Tanger Inc (SKT) 2020 Q1 法說會逐字稿

Good morning and welcome to the Tanger Factory Outlet Centers First Quarter 2020 Conference Call. (Operator Instructions)

Please note, this event is being recorded. I would now like to turn the conference over to Cyndi Holt, Vice President of Investor Relations. Please go ahead.

Good morning. This is Cyndi Holt, Vice President of Investor Relations, and I would like to welcome you to the Tanger Factory Outlet Centers First Quarter 2020 Conference Call.

Yesterday evening, we issued our earnings release as well as our supplemental information package and investor presentation. This information is available on our Investor Relations website, 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 our 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, core FFO, same-center net operating income and adjusted EBITDA. Reconciliations of these non-GAAP measures to the most directly comparable GAAP financial measures are included in 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, May 12, 2020.

(Operator Instructions)

On the call today will be Steven Tanger, Chief Executive Officer; Stephen Yalof, President and Chief Operating Officer; and Jim Williams, Executive Vice President and Chief Financial Officer. I will now turn the call over to Steven Tanger. Please go ahead, Steve.

Good morning, and thank you for joining us. On behalf of the entire Tanger team, I want to convey our sincere best wishes for everyone's good health and well-being during these unprecedented times. The safety of our employees, tenants and customers are the focus of every decision we have made since the start of the pandemic. On today's call, we will provide our first quarter results and discuss the impact of COVID-19 on our business. Also, we will provide an update on the actions we have taken to fortify our liquidity position to support our employees, to work with our tenants, and to facilitate the ongoing process of stores successfully reopening. As of today, approximately 18% of the stores in our consolidated portfolio are open. As reopenings increase, we are seeing shoppers return. Prior to the emergence and impact of COVID-19 and related stay-at-home restrictions, we anticipated the start of 2020 with average challenges.

However, January and February performed better than our expectations. As discussed on our year-end call, we expected occupancy and net operating income decline due primarily to the space we recaptured from bankruptcies and brand-wide restructurings, along with select lease modifications. Beginning in mid-March, stay-at-home orders and the classification of almost all of our tenants as nonessential led to virtually all of these stores closing across our portfolio.

These closings had an immediate impact on tenant sales and therefore, put pressure on variable rents. Our same-center NOI in the first quarter was down 3.7%. As anticipated and previously communicated, our consolidated portfolio occupancy declined both sequentially and from a year ago period ending the quarter at 94.3% occupancy. Additionally, leases that commenced during the trailing 12 months, our average rental rates were down 1.5% and 6.7% on a straight-line and cash basis, respectively. Prior to stay-at-home mandates and the store closures, the sales trend was positive. To provide some perspective for the trailing 12 months ending February 29, tenant sales in the consolidated portfolio were $405 per square foot and same-center tenant sales performance for the overall portfolio increased to 4%.

For the trailing 12 months ended March 31, average tenant sales for the consolidated portfolio were $387 per square foot, down 1% from the prior year. Same-center tenant sales performance decreased 80 basis points from -- for the overall portfolio. These results reflect the impact of the closures that began in mid-March. Our centers are primarily open-air shopping destinations, and they have never closed in order to support the tenants who were deemed essential and stayed open. Stores in our centers began closing in mid-March as a result of the pandemic. And by April 6, operations at all of our 39 centers were under restrictions.

At the lowest point on April 6, open stores represented 6% of the consolidated portfolio in terms of gross leasable area and 2% in terms of annualized base rent. As of yesterday, these percentages had improved to 16% and 12%, respectively, as mandates had eased or lifted and jurisdictions were 20% or 63% of centers in Tanger's consolidated portfolio are located. These totals include some stores that are open only for curbside pickup or where maximum store capacity is restricted by governmental mandates.

It remains unclear when mandates will be lifted completely or eased in additional locations. While it is premature to speculate on the timing and pace of ongoing openings, I want to provide an update on what we have experienced to date. Once mandates have been lifted or eased and stores have been allowed to reopen, we have seen the percentage of stores open to be in the mid-single-digit range within a week.

