Tanger Inc (SKT) 2014 Q4 法說會逐字稿

Good morning, everyone. This is Cyndi Holt, Vice President, Finance and Investor Relations, and I would like to welcome you to the Tanger Factory Outlet Center's fourth-quarter and 2014 year-end conference call. Yesterday we issued our earnings release as well as our supplemental information package and our investor presentation. This information is available on our investor relations web page, investors.tangeroutlets.com.

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, development acquisition and expansion activities as well as their 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 and obtain public financing, the expected timing and yields related to development projects 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. Reconciliation of these non-GAAP financial 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, February 11, 2015.

At this time all participants are in listen only mode. Following management's prepared comments the call will be opened 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; Frank Marchisello, Executive Vice President and Chief Financial Officer; Tom McDonough, Executive Vice President and Chief Operating Officer; and Jim Williams, Senior Vice President and Chief Accounting Officer. I will now turn the call over to Steven Tanger. Please go ahead, Steve.

Thank you, Cyndi, and good morning, everyone. 2014 was another outstanding year for Tanger. Year-end occupancy of 98% marked our 34th consecutive year with year-end occupancy of 95% or greater.

Our internal growth track record is just as impressive. The fourth quarter of 2014 extends our streak of same-center net operating income growth to a record 40 consecutive quarters.

During 2014 Tanger delivered nearly 1 million square feet of new space which represents a 7.3% expansion of our total footprint at the beginning of the year. And late in the year we resumed our long-standing practice of opportunistically divesting non-core assets.

Many of you are interested in an update on our new development and disposition plans. 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 outlook for 2015.

Thank you, Steve, and good morning, everyone. 2014 AFFO per share increased 4.8% to $1.97 per share compare to $1.88 per share in 2013. On a consolidated basis, our total market capitalization at December 31, 2014 was $5.2 billion, up 14% compared to December 31, 2013. And our debt to total market capitalization of 28% was best in class for the mall REIT group.

We also maintained a strong 2014 interest coverage ratio of 4.09 times. On November 21, 2014 we completed a $250 million 10-year senior notes offering. Investor demand was strong, creating a book that was nearly four times oversubscribed and ultimately resulted in a zero new issue concession.

The notes which matured December 1, 2024 bear interest at 3.75%, a record low coupon for Tanger and were price at 99.429% of par to yield 3.819%. Net proceeds from this offering were use for the redemption of $250 million and 6.15% senior notes due November 15, 2015.

On completion of the redemption on December 15, 2015, we recorded a charge of $13.1 million related to the make-whole premium due on the -- to the note holders. We are satisfied that these transactions accomplished our objectives of extending the average maturity of our outstanding debt and capitalizing on historically low interest rates.

Our balance sheet strategy continues to be conservative targeting minimal use of secured financing and a manageable schedule of debt maturity. As of December 31, 2014, there was $409 million of available capacity under our unsecured lines of credit or 79% of the total $520 million in commitment.

As of year end, approximately 86% of our consolidated square footage was unencumbered by mortgages. We have no significant maturities on our balance sheet until October of 2017 when our lines of credit mature, and we can extend those maturities by one year at our option.

We have paid cash dividends each quarter and have raised our dividend each of the 21 years since becoming a public company back in may of 1993. Our dividend is well covered with an expected FAD pay out ratio for 2015 in the mid-50% range. At these levels we expect to generate about $100 million in excess 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 expansions of successful properties.

And now I'll turn the call back over to Steve.

Thanks. I'm pleased to report that we continued to generate positive rent spreads during the fourth quarter of 2014. For the year ended December 31, blended base rental rates increased 23%. Our ability to drive rents higher is a function of retailer demand for outlet space, increasing tenant sales and the fact that on average our leases are currently at below market rents with the lowest average tenant occupancy cost ratio in our mall peer group at just 8.9% of our consolidated portfolio in 2014.

We believe that our average occupancy cost ratio is well below market. Under these conditions we have been successful in raising rents while maintaining a very profitable distribution channel for our tenant partners.

Lease renewals in 2014 accounted for 1.24 million or about 77% of the space coming up for renewal during 2014 and generated a 17.1% average increase in base rental rates. We have always intentionally opted to not renew certain leases in order to have space available for higher volume tenants.

