Tanger Inc (SKT) 2016 Q2 法說會逐字稿

Good morning, this is Cyndi Holt, Vice President of Investor Relations and I would like to welcome you to the Tanger Factory Outlet Centers second-quarter 2016 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 webpage: Investors.tangeroutlets.com.

Please note that during this conference call some of management's comments will be forward-looking statements that are subject to numerous risks and uncertainties and actual results could differ materially from those projected. 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, including funds from operations, or FFO, adjusted funds from operations, or AFFO. Same center net operating income and portfolio net operating income. Reconciliations of these non-GAAP measures to the most directly 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, July 27, 2016.

(Caller Instructions)

On the call today will be Steven Tanger, President and Chief Executive Officer, Jim Williams, Senior Vice President and Chief Financial Officer and Tom McDonough, Executive Vice President and Chief Operating Officer. I will now turn the call over to Steven Tanger.

Please go ahead, Steve.

Thank you, Cindy and good morning everyone.

During the second quarter of 2016, Tanger continued to produce strong growth with AFFO per share up 9.3% and same center net operating income up 3.8% compared to the second quarter of 2015. Other key highlights for the quarter included the June 24, 2016 opening of the Tanger Outlet Center in Columbus Ohio and the June 30, 2016 acquisition of our partners interest ownership interest in the Tanger Outlet Center in Westgate, Arizona, increasing our ownership interest from 58% to 100%.

Before I discuss our other external growth opportunities, our operating performance, and our outlook for the balance of the year, I will turn the call over to Jim who will take you through our financial results and a brief overview of our recent financing activities. Go ahead, Jim.

Thank you, Steve.

Positively impacted by a $49.3 million gain on our previously held joint venture interests related to the Westgate transaction, second quarter 2016 net income available to common shareholders increased 192.3% to $0.76 per share, or $72.7 million from $0.26 per share, or $24.2 million for the second quarter of 2015. As Steve mentioned AFFO increased 9.3% during the second quarter of 2016 to $0.59 per share, or $59.4 million from $0.54 per share, or $54.1 million during the second quarter of 2015.

Our total market capitalization as of June 30, 2016 was $5.6 billion, up 19% compared to June 30, 2015. Our debt to total market capitalization ratio was 28% as of June 30, 2016 compared to 32% as of June 30, 2015. We continue to maintain a strong interest coverage ratio during the quarter of 4.68 times. We have raised our dividend each of the 23 years since becoming a public Company in May of 1993 and have paid a cash dividend for 92 consecutive quarters.

Our dividend is well covered with an expected FFO payout ratio for 2016 in the mid-50% range. At these levels we expect to generate more than $100 million in excess cash flow to cover our dividend, which we plan to continue to reinvest in our business by upgrading our properties and funding most of our development needs.

On April 13, 2016 we amended our $250 million unsecured term loan. The size of the facility was increased to $325 million, the maturity date was extended more than two years from February of 2019 to April of 2021 and the LIBOR spread was reduced by 10 basis points from 105 basis points to 95 basis points.

As a result the next significant maturity on our balance sheet has now been pushed to June of 2020. The $75 million in proceeds was used to pay down balances under our unsecured lines of credit. Also in April we entered into interest-rate swap agreements that fixed the base LIBOR rate at an average of 1.03% on $175 million in LIBOR-denominated debt through January 1, 2021. Combined with the existing derivatives in place since October 2013 the recent derivative transactions effectively lock $325 million of our floating rate debt at an average interest rate of 2.11% through August of 2018.

Tanager Outlets Westgate became wholly-owned on the last day of the quarter when we acquired our partner's ownership interest. Serving the vibrant Phoenix markets since 2012 the Westgate center is an upscale outlet shopping destination featuring 95 brand-name and designer outlet stores. While only ranked 10th in our consolidated portfolio in terms of tenant sales productivity, it ranks third in terms of traffic growth for the first half of 2016.

The Westgate joint venture was an effective collaboration. Our partners contributed the underlying real estate on which our center was built. We contributed our retail relationships and outlet center expertise. Consummating a privately negotiated transaction between partners, we paid $40.9 million in cash consideration and assumed the $62 million in place mortgage loan, valuing the property at $159.5 million.