Over the subsequent week, the percentage reopening has climbed to the high teens on average. In South Carolina, which is the state where we have 5 centers that have been open the longest. After 3 weeks, approximately 33% of the stores are now open. We anticipate more stores to open going forward, particularly as national retailers establish opening protocols. From a Tanger perspective, we are fully prepared to support our retailers. During this period of uncertainty and store closures, we did not terminate or furlough any employees. So we have a talented and experienced team that is ready to pick up again quickly.

We are working closely with our tenants as they implement new safety protocols and resume their operations. We are also closely monitoring CDC and other applicable health guidelines to assess these new measures on an ongoing basis. The most important thing we can do today is to demonstrate our commitment to providing a consistent experience across our portfolio that focuses on public safety measures.

These measures currently include frequently cleaning of high-touch surface areas, providing signage that reinforces the recommended 6 feet of social distancing for customers in queue outside their stores and closing children's play areas.

We are working hard to create a safe environment for our loyal employees and our dedicated shoppers. As mandates to close nonessential businesses began, we anticipated that practically all of our tenants would be facing store closures for a period of time. We formulated the strategy to take control of the situation with a goal of ultimately facilitating store reopenings in the most efficient way. To that end, in late March, we offered all tenants in our consolidated portfolio, the option to defer 100% of April and May rents, while reserving all of our rights under these lease agreements.

Deferred rent would then be payable in January and February of 2021, providing what we believe will be sufficient time to rebuild operations and monetize their inventory. With this proactive approach, we allowed tenants to preserve capital in the short term. And in turn, we are helping them to be prepared to reopen as soon as possible.

While this approach certainly has a short-term impact on our cash flow, we are focused on the long-term viability of our tenants and maintaining vibrant, highly occupied centers. I am proud of the steps we have taken as a community partner. Throughout this crisis, we have made our centers available for frontline relief efforts. Through partnerships with organizations like the Red Cross, we have hosted blood drives on our properties in many of our centers.

Through a partnership with Second Harvest, volunteers and the National Guard distributed over 1,000 food packs in less than 5 hours to our first responders from just one of our locations. Jim will provide additional details, but it is important to note that we feel confident that our liquidity position should allow us to successfully navigate this period of uncertainty. Balance sheet strength has long been a core tenet of Tanger, and this discipline is serving us well.

We entered 2020 with one of the strongest balance sheets in our peer group. And we have since taken additional steps that we feel are prudent until there is greater clarity. As part of this approach, our Board of Directors has decided to temporarily suspend future dividend distributions to provide additional flexibility and liquidity. The Board will continue to evaluate future dividend distributions on a quarterly basis. Note that we intend to pay the dividend that we declared in January as scheduled on May 15, which, based on what we know today, should satisfy the minimum REIT taxable distribution requirements for the year. We believe a solid balance sheet is crucial to navigate these challenging times and to re-emerge with the strength necessary to pursue potential opportunities that might arise as a result of this crisis.

As we look ahead, the ultimate duration and impact of the pandemic is very difficult to forecast. In the near term, we continue to endure store closures, cautious consumer behavior and the impact of rent deferrals. However, our strategy and our portfolio give us optimism. The near-term opportunity I discussed is regarding new permanent and temporary pop-up stores to help retailers monetize their current excess inventory.

Also, over many economic cycles during the past 39 years, we have shown that in good times, people like a bargain, and in tough times like this, they need a bargain.

We believe in our fundamental principal holds true today, now more than ever. Most important, our conviction in the outlet distribution channel remains steadfast. The current situation is a moment in time, albeit one that has persisted for longer than anyone could have hoped, but it will pass. While we do not know exactly what long-term changes will arise from this, we are confident that the fundamental value proposition that Tanger Outlets provide will persist. For our tenants, we provide an attractive profitable channel with a low-cost occupancy compared to other forms of distribution.

For our shoppers, we will continue to provide the brands that they are seeking at the prices they want. While our country has not been through a crisis such as this in our lifetimes, there have been several other shocks to the system over the years that this seasoned management team has successfully navigated and have come out stronger on the other end.

