GREENSBORO, N.C., Jan. 27, 2020 /PRNewswire/ -- Tanger
Factory Outlet Centers, Inc. (NYSE:SKT) today reported
financial and operating results for the three months and year ended
December 31, 2019.
Fourth Quarter Results
- Net loss available to common shareholders was $0.13 per share, or $12.1
million, compared to net income available to common
shareholders of $0.21 per share, or
$19.4 million, for the prior year
period. The current year period is inclusive of a $0.04 per share dilutive impact related to assets
sold in March 2019, net of interest
expense savings related to the use of proceeds. The current year
period was also impacted by a non-cash impairment charge totaling
$37.6 million, or $0.39 per share, related to the Company's outlet
center in Jeffersonville, Ohio.
The prior year period was impacted by a non-cash impairment charge
related to certain assets in a Canadian unconsolidated joint
venture totaling $7.2 million, or
$0.07 per share.
- Funds from operations ("FFO") and adjusted funds from
operations ("AFFO") available to common shareholders were both
$0.59 per share, or $57.5 million, compared to $0.64 per share, or $63.1
million, for the prior year period. The current year period
is inclusive of a $0.04 per share
dilutive impact related to the asset sales discussed above.
Full Year Results
- Net income available to common shareholders was $0.93 per share, or $86.5
million, compared to $0.45 per
share, or $42.4 million, for the
prior year. The current year is inclusive of a $0.38 per share accretive impact related to the
asset sales, net of interest expense savings, discussed above,
including a gain on the sale of four outlet centers totaling
$43.4 million, or $0.44 per share. The current and prior years were
impacted by non-cash impairment charges totaling $37.6 million, or $0.39 per share, and $56.9
million, or $0.58 per share,
respectively.
- FFO available to common shareholders was $2.27 per share, or $221.7
million, compared to $2.48 per
share, or $243.3 million, for the
prior year. The current year period is inclusive of an $0.11 per share dilutive impact related to the
asset sales, net of interest expense savings, discussed above.
- AFFO available to common shareholders was $2.31 per share, or $226.1
million, compared to $2.48 per
share, or $243.3 million, for the
prior year. AFFO excludes certain items that the Company does not
consider indicative of its ongoing operating performance. The
current year is inclusive of an $0.11
per share dilutive impact related to the asset sales, net of
interest expense savings, discussed above and excludes $4.4 million, or $0.04 per share, of general and administrative
expense for the accelerated recognition of compensation cost
related to the retirement of an executive officer.
FFO and AFFO are widely accepted supplemental non-GAAP financial
measures used in the real estate industry to measure and compare
the operating performance of real estate companies. A complete
reconciliation containing adjustments from GAAP net income to FFO
and AFFO are included in this release. Per share amounts for net
income, FFO and AFFO are on a diluted basis.
"Better than anticipated performance in the fourth quarter and
throughout 2019 enabled us to surpass our expectations," said
Steven B. Tanger, Chief Executive
Officer. "With strong leasing execution, we ended the year with
consolidated portfolio occupancy above that of the prior year at
97.0%, contributing to better than expected same center net
operating income. Increases in traffic and sales validate
consumers' ongoing desire for the best brands, prices and shopping
experience at Tanger Outlets."
"As we enter 2020, we are focused on building on last year's
leasing success, as we believe this is the fastest way to restore
internal growth. Maintaining strong occupancy remains our top
priority as our team works to overcome the challenges associated
with the recapture of space due to both previously announced
closures and any additional space that could come back from ongoing
negotiations with select tenants. Along with leasing, we will also
continue to focus on our strategic marketing efforts to further
increase traffic and shopper engagement. However, releasing the
recaptured space will take time. While we anticipate potential
near-term occupancy and rent pressure, we plan to lease
strategically to upgrade our tenancy and the consumer experience in
order to drive long-term growth. Brand name retailers remain
committed to the outlet distribution channel and continue to
benefit from our value proposition, including our low cost of
occupancy," Mr. Tanger added.
Operating Metrics
The Company's key portfolio results were as follows:
- Consolidated portfolio occupancy rate was 97.0% on
December 31, 2019, compared to 95.9% on September 30, 2019 and 96.8% on December 31,
2018
- Blended average rental rates increased 2.7% on a straight-line
basis and decreased 1.3% on a cash basis for all renewals and
re-tenanted leases that commenced during the trailing twelve months
ended December 31, 2019
- Lease termination fees totaled $1.6
million for 2019, including $0.1
million for the fourth quarter of 2019, compared to
$1.2 million for 2018, including
$0.1 million for the fourth quarter
of 2018
- Same center net operating income ("Same Center NOI") for the
consolidated portfolio decreased 0.4% for the quarter and 0.7% for
the full year due primarily to the impact of tenant bankruptcies,
lease modifications and store closures
- Average tenant sales productivity for the consolidated
portfolio was $395 per square foot
for the twelve months ended December 31, 2019, compared to
$385 per square foot in the
comparable prior year period
- Same center tenant sales performance for the overall portfolio
increased 1.5% for the twelve months ended December 31, 2019
compared to the twelve months ended December 31, 2018
- Occupancy cost ratio for the trailing twelve months ended
December 31, 2019 was 10.0%
Same Center NOI is a supplemental non-GAAP financial measure of
operating performance. A complete definition of Same Center NOI and
a reconciliation to the nearest comparable GAAP measure is included
in this release.
Leasing Activity
Total commenced leases for the trailing twelve months ended
December 31, 2019 that were renewed or re-leased for all terms
included 337 leases, totaling approximately 1.5 million square
feet.