We estimate this value to be equivalent to a market capitalization rate of approximately 6.27% based on our 2016 net operating income forecast. Excluding termination rents and straight line rent adjustments. Keep in mind that a joint venture partner often cannot sell its ownership interest to a third party without the other partner's consent. An agreement among existing partners also avoids a transaction complexity that a third party may introduce.

We believe that of restrictions on marketability, combined with the execution certainty and efficiency, can result in a negotiated price among partners that is lower than what a buyer might pay for 100% ownership of a center. There are many factors other than price that motivate buyers and sellers. While this transaction -- it was very attractive to our partners that we had the ability to close within 30 days of our initial negotiations.

Part of this -- prior to this transaction, we accounted for Westgate under the equity method of accounting. And effective as of the acquisition date, Westgate is consolidated in Tanger's financial results. Based on in place financing we expect the impact of the Westgate acquisition to be modestly accretive to net income and FFO per share during the second half of 2016.

We continue to evaluate our overall capital structure and are considering various long-term financing alternatives with the objective of reducing our floating-rate debt exposure, extending the average term of our outstanding debt, increasing the unused capacity under our lines of credit, and expanding our unencumbered asset pool. Based upon current market conditions, we believe the Westgate acquisition, combined with any potential future long-term refinancing activities, if executed, should be modestly dilutive to net income per share and approximately neutral to FFO per share for the second half of 2016.

Our conservative mindset has served Tanger well throughout 35 years of economic peaks and valleys. Maintaining a fortress balance sheet and investment-grade credit is our way of life. Financial stewardship is a hallmark of Tanger Outlets that we do not intend to change.

I will now turn the call back over to Steve.

Thanks, Jim.

Blended base rental rates increased 20.2% during the first-half of 2016, on top of a 24.9% increase during the first-half of 2015. Lease renewals during the quarter accounted for approximately 934,000 square feet, or about 66% of the space coming up for renewal, and generated an 17.4% average increase in base rental rates.

Re-tenanting activity accounted for an additional 302,000 square feet of leases executed during the quarter and generated an average increase in base rental rates of 27.9%, with the lowest average tenant occupancy cost ratio among the high-quality mall REITs at just 9.3% for our consolidated portfolio in 2015. We have been successful in raising rents while maintaining a very profitable distribution channel for our tenant partners.

Over the last several years, we have successfully implemented a leasing strategy to give tenants fewer renewal options and to increase the number of leases with annual rent escalations. As a result of our ability to capture base rent growth and increased CAM reimbursement throughout the lease term, our rent spreads have narrowed slightly for lease renewals. These embedded base rent and CAM escalations during the term of our leases, are key drivers of the same center net operating income growth.

Same center net operating increased 3.8% during the quarter on top of a 4.6% increase in the second quarter of 2015. On a year-to-date basis, same center net operating income increased 4.1% on top of a 4.3% increase in the first half of last year. We have now posted same center NOI growth in 51 consecutive quarters. In addition total portfolio NOI for the consolidated portfolio increased 6.2% and 6.8%, respectively, for the second quarter and the first half of 2016. Lease termination fees, which are not included in same center NOI or portfolio NOI, were approximately $1.5 million and $2 million respectively, during the second quarter and the first half of 2016, compared to $1.7 million and $2.8 million, respectively, during the second quarter and first-half of 2015.

Price deflation is prevalent in the apparel business today. The tenant mix -- our tenant mix is primarily footwear and apparel in the outlet business. We do not have Apple or Tesla stores, nor do we have large department stores. Given this heavily promotional environment, average tenant sales within our consolidated portfolio were $395 per square foot for the trailing 12 months ended June 30, 2016, stable compared to the 12 months ended June 30, 2015, in spite of our comparable traffic being up for the same period.

Although our tourist centers are primarily drive to vacation destinations that are not affected materially by foreign currency exchange rates, we have a few centers that have experienced some negative impact related to the strong dollar. Given these various headwinds, we are pleased that tenant sales productivity has been in line with our initial guidance, which assumes stable tenant sales.

You may have noticed that the trailing 12-month average tenant sales that we report each quarter in our supplement decreased this quarter for our consolidated portfolio to $398 per square foot and $416 per square foot. Changes in the productivity of any given center or changes in the mix of centers are more impactful to our unconsolidated portfolio average, given its total square footage of 2.8 million square feet compared to the size of our consolidated portfolio at 11.9 million square feet.