I would like to sincerely thank the entire Tanger team for their hard work, dedication and resolve. We are delighted that Steve Yalof has joined Tanger as our new President and Chief Operating Officer. Steve has over 30 years in the retail real estate business on both the tenant and landlord side, working for Gap, Ralph Lauren and most recently leading Simon's premium outlet division. Since joining the team a month ago, Steve's impact has been felt throughout our organization as he has helped focus our team's efforts on leasing, rent collection and expense management.

His extensive experience working with the world's biggest brands and landlords has already proven fruitful, and we look forward to his welcome leadership as we begin to reimagine our business and develop our future vision for our valuable properties in our brand. I'm now very pleased to turn the call over to Steve.

Thank you, Steve. I'm excited to be here. This is certainly an interesting and unprecedented time to be joining the Tanger team. In my new role, I'm currently focusing on 3 key initiatives: first, developing, organizing and implementing our strategy around rent collections and managing our rent deferment program; second, providing support to our retail partners while they manage their store reopenings and ensure that the shopping experience is safe, organized and fun for our many loyal shoppers. And third, leading the leasing effort to fill vacant stores with new, permanent, short-term and pop-up stores. With respect to rent collections and our deferral program, we have prioritized the long-term over short-term collections, and we are committed to working with our retailer partners towards achieving a mutually beneficial outcome.

In late March, we proactively offered all of the tenants in our consolidated portfolio the option to defer 100% of April and May rent, interest-free and payable in January and February of 2021. Due to the deferral program, April rent receipts represented approximately 12% of the amount billed, and that we expect to be lower in May. Our proactive deferral approach is designed to avoid potential defaults while stores are closed and facilitate store reopenings as quickly as possible when restrictions are lifted. Our standard leases specify that rent must be paid even if a tenant is not open. Should we not agree to a deferral or payment schedule with tenants, we will pursue our lease rights and remedies as appropriate.

Our best-in-class property management and marketing teams are currently hard at work, assisting our retailer partners reopening efforts and ensuring that the centers are equipped, resourced and staffed to execute appropriate safety protocol as we welcome back our tenants and our loyal shoppers in the approved geographies.

To date, just over half of our centers are in jurisdictions that have lifted mandates and are welcoming shoppers. Lastly, the outlet channel is widely recognized as the place to find the best brand names on sale every day in a shopper friendly and traditionally open-air environment.

Therefore, Tanger Outlets are the natural destination for brands looking to clear excess inventory that were intended for other distribution channels. Our leasing team is focused on filling vacant stores with permanent, short-term and pop-up stores aimed at both exciting tenants and new to channel retailers looking to clear excess inventory or acquire new customers. While it is premature to provide details on these efforts, we are encouraged by the initial reception and the prospect of adding rent-paying tenancy and exciting new brands to our centers in the near term.

Tanger outlets remain the lowest cost distribution channel for our tenants. I would now like to turn the call over to Jim to take you through our financial results and provide a brief balance sheet recap.

Thank you, Steve. For the first quarter, net loss available to common shareholders was $0.30 per share compared to net income of $0.66 per share in the prior year. This year's per share results were impacted by $0.47 noncash impairment charge related to our Foxwoods outlet center, while the prior year benefited from a $0.44 gain on the sale of 4 of our centers. With regard to the impairment charge on our Foxwoods outlet center in Manshantucket, Connecticut, the opening of several casinos and nearby markets since the center was developed has negatively impacted the traffic to the resort and our center and consequentially, the performance of our tenants.

Based on the expected decline in the occupancy of the center and its future NOI and cash flows, we wrote the asset down to its estimated fair value. First quarter core FFO available to common shareholders was $0.50 per share compared to $0.57 per share in the first quarter of 2019. Note that core FFO is the same metric that we previously referred to as AFFO, but we've adjusted our terminology to be more in line with most of our peers and to eliminate the confusion by those that use the same acronym to refer to an after CapEx metric for purposes of computing payout ratios.

In the first quarter, for the consolidated portfolio, same-center NOI decreased 3.7% compared to the prior year quarter, driven primarily by tenant bankruptcies, lease modifications and store closures. These results were slightly better than we had anticipated due to lower operating expenses and snow removal expense as a result of a mild winter season, partially offset by lower variable rents due to the sales impact from COVID-19 in the second half of March.