In 2014 we chose to not renew slightly more leases than we would in a typical year. Excluding the expiring space in which the tenant has no renewal option and we are opting not to renew the lease to further upgrade our tenant mix, 92% was either executed or in process at December 31, 2014. Retenanting activity accounted for an additional 470,000 square feet of leases executed during 2014. This space was released at an average increase in base rental rates of 36.1% as we continue to capture the embedded value within our portfolio.

Keep in mind that most of our leasing activity happens earlier in the year. Later quarters when only a small portion of the annual leasing activity takes place may not be representative of our ongoing leasing performance because the mix of leases can easily skew spreads when the base activity for a given quarter is small. For instance, only about 11% of the total square feet renewed during 2014 was during the fourth quarter, and only three leases were retenanted during the fourth quarter.

We're analyzing leasing spread trends, we recommend that you always focus on year-to-date activity. Our early 2015 leasing activity supports our thesis that retailer demand for space in Tanger Outlet centers remains strong. As of January 31, 2015, we had executed leases or leases in process for 54.8% of the space expiring in 2015, in line with our renewal progress for 2014 expirations at the same time last year of 54.9%.

Furthermore, 2015 lease executions for space renewed and released within the consolidated portfolio through the end of January resulted in a base increase and average base rental rates in line with our reported 2014 full-year increase. Avera -- occupancy for the consolidate portfolio was 98% on December 31, 2014, up 30 basis points compared to the end of the third quarter and the highest of the reporting mall REITs.

Occupancy at year end was down 90 basis points compared to 2013 year-end occupancy primary as a result of tenant bankruptcies and store closures and the leasing strategy I mentioned earlier. Tanger's ongoing, long-term strategy is to provide the consumer with the best overall shopping experience, so we strive to perpetually upgrade our tenant mix to position our centers for long-term growth.

Subsequent to year end, Izod and Jones New York each announced plans to close all of their retail stores by the end of 2015. Including unconsolidated properties, these tenants account for 25 stores totaling 79,000 square feet which were not scheduled to naturally expire in 2015. This represents approximately 0.5% of our total GLA. These store closings afford us a unique re-merchandising opportunity to further upgrade our portfolio with more productive tenants at higher average rents.

As I mentioned in my opening remarks, we have accomplished quite a long record of consecutive quarters of same center and operating income growth dating back to the first quarter of 2005 when we first began tracking this metric. However, our internal growth was impacted by an 80 basis point decrease in average occupancy during 2014. Our same-center net operating income increased 2.6% for 2014 and 2.7% for the fourth quarter.

We are pleased to post this healthy growth in the face of tough comps of 4.3% and 6% for 2013 and 2012 respectively. Tenant demand for outlet space coupled with our reputation within the industry of having a quality portfolio of outlet centers and a refined skill set for developing, leasing, operating and marketing them has afforded us a robust external growth pipeline throughout the United States and Canada.

As I mentioned earlier, development activity completed in 2014 expanded our total footprint significantly. We opened two new developments and six expansions and currently have four additional new development projects under construction which we plan to open by the end of this year. In July 2014 we and our 50/50 joint venture partner opened a new outlet center eight miles southwest of uptown Charlotte, North Carolina.

In October 2014 we and our 50/50 co-owner open Tanger Outlets Ottawa, the first round of development of a Tanger Outlet center in Canada in suburban Kanata, Ontario. Also located in Ontario on the northern end of the greater Toronto area, Tanger Outlets Cookstown underwent a major expansion and renovation project that nearly doubled its size while creating an updated exterior for the existing space consistent with that of the expansion. We and our 50/50 co-owner opened the newly expand property in November of 2014.

During 2014 we also completed several smaller expansion projects totaling approximately 125,000 square feet including properties located in Branson, Missouri; Charleston, South Carolina; Park City, Utah; Sevierville Tennessee and Glendale, Arizona. In January of 2015 we and our 50/50 joint venture partner commenced construction of the newest Tanger Outlet center located 4 1/2 miles south of Memphis in Southaven, Mississippi.

Memphis attracts over 9 million visitors annually and more than a million and a half people live within an hour of the development site. We currently expect the center to be completed in time for a holiday 2015 opening.