As of January 22, 2020, Tanger had lease renewals executed
or in process for 45.8% of the space in the consolidated portfolio
scheduled to expire during 2020 compared to 58.6% of the space
scheduled to expire during 2019 that was executed or in process as
of January 31, 2019.
Tanger recaptured approximately 198,000 square feet within its
consolidated portfolio during 2019 related to bankruptcies and
brand-wide restructurings by retailers, including 3,000 square feet
in the fourth quarter. During 2018, approximately 126,000 square
feet were recaptured, including 3,000 square feet during the fourth
quarter.
Dividend Increase
In January 2020, the Company's
Board of Directors approved a 0.7%, or $0.01 per share, increase in the annualized
dividend on its common shares to $1.43 per share and simultaneously declared a
quarterly dividend of $0.3575 per
share for the first quarter ended March 31,
2020. This cash dividend will be payable on May 15, 2020 to holders of record on April 30, 2020. Since becoming a public company
in May 1993, the Company has paid a
cash dividend each quarter and has increased its dividend each
year, putting it among a very small group of equity REITs to
achieve such a milestone.
Balance Sheet and Capital Market Activity
As of December 31, 2019:
- Total enterprise value was $3.0
billion
- Total outstanding floating rate debt was approximately
$11 million, representing less than
1% of both total consolidated debt outstanding and total enterprise
value
- Unused capacity under the Company's $600
million unsecured lines of credit was nearly 100%, or
$599.8 million
- Weighted average interest rate was 3.5% and weighted average
term to maturity of outstanding consolidated debt, including
extension options, was approximately 5.5 years
- Approximately 94% of the Company's consolidated square footage
was unencumbered by mortgages
- Interest coverage ratio was 4.3 times for 2019
- FAD payout ratio was 70% for 2019
FAD payout ratio is a supplemental non-GAAP financial measure of
operating performance. A definition of FAD payout ratio is included
in this release.
Tanger has reduced its outstanding consolidated debt by
$143.1 million since December 31, 2018.
During 2019, the Company repurchased approximately 1,209,000
common shares for total consideration of approximately $20.0 million. As of December 31, 2019,
$80.0 million remains under the
current repurchase authorization, which is valid through
May 2021.
Guidance for 2020
Based on the Company's internal budgeting process and its view
on current market conditions, management currently believes the
Company's net income and FFO per share for 2020 will be as
follows:
For the year ended
December 31, 2020:
|
|
|
|
Low
Range
|
High
Range
|
Estimated diluted
net income per share
|
$0.65
|
$0.73
|
Depreciation and
amortization of real estate assets - consolidated and the Company's
share of unconsolidated joint ventures
|
1.31
|
1.31
|
Estimated diluted
FFO per share
|
$1.96
|
$2.04
|
|
|
|
|
Tanger's estimates reflect the following key assumptions:
- Same Center NOI guidance for the consolidated portfolio between
(6.75)% and (8.25)%, which reflects the following:
-
- Approximately (0.7%) impact related to the Jeffersonville, Ohio property, for which the
Company recorded a significant impairment as discussed above
- Projected average occupancy for the year is expected to be
between 92% and 93%
- Projected store closures related to tenant bankruptcies and
restructurings
-
- 303,000 square feet of known closures related to all of
the Dressbarn and Kitchen Collection stores and certain Forever 21
and Destination Maternity stores that all closed in January and
which, if not released, would represent 350 basis points of
Same Center NOI (27,000 square feet and 10 basis points
attributable to the Jeffersonville,
Ohio property)
- 322,000 to 372,000 square feet of potential additional closures
that are unknown or unresolved at this time
- Projected full-year lease termination fees (which are not
included in Same Center NOI) of approximately $1.5 million for the consolidated portfolio
- Annual general and administrative expense of between
$48.0 million and $50.0 million
- Annual consolidated portfolio interest expense of $59.5 million to $60.0
million
- The Company's share of annual interest expense in the
unconsolidated portfolio of $7.2
million to $7.6 million
- 2020 weighted average diluted common shares of approximately
92.5 million for earnings per share and 97.5 million for FFO per
share
- Combined annual recurring capital expenditures and second
generation tenant allowances of approximately $44 million to $48
million
- Does not include the impact of any financing activity, the sale
of any outparcels, properties or joint venture interests, or the
acquisition of any properties or joint venture partner
interests
The following table provides a bridge from the Company's 2019
actual FFO per diluted share to the low and high ranges of the
Company's 2020 diluted FFO per share guidance:
|
|
Low
Range
|
High
Range
|
2019 diluted FFO
per share
|
$2.27
|
$2.27
|
2019 compensation
related to executive officer retirement
|
0.04
|
0.04
|
2019 diluted AFFO
per share
|
2.31
|
2.31
|
Same Center NOI
decline
|
(0.26)
|
(0.22)
|
Dilutive impact of
2019 asset sales
|
(0.04)
|
(0.04)
|
Change in general and
administrative expense
|
(0.01)
|
0.01
|
Decreased interest
expense, including approximately $0.01 at the joint venture
level
|
0.03
|
0.03
|
Net decline in
non-cash rents (1)
|
(0.07)
|
(0.05)
|
Estimated 2020
diluted FFO per share
|
$1.96
|
$2.04
|
(1) Includes
straight-line and market rent adjustments
|
Fourth Quarter and Full Year Conference Call
Tanger will host a conference call to discuss its fourth quarter
and full year results for analysts, investors and other interested
parties on Monday, January 27, 2020, at 8:30 a.m. Eastern Time. To access the conference
call, listeners should dial 1-877-277-5113 and provide conference
ID # 8599609 to be connected to the Tanger Factory Outlet Centers
Fourth Quarter 2019 Financial Results call. Alternatively, a live
audio webcast of this call will be available to the public on
Tanger's Investor Relations website, investors.tangeroutlets.com,
hosted by S&P Global Market Intelligence. A telephone replay of
the call will be available from January 27, 2020 at
11:30 a.m. through February 3,
2020 at 11:59 p.m. by dialing
1-855-859-2056, conference ID # 8599609. An online archive of the
webcast will also be available through February 3, 2020.
