GREENSBORO, N.C., Oct. 30, 2019 /PRNewswire/ -- Tanger Factory
Outlet Centers, Inc. (NYSE:SKT) today reported financial
and operating results for the three and nine months ended
September 30, 2019.
Third Quarter Results
- Net income available to common shareholders was $0.25 per share, or $23.2
million, compared to a net loss available to common
shareholders of $0.24 per share, or
$22.2 million, for the prior year
period. The current year period is inclusive of a $0.02 per share dilutive impact related to assets
sold in March 2019, net of interest
expense savings related to the use of proceeds. The prior year
period was impacted by a non-cash impairment charge totaling
$49.7 million, or $0.51 per share, related to the Company's outlet
center in Jeffersonville,
Ohio.
- Funds from operations ("FFO") and adjusted funds from
operations ("AFFO") available to common shareholders were both
$0.58 per share, or $56.8 million, compared to $0.63 per share, or $61.9
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.
Year-to-Date Results
- Net income available to common shareholders was $1.06 per share, or $98.6
million, compared to $0.25 per
share, or $23.1 million, for the
prior year period. The current year period is inclusive of a
$0.42 per share dilutive impact
related to the asset sales discussed above, including a gain on the
sale of four outlet centers totaling $43.4
million, or $0.44 per share.
The prior year period was impacted by a non-cash impairment charge
discussed above totaling $49.7
million, or $0.51 per
share.
- FFO available to common shareholders was $1.68 per share, or $164.2
million, compared to $1.83 per
share, or $180.3 million, for the
prior year period. The current year period is inclusive of a
$0.07 per share dilutive impact
related to the asset sales discussed above.
- AFFO available to common shareholders was $1.72 per share, or $168.6
million, compared to $1.83 per
share, or $180.3 million, for the
prior year period. AFFO excludes certain items that the Company
does not consider indicative of its ongoing
operating performance. The current year period is inclusive of
a $0.07 per share dilutive impact
related to the asset sales discussed above and excludes
$4.4 million, or $0.04 per share, of general and administrative
expense in the current year period for the accelerated recognition
of compensation cost related to the planned 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.
"Our third quarter results exceeded our AFFO and same center NOI
expectations as we continue to focus on our priorities of leasing
and providing shoppers with the brands and the value they seek,"
said Steven B. Tanger, Chief
Executive Officer. "We have maintained a high 95.9% occupancy rate,
reflecting the resilience and desirability of the outlet channel.
Additionally, we have continued to increase traffic, as our
targeted marketing programs and engaging on-site experiences helped
to draw shoppers to our centers. Our tenant occupancy cost ratio
remains lower than any of the mall REITs at 9.9%. We have also
sustained a strong financial position, with no significant debt
maturities in our consolidated portfolio until December 2023 and a low 3.5% weighted average
interest rate. We have a 26-year historic commitment to paying a
quarterly cash dividend. Our dividend remains well covered, as we
expect to generate nearly $95 million
of free cash flow over and above our dividend during 2019 and have
nearly $600 million in unused line of
credit capacity. As we move towards 2020, we remain focused on
leasing to desired brands while creating the level of activity and
excitement that drives shoppers to Tanger
Centers."
Operating Metrics
The Company's key portfolio results were as follows:
- Consolidated portfolio occupancy rate was 95.9% on September 30, 2019, compared to 96.0% on
June 30, 2019 and 96.4% on
September 30, 2018
- Blended average rental rates increased 2.5% on a straight-line
basis and decreased 2.0% on a cash basis for all renewals and
re-tenanted leases that commenced during the trailing twelve months
ended September 30, 2019
- Lease termination fees totaled $1.5
million for the first nine months of 2019, including
$0.1 million for the third quarter of
2019, compared to $1.1 million for
the first nine months of 2018, including $0.1 million for the third quarter of 2018
- Same center net operating income ("Same Center NOI") for the
consolidated portfolio decreased 1.8% for the quarter and 0.8% year
to date 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 September 30,
2019, compared to $383 per
square foot in the comparable prior year period
- Same center tenant sales performance for the overall portfolio
increased 1.7% for the twelve months ended September 30, 2019 compared to the twelve months
ended September 30, 2018
- Occupancy cost ratio for the trailing twelve months ended
September 30, 2019 was 9.9%
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
September 30, 2019 that were renewed or re-leased for all
terms included 345 leases, totaling approximately 1.7 million
square feet. As of September 30, 2019, Tanger had lease
renewals executed or in process for 74.2% of the space in the
consolidated portfolio scheduled to expire during 2019 compared to
76.1% of the space scheduled to expire during 2018 that was
executed or in process as of September 30, 2018.