Construction of the other new developments, the Company intends to open in 2015 is ongoing. Current plans include an April 2015 grand opening at the Tanger Outlet center in Savannah, Georgia; a May 2015 grand opening at the Tanger Outlet center locate at the Foxwoods resort casino in Mashantucket, Connecticut; and a third quarter 2015 grand opening of the Tanger Outlet center in Grand Rapids, Michigan. We and our 50/50 joint venture partner currently expect to be able to commence construction of the Tanger Outlet center in Columbus, Ohio, a pre-development stage project in time to complete construction and open the center in the first half of 2016.

Total project costs for the new development that we plan to open in 2015 is about $377.8 million. Of this amount our remaining equity contribution necessary to complete these projects net of construction loan proceeds was only about $76.6 million as of December 31, 2014.

At the mid-point of the yield ranges disclosed in our supplemental information, the weighted average stabilized return on cost for these projects is currently projected to be approximately 10.1%. These developments extend our proven track record of creating high-quality outlet assets at yields way above our cost of capital and should create significant long-term shareholder value.

Moving on to asset recycling, active asset management and opportunistic divesture of non-core assets are long-standing practices of our Company. On December 13, 2014, we sold an outlet center in Lincoln City, Oregon for $39.9 million and entered into an option agreement with the same private buyer for the sale of up to four additional outlet centers identified as non-core assets. The buyer is currently conducting due diligence on three of the properties, and should they choose to acquire these properties during the first quarter of 2015, the agreement provides the option to acquire the final property in the first quarter of 2016.

All four of the remaining potential disposition properties are classified as rental properties held for sale as of December 31, 2014. The average sales productivity for the properties sold in 2014 and the three properties that may be sold to this buyer during 2015 was approximately $249 per square foot, 37% below the average sales within our consolidated portfolio.

We cannot say with certainty that the transactions will close. We believe the buyer's appetite to acquire was demonstrated in December when the sale of Lincoln City closed. Based on confidentiality obligations to the buyer, we will not specifically identify the properties at this time, nor will we identify the buyer.

In addition we initiated the buy-sell provision for the partnership that owns an outlet center in Wisconsin Dells, Wisconsin. Our joint venture partner has decided to acquire our 50% equity interest in the venture, and currently we expect to close on the transaction during the first quarter of 2015.

Some of you expressed curiosity regarding our desire to trigger the buy-sell. There were a number of circumstances we took into account. Although our unconsolidated joint venture exposure has increased over the last few years, most of you know that we generally prefer to control the entire property and use joint venture arrangements opportunistically.

Asset quality is another major consideration. In our opinion Wisconsin Dells is a stable asset but is not one of the top performers in our portfolio. Taking all of these factors into consideration, we chose to set a price at which we were indifferent as to whether we would be the buyer or the seller, and ultimately we are pleased with the expected outcome.

While the disposition of the properties sold in 2014, the sale of the three properties that may be sold in 2015 and the sale of our 50% equity interest in Wisconsin Dells joint venture would collectively result in FFO dilution of $0.10 per share for 2015. The Tanger portfolio would be strengthened by the elimination of assets with lower relative productivity, thereby upgrading the overall asset quality of the remaining portfolio.

We intend to redeploy the disposition proceeds into higher quality investments like our new development projects that currently produce average yields around 10%. Should these transactions close, on the sale of these assets, we will provide more information and details at that time.

With respect to earnings guidance for 2015, based on our current view of market conditions and trends, we expect our estimated diluted net income will be between $1.47 and $1.53 per share, and our FFO will be between $2.07 and $2.13 per share. Guidance assumes same-center net operating income growth of approximately 3% to 3.5%, average general administrative expense of approximately $11.5 million to $12 million per quarter, 10% per share dilution related to dispositions completed in 2014 and expected to close in 2015 and dilution of approximately $0.02 associate with the strengthening dollar as it relates to our Canadian operations.

Our estimates do not include the impact of any potential refinancing transactions, the sale of any out parcels of land or the sale or acquisition of any properties. With the exception of the $0.10 dilutive impact of the asset sales which was news the street and the $0.02 related to the strengthening of the dollar, our guidance is in line with the street's expectations. We remain optimistic about the growth prospects for our company and for our industry as shoppers continue to seek brand name products direct from the manufacturer, the tenant community continues to indicate its 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 34 years through many economic cycles. We have nearly 3,000 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 revenues or 7.8% 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.

And now I'd like to open the call for any questions.

(Operator Instructions)

Your first question comes from Samir Khanal, Evercore ISI. Please go ahead.