About Tanger Factory Outlet Centers, Inc.
Tanger Factory Outlet Centers, Inc. (NYSE: SKT), is a
publicly-traded REIT headquartered in Greensboro, North Carolina that presently
operates and owns, or has an ownership interest in, a portfolio of
39 upscale outlet shopping centers. Tanger's operating properties
are located in 20 states and in Canada, totaling approximately 14.3 million
square feet, leased to over 2,800 stores which are operated by more
than 510 different brand name companies. The Company has more than
39 years of experience in the outlet industry. Tanger Outlet
Centers continue to attract more than 181 million visitors
annually. Tanger is furnishing a Form 8-K with the Securities and
Exchange Commission that includes a supplemental information
package for the quarter and year ended December 31, 2019. For
more information on Tanger Outlet Centers, call 1-800-4TANGER or
visit the Company's website at www.tangeroutlets.com.
Safe Harbor Statement
This news release contains certain forward-looking statements
within the meaning of Section 27A of the Securities Act of 1933, as
amended, and Section 21E of the Securities Exchange Act of 1934, as
amended. The Company intends such forward-looking statements to be
covered by the safe harbor provisions for forward-looking
statements contained in the Private Securities Litigation Reform
Act of 1995 and includes this statement for purposes of complying
with the safe harbor provisions. Forward-looking statements, which
are based on certain assumptions and describe the Company's future
plans, strategies and expectations, are generally identifiable by
use of the words "believe," "expect," "intend," "anticipate,"
"estimate," "project," "will," "forecast" or similar expressions,
and include the Company's expectations regarding its financial
results and the assumptions used to forecast such expected results,
our leasing strategy and value proposition to retailers, occupancy
and rent pressures, marketing programs, uses of capital, liquidity,
dividend payments, cash flows, filling vacant space and share
repurchases.
You should not rely on forward-looking statements since they
involve known and unknown risks, uncertainties and other important
factors which are, in some cases, beyond our control and which
could materially affect our actual results, performance or
achievements. Important factors which may cause actual results to
differ materially from current expectations include, but are not
limited to: our inability to develop new outlet centers or expand
existing outlet centers successfully; risks related to the economic
performance and market value of our outlet centers; the relative
illiquidity of real property investments; impairment charges
affecting our properties; our dispositions of assets may not
achieve anticipated results; competition for the acquisition and
development of outlet centers, and our inability to complete outlet
centers we have identified; the bankruptcy of one or more of the
retailers in our centers; the fact certain of our lease agreements
include co-tenancy and/or sales-based provisions that may allow a
tenant to pay reduced rent and/or terminate a lease prior to its
natural expiration; environmental regulations affecting our
business; risks associated with possible terrorist activity or
other acts or threats of violence and threats to public safety; our
dependence on rental income from real property; our dependence on
the results of operations of our retailers; the fact that certain
of our properties are subject to ownership interests held by third
parties, whose interests may conflict with ours; risks related to
uninsured losses; the risk that consumer, travel, shopping and
spending habits may change; risks associated with our Canadian
investments; risks associated with attracting and retaining key
personnel; risks associated with debt financing; risks associated
with our guarantees of debt for, or other support we may provide
to, joint venture properties; the effectiveness of our interest
rate hedging arrangements; uncertainty relating to the potential
phasing out of LIBOR; our potential failure to qualify as a REIT;
our legal obligation to make distributions to our shareholders;
legislative or regulatory actions that could adversely affect our
shareholders, including the recent changes in the U.S. federal
income taxation of U.S. businesses; our dependence on distributions
from the Operating Partnership to meet our financial obligations,
including dividends; the risk of a cyber-attack or an act of
cyber-terrorism and other important factors set forth under Item 1A
- "Risk Factors" in the Company's and the Operating Partnership's
Annual Report on Form 10-K for the year ended December 31, 2018, as may be updated or
supplemented in the Company's Quarterly Reports on Form 10-Q and
the Company's other filings with the SEC. Accordingly, there is no
assurance that the Company's expectations will be realized. The
Company disclaims any intention or obligation to update the
forward-looking statements, whether as a result of new information,
future events or otherwise. You are advised to refer to any further
disclosures the Company makes or related subjects in the Company's
Current Reports on Form 8-K that the Company files with the
SEC.