I would like to take a moment to discuss how we are treating the rent deferrals on our financial statements. For tenants who simply take our offer, we will continue to recognize revenue from these leases and our net income, FFO and same-center NOI and record a lease receivable on our balance sheet.

Until these deferrals are paid, we will evaluate the collectability of the receivables in each quarter and reduce revenues to the extent the receivable is not probable of being paid. If other changes to the lease contract are made, we will need to evaluate the substance of the change to determine the amount of revenue and the timing of such to be recognized.

As Steve Tanger discussed, maintaining a strong financial position is of the utmost importance. We came into this period with a solid balance sheet, and we have taken a number of additional steps to further increase liquidity and preserve financial flexibility through the current uncertainty. As the pandemic spread, we moved quickly to reduce cash outflows. These actions included temporary reductions in salaries for management and cash retainers for the Board of Directors, along with a difficult decision to implement temporary salary reductions for other employees.

We have deferred certain operating and G&A expenses as well as certain capital expenditures, including the Nashville predevelopment project at this time. In a move to further strengthening our financial position, we drew down substantially all of the capacity under our $600 million unsecured line of credit at the end of the quarter. As of March 31, we had a largely unencumbered portfolio with 94% of our consolidated portfolio unencumbered by mortgages and a trailing 12-month interest coverage ratio of 4.5x.

Other than our unsecured line of credit, which matures in October of 2021 and may be extended at our option for an additional year, we have no significant debt maturities until December 2023. As of April 30, we had a cash balance of $594 million. Additionally, as disclosed in our release last night, the Board has elected to temporarily suspend future dividend payments, which equates to approximately $35 million on a quarterly basis.

These steps will help position us from a liquidity perspective to endure a protracted, challenging environment. Based on our estimated pre-COVID-19 cash expenditures of approximately $25 million per month, we expect to have sufficient liquidity to meet our obligations even under our most conservative rent collection scenario of not receiving any rent for approximately 2 years, assuming no dividend payments or debt maturities, and we remain in compliance with our debt covenants.

Finally, due to the uncertainty around the current environment and our limited visibility regarding the length and depth of the impact of the pandemic, we have withdrawn our previously issued guidance. I want to reiterate that despite significant near-term challenges, we remain optimistic. We believe we are taking all the steps necessary to navigate the current environment. We have a resilient model, a compelling value proposition and a strong balance sheet.

I'd now like to open it up for questions. Operator, can we take our first question?

(Operator Instructions) First question comes from Christy McElroy of Citi.

If the collections were 12%, if I think about the 88% that did not pay, what portion of that 88% signed the deferral agreement versus what remains unresolved? And can you provide any additional detail on the modifications of the leases if there were any other changes like the move to sales-based rents? Or if there's anything that you received in return?

Christy, let me be clear. We offered the short-term deferral as a method for the retailers to get open as quickly as possible. We are sensitive to the short-term impact on their cash flow and on our cash flow. Since most of our tenants were forced to close by government mandate, we wanted to facilitate their opening stores as quickly as possible when those mandates were lifted. We feel comfortable that tenants appreciate the fact that we wanted to help them through this period of time where they can monetize their inventory and bring back their employees and get back in business. However, let there be no mistake, we are continuing to preserve all of our rights under our contract. And if necessary, we'll take actions to collect any unpaid rent.

Could you say at this point what percentage remains unresolved versus what percentage signed the agreement?

As far as we are concerned, everybody plans to accept the deferral offer. If they do not, we will preserve our rights under the lease. If there are any changes in our offer, then we will put forward requirements to change some of the tenant-friendly language to more landlord-friendly language. But right now, we're anticipating that virtually all of the tenants will accept, and we're looking forward to getting them open. Of course, we're happy to update you as the year goes by.

And in regard to the expense reductions, can you provide some additional information on our efforts to reduce the property operating expenses while the centers have been closed? And are you looking at property tax deferrals or maintenance at all?

Yes. We -- every year, we look at the local property tax bill. And as standard practice, there are attorneys that review those bills to be sure that they're accurate and appropriate. Most of the bills are due later in the year, sometimes in December.