Thank you. Steve, just listening to you, there seems to be a shift in strategy with you guys being more open to selling assets here. Can you talk about how this deal came about with the buyer? I mean, did the buyer kind of make the first call, or are you actively looking to improve your portfolio at this point? I guess should we expect more selling beyond the ones that you sort of announced at this time?

Good morning, Samir. We have always sold assets and redeployed the proceeds into upgrading our portfolio. This process started about a year ago, and we were very pleased that we delayed the closing of the first transaction until the end of the year. The execution I think was better. We have straddled numerous different year -- at least two tax years on the transaction to allow us in an efficient manner to redeploy the asset -- redeploy the proceeds into higher assets, newer assets with a better return, and we will continue to do that.

Right now we have -- other than what I've mentioned in the call, we have no other expectations of selling assets, but from time to time we do get unsolicited inquiries which we always respond to.

And just in terms of the pricing, is there anything you can share in terms of the cap rate on the one you sold in 4Q?

Right now we're going to leave it as we said in the script. We're not going to identify cap rates on any particular assets, but I will tell you that the proceeds will be deployed as I mentioned in our new developments which yield in excess of 10%.

Okay and one last thing for me, if I may, recently a few of the retailers have spoken about kind of traffic being sort of soft or down in the outlet channel. You've heard it from Ralph Lauren. You've heard from Ann Taylor, Kors, I wondered if you had any comment on that and what you're seeing in your channels, from your centers today.

We are very happy with our traffic in the holiday season, November and December, and continuing into January. We do business with about 500 different quality brand name and designer tenants, some of which are the ones you mentioned. Our traffic, our average traffic in November, December and January was up about mid-single digits, so it's significantly different. Our traffic is up, and some tenants do well, and some tenants don't do well. That's the nature of retail.

Okay. Thank you.

Your next question comes from the line of Tayo Okusanya with Jefferies. Please go ahead.

Yes. Good morning. Question on the renewal spread in fourth quarter specifically, seemed like it came down a bit from the prior quarters, although the entire year was pretty healthy. Was anything unique in regards to just one or two particular leases in 4Q that kind of created that?

Good morning. As I mentioned, the sample size of three is not indicative of anything. We would encouraging you, as we always have, to look at the year-to-date results, not a very small sample size.

Okay. That's helpful. And then in the 2015 guidance, the same store NOI growth is meaningfully above what you experienced in 2014, is that based on the idea of some of the space you've held back you start to lease it up, is that really the driver there?

Comp NOI is a function of leasing spreads, filling some vacancies and general overall operating efficiencies, I think all of those go into the guidance. We are comfortable with the guidance of 3% to 3.5% as we've mentioned.

Any of those factors like a bigger weighting in that improvement versus any of the others?

We're not going to get into the formula. They all impact comp NOI, and that's our guidance, and that's what we think we can deliver.

Great. Thank you.

Your next question comes from Andrew Rosivach with Goldman Sachs.

Good morning, this is Caitlin Burrows. I was just also wondering regarding the property that you did sell and the additional ones that you plan to sell or might sell. Was it a regional operator, and do they own other outlet or retail properties?

Good morning, Caitlin. We have a confidentiality agreement with the buyer and will not disclose any information about the buyer.

Okay and then if they do not decide to buy the properties, would you continue to market them or hold on to them?

We'll have to make that decision once the buyer either exercises or does not exercise his option to buy the existing -- the remaining three.

Okay. Thanks.

your next question comes from Ross Nussbaum with UBS. Please go ahead.

Good morning, Jeremy Metz on with Ross. Steve, first going back to the sales, is this the same package of five that you had on the market early last year for sale?

We're not going to comment on the specific assets. If they do close, we'd be happy to provide more detail.

Okay. Just thinking about the package you did have originally, you pulled that from due to the Barstow asset which you thought you had a little bit of a development, redevelopment opportunity, can you just give us an update on the latest there?

Barstow continues to do well, and I want to be clear I'm not saying Barstow is either in or out of the package. With regard to Barstow specifically, the sales trend and the productivity continue to increase nicely, and that's all I really want to say. Okay and just,, to the extent you can talk about the profile, you know, you said it's about, you know, 35% or 37% below the portfolio average for these assets. Can you just talk, what drove that underperformance relative to the rest of the portfolio? Is that just new competition coming into the market that is leading to that, or is it something else structurally? We've own these assets for quite a long time, and they are stable assets, and if they do sell, it would be our intention to reinvest the proceeds into some -- in our new development activities at a higher return.