Investor Contact
Information
|
|
|
|
Cyndi
Holt
|
Jim
Williams
|
VP, Investor
Relations
|
EVP &
CFO
|
336-834-6892
|
336-834-6800
|
cyndi.holt@tangeroutlets.com
|
jim.williams@tangeroutlets.com
|
|
|
Media Contact
Information
|
|
|
|
Quentin
Pell
|
|
VP, Corporate
Communications and Enterprise Risk Management
|
|
336-834-6827
|
|
quentin.pell@tangeroutlets.com
|
|
TANGER FACTORY
OUTLET CENTERS, INC. AND SUBSIDIARIES
|
CONSOLIDATED
STATEMENTS OF OPERATIONS
|
(in thousands,
except per share data)
|
(Unaudited)
|
|
|
|
|
|
Three months
ended
|
|
Year
ended
|
|
December
31,
|
|
December
31,
|
|
2019
|
|
2018
|
|
2019
|
|
2018
|
Revenues:
|
|
|
|
|
|
|
|
Rental revenues
(1)
|
$
|
116,557
|
|
|
$
|
123,256
|
|
|
$
|
463,946
|
|
|
$
|
480,707
|
|
Management, leasing
and other services (2)
|
1,476
|
|
|
1,415
|
|
|
5,419
|
|
|
4,995
|
|
Other
revenues
|
2,459
|
|
|
2,528
|
|
|
8,983
|
|
|
8,979
|
|
Total
revenues
|
120,492
|
|
|
127,199
|
|
|
478,348
|
|
|
494,681
|
|
Expenses:
|
|
|
|
|
|
|
|
Property
operating
|
39,482
|
|
|
40,640
|
|
|
157,734
|
|
|
160,457
|
|
General and
administrative (3), (4)
|
12,880
|
|
|
11,306
|
|
|
53,790
|
|
|
44,167
|
|
Impairment
charge
|
37,610
|
|
|
—
|
|
|
37,610
|
|
|
49,739
|
|
Depreciation and
amortization
|
30,305
|
|
|
33,055
|
|
|
123,314
|
|
|
131,722
|
|
Total
expenses
|
120,277
|
|
|
85,001
|
|
|
372,448
|
|
|
386,085
|
|
Other income
(expense):
|
|
|
|
|
|
|
|
Interest
expense
|
(15,034)
|
|
|
(16,473)
|
|
|
(61,672)
|
|
|
(64,821)
|
|
Gain on sale of
assets
|
—
|
|
|
—
|
|
|
43,422
|
|
|
—
|
|
Other income
(expense) (5)
|
205
|
|
|
203
|
|
|
(2,761)
|
|
|
864
|
|
Total other income
(expense)
|
(14,829)
|
|
|
(16,270)
|
|
|
(21,011)
|
|
|
(63,957)
|
|
Income (loss)
before equity in earnings (losses) of unconsolidated joint
ventures
|
(14,614)
|
|
|
25,928
|
|
|
84,889
|
|
|
44,639
|
|
Equity in earnings
(losses) of unconsolidated joint ventures
|
2,235
|
|
|
(5,309)
|
|
|
7,839
|
|
|
924
|
|
Net income
(loss)
|
(12,379)
|
|
|
20,619
|
|
|
92,728
|
|
|
45,563
|
|
Noncontrolling
interests in Operating Partnership
|
630
|
|
|
(1,055)
|
|
|
(4,678)
|
|
|
(2,329)
|
|
Noncontrolling
interests in other consolidated partnerships
|
—
|
|
|
143
|
|
|
(195)
|
|
|
421
|
|
Net income (loss)
attributable to Tanger Factory Outlet Centers, Inc.
|
(11,749)
|
|
|
19,707
|
|
|
87,855
|
|
|
43,655
|
|
Allocation of
earnings to participating securities
|
(306)
|
|
|
(322)
|
|
|
(1,336)
|
|
|
(1,211)
|
|
Net income (loss)
available to common shareholders of
Tanger Factory
Outlet Centers, Inc.
|
$
|
(12,055)
|
|
|
$
|
19,385
|
|
|
$
|
86,519
|
|
|
$
|
42,444
|
|
|
|
|
|
|
|
|
|
Basic earnings per
common share:
|
|
|
|
|
|
|
|
Net income
(loss)
|
$
|
(0.13)
|
|
|
$
|
0.21
|
|
|
$
|
0.93
|
|
|
$
|
0.45
|
|
|
|
|
|
|
|
|
|
Diluted earnings
per common share:
|
|
|
|
|
|
|
|
Net income
(loss)
|
$
|
(0.13)
|
|
|
$
|
0.21
|
|
|
$
|
0.93
|
|
|
$
|
0.45
|
|
(1) In
connection with the adoption of ASC 842 on January 1, 2019, rental
revenues includes base rentals, percentage rentals, and expense
reimbursements for all periods presented. Additionally, for the
three months and year ended December 31, 2019, rental revenues
is presented net of uncollectible tenant revenues and includes a
straight-line rent adjustment of $1.5 million and $6.4 million,
respectively, to record contractual payments received as
consideration from certain executory costs on a straight-line
basis.
|
(2) Upon
adoption of ASC 842, expense reimbursements from joint ventures of
$745,000 and $2.5 million, respectively, previously included in
expense reimbursements for the three months and year ended
December 31, 2018, which are not related to leases, have been
reclassified to management, leasing and other services on the
consolidated statements of operations to conform to the current
year presentation.
|
(3) Upon
adoption of ASC 842, indirect internal leasing costs previously
capitalized are now expensed. For the three months and year ended
December 31, 2019, lease costs of approximately $1.5 million
and $4.9 million, respectively, were expensed as general and
administrative expenses which would have been capitalized under the
previous accounting standard.
|
(4) The year
ended December 31, 2019 includes $4.4 million related to the
accelerated recognition of compensation cost entitled to be
received by the Company's former President and Chief Operating
Officer per the terms of a transition agreement executed in
connection with his retirement.
|
(5) The year
ended December 31, 2019 includes a $3.6 million charge related
to the foreign currency effect of the sale of the Bromont, Quebec
property by the RioCan Canada joint venture.