Primary drivers of this change are related to a new center entering the unconsolidated portfolio and a more productive, established center leaving the unconsolidated portfolio. In our first quarter 2016 supplement, Westgate was included in the unconsolidated portfolio tenant sales average and its productivity was slightly below the unconsolidated portfolio average. Beginning in the second quarter, Westgate moved to the consolidated portfolio due to our acquisition of our partnership centers -- our partner's ownership interest.

In our second quarter supplement, our Savannah Center, which opened in April 2015, was included in the unconsolidated portfolio tenant sales average. When new centers initially enter the unconsolidated sales pool it is not uncommon for them to not be as productive as the existing centers. Prior to Savannah, the most recent new developments to enter the tenant sales average for the unconsolidated portfolio was Charlotte, North Carolina in the fourth quarter of last year, which had a slight negative impact in that quarter.

In each of the following two quarters, the unconsolidated portfolio tenant sales average increased, as did the amount of the Charlotte space open for the entire trailing 12-months period, and therefore included in our unconsolidated portfolio tenant sales average. Our consolidated portfolio was 96.9% occupied as of June 30, 2016. Up 10 basis points from 96.8% on June on June 30, 2015, and up 30 basis points from 96.6% at March 30, 2016.

We remain optimistic about the future of our Business. Our reputation with retailers 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. In 2016 we expect to expand our footprint by approximately 5% by opening two new outlet centers. The first of these two centers opened 95% leased in Columbus, Ohio, in the Columbus Ohio market on June 24, 2016.

As a result of overwhelming shopper response, standstill traffic stretched several miles from the center's freeway off-ramp on Interstate 71 during much of the opening weekend. The 355,000 foot center features over 90 brand-name and designer outlet stores. In addition, our construction and leasing efforts are on target for the planned November opening of our new 352,000 square foot center in Daytona Beach, Florida.

Currently, we plan to commence construction in the Fort Worth, Texas market in mid-September, targeting a holiday 2017 grand opening. Last week we signed a lease with a magnet tenant unique to the market bringing our retailer commitments to 59%. This retailers commitment has generated significant interest from other retailers. We currently expect to have substantially surpassed our 60% pre-leasing threshold before we break ground. The center will be located within the Champion's Circle mixed-use development adjacent to the Texas Motor Speedway.

Our second 2017 project will be a major expansion of our center in Lancaster, Pennsylvania, which will increase the size of the center by approximately 123,000 square feet. Last week, we secured some key entitlements and are already mobilizing on the site. We plan to break ground soon and are targeting a third quarter 2017 opening for the expansion. In addition, work is ongoing on a number of pre-development stage sites in our shadow pipeline, which we plan to announce upon successful completion of our underwriting process.

We are increasing our 2016 diluted net income per share guidance range to $1.55 to $1.60 per share from $1.05 to $1.11 per share. This increase is primarily due to the large gain recognized on the Westgate transaction during the second quarter. Driven primarily by better than expected results during the quarter, we are raising the midpoint of our FFO and AFFO guidance by $0.015 per share. We currently expect 2016 FFO to be between $2.31 and $2.36 per share and AFFO to be between $2.32 and $2.37 per share.

We are leaving our guidance for same center net operating income growth unchanged, with an expected range between 3% to 3.5%. As our forecast includes the impact of re-merchandising activity planned at a number of our centers during the balance of the year. Our forecast also includes projected downtime associated with the bankruptcies of Aeropostale and PacSun and with Jos. A Bank's announced store closings as we work to fill any space we capture with higher volume, more sought-after brands.

Our total consolidated portfolio exposure for these three tenants is approximately 210,000 square feet, or about 1.8% of our total consolidated square footage. While we expect to have more clarity on the outcome of the space later in the third quarter, based on what we know today, we are projecting as we will recapture approximately 58,000 square feet, which includes 42,000 square feet during the third quarter and 16,000 square feet in the first quarter of 2017.

The total space we are currently expect to recapture constitutes only about one half of one percent of our consolidated portfolio, both in terms of square footage and our annual base rental rate. The majority of the 42,000 square feet we expect to recapture this quarter is related to the scheduled closure of all 33,000 square feet of the Jos. A Bank stores in our consolidated portfolio at the end of this month.