Tanger recaptured approximately 195,000 square feet within its
consolidated portfolio during the first nine months of 2019 related
to bankruptcies and brand-wide restructurings by retailers,
including 6,000 square feet in the third quarter. During the first
nine months of 2018, approximately 123,000 square feet were
recaptured, including 17,000 square feet during the third
quarter.
Balance Sheet and Capital Market Activity
As of September 30, 2019:
- Total enterprise value was $3.1
billion
- Total outstanding floating rate debt was approximately
$16 million, representing 1% of total
consolidated debt outstanding, or less than 1% of total enterprise
value
- Unused capacity under the Company's $600
million unsecured lines of credit was 99%, or $595.7 million
- Weighted average interest rate was 3.5% and weighted average
term to maturity of outstanding consolidated debt, including
extension options, was approximately 5.7 years
- Approximately 94% of the Company's consolidated square footage
was unencumbered by mortgages
- Interest coverage ratio was 4.3 times for the first nine months
of 2019
- FAD payout ratio was 71% for the first nine months of 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
$141.0 million since December 31, 2018.
During the first nine months of 2019, the Company repurchased
approximately 1,209,000 common shares for total consideration of
approximately $20.0 million,
including approximately 651,000 common shares for total
consideration of approximately $10.0
million during the third quarter. As of September 30,
2019, $80.0 million remains under the
current repurchase authorization, which is valid through
May 2021.
Tanger's priority uses of capital at this time include:
reinvesting in its assets, paying its dividend, repurchasing its
common shares opportunistically, and de-leveraging its balance
sheet, while evaluating potential long-term opportunities for
growth.
Guidance for 2019
The Company is raising its 2019 annual guidance. Management
currently believes its net income, FFO and AFFO per share for 2019
will be as follows:
For the year ended
December 31, 2019:
|
Current
|
Previous
|
|
|
Low
Range
|
High
Range
|
Low
Range
|
High
Range
|
Estimated diluted
net income per share
|
$1.26
|
$1.30
|
$1.24
|
$1.30
|
Depreciation and
amortization of real estate assets - consolidated and
the Company's share of unconsolidated joint ventures
|
1.36
|
1.36
|
1.36
|
1.36
|
Gain on sale of
assets
|
(0.44)
|
(0.44)
|
(0.44)
|
(0.44)
|
Foreign currency loss
from sale of joint venture property
|
0.04
|
0.04
|
0.04
|
0.04
|
Other
|
0.01
|
0.01
|
0.01
|
0.01
|
Estimated diluted
FFO per share
|
$2.23
|
$2.27
|
$2.21
|
$2.27
|
AFFO adjustment per
share
|
0.04
|
0.04
|
0.04
|
0.04
|
Estimated diluted
AFFO per share
|
$2.27
|
$2.31
|
$2.25
|
$2.31
|
|
|
|
|
|
|
|
|
|
|
Tanger's estimates reflect the following key assumptions:
- Increase in Same Center NOI guidance for the consolidated
portfolio to a range of (1.40)% to (1.80)% from the previous range
of (1.50)% to (2.25)%, which reflects the following:
-
- Outperformance of the Company's forecast for the third quarter
of 2019
- Projected 2019 store closings related to tenant bankruptcies
and restructurings of up to 225,000 square feet for the
consolidated portfolio. This excludes the Dressbarn stores, which
are expected to remain open through December
31, 2019, and assumes that recently announced footprint
optimization plans by tenants, which remain fluid at this time,
will not have a significant impact on 2019 occupancy or Same Center
NOI.