|
TANGER FACTORY
OUTLET CENTERS, INC. AND SUBSIDIARIES
|
CONSOLIDATED
BALANCE SHEETS
|
(in thousands,
except share data)
|
(Unaudited)
|
|
|
December
31,
|
|
December
31,
|
|
2019
|
|
2018
|
Assets
|
|
|
|
Rental
property:
|
|
|
|
Land
|
$
|
266,537
|
|
|
$
|
278,428
|
|
Buildings, improvements and fixtures
|
2,630,357
|
|
|
2,764,649
|
|
Construction in progress
|
—
|
|
|
3,102
|
|
|
2,896,894
|
|
|
3,046,179
|
|
Accumulated depreciation
|
(1,009,951)
|
|
|
(981,305)
|
|
Total rental property,
net
|
1,886,943
|
|
|
2,064,874
|
|
Cash and
cash equivalents
|
16,672
|
|
|
9,083
|
|
Investments in unconsolidated joint ventures
|
94,691
|
|
|
95,969
|
|
Deferred
lease costs and other intangibles, net
|
96,712
|
|
|
116,874
|
|
Operating lease right-of-use assets (1)
|
86,575
|
|
|
—
|
|
Prepaids
and other assets
|
103,618
|
|
|
98,102
|
|
Total assets
|
$
|
2,285,211
|
|
|
$
|
2,384,902
|
|
|
|
|
|
Liabilities and
Equity
|
|
|
|
Liabilities
|
|
|
|
Debt:
|
|
|
|
Senior, unsecured
notes, net
|
$
|
1,138,603
|
|
|
$
|
1,136,663
|
|
Unsecured term loan,
net
|
347,367
|
|
|
346,799
|
|
Mortgages payable,
net
|
83,803
|
|
|
87,471
|
|
Unsecured lines of
credit, net
|
—
|
|
|
141,985
|
|
Total debt
|
1,569,773
|
|
|
1,712,918
|
|
Accounts payable and
accrued expenses
|
79,562
|
|
|
82,676
|
|
Operating lease
liabilities (1)
|
91,237
|
|
|
—
|
|
Other
liabilities
|
88,530
|
|
|
83,773
|
|
Total liabilities
|
1,829,102
|
|
|
1,879,367
|
|
Commitments and
contingencies
|
|
|
|
Equity
|
|
|
|
Tanger Factory
Outlet Centers, Inc.:
|
|
|
|
Common shares, $.01
par value, 300,000,000 shares authorized, 92,892,849 and 93,941,783
shares issued and outstanding at December 31, 2019 and 2018,
respectively
|
929
|
|
|
939
|
|
Paid in
capital
|
775,035
|
|
|
778,845
|
|
Accumulated distributions in excess of net income
|
(317,263)
|
|
|
(272,454)
|
|
Accumulated other comprehensive loss
|
(25,495)
|
|
|
(27,151)
|
|
Equity attributable to Tanger Factory Outlet Centers,
Inc.
|
433,206
|
|
|
480,179
|
|
Equity
attributable to noncontrolling interests:
|
|
|
|
Noncontrolling
interests in Operating Partnership
|
22,903
|
|
|
25,356
|
|
Noncontrolling
interests in other consolidated partnerships
|
—
|
|
|
—
|
|
Total equity
|
456,109
|
|
|
505,535
|
|
Total liabilities and equity
|
$
|
2,285,211
|
|
|
$
|
2,384,902
|
|
|
|
|
|
|
|
|
|
(1) In
connection with the adoption of ASC 842 on January 1, 2019,
operating lease right-of-use assets and operating lease liabilities
were recorded.
|
TANGER FACTORY
OUTLET CENTERS, INC. AND SUBSIDIARIES
|
CENTER
INFORMATION
|
(Unaudited)
|
|
|
|
December
31,
|
|
|
2019
|
|
2018
|
Gross leasable
area open at end of period (in thousands):
|
|
|
|
|
Consolidated
|
|
12,048
|
|
|
12,923
|
|
Partially owned -
unconsolidated
|
|
2,212
|
|
|
2,371
|
|
Total
|
|
14,260
|
|
|
15,294
|
|
|
|
|
|
|
Outlet centers in
operation at end of period:
|
|
|
|
|
Consolidated
|
|
32
|
|
|
36
|
|
Partially owned -
unconsolidated
|
|
7
|
|
|
8
|
|
Total
|
|
39
|
|
|
44
|
|
|
|
|
|
|
States operated in at
end of period (1)
|
|
19
|
|
|
22
|
|
Occupancy at end of
period (1), (2)
|
|
97.0
|
%
|
|
96.8
|
%
|
(1) Excludes
the centers in which the Company has ownership interests but are
held in unconsolidated joint ventures.
|
(2) Excludes
centers not yet stabilized at period end. The 2018 period excludes
the Fort Worth outlet center (which opened during the fourth
quarter of 2017).
|
NON-GAAP SUPPLEMENTAL MEASURES
Funds From Operations
Funds From Operations ("FFO") is a widely used measure of the
operating performance for real estate companies that supplements
net income (loss) determined in accordance with GAAP. We determine
FFO based on the definition set forth by the National Association
of Real Estate Investment Trusts ("NAREIT"), of which we are a
member. In December 2018, NAREIT
issued "NAREIT Funds From Operations White Paper - 2018
Restatement" which clarifies, where necessary, existing guidance
and consolidates alerts and policy bulletins into a single document
for ease of use. NAREIT defines FFO as net income/(loss) available
to the Company's common shareholders computed in accordance with
generally accepted accounting principles in the United States ("GAAP"), excluding (i)
depreciation and amortization related to real estate, (ii) gains or
losses from sales of certain real estate assets, (iii) gains and
losses from change in control, (iv) impairment write-downs of
certain real estate assets and investments in entities when the
impairment is directly attributable to decreases in the value of
depreciable real estate held by the entity and (v) after
adjustments for unconsolidated partnerships and joint ventures
calculated to reflect FFO on the same basis.
FFO is intended to exclude historical cost depreciation of real
estate as required by GAAP which assumes that the value of real
estate assets diminishes ratably over time. Historically, however,
real estate values have risen or fallen with market conditions.