So we have time to work with the local communities on that. But we want to continue to be good corporate citizens as we have for close to 40 years. We feel the property tax provides revenue for police, fire, teachers, first responders. So there's a balance in being a good corporate citizen and being sure that the property tax is reflective of the value of the property in today's world.

And I guess in terms of what you'll report for operating expenses in the second quarter. Aside from property taxes, are there any other property operating expenses that you'll be able to cut during that period aside from utilities, which is presumably lower?

As you may know, pardon me. Jim, do you want to take -- sure, Jim, go ahead and take that.

Sure. Christy, we've been able to cut a few million out of the operating expense budget. It's not -- it's not a good run rate to use right now because it's based on the lot of the stores being closed. Our centers never closed. So we still have security and maintenance and those types of costs. But we have reduced hours that does help us to save on cost as long as the center is operating on reduced hours. But as we ramp back up, some of those -- I'm sure those costs are going to return.

The next question comes from Todd Thomas of KeyBanc.

Steve, you talked a little bit about what you're experiencing at the centers as stores begin to reopen for the 50% of the portfolio, I guess, in locations where restrictions have been eased. Is there a time at which tenants must reopen once retail establishments in that location are given the go-ahead? And what rights do the tenants have regarding that reopening process per the lease?

We do have a strong contract with each tenant in the properties. As we reported at the end of the quarter, we were 94.3% occupied. We are working with the tenants to try to get them open as soon as possible. And we're providing an open-air environment where our customers will feel comfortable returning and enjoying shopping again. The leases require continuous operation.

And if necessary, we will enforce our rights under the lease.

Okay. And in your discussions with your retail partners, what's the biggest challenge or hurdle that they're discussing in terms of reopening, for some of these centers now, it has been a few weeks. Is it staffing, inventory, safety, do you have a sense for what the biggest obstacle that they're facing in the reopening processes?

Todd, as you might imagine, we have over 320 different tenants, each with a different perspective and business model. So it's very much tenant by tenant. I hate to be redundant, but our entire team is working with our tenant partners, trying to help them facilitate a prompt reopening of their stores to start clearing their excess inventory and getting back into business. The outlets by all conversations we have with our tenants, remains one of, if not their most profitable business division, and they all want to get back to work as do most people in this country.

All right. And then just one last question here. I was wondering if you have information from either your -- the TangerClub membership program or your shopper app or otherwise, do you have a sense for how much of your shopper base across the portfolio shops at your centers while traveling, maybe staying in a hotel? Do you have a breakout of that between sort of air and car by any chance?

Todd, whatever breakout we have, and we have very sophisticated data on our customers, pre-COVID. I don't know how much value that has in this world. Happy to continue that dialogue with you as the year goes by, and we can see what the new normal looks like. So I really -- I don't have a really good accurate answer for you today. It would be obsolete.

Next question comes from Greg McGinniss of Scotiabank.

I guess to avoid some confusion here, I'll be a bit more formal. So Mr. Tanger, could you give us an update on current leasing activity? And I was encouraged to see re-leasing activity through March was in line with last year. We're just trying to understand what's happening now in regards to expiring leases and then what the impact may be on rent spreads or occupancy? I mean, are tenants willing to sign options right now or are most renewals being renegotiated?

We continue to renegotiate -- not renegotiate, we continue to work with our tenants to renew existing leases in our existing portfolio. And I appreciate you're noticing that the volume of the extension of the leases is pretty much consistent with last year. As you might imagine, in this crisis mode, most of the tenants have pushed the pause button on talking about existing renewals for a while until they get back open again. We are in very exciting conversations with several new to Tanger and in some instances, new to the outlet concept tenants to either open permanent stores with us or open pop-up stores where they can test the outlet concept and possibly continue to roll out new stores upon that success.

Okay. And then to follow-up on Christy's deferral question, just looking for a few more details. Did deferrals include -- is that inclusive of reimbursable expenses? Or is it just base rent? And then at this point, do you have any idea how much rent you may intend on shifting to cash accounting from an accrual basis?

The deferral includes base rent and extra charges. And as with the information we have today, we have shifted no receivable to a cash basis.

Next question comes from Samir Khanal of Evercore.