For the 12 months ended June 30, the average tenant sales per square foot generated by these nine stores was less than half the average tenant sales per square-foot for our consolidated portfolio. Lease termination agreements have been executed and the tenant has paid a significant termination rents for each of these stores. Our estimates are based on average quarterly general and administrative expense of approximately $11.4 million to $11.9 million and average projected management leasing and other service income of approximately $1 million per quarter.

Our forecast assumes tenant sales remain stable and does not include the impact of any additional bankruptcies or storewide closures, the sale of out parcels, additional properties, or joint venture interests, or the acquisition of any properties, or any additional partner joint venture interest. We remain optimistic about the growth of our Company as shoppers continue to seek Tanger's unique shopping experience and a wide array of brand-name merchandise direct from the 80 to 90 manufacturers that operates stores in each Tanger Outlet Center.

The tenant community continues to indicate its desire to expand into new markets within the profitable outlet channel and with Tanger as a preferred partner. The resiliency of the outlet channel has been proven over the past 35 years through many economic cycles. We have more than 3,100 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 6.1% of our base and percentage rental revenues are 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 would be happy to answer any of your questions. Operator we are happy to take any questions.

Thank you.

(Operator instructions)

Your first question comes from the line of Todd Thomas from KeyBanc Capital Markets. Your line is open.

Hi, thanks, good morning. This first question just regarding development. It seems like the pace of new starts is slowing as we think about 2017 and maybe 2018 and beyond. Is it getting harder to source deals or would you say that is not a fair characterization of the current environment?

I think that is not a fair characterization of the current environment. We have guided the Street continuously that we will produce and develop one to new centers a year. We are on pace for that. We will deliver two this year. We anticipate one to two next year and we have no reason to doubt that we will continue that pace into 2018 and

As you think about new starts, you have been able to achieve double-digit stabilize yields on the domestic developments. And I'm just curious with required returns coming down more broadly and your cost of capital amount much lower than it has been in quite some time are you lowering your return hurdles at all for new deals?

Fortunately, Todd, the tenant community still finds the outlet distribution channel highly profitable. We have been successful in working with our tenants to get new developments in the range of 9% to 11% cost of occupancy for our tenants and so far that seems to be stable.

Of course we will update the analyst community and our investors as we announce the 2018 transactions. But right now we do not see anything to change that guidance

Okay. And then just regarding the PacSun, Aero, and Jos. A. Bank space that you talked about, you mentioned 58,000 square feet of the 210,000 feet of total exposure and what is happening there. What is the expectation around the remainder of that space?

So far we are negotiating with each of the tenants the two that are in bankruptcy. And this is -- what we are led to believe and our current negotiations that we will only get back 58,000 feet. It hasn't been approved by the bankruptcy court yet, but as of today that is what we are led to believe. The balance of the space will stay open with the existing tenant.

Okay. Thank you.

Thank you.

Your next question comes from the line of Caitlin Burrows from Goldman Sachs. Your line is open.

Hi, good morning. My question was on same-store NOI. Your first half of the year same-store NOI growth was above 4%, but like you mentioned the full-year guidance is for 3% to 3.5%. So that would make us expect a slowdown in the second half and a similar thing did happen in 2014 in 2015.

So was just wondering what drives that slowdown in the second half? And it seems like there should be some sort of easy comp that then laps itself, sorry and then also combined with the holiday season in the fourth quarter.

Good morning, Caitlin. We have received and disclosed a large termination fee from the tenants in this quarter and we probably get more termination fee in the third quarter. That pays up front for the space that is vacated over time.

So there is two buckets. We get the cash and termination fee now. But we do not get the monthly rent which affects the same center NOI in the next several months until we re-lease the space. So that is why we're guiding still remain stable 3%, 3.5%. And we will update that in the next 90 days as we have more clarity on our ability to fill the space with more productive, more exciting tenants.

Okay got it. So it is related to more like one off things that happen to have occurred as opposed to something else that is part of a regular schedule?

Caitlin, you look last year we had similar termination fees and similar same center NOI in the third and fourth quarter. This is consistent to what has happened in the past. This gives us, at 97% occupied, this gives us the opportunity to re-merchandise some of our centers by adding some larger or some more exciting tenants where we did not have space before to accommodate them.