Because FFO excludes depreciation and amortization of real estate
assets, gains and losses from property dispositions and
extraordinary items, it provides a performance measure that, when
compared year over year, reflects the impact to operations from
trends in occupancy rates, rental rates, operating costs,
development activities and interest costs, providing perspective
not immediately apparent from net income.
We present FFO because we consider it an important supplemental
measure of our operating performance. In addition, a portion of
cash bonus compensation to certain members of management is based
on our FFO or Adjusted Funds From Operations ("AFFO"), which is
described in the section below. We believe it is useful for
investors to have enhanced transparency into how we evaluate our
performance and that of our management. In addition, FFO is
frequently used by securities analysts, investors and other
interested parties in the evaluation of REITs, many of which
present FFO when reporting their results. FFO is also widely used
by us and others in our industry to evaluate and price potential
acquisition candidates. We believe that FFO payout ratio, which
represents regular distributions to common shareholders and unit
holders of the Operating Partnership expressed as a percentage of
FFO, is useful to investors because it facilitates the comparison
of dividend coverage between REITs. NAREIT has encouraged its
member companies to report their FFO as a supplemental,
industry-wide standard measure of REIT operating performance.
FFO has significant limitations as an analytical tool, and you
should not consider it in isolation, or as a substitute for
analysis of our results as reported under GAAP. Some of these
limitations are:
- FFO does not reflect our cash expenditures, or future
requirements, for capital expenditures or contractual
commitments;
- FFO does not reflect changes in, or cash requirements for, our
working capital needs;
- Although depreciation and amortization are non-cash charges,
the assets being depreciated and amortized will often have to be
replaced in the future, and FFO does not reflect any cash
requirements for such replacements; and
- Other companies in our industry may calculate FFO differently
than we do, limiting its usefulness as a comparative measure.
Because of these limitations, FFO should not be considered as a
measure of discretionary cash available to us to invest in the
growth of our business or our dividend paying capacity. We
compensate for these limitations by relying primarily on our GAAP
results and using FFO only as a supplemental measure.
Adjusted Funds From Operations
We present AFFO as a supplemental measure of our performance. We
define AFFO as FFO further adjusted to eliminate the impact of
certain items that we do not consider indicative of our ongoing
operating performance. These further adjustments are itemized in
the table below. You are encouraged to evaluate these adjustments
and the reasons we consider them appropriate for supplemental
analysis. In evaluating AFFO you should be aware that in the future
we may incur expenses that are the same as or similar to some of
the adjustments in this presentation. Our presentation of AFFO
should not be construed as an inference that our future results
will be unaffected by unusual or non-recurring items.
We present AFFO because we believe it assists investors and
analysts in comparing our performance across reporting periods on a
consistent basis by excluding items that we do not believe are
indicative of our core operating performance. In addition, we
believe it is useful for investors to have enhanced transparency
into how we evaluate management's performance and the effectiveness
of our business strategies. We use AFFO when certain material,
unplanned transactions occur as a factor in evaluating management's
performance and to evaluate the effectiveness of our business
strategies, and may use AFFO when determining incentive
compensation.
AFFO has limitations as an analytical tool. Some of these
limitations are:
- AFFO does not reflect our cash expenditures, or future
requirements, for capital expenditures or contractual
commitments;
- AFFO does not reflect changes in, or cash requirements for, our
working capital needs;
- Although depreciation and amortization are non-cash charges,
the assets being depreciated and amortized will often have to be
replaced in the future, and AFFO does not reflect any cash
requirements for such replacements;
- AFFO does not reflect the impact of certain cash charges
resulting from matters we consider not to be indicative of our
ongoing operations; and
- Other companies in our industry may calculate AFFO differently
than we do, limiting its usefulness as a comparative measure.
Because of these limitations, AFFO should not be considered in
isolation or as a substitute for performance measures calculated in
accordance with GAAP. We compensate for these limitations by
relying primarily on our GAAP results and using AFFO only as a
supplemental measure.
Funds Available for Distribution
Funds Available for Distribution ("FAD") is a non-GAAP financial
measure that we define as FFO, excluding corporate depreciation,
amortization of finance costs, amortization of net debt discount
(premium), amortization of equity-based compensation, straight-line
rent amounts, market rent amounts, second generation tenant
allowances, capital improvement expenditures, and our share of the
items listed above for our unconsolidated joint ventures.
Investors, analysts and the Company utilize FAD as an indicator of
common dividend potential. The FAD payout ratio, which represents
regular distributions to common shareholders and unit holders of
the Operating Partnership expressed as a percentage of FAD,
facilitates the comparison of dividend coverage between REITs.
We believe that net income (loss) is the most directly
comparable GAAP financial measure to FAD. FAD does not represent
cash generated from operating activities in accordance with GAAP
and should not be considered as an alternative to net income (loss)
as an indication of our performance or to cash flows as a measure
of liquidity or our ability to make distributions. Other companies
in our industry may calculate FAD differently than we do, limiting
its usefulness as a comparative measure.
Portfolio Net Operating Income and Same Center Net Operating
Income
We present portfolio net operating income ("Portfolio NOI") and
same center net operating income ("Same Center NOI") as
supplemental measures of our operating performance. Portfolio
NOI represents our property level net operating income which is
defined as total operating revenues less property operating
expenses and excludes termination fees and non-cash adjustments
including straight-line rent, net above and below market rent
amortization, impairment charges and gains or losses on the sale of
assets recognized during the periods presented. We define Same
Center NOI as Portfolio NOI for the properties that were
operational for the entire portion of both comparable reporting
periods and which were not acquired, or subject to a material
expansion or non-recurring event, such as a natural disaster,
during the comparable reporting periods.