- Increase in projected average occupancy for the year to between
95.5% and 95.8%, from the previous range of 94.75% to 95.25%. This
change reflects fewer than previously anticipated store closures
and the contribution of Tanger's pop-up and temporary leasing
program.
- Projected full-year lease termination fees (which are not
included in Same Center NOI) of approximately $1.5 million for the consolidated portfolio
- Estimated incremental annual revenue of approximately
$6.0 million, or $0.06 per share, from the straight-line
recognition of fixed common area maintenance related to the
implementation of the new lease standard effective January 1, 2019
- Increase in average general and administrative expense to
between $12.3 million and
$12.7 million for the fourth quarter
of 2019 from the previous range of $12.0
million to $12.4 million. The
implementation of the new lease standard is currently expected to
result in incremental general and administrative expense of
approximately $4.0 million to
$5.0 million, or $0.04 to $0.05 per
share, annually.
- Annual consolidated portfolio interest expense of $61.0 million to $63.0
million
- The Company's share of annual interest expense in the
unconsolidated portfolio of $8.0
million to $8.5 million
- 2019 weighted average diluted common shares of approximately
92.8 million for earnings per share and 97.7 million for FFO per
share
- Combined annual recurring capital expenditures and second
generation tenant allowances of approximately $38 million to $40
million, compared to the previous range of $36 million to $40
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
Third Quarter Conference Call
Tanger will host a conference call to discuss its third quarter
results for analysts, investors and other interested parties on
Thursday, October 31, 2019, at 8:00
a.m. Eastern Time. To access the conference call, listeners
should dial 1-877-277-5113 and provide conference ID # 4674518 to
be connected to the Tanger Factory Outlet Centers Third 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 October 31, 2019 at 11:00 a.m. through November 7, 2019 at
11:59 p.m. by dialing 1-855-859-2056,
conference ID # 4674518. An online archive of the webcast will also
be available through November 7, 2019.
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 2,900 stores which are operated by more
than 510 different brand name companies. The Company has more than
38 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 ended September 30, 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, 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; 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
|
Nine months
ended
|
|
September
30,
|
September
30,
|
|
2019
|
|
2018
|
2019
|
|
2018
|
Revenues:
|
|
|
|
|
|
|
Rental revenues
(1)
|
$
|
115,050
|
|
|
$
|
120,277
|
|
$
|
347,389
|
|
|
$
|
357,450
|
|
Management, leasing
and other services (2)
|
1,356
|
|
|
1,239
|
|
3,943
|
|
|
3,580
|
|
Other
revenues
|
2,588
|
|
|
2,720
|
|
6,524
|
|
|
6,452
|
|
Total
revenues
|
118,994
|
|
|
124,236
|
|
357,856
|
|
|
367,482
|
|
Expenses:
|
|
|
|
|
|
|
Property
operating
|
39,149
|
|
|
39,653
|
|
118,252
|
|
|
119,817
|
|
General and
administrative (3), (4)
|
12,292
|
|
|
10,752
|
|
40,910
|
|
|
32,861
|
|
Impairment
charge
|
—
|
|
|
49,739
|
|
—
|
|
|
49,739
|
|
Depreciation and
amortization
|
30,103
|
|
|
32,850
|
|
93,009
|
|
|
98,667
|
|
Total
expenses
|
81,544
|
|
|
132,994
|
|
252,171
|
|
|
301,084
|
|
Other income
(expense):
|
|
|
|
|
|
|
Interest
expense
|
(15,197)
|
|
|
(16,367)
|
|
(46,638)
|
|
|
(48,348)
|
|
Gain on sale of
assets
|
—
|
|
|
—
|
|
43,422
|
|
|
—
|
|
Other income
(expense) (5)
|
227
|
|
|
261
|
|
(2,966)
|
|
|
661
|
|
Total other income
(expense)
|
(14,970)
|
|
|
(16,106)
|
|
(6,182)
|
|
|
(47,687)
|
|
Income (loss)
before equity in earnings of unconsolidated joint
ventures
|
22,480
|
|
|
(24,864)
|
|
99,503
|
|
|
18,711
|
|
Equity in earnings of
unconsolidated joint ventures
|
2,329
|
|
|
1,833
|
|
5,604
|
|
|
6,233
|
|
Net income
(loss)
|
24,809
|
|
|
(23,031)
|
|
105,107
|
|
|
24,944
|
|
Noncontrolling
interests in Operating Partnership
|
(1,263)
|
|
|
1,172
|
|
(5,308)
|
|
|
(1,274)
|
|
Noncontrolling
interests in other consolidated partnerships
|
—
|
|
|
—
|
|
(195)
|
|
|
278
|
|
Net income (loss)
attributable to Tanger Factory Outlet Centers, Inc.