Got it. And then just when you think about out over the long-term, do you think that 3% to 3.5% same-store NOI growth could be sustainable over a 5 or 10 year period?

I wish my crystal ball was that good, Caitlin. I can't look out that far, unfortunately. But if you look back 10 years, we have averaged more than 3.5% NOI growth over the past 10 years.

So the past is not an indicator of the future. We are comfortable guiding you to the end of this year and we will give guidance as we always do for 2017 at the appropriate time.

Okay. Thank you.

Your next question comes from the line of Jeremy Metz from UBS. Your line is open.

Hey, good morning. I jumped on a little late so I apologize if I missed this, but I wanted quickly ask the Westgate acquisition, this is a top 10 asset for Tanger. So I'm just wondering why your partner would want to exit that and did you guys have a [ROFO] there?

Good morning, Jeremy. In our presentation we did go into that in some detail. Our partner was a very fine private equity fund. Our partnership agreement, as most partnership agreements, restrict the transfer of a partners interest without the other's consent.

Also we were able to accommodate our partner from start of negotiation to closing in 30 days, which was important to them. So this transaction worked for both of us. And I think if you check with our partner they are pleased and we are pleased.

Okay. And then the 6.3% Cap rate, just how should we think about that? Is that a fair view of market for how it's doing over $400 per square foot or does the Cap rate reflect a little more of that ability to close quickly and the minority interest was that for sale here?

I think the latter is probably true. We bought a minority interest which of course is not marketable. We bought an interest from our partner, which would have required our consent to market. And we were able to close fast and our partner had another use for the money, being a private equity fund.

This is consistent with their normal business practice. I think we accomplished what they wanted in closing quickly and it accomplished for us what we wanted to gain 100% control. I do not think this is indicative of anything this is a one-off transaction that we were very pleased with.

Thanks, Steve.

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

Hi, good morning congrats on a very fine quarter. Two questions from me. The first one is just a regards to demand for space in general. Could you talk about any new concepts out there that may be looking for space in the outlet business? Whether it's a spin off brand or what have you that maybe the Street is not aware of that could drive meaningful demand going forward?

Good morning, Tayo. And thank you for your nice comments about our outstanding quarter. We appreciate it.

The demand for space continues in the outlet world. We are doing very well at 97% occupied. I am sure that our good friends at the Simon Property Group had the same experience.

There is all kinds of new concepts and new tenants looking to come in. Such as Tory Burch, Lululemon, Vineyard Vines, these are very high profile, very high-volume tenants that we are excited to do business with and excited to welcome them into the outlet environment. So I think you should be aware that the top 10 tenants in our portfolio 10 years ago no longer exist.

We couldn't get a center built without Liz Claiborne, Anne Klein, Mikasa and some of those concepts. So part of our skill set for 35 years is to identify new tenants and start relationships with them, introduce them to the outlet concept, and roll it out.

Are any of the discounts, any of the department store discount concepts increasing and looking for space and is Primark also possibly looking at anything on the outlet side?

We're not in conversations with Primark. We have a very few of the department store, off-price concepts. We have several Saks OFF 5th, we have one Neiman Marcus. And that is it. I don't know what their plans are. Or the site location criteria they currently have.

Got it that's helpful. And then the last one for me I appreciate you indulging me. The one to two outlets a year being built I appreciate that color. Could you talk about your Shadow pipeline anything in that space getting hotter or colder in regards to potentially starting development?

It has always been the same temperature, Tayo. We are looking at lots of sites around the country. We are talking to our key tenants about lots of different sites. But we want to be sure that it is an orderly expansion of our portfolio.

It would not make sense to announce five or six sites and then get them stale over a period of time. So this is an orderly roll out, which seems to work for us for 35 years. We see no reason to change it.

Sounds good. Thank you.

Your next question comes from the line of Carol Kemple from Hilliard. Your line is open.

Good morning.

Hi, Carol.

As far as your Lancaster expansion how did you all decide to expand that center? And what additional centers or how many centers do you have additionally where you could do a similar project?