Steve, I guess, to expand on the previous question. I know you talked about sort of engaging with many retailers about opening stores, dealing with sort of excess inventory and sort of curbside pickup. Can you expand on that a little bit and just talk about, [generally] the tenant demand, I mean, I don't need you to go into every specific retailer disclose on that, but just kind of generally, what categories are looking to come into the space, especially for all of the -- sort of the 300,000 square feet that you've gotten back kind of in the first quarter here?

As you know, obviously, we're only 3 weeks into opening up America again. And people being free and allowed to leave their homes and trial about.

I don't really want to get into, for all kinds of reasons, names of these exciting tenants that we're talking to, but it's a mix of existing designer and brand name tenants that we've worked with for years that may be testing brand extensions, and it's a new online only e-commerce tenants that are looking for a physical presence. And it's some designer tenants that still feel there's a market in the outlets, which has been very successful for them to continue to open new stores and to expand their market to outlet shoppers, which have always been aspirational shoppers. Look, you get the best brand name and designer names in the world at prices that are more affordable. So for every challenge and there are lots of challenges, people today are planning to take advantage of these as opportunities. We have an environment with the lowest cost of occupancy. So very profitable for our tenants. And we have a dedicated, seasoned team of real estate professionals talking to a wide, wide universe of potential tenant partners led by Steve Yalof, and we'll keep you up-to-date as the year goes by. But as we've all said, we are optimistic that over time, America is going to reopen, businesses will start to generate cash flow and profits.

And the outlets will be a place to shop. I hate to say this again, but I'd love to say it. In good times, people like a bargain, and in tough times like these, they need a bargain. Our business model for 40 years has been sustained.

Okay. And I guess my second question is on the dividend. And maybe shifting over to Jim. When you look at your 2019, I think sort of $1.32 was paid as ordinary income. And I guess I'm just curious as to how you can only pay one dividend at this time and sort of satisfy the taxable income here?

Samir, so when we pay the May 15 dividend, that will be our second dividend for the year. Just to clarify that.

And there's -- it's the taxable income and book income are completely different things. And we certainly can see certain tax scenarios where we might be able to use some deductions that's supported to us by the CARES Act that will allow us to meet the minimum distribution requirements this year.

The next question comes from Craig Schmidt of Bank of America.

My question also focuses on the possible new tenants. I mean there's clearly a need for the existing U.S. retailers to liquidate their inventory, but it also seems like there's a lot of orders that were canceled in March and April.

That suggests that maybe the vendors have excess inventory to get rid of. Is there any way to have the vendors take part in the entry of possible new tenants for Tanger?

Craig, most of the product that you mentioned that's made in various locations around the world that's being delayed or the shipments are being delayed or canceled, have a brand name in the label. It is very difficult to take that out. And as such, it would be difficult for us to cut out our tenant partner and go directly to their supplier. We -- I don't think that we're not set up and nor would we be interested in doing that. So we're only working with the brand names that we have existing and new brand names.

Okay. And then these new tenants, do you think they could be opened by third quarter?

It depends on how quickly they want to move. We can, in some instances, get them open next week. And we are working with several new people that will be open we hope in second quarter, that's our plan. And they -- there's no reason why they can't be.

The next question comes from Vince Tibone of Green Street Advisors.

How are you thinking about offering additional rent deferral in June and beyond, if foot traffic and sales are slow to recover during the initial reopening phases of the country? How long do you -- before you expect to get back to your normal levels of monthly cash collections?

Vince right now, we have no intention of extending the deferral program.

Okay. I guess, fair enough. What -- I mean what's your tact if on June 1, a lot of companies or your partners choose not to pay rent. And then it's probably more active negotiation than prior given the decision to offer rent deferral for all? I'm just trying to get a sense of when or how you will handle the situation that seems likely in a lot of cases.

Vince, we have taken a very proactive approach with our tenant partners. We were the first at the end of March to go to our tenant partners with our hand out, and say we're happy to try to help you through this situation. We understand you're going to be closed, and you will have cash flow issues and be able to defer the rent, not abate the rent, but defer the rent until January and February, after you've had a chance to sell-through during the Thanksgiving holiday and Christmas holiday seasons, where most tenants are able to monetize their inventory. Today, we have no interest in extending that deferral period. We feel that we have a very strong, enforceable contract. And not our first choice, but if we're not able to get the tenants open, we will reluctantly pursue every right we have under the lease.

