indian nation, I should say, after 12 years has had their environmental impact report accepted. So almost immediately after that we received inquiries, not only from our tenants but from potential out-parcel users so we want to pursue that and see what happens.

With regard to the other four, the reason we packaged this as a portfolio was to give potential buyers an opportunity to invest more money and start a portfolio of outlet properties. So the other four, we're not going to continue to market at this time. As I mentioned, maybe within a year when we actually build-out and prove out the re-development opportunity we will take another look at the market and our assets and decide what we want to do.

So what you found in the market was you don't think that those assets would stand on their own, as far as potential opportunities for buyers?

We have not marketed them individually and don't intend to.

Okay. And then just with regards to Cheshire, can you talk maybe a little bit about the location and decision to do a project there? What's the competitive landscape and were where would you expect the center to draw its core customer base? Just sort of initial findings for that site.

Well, it's a joint venture with WS Development, Jeremy Sclar and his partners have a long-standing track record of developing successful properties in the New England market. We -- there is a competitive site in that area and we have looked at those sites and we feel that the WS Development site is far superior in Cheshire. We had our leasing group up there yesterday and we're just starting really to aggressively market that.

It will draw from the high income counties of Connecticut between New Haven, Hartford and the other high income areas in the state. And we feel that the Hartford market is probably under-served by an outlet center. So we're excited about that. It's in its very early stages. We just announced it. We have a very high-quality, well-known seasoned developer as our joint venture partner.

Thank you, Steve.

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

Hi. Thanks. Good morning. Just first question for Frank. You noted that the quarterly result was in line with your internal budget. I was just curious, though, if that included the $0.01 impact, net of recoveries, from the higher snow removal costs? Or if that was offset by rents and other income running slightly ahead of your budget?

We actually -- with the hit from the snow, we were still able to meet our internal forecast. So obviously without the snow we would have been ahead of our internal budget.

Okay. And then I saw that occupancy dipped down in the portfolio overall. And I was just curious if there were any bankruptcy related move-outs or anything? Or would you just sort of characterize that as post-holiday move out activity? I noticed Deer Park and Atlantic City, specifically, looked like they were both big drivers of the occupancy decrease in the quarter. Anything going on there, specifically?

Well, nothing unusual. It's consistent with many years of occupancy dipping slightly in the first quarter as seasonal temporary tenants -- holiday seasonal temporary tenants move out. I will say that we have had great success in re-leasing most of the space to higher volume tenants. And you will see that -- and we expect occupancy to trend back up in the next several quarters. But this is consistent with prior years.

Okay. Anything specific, though, at Deer Park or Atlantic City? Looked like a little bit of a larger decrease, perhaps particularly relative to where the rest of the portfolio is sitting today.

Nothing unusual in either one of those markets. They are larger centers. But there's nothing unusual in either one. And as I said before, we expect to continue to have occupancy to trend back up.

I think virtually most of the space in both Deer Park and Atlantic City is already spoken for.

Okay. Thank you.

Thank you, Todd.

And our next question is from Ben Yang from Evercore. Your line is open.

Hi. Good morning. Thanks. Steven, I'm just wondering if you have any thoughts about Coach, obviously an important tenant. They reported yesterday that their comp sales were down 21% in the quarter. And from what I understand, it was predominantly in their outlet channel. I mean are you having any concerns? Can you comment on some of your recent discussions with them? And how they intend to maybe operate their business going forward?

I have had the opportunity to meet with their new Chairman and their new Management Team and was very impressed. As you may know, they've also hired a new designer and their line should be delivered in the -- I think the third quarter of this year. So we're watching it closely. They are a long-standing valued tenant. They still, even though their sales were off a little bit on our properties, not nearly what was announced. They still are one of the highest, if not the highest volume tenant in our centers. So we're hopeful that the new line will be received by Coach customers and that their sales will stabilize and head back up.

So I guess it's still early and it's not necessarily your sense that they don't intend to renew leases, maybe slow down in the pace of new openings and development? The jury is still out? Is that kind of a fair way to describe that from your perspective?

We have a close relationship with Coach. We have seen no slowdown in their renewing existing leases when they come up for renewal. And we're working them on our various new development projects.

Great. Thank you.

And our next question comes from Carol Kemple from Hilliard Lyons. Your line is open.

Good morning. How does first-quarter sales compare to the first quarter of last year, just for the three month periods?

Good morning, Carol. How you doing?

Good. How are you?

Good. We announced as -- we announced in our script that the 12 months rolling sales at the end of December 31 were approximately the same as the rolling 12-month sales as of March 31.

So for the -- but for the three-month period, just January through March of the first quarter 2014 and the first quarter of 2013, would those be the same?

Carol, we report as we report. You can draw whatever conclusion you want.

Okay. Thank you.

And our next question comes from Rich Moore from RBF Capital Markets. Your line is now open.