Last one for me, just the decision to walk away from Cheshire, obviously WS development is going to continue to move forward so it sounds like you clearly believe in the project, just what led to you guys -- you know, what did you see that led you to walk away from that one?

Chesh -- sorry the WS folks are quality people and quality developers of long standing. They have been working on this site for a while, and we came in with the expectation of being able to help them lease the asset outlet tenants. After a relative -- after a period of time we felt that was not going to happen, so in fairness to our partners and in transparency to our investors, we decide to focus our attention on other assets.

Was there just other competition in the area? Why wasn't it going to work as an outlet?

There are other new development sites in the market place. I don't know if they're going to move forward or not. There are multiple reasons why tenants make their decisions, but I really don't want to get into specific tenant discussions or specific site discussions with regard to that. We have moved on from that project, and we wish our partners well. It is a great piece of real estate and with the right tenant mix, I think it will be very successful.

Thank you.

Your next question comes from Christy McElroy with Citi. Please go ahead.

Hi, good morning, guys. Just wanted to follow up on the asset sales. I realize that you're still in the due diligence phase on some of them, so you can't tell us everything that we want to know, but maybe just to help us better understand the $0.10 of dilution embedded in your 2015 guidance, not necessarily on individual assets, but just more broadly can you give us a range of total proceeds on those remaining assets in addition to the 50% Wisconsin Dells stake? And maybe you can give us a sense for what that dilution assumes for a reinvestment of those proceeds in 2015.

Christy, in total transparency, we placed these assets in the category assets held for sale, because there is an option for the buyer -- the buyer can exercise an option to buy three additional properties this year. And if they do complete that, they have an option to buy another property in 2016. We're not going to disclose anything further than we've already disclosed. We are subject to an agreement with the buyer which we will respect.

Well, Steve, you mentioned that you cannot say with certainty that those extra -- that those additional sales will close. Can you separate out maybe the $0.10 between Oregon and Wisconsin Dells which will close and then the other three that you could sell in 2015, maybe separate out the $0.10.

The only one that's closed so far is the one in Lincoln City, and the other ones are still -- still have not closed yet, and when they do close we'd be happy to provide more information and more color. But right now I don't want to -- I don't want to get into what might happen, our guidance is based on our best information at this point in time. If they don't close, we'll update guidance, and if they do close, we'd be happy to provide more information.

Steve, it's Michael Bilerman speaking. I guess what we're trying to figure out is you've clearly embedded $0.10 or $3 million of FFO dilution in your 2015 guidance. Part of that is the cap rate at which you're selling the assets and part of what you're doing with the proceeds both in terms of what you do with them and when you do it with them. And so the $0.10, obviously, depending on what those differences are has a lot of different meanings.

And so we're just trying to understand. You've put out there that there's $0.10 dilution. We're just trying to understand, well, what does that mean? How did you come up with the $0.10? Why is it $0.10? So that being able to provide at least some clarity as to why there is $0.10 of dilution because if you're sitting on cash for the whole year, that's very different than reinvesting right away.

And so we're just trying to get a better perspective of what's in the $0.10.

This is Frank. The $0.10 obviously relates to what we believe the lost NOI from the properties being sold will be, offset by use. And we've stated already that the use of proceeds, our intention there is to reinvest that money in our new developments.

Right. But the timing of that income coming online is probably not this year, so should we assume that you're effectively sitting on, we all can do some reasonable math to see some level of proceeds probably north of $120 million --

You can assume -- we sit on the cash or we pay down our lines which are at a very low interest rates and typically won't make a whole lot of difference to the numbers.

So effectively this year selling at whatever cap rate, we should think about it as execute -- end of the first quarter an then sit on the cash for 2015 and the reinvestment as those proceeds come in 2016 as you -- 2016 and 2017 are to earn back the accretion from doing the transaction.

We will reinvest it in our new developments as they proceed forward which obviously will be investing money every quarter in our new development projects.

So we should think about it as $3 million of effectively lost NOI because the interest savings, paying down your line is pretty minimal.

Yes. I don't know where you're getting $3 million.