|
23,546
|
|
|
(21,859)
|
|
99,604
|
|
|
23,948
|
|
Allocation of
earnings to participating securities
|
(305)
|
|
|
(313)
|
|
(1,030)
|
|
|
(889)
|
|
Net income (loss)
available to common shareholders of
Tanger Factory
Outlet Centers, Inc.
|
$
|
23,241
|
|
|
$
|
(22,172)
|
|
$
|
98,574
|
|
|
$
|
23,059
|
|
|
|
|
|
|
|
|
Basic earnings per
common share:
|
|
|
|
|
|
|
Net income
(loss)
|
$
|
0.25
|
|
|
$
|
(0.24)
|
|
$
|
1.06
|
|
|
$
|
0.25
|
|
|
|
|
|
|
|
|
Diluted earnings
per common share:
|
|
|
|
|
|
|
Net income
(loss)
|
$
|
0.25
|
|
|
$
|
(0.24)
|
|
$
|
1.06
|
|
|
$
|
0.25
|
|
(1) In connection with the adoption of ASC 842 on
January 1, 2019, rental revenues
includes base rentals, percentage rentals, and
expense reimbursements for both periods presented.
Additionally, for the three and nine months ended
September 30, 2019, rental revenues is presented net of
uncollectible tenant revenues and includes a straight-line rent
adjustment of $1.6 million and
$4.9 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 $656,000 and $1.8 million, respectively, previously
included in expense reimbursements for the three and nine months
ended September 30, 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 and nine months ended September 30, 2019, lease
costs of approximately $1.3 million
and $3.5 million, respectively, were
expensed as general and administrative expenses which would have
been capitalized under the previous accounting standard.
(4) The nine months ended ended
September 30, 2019 includes $4.4
million related to the accelerated recognition of
compensation cost entitled to be received by the Company's
President and Chief Operating Officer per the terms of a transition
agreement executed in connection with his planned retirement.
(5) The nine months ended September 30,
2019 include 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)
|
|
|
September
30,
|
|
December
31,
|
|
2019
|
|
2018
|
Assets
|
|
|
|
Rental
property:
|
|
|
|
Land
|
$
|
267,642
|
|
|
$
|
278,428
|
|
Buildings, improvements and fixtures
|
2,663,507
|
|
|
2,764,649
|
|
Construction in progress
|
—
|
|
|
3,102
|
|
|
2,931,149
|
|
|
3,046,179
|
|
Accumulated depreciation
|
(991,441)
|
|
|
(981,305)
|
|
Total rental property,
net
|
1,939,708
|
|
|
2,064,874
|
|
Cash and
cash equivalents
|
4,664
|
|
|
9,083
|
|
Investments in unconsolidated joint ventures
|
94,415
|
|
|
95,969
|
|
Deferred
lease costs and other intangibles, net
|
101,373
|
|
|
116,874
|
|
Operating lease right-of-use assets (1)
|
86,830
|
|
|
—
|
|
Prepaids
and other assets
|
97,367
|
|
|
98,102
|
|
Total assets
|
$
|
2,324,357
|
|
|
$
|
2,384,902
|
|
|
|
|
|
Liabilities and
Equity
|
|
|
|
Liabilities
|
|
|
|
Debt:
|
|
|
|
Senior, unsecured
notes, net
|
$
|
1,138,115
|
|
|
$
|
1,136,663
|
|
Unsecured term loan,
net
|
347,253
|
|
|
346,799
|
|
Mortgages payable,
net
|
84,738
|
|
|
87,471
|
|
Unsecured lines of
credit, net
|
1,817
|
|