Hello, guys. Good morning I'm actually still at RBC. I want to go back, if I could, to Todd's question. And, Steve, I'm wondering, too, but the dip in occupancy which was a little bit more in the first quarter than it normally is in a normal first quarter. You hit a record in the fourth quarter of 2013 but then you did kind of back up a little bit more than usual, even more so than 1Q 2013 backed up from 4Q 2012. And you had given us some stats before on the renewal outlook, and I realize bankruptcy is one side of the story. But I'm also curious, from a renewal standpoint, if you are seeing any change in the level of renewals that you guys are enforcing, renewals that tenants are selecting versus what you had seen, say last year.

Hey, Rich -- Steve, if I could, just to put it in perspective; you go back a few years, Q1 2011 we ended at 96.7%, Q1 of 2012 we ended at 97.3%. So Q1 of 2013 being 98% was kind of the abnormal Q1 end, if you will, in occupancy. So dropping to 97% is not atypical.

Okay. Would you say, Frank there's any change in the level of renewal activity? Because that's harder to track. We can see the bankruptcies but we can't tell if there are tenants that just don't want to renew as much as they used to want to.

Yes. Go ahead, Steve.

The an is no. There is no trend that you are trying to identify. Leases -- we have a very high percentage of lease renewals when leases come up for renewal. And if the space is not renewed, that's in the re-tenanted category for which we get a huge increase when we mark that space to market and capture the embedded value. So we almost root for tenants not to renew. And that goes back to increasing our cash flow and building long-term shareholder value.

I think it's terrific that in three years we've increased our free cash flow -- I think it's 149%. That's extraordinary. And our goal is to continue to increase cash flow and that's by continuing to upgrade our co-tenancy with higher volume and higher rent-paying tenants when space does come available. We are in the process and already have released a substantial portion of the space that vacated in the first quarter. And I think you will see that, as I may have mentioned, I think you will see that reflected in our numbers through the rest of the year.

Okay. Yes. Got you, Steve. Thank you. And then one thing on the snow removal expenses. Are those not recoverable when they increase? Is there some reason that those aren't put back in common area maintenance and charged back to the tenant?

Yes. Quite a bit of it was recoverable, which is why Steve pointed out that it made about $0.01 per share difference, even though we exceeded our expectations of snow by well over $2 million. The bottom line impact was less than that because we were able to recover quite a bit of it. But still it was a substantial increase in leakage for the quarter.

Okay, and the part not recoverable, Frank, is the fixed cam contracts -- or fixed -- ?

Yes. That kind of a thing.

Fair enough. Yes. Right. Okay. Great. Thank you, guys.

And our next question comes from Michael Mueller from JPMorgan. Your line is open.

Hi. I tried to get out queue. I'm good. My question was answered. Thanks.

And our next question comes from Nathan Isbee. Please state your company name. Your line is open.

Yes. Hi. It's Nate Isbee from Stifel. Good morning. Just going back to the comp tenant sales figures. You have previously disclosed on a quarterly basis. I'm just curious why you changed now.

We decided to report the way that most of our competitors are reporting and we're going to be consistent with that.

Okay. And then on the occupancy; where would you say year-end occupancy is relative to last year in your guidance?

You mean our projected year-end occupancy?

Correct.

For 2014?

Yes.

I don't think we provided an occupancy guidance if you will, Nate. But certainly I think if you look historically we have ended the year at -- obviously in the high 90s.

I know. But you're about a hundred basis points below where you were last year at the same period. I'm just curious, as we go through the year, is there a catch-up or should we assume that it will be pretty much -- there will be some lower occupancy throughout this year?

Well, the first quarter occupancy level tends to be the lowest of any year.

No, I know but year-over-year, you're about a hundred basis points -- like you pointed out before, you're about a hundred basis below where you were last year.

Correct.

So I'm curious as we trend through 2014, should we expect about one hundred basis points lower throughout the year, or will there be a catch-up as we get into the important lease-up season?

As Steve had mentioned, we have already re-tenanted a lot of the space that became vacant during the first quarter. So unless there's other vacancies that occur, we should be back to similar occupancy as the prior year.

Okay. Perfect. Thank you so much.

Next question comes from Samir Khanal from ISI Group. Your line is open.

Thank you. Good morning. Just curious on -- with all the new developments taking place, are you guys seeing a more competitive environment for tenants with expiring leases, at this point?

No. Expiring leases, again as I mentioned, are being renewed at pretty much the same frequency as previous years. And if they're not renewed, we're able to capture the embedded value in the portfolio. So I wouldn't draw that conclusion.

Okay. And can you remind us where are you guys on the conversion of fixed cam at this point?

We're about 18% of the way there.

Okay. Thank you.

We have no further questions in queue. I will turn it back to the presenters.

In closing, I would like to remind all of our shareholders of our annual meeting on May 16th. Your vote is important to us, so we ask that you review the proxy statement we filed on April 4th and please vote your shares.

Thank you all for participating in our call today and your interest in our Company. Frank and I are always available to answer any questions you may have. Thank you again. Have a great day and think outlets and think Tanger. Good-bye.

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