$0.10, you have -- sorry, you have $0.10, $10 million, sorry, $10 million of lost FFO. 100 million shares outstanding?

I'd be happy to talk to you offline instead of taking everybody's time on this, Mike.

Okay. Thank you.

Your next question comes from the line of Michael Mueller with JPMorgan. Please go ahead.

Yes, hi. Just a quick one, why is the fourth property that's slated for sale pushed off into 2016?

We want to efficiently plan the use of proceeds in the most tax-efficient manner.

Okay. And actually one other one too. I know last quarter you talked about Atlantic City and a tenant moving in. Can you talk a little bit about the occupancy changes sequentially, that you saw at Atlantic City and Glendale?

Well, occupancy of Atlantic City is up.

Yes.

Pretty significantly and we continue to have -- pardon me. Atlantic City continues to do well and is -- we've added several new tenants. Also you should be aware that Bass Pro Shops recently opened right next to our property in addition to a large structured parking deck provided by the city, so there's a lot of growth and excitement in Atlantic City. Glendale was -- we successfully hosted visitors to the Super Bowl couple of weeks ago, traffic was huge, some of our tenants said it was like another Black Friday. The dip in -- slight dip in occupancy I think will be short term. We have an anchor tenant by the name of Sachs, opening. We turned over space to them, and they should be opening in the next couple of weeks and 97% occupancy down from 100% three months before we feel that whatever remaining space the 10,000 feet or so will be refilled shortly.

Okay. Thank you.

Your next question comes from the line of Carol Kemple with Hilliard Lyons. Please go ahead.

Good morning. Beyond the Columbus pre-development project, how many assets would you say you have in pre-development in the US and in Canada?

We have numerous in various stages of pre-development. There's probably three or four that, one of which is Memphis which we announced shortly after we terminated our relationship in Cheshire, and we announced Memphis and broke ground in Memphis, and that was part of our shadow pipeline. There are probably three or four others that when we start to open in the first quarter we will start to announce new projects.

And is there anything new on Canada right now, do you have any new projects planned there?

Not right now.

Okay. Thank you.

Your next question comes from the line of Rich Moore with RBC Capital Markets. Please go ahead.

Yes, hi, good morning, guys. I'm curious, it seems like there's retailers, as you look at -- as you drive around and look at the outlets that aren't yet in the outlet centers, different kinds of retailers. And I'm wondering what you're seeing in terms of new retailers that are entering your centers, or do you think we've kind of reached a near-term top in terms of new guys coming into the centers?

We certainly have not reached any sort of saturation. There's literally almost everyday and every week new people expressing interest and coming into Tanger Centers and also other outlet centers. For instance, in 2014 we were delighted to welcome North Face, Chaps, Joe's Crab Shack, Diane von Furstenberg, Helly Hansen, Limited, CAbi, just to name a few.

We have now signed leases and will be opening shortly one of the first Rag & Bone outlet stores, Alex And Ani, Alice + Olivia, so as you can see there's tremendous demand for space. This is retail. Retail constantly evolves. Our job and part of our skill set is to do just what you did, walked around the malls and walked around other retail venues and try to determine the most exciting, the most high-growth retailers today and to try to attract them to the outlets.

That's why in some cases at 98%, 99% occupancy which is pretty much statistical full occupancy, we have to absorb some short-term increase in vacancy to be able to accumulate space to put in higher volume, exciting tenants like H&M, Forever 21, some of the tenants that we've added to our portfolio. And, again, some of the tenants that started with smaller stores, I won't mention many names, but a lot of the high-volume tenants we have today started with 6,000-foot stores, did so well that they're expanding to 10,000 and 12,000-foot stores.

So it's an exciting period in the outlets now, and there's tremendous demand for space with very high quality, brand name and designer tenants.

That's a good lead, Steve. Sounds like you were ready for that question, and I thank you.

I thank you for asking it.

Your next question comes from the line of Todd Lukasik with Morningstar. Please go ahead.

Good morning. Thanks. Just a quick question on the accounting for the assets that you have up for sale. On the balance sheet, they're broken out obviously, do they stay in the consolidated revenue and operating expenses on the income statement until they're sold?

That's correct. That accounting treating has changed recently. You no longer have to drop them down to discontinued ops, so they'll continue to be in our operating results until they sell.

Okay. And then I know you've mentioned that you're going to redeploy the capital into your development projects. Do you anticipate there being a tax requirement to pay a special dividend at all for 2015 due to those sales?