We believe Portfolio NOI and Same Center NOI are non-GAAP
metrics used by industry analysts, investors and management to
measure the operating performance of our properties because they
provide performance measures directly related to the revenues and
expenses involved in owning and operating real estate assets and
provide a perspective not immediately apparent from net income, FFO
or AFFO. Because Same Center NOI excludes properties developed,
redeveloped, acquired and sold; as well as non-cash adjustments,
gains or losses on the sale of outparcels and termination rents; it
highlights operating trends such as occupancy levels, rental rates
and operating costs on properties that were operational for both
comparable periods. Other REITs may use different methodologies for
calculating Portfolio NOI and Same Center NOI, and accordingly, our
Portfolio NOI and Same Center NOI may not be comparable to other
REITs.
Portfolio NOI and Same Center NOI should not be considered
alternatives to net income (loss) or as an indicator of our
financial performance since they do not reflect the entire
operations of our portfolio, nor do they reflect the impact of
general and administrative expenses, acquisition-related expenses,
interest expense, depreciation and amortization costs, other
non-property income and losses, the level of capital expenditures
and leasing costs necessary to maintain the operating performance
of our properties, or trends in development and construction
activities which are significant economic costs and activities that
could materially impact our results from operations. Because of
these limitations, Portfolio NOI and Same Center NOI should not be
viewed in isolation or as a substitute for performance measures
calculated in accordance with GAAP. We compensate for these
limitations by relying primarily on our GAAP results and using
Portfolio NOI and Same Center NOI only as supplemental
measures.
TANGER FACTORY
OUTLET CENTERS, INC. AND SUBSIDIARIES
|
RECONCILIATION OF
GAAP TO NON-GAAP SUPPLEMENTAL MEASURES
|
(in thousands,
except per share)
|
(Unaudited)
|
|
Below is a
reconciliation of net income to FFO and AFFO:
|
|
|
|
Three months
ended
|
|
Year
ended
|
|
|
December
31,
|
|
December
31,
|
|
|
2019
|
|
2018
|
|
2019
|
|
2018
|
Net income
(loss)
|
|
$
|
(12,379)
|
|
|
$
|
20,619
|
|
|
$
|
92,728
|
|
|
$
|
45,563
|
|
Adjusted
for:
|
|
|
|
|
|
|
|
|
Depreciation and
amortization of real estate assets - consolidated
|
|
29,707
|
|
|
32,440
|
|
|
120,856
|
|
|
129,281
|
|
Depreciation and
amortization of real estate assets - unconsolidated joint
ventures
|
|
3,059
|
|
|
3,294
|
|
|
12,512
|
|
|
13,314
|
|
Impairment charge -
consolidated
|
|
37,610
|
|
|
—
|
|
|
37,610
|
|
|
49,739
|
|
Impairment charge -
unconsolidated joint ventures
|
|
—
|
|
|
7,180
|
|
|
—
|
|
|
7,180
|
|
Foreign currency loss
from sale of joint venture property
|
|
—
|
|
|
—
|
|
|
3,641
|
|
|
—
|
|
Gain on sale of
assets
|
|
—
|
|
|
—
|
|
|
(43,422)
|
|
|
—
|
|
FFO
|
|
57,997
|
|
|
63,533
|
|
|
223,925
|
|
|
245,077
|
|
FFO attributable to
noncontrolling interests in other consolidated
partnerships
|
|
—
|
|
|
143
|
|
|
(195)
|
|
|
421
|
|
Allocation of
earnings to participating securities
|
|
(489)
|
|
|
(580)
|
|
|
(1,991)
|
|
|
(2,151)
|
|
FFO available to
common shareholders (1)
|
|
$
|
57,508
|
|
|
$
|
63,096
|
|
|
$
|
221,739
|
|
|
$
|
243,347
|
|
As further adjusted
for:
|
|
|
|
|
|
|
|
|
Compensation related
to executive officer retirement (2)
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
4,371
|
|
|
$
|
—
|
|
Impact of above
adjustment to the allocation of earnings to participating
securities
|
|
—
|
|
|
—
|
|
|
(35)
|
|
|
—
|
|
AFFO available to
common shareholders (1)
|
|
$
|
57,508
|
|
|
$
|
63,096
|
|
|
$
|
226,075
|
|
|
$
|
243,347
|
|
FFO available to
common shareholders per share - diluted
(1)
|
|
$
|
0.59
|
|
|
$
|
0.64
|
|
|
$
|
2.27
|
|
|
$
|
2.48
|
|
AFFO available to
common shareholders per share - diluted
(1)
|
|
$
|
0.59
|
|
|
$
|
0.64
|
|
|
$
|
2.31
|
|
|
$
|
2.48
|
|
|
|
|
|
|
|
|
|
|
Weighted Average
Shares:
|
|
|
|
|
|
|
|
|
Basic weighted
average common shares
|
|
92,243
|
|
|
93,123
|
|
|
92,808
|
|
|
93,309
|
|
Effect of outstanding
options and certain restricted common shares
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1
|
|
Diluted weighted
average common shares (for earnings per share
computations)
|
|
92,243
|
|
|
93,123
|
|
|
92,808
|
|
|
93,310
|
|
Exchangeable
operating partnership units
|
|
4,949
|
|
|
4,983
|
|
|
4,958
|
|
|
4,993
|
|
Diluted weighted
average common shares (for FFO and AFFO per share computations)
(1)
|
|
97,192
|
|
|
98,106
|
|
|
97,766
|
|
|
98,303
|
|
(1) Assumes the
Class A common limited partnership units of the Operating
Partnership held by the noncontrolling interests are exchanged for
common shares of the Company. Each Class A common limited
partnership unit is exchangeable for one of the Company's common
shares, subject to certain limitations to preserve the Company's
REIT status.