Okay. That makes sense and is helpful color. One more for me. Could you discuss any co-tenancy clauses that are common in your tenant leases? Are there any risks associated with any individual tenant or to a center's total occupancy levels?

Most leases have some sort of co-tenancy clause, since we don't have any big department stores. They're not normally tied to a major anchor. There may be one halo brand, but we're pretty comfortable with that. Most co-tenancies also have a requirement for occupancy levels. But our leases are written so that we're comfortable there won't be a co-tenancy issue because our leases, for the most part, say, the space will be either leased and/or open. So if the tenant decides not to open, but still leased, it qualifies as leased occupied space.

The next question comes from Mike Mueller of JPMorgan.

I'm curious for the centers that you've had reopened so far, can you talk a little bit about how sales have trended in relation to traffic?

We have, as we mentioned in South Carolina, about 1/3 of the stores now have reopened. More stores are opening every day. And some of the larger, well-known tenants, we call them halo tenants, where people travel a great deal to go and shop, we'll be opening in the next 2 to 3 weeks. So any traffic or sales data would be premature and based on a really small sample set.

We'd be happy to update you each quarter as the year goes by. I will tell you anecdotally from reports on site, the store managers of stores that have now opened are delighted with their sales. The consumers are delighted to go back to shop again and the tenants and Tanger are doing whatever we can to follow guidelines and provide an area where -- provide an environment where our customers feel comfortable. And that's our primary goal, is to get the centers open again, get the tenants installed and let's just get back to business and move forward.

Yes. And I guess for the reopenings, are you of the mindset and you're thinking that this is one scenario where it takes maybe several weeks to a month or so, a month or 2 to kind of get tenants back to open? Or should we be thinking of this like a, I guess, a new development project where it can take several quarters to a year, to stabilize in terms of occupancy?

Mike, every tenant is different. It only took us 3 or 4 days to refresh our center. As we mentioned, Tanger never furloughed, never laid off a single employee. Every employee of Tanger had a paycheck and their health benefits continue. That is morally the correct thing to do, in my opinion, but also from a business perspective, the team now is back in place. They are well trained, well motivated and ready to serve our tenant partners. Every tenant has a different strategy. Every tenant has a different time line. I can't give you a precise answer. It's not really like a new development for us because it's an existing asset with existing customers. So we're working hard to get our tenants open and the professional tenants are working hard to get their stores open because they have the lease obligation, a contract to pay the rent. And they understand that, and they're working hard to get their stores opened.

(Operator Instructions) We have a follow-up from Christy McElroy of Citi.

It's Michael Bilerman out here with Christy.

I have a question for Yalof. What -- maybe you can talk a little bit about -- you talked about the 3 things that you've been focused on, but maybe you can just step back in terms of thinking about the opportunity to join Tanger, eventually become CEO. How do you think about that opportunity, that portfolio relative to where you sat before with Simon, which obviously is also within the outlet business, but a higher productive portfolio, a little bit different of a tenant base. And I guess, what drew you to Tanger and the opportunities that it affords?

Well, Michael, thanks for the question. I appreciate it. Well, first of all, I mean, I'm thrilled to have joined Tanger. It's a great management team, great marketing team, and I'm looking forward to the partnership with Steve. Obviously, we see a lot of opportunity in the outlet business. I've been in the outlet business pretty much in my entire 30-year career. Not only have I been a landlord -- on the landlord side previously, but have also done outlet deals as both the tenant with both Gap and Ralph Lauren. But the one part we don't really talk about, I'm also an outlet customer. I shop them frequently, I believe, in the channel. And I think that there is great upside and great opportunity for open-air, value-oriented shopping centers, especially in today's day and age. So from my perspective, with some of the things that Steve and I have been talking about as far as what we think that we can do on a going-forward basis, I think it's important to really focus on what's happening right now. And the critical focus for us is, obviously, the safety and the health of our employees that are working in our shopping centers, some of which have, as Stephen mentioned earlier, the centers have never closed and have been working through and now also supporting the retail partners as they get open and start servicing the shoppers and our customers. And we're thrilled. That had some good successes over the past few weeks as we've been getting open.