Our goal is to reinvest the proceeds tax efficiently. If we are unable to do that, then there may be the possibility that we would have to pay a special dividend. But at this point we're not prepared to make a definitive answer on that. It will depend on our ability to redeploy over the next six to nine months.

Okay. But redeployment into developments as opposed to incremental acquisitions would count from that perspective?

Yes. If we could redeploy into an acquisition, that would certainly take care of the potential problems as well.

Okay. Thank you.

Your next question comes from the line of Nathan Isbee with Stifel, please go ahead.

Good morning. If you could just comment, last quarter you were tracking same-store growth of 2.6%, and you projected to meet or exceed the original guidance of 3%, so I'm just curious what the material shortfall versus your projections a third of the way through the fourth quarter.

Nate, good morning. As we mentioned, our total occupancy was down slightly 90 basis points to -- from 98.9% to 98%. I want to stress it's still 98% occupied, but we had certain leases under negotiation, and we expected certain tenants to take space before the end of the year which was delayed. And obviously that impacted directly, because you're against some revenue the year before and zero this year, so it's a direct impact on comp NOI. There's really very little other explanation, other than just the small drop in occupancy.

Okay. And then you talk a little bit about the store closures in 2015 as an opportunity to retenant space. Can you talk about just broadly what your watch list looks like? Are you expecting not just in 2015 but 2015, 2016 that that store closures might be ticking up a little bit?

Neither Izod or Jones were on our watch list. They are both very high-quality tenants with high quality parent companies. They, Jones stopped wholesale production. It had nothing to do with the outlet space and Izod which is part of Phillips Van Heusen, or PVH, decided focus their sales on Kohl's, and it had nothing to do with the outlet. There's no way to have them on a watch list or not.

Our receivables, our doubtful receivables are virtually nothing, and as you know from long-standing partner and friend, we kind of root for people to go bankruptcy -- to go bankrupt so we can try to get space back to put in higher -- higher productivity tenants into our portfolio. So this is -- we've been doing it for 34 years, this is just a normal part of the of the process. This is not a greater number nor a lesser number than in years past.

Thank you so much.

(Operator Instructions)

Your next question comes from the line of Todd Thomas with KeyBanc Capital Markets. Please go ahead.

Hi, thank you. Good morning. First just regarding both Jones New York and Izod, I was wondering if you have any sense of the timing of those closures in your portfolio throughout 2015 sort of when they'll hit? And what do you think the potential mark-to-market on those spaces might look like and are you expecting to receive a lease termination fee?

Good morning, Todd. I would refer you to the press releases from the individual companies. We are being told that their goal is to close the stores by the end of 2015 which gives us -- and the tenant time to plan for this event. We will not discuss and have not agreed to any termination fees as of this point. But if they are forthcoming, they will be disclosed.

And with regard to mark-to-market, we are not going to get into that discussion for competitive and confidentiality reasons, but over time these tenants in our view are below market and as with other situations like that over the past many years where tenants based on their corporate strategy have decided to outlet re -- exit retail. It has nothing to do with our portfolio or anybody else's portfolio. It's their corporate strategy. They are usually below market, and we are working with those tenants and other tenants to fill the space.

Okay. Can you give us an update -- I think last quarter you talked about the 11 Coldwater Creek spaces that were vacated earlier in the year. Can you maybe share with us what the progress has been like to backfill those stores and what kind of mark-to-market you've realized on some of those leases that you signed?

Most of those are either released or in negotiations to be released, and with regard to specific mark-to-market on specific leases, we don't get into that on a per-lease basis.

Okay, and then just lastly, just one follow-up for me on the capital recycling activity. I was curious if it's your understanding, if you could share with us, that the buyer will be employing leverage with these acquisitions and is purchase of the remaining three contingent on financing?

Again, we've disclosed all the details that we're at liberty to disclose. We do have contractual obligations that we will respect, and once they do close, we'd be happy to provide you with information.

Okay. Thank you.

Thank you.

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

Well, thank you all for participating in the call today and your interest at Tanger Outlets. Frank, myself, Cyndi, Jim and Tom are always available to answer any of your questions. Have a great day. We appreciate your interest. Good-bye.

Ladies and gentlemen, this concludes today's call conference call. You may now disconnect.