|
(2) Represents
the accelerated recognition of compensation cost entitled to be
received by the Company's former President and Chief Operating
Officer per the terms of a transition agreement executed in
connection with his retirement.
|
Reconciliation of
FFO to FAD (dollars and shares in thousands)
|
|
|
|
Three months
ended
|
|
Year
ended
|
|
|
December
31,
|
|
December
31,
|
|
|
2019
|
|
2018
|
|
2019
|
|
2018
|
FFO available to
common shareholders
|
|
$
|
57,508
|
|
|
$
|
63,096
|
|
|
$
|
221,739
|
|
|
$
|
243,347
|
|
Adjusted
for:
|
|
|
|
|
|
|
|
|
Corporate
depreciation excluded above
|
|
598
|
|
|
615
|
|
|
2,458
|
|
|
2,441
|
|
Amortization of
finance costs
|
|
758
|
|
|
778
|
|
|
3,004
|
|
|
3,058
|
|
Amortization of net
debt discount (premium)
|
|
115
|
|
|
107
|
|
|
448
|
|
|
416
|
|
Amortization of
equity-based compensation
|
|
3,749
|
|
|
3,855
|
|
|
18,120
|
|
|
14,669
|
|
Straight-line rent
adjustments
|
|
(317)
|
|
|
(1,100)
|
|
|
(7,721)
|
|
|
(5,844)
|
|
Market rent
adjustments
|
|
365
|
|
|
597
|
|
|
1,432
|
|
|
2,577
|
|
Second generation
tenant allowances
|
|
(3,018)
|
|
|
(4,141)
|
|
|
(18,189)
|
|
|
(15,729)
|
|
Capital
improvements
|
|
(6,800)
|
|
|
(5,564)
|
|
|
(21,478)
|
|
|
(22,047)
|
|
Adjustments from
unconsolidated joint ventures
|
|
(408)
|
|
|
94
|
|
|
(1,662)
|
|
|
(780)
|
|
FAD available to
common shareholders (1)
|
|
$
|
52,550
|
|
|
$
|
58,337
|
|
|
$
|
198,151
|
|
|
$
|
222,108
|
|
Dividends per
share
|
|
$
|
0.3550
|
|
|
$
|
0.3500
|
|
|
$
|
1.4150
|
|
|
$
|
1.3925
|
|
FFO payout
ratio
|
|
60
|
%
|
|
55
|
%
|
|
62
|
%
|
|
56
|
%
|
FAD payout
ratio
|
|
66
|
%
|
|
59
|
%
|
|
70
|
%
|
|
62
|
%
|
Diluted weighted
average common shares (1)
|
|
97,192
|
|
|
98,106
|
|
|
97,766
|
|
|
98,303
|
|
(1) Assumes the
Class A common limited partnership units of the Operating
Partnership held by the noncontrolling interests are exchanged for
common shares of the Company. Each Class A common limited
partnership unit is exchangeable for one of the Company's common
shares, subject to certain limitations to preserve the Company's
REIT status.
|
Below is a
reconciliation of net income to Portfolio NOI and Same Center NOI
for the consolidated portfolio:
|
|
|
|
|
|
|
|
Three months
ended
|
|
Year
ended
|
|
|
December
31,
|
|
December
31,
|
|
|
2019
|
|
2018
|
|
2019
|
|
2018
|
Net income
(loss)
|
|
$
|
(12,379)
|
|
|
$
|
20,619
|
|
|
$
|
92,728
|
|
|
$
|
45,563
|
|
Adjusted to
exclude:
|
|
|
|
|
|
|
|
|
Equity in (earnings)
losses of unconsolidated joint ventures
|
|
(2,235)
|
|
|
5,309
|
|
|
(7,839)
|
|
|
(924)
|
|
Interest
expense
|
|
15,034
|
|
|
16,473
|
|
|
61,672
|
|
|
64,821
|
|
Gain on sale of
assets
|
|
—
|
|
|
—
|
|
|
(43,422)
|
|
|
—
|
|
Other non-operating
(income) expense
|
|
(205)
|
|
|
(203)
|
|
|
2,761
|
|
|
(864)
|
|
Impairment
charge
|
|
37,610
|
|
|
—
|
|
|
37,610
|
|
|
49,739
|
|
Depreciation and
amortization
|
|
30,305
|
|
|
33,055
|
|
|
123,314
|
|
|
131,722
|
|
Other non-property
expenses
|
|
555
|
|
|
166
|
|
|
1,049
|
|
|
1,001
|
|
Corporate general and
administrative expenses
|
|
12,852
|
|
|
11,072
|
|
|
53,881
|
|
|
43,291
|
|
Non-cash adjustments
(1)
|
|
(409)
|
|
|
(485)
|
|
|
(6,237)
|
|
|
(3,191)
|
|
Lease termination
fees
|
|
(89)
|
|
|
(112)
|
|
|
(1,615)
|
|
|
(1,246)
|
|
Portfolio
NOI
|
|
81,039
|
|
|
85,894
|
|
|
313,902
|
|
|
329,912
|
|
Non-same center NOI
(2)
|
|
165
|
|
|
(4,398)
|
|
|
(4,024)
|
|
|
(17,900)
|
|
Same Center
NOI
|
|
$
|
81,204
|
|
|
$
|
81,496
|
|
|
$
|
309,878
|
|
|
$
|
312,012
|
|
(1) Non-cash
items include straight-line rent, above and below market rent
amortization, straight-line rent expense on land leases and gains
or losses on outparcel sales, as applicable.
|
(2) Excluded
from Same Center NOI:
|
Outlet centers
sold:
|
Nags Head, Ocean City,
Park City, and Williamsburg
|
March 2019
|
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SOURCE Tanger Factory Outlet Centers, Inc.