Our national tenants are starting to get open. Our food retailers and our kiosks and pop-up stores are getting open. So we're enjoying watching as the lights get turned back on, the centers get energized, the customers come back. And that's really going to be our focus for the foreseeable future. And then hopefully, going forward, we'll start talking about plans for what's next for Tanger.

Yes. And Yalof, you talked a little bit about the rent collections, 88% not paying in April and that's going to go higher into May. What percentage of those because you started this program in late March, what actually of that 88% have actually now signed your deferral agreement to pay rent in January and February. I assume a good portion of them have because we're 2.5 months into this, just to give us a sense of how much is still on the table versus not because as we come into June, I think the -- if you're not going to be offering any more deferrals, that breakdown is going to be important because, let's say, half, let's just say, 50% accepted your deferral and 50% didn't, the tenant may still not pay rent in June that half. So I just wanted to get some clarity on the breakdown of what actually has occurred.

Michael, let me take that. Clearly, it's the risk of being redundant, we've offered a gracious solution for our tenant partners to get open and to try to help them. We've made that offer. We're assuming that they will accept. We feel comfortable with those that have accepted. We have appropriate documentation. And if June 1 comes, and we're not comfortable, we intend fully to pursue our rights under the lease. It's premature for me to give you an actual number with -- I really can't -- if I had the number, I'd be happy to give you, but I don't have it yet, and we'd be happy to report it to you in 90 days.

I don't need a specific, it's really 2.3%. I think it's just trying to get a sense. You clearly -- I mean you started this in late March. We're now sitting here in mid-May. 2.5 months have passed. I -- just to get a sense, [since like], half of them -- and look, I think it's -- you did a very honorable thing of allowing your tenants not to pay rent when they had lease agreements. I don't think we've seen any other REIT actually go to their entire tenant base and say, you know what, don't pay us. We know you're hurting. So I know it's going to build goodwill with your tenants. Let's hope. Let's hope most of them stay solvent so that those rents will get paid. But we're just trying to get a sense of, well, did half of them accept it? Did only a 1/4? Or was it 75%? Just some range, some goalpost to think about because it would be helpful to that having a little bit more certainty around that, I think, gives investors confidence of what the future may hold.

It's too early for me to give you the certainty that you're looking for. I can do that in 90 days when we have more information, as I mentioned. We're going under the operating assumption that if they have not paid April and May, they have accepted, and we have appropriate documentation that they have accepted the deferral.

And we'll see what happens in June. And we expect that the tenants will honor their contract. And if not, we'll take whatever necessaries that we deem appropriate to protect our rights and the rights of our shareholders. But Michael, I can't give you more information than that today.

Okay. Right. I think the added uncertainty is probably going to -- I mean it's just more uncertainty, I think actually having at least saying, like half of them have signed it and taken it or 1/4 at least giving some sense to the Street because I think most people, given the environment, are just going to assume the worst that no tenant has actually signed the deferral or a very small percentage, and we're going to roll into June and see what happens versus having the confidence in saying, well, look, a good majority of them has -- we've spoken to them. They've accepted it, they understand. They're thankful. They're grateful and their intention is to start paying us rent in June and pay us back for April and May next January and February. So if you -- and I would say if you -- instead of 90 days, I would say if there's -- as we roll into June, I think a proper update to the Street maybe at NAREIT would be helpful.

I appreciate that. I will tell you that our tenant partners echo what your thoughts are. They very much appreciate our sensitivity to their issue. And we'll see what happens if they're able to or if they are willing to fulfill their legal obligation.

This concludes our question-and-answer session. I would like to turn the conference back over to Steve Tanger for any closing remarks.

I want to thank everybody for joining us today. This will be, as most, a very interesting journey this year. Once again, I'd like to welcome Steve Yalof to our team and thank everybody on the Tanger team for all their hard work during these extraordinary times to maintain the viability of our shopping centers. I wish each of you good health, and please be safe. Goodbye now.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.