We have and working on buying additional land attached to our Lancaster center, which is one of our best for several years now. There were some permitting issues, some access issues but we were able to get them solved. As such this 123,000 foot expansion will allow us to attract some more very high-profile, high-volume tenants to cement our Lancaster property as the go to property in the Lancaster market.

With regard to expansions in other centers, some of the newer centers we have, we can expand based on tenant demand. Most of the legacy portfolio we have, has been so successful it's has already been expanded and totally built out.

So with an expansion do you have a pre-leasing threshold before you break ground or since you already have retailers there will you break ground before you hit a 50% or 60% threshold?

We maintain the same disciplines we've had. We are certainly are over the 60% commitments for expansion in Lancaster. We're not going to change our underwriting standards.

Okay. Thank you very much.

Your next question comes from James Bambrick from RBC Capital Markets. Your line is open.

Hello, Steve. Hi, guys, it's Rich. I am here with Jimmy. Steve I got to say I enjoyed the Columbus center, you guys did a great job on that. You and Simon both.

So my question to you is with all the moving parts going on, what are you thinking about year-end 2016 occupancy? What do you think the target is at the end of the year?

Thanks Rich for your comments. We were delighted to have you and your wife and Jim attend the grand opening and experience the excitement of the grand opening and the way consumers still love the outlet concept. It was amazing that we backed up Interstate 71 for six miles getting into the property.

With regard to occupancy, we are currently effectively 97% occupied, as of the end of the second quarter. I think and this is speculation, but based on every indication we have, assuming no further bankruptcies, we still think that we will be able to fill some of the vacant space so that we will be between 97% and 97.5% by year end, which will mark the 35th consecutive year we've ended the year at least 95% occupied.

Okay good, got you. As you think about 2017 leasing I know you guys are I'm sure well underway with 2017 leasing, how is that going versus what it normally does this time of year and I guess from a demand standpoint by retailers what you think about 2017?

We are substantially ahead of our renewals for 2017 versus this time last year the renewals for 2016. The demand from the tenants remains strong. We remain a very profitable distribution channel for our tenants. Right now we see no indication that will change.

Good. Thank you.

(Operator Instructions)

Your next question comes from the line of DJ Busch from Green Street Advisors. Your line is open.

Thank you. Steve I just have follow up on Lancaster expansion. I understand that there is a competing center down the road certainly not of the same quality as the Tanger Outlet, but has some of the key tenants that maybe your center is currently missing. What is the status of that outlet and is the opportunity here to bring some of those tenants that may have been missing in the Tanger spot over?

Hi, DJ, how are you doing? We appreciate you taking such a great interest in the outlet distribution channel by visiting so many of our sites and the other sites and getting educated. It means a lot to us.

You would have to ask the owner of the other site in Lancaster what their future is, I certainly can't speak to that.

But we are excited and we will announce shortly the names of the major magnet tenants that will be occupying our expansion. And I think you will find some of the names that are currently in the other center coming over to our property with brand-new larger stores.

Okay. Fair enough. I guess my second question is as you think about the Shadow pipeline and new ground up opportunities, it seems like most recently it has been focused on the US. Can you talk about potential opportunities, if any, in your Canadian partnership and how you're thinking about that part of the portfolio at this time?

We are very pleased with our partnership with RioCan they are superb partners and great operators. We have four properties there. The ones in Ottawa, which was the first ground up property, are comping very well and our major expansion in large center in Cookstown are doing very well.

So as we mentioned, we want to get through a couple of years just to assess the market and see what the total expectation is and the size of the market. We are constantly reviewing that with our 50% partner in Canada. Right now we have not announced any new sites, but we are looking at several.

Great. Thanks so much.

Your next question comes from the line of [Nikita Bali] with JPMorgan. Your line is open.

Hey it's Mike Mueller. I got on the call late, so I apologize it I missed this and if you addressed it already, I will pull it from the transcript. But I was wondering can you give a little color on the moderation in the leasing spreads? And how much of that may be just coming from bumping up against higher rents as opposed to the changes in lease terms and bumps or just terms, et cetera?

Mike, we did address that in pretty great detail in the prepared remarks. I would refer you to those.

Okay. That will be fine. Thanks.

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

Thank you. And thank you all for participating in the call today and your interest in Tanger Outlet Centers. All of us are prepared at any time to answer your questions and provide more color. I want to wish all of you a great day and goodbye.

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