|
141,985
|
|
Total debt
|
1,571,923
|
|
|
1,712,918
|
|
Accounts payable and
accrued expenses
|
73,932
|
|
|
82,676
|
|
Operating lease
liabilities (1)
|
91,683
|
|
|
—
|
|
Other
liabilities
|
88,619
|
|
|
83,773
|
|
Total liabilities
|
1,826,157
|
|
|
1,879,367
|
|
Commitments and
contingencies
|
|
|
|
Equity
|
|
|
|
Tanger Factory
Outlet Centers, Inc.:
|
|
|
|
Common shares, $.01
par value, 300,000,000 shares authorized, 92,893,338 and
93,941,783 shares issued and outstanding at September 30, 2019 and
December 31,
2018, respectively
|
929
|
|
|
939
|
|
Paid in
capital
|
771,868
|
|
|
778,845
|
|
Accumulated distributions in excess of net income
|
(272,481)
|
|
|
(272,454)
|
|
Accumulated other comprehensive loss
|
(27,372)
|
|
|
(27,151)
|
|
Equity attributable to Tanger Factory Outlet Centers,
Inc.
|
472,944
|
|
|
480,179
|
|
Equity
attributable to noncontrolling interests:
|
|
|
|
Noncontrolling
interests in Operating Partnership
|
25,256
|
|
|
25,356
|
|
Noncontrolling
interests in other consolidated partnerships
|
—
|
|
|
—
|
|
Total equity
|
498,200
|
|
|
505,535
|
|
Total liabilities and equity
|
$
|
2,324,357
|
|
|
$
|
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)
|
|
|
September
30,
|
|
|
2019
|
|
2018
|
Gross leasable
area open at end of period (in thousands):
|
|
|
|
|
Consolidated
|
|
12,048
|
|
|
12,923
|
|
Partially owned -
unconsolidated
|
|
2,212
|
|
|
2,370
|
|
Total
|
|
14,260
|
|
|
15,293
|
|
|
|
|
|
|
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)
|
|
95.9%
|
|
|
96.4%
|
|
(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 share-based compensation, straight-line
rent amounts, market rent amounts, less 2nd 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
|
|
Nine months
ended
|
|
|
September
30,
|
|
September
30,
|
|
|
2019
|
|
2018
|
|
2019
|
|
2018
|
Net income
(loss)
|
|
$
|
24,809
|
|
|
$
|
(23,031)
|
|
|
$
|
105,107
|
|
|
$
|
24,944
|
|
Adjusted
for:
|
|
|
|
|
|
|
|
|
Depreciation and
amortization of real estate assets - consolidated
|
|
29,451
|
|
|
32,237
|
|
|
91,149
|
|
|
96,841
|
|
Depreciation and
amortization of real estate assets - unconsolidated
joint
ventures
|
|
3,058
|
|
|
3,466
|
|
|
9,453
|
|
|
10,020
|
|
Impairment charge -
consolidated
|
|
—
|
|
|
49,739
|
|
|
—
|
|
|
49,739
|
|
Foreign currency loss
from sale of joint venture property
|
|
—
|
|
|
—
|
|
|
3,641
|
|
|
—
|
|
Gain on sale of
assets
|
|
—
|
|
|
—
|
|
|
(43,422)
|
|
|
—
|
|
FFO
|
|
57,318
|
|
|
62,411
|
|
|
165,928
|
|
|
181,544
|
|
FFO attributable to
noncontrolling interests in other consolidated
partnerships
|
|
—
|
|
|
—
|
|
|
(195)
|
|
|
278
|
|
Allocation of
earnings to participating securities
|
|
(481)
|
|
|
(560)
|
|
|
(1,502)
|
|
|
(1,571)
|
|
FFO available to
common shareholders (1)
|
|
$
|
56,837
|
|
|
$
|
61,851
|
|
|
$
|
164,231
|
|
|
$
|
180,251
|
|
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)
|
|
$
|
56,837
|
|
|
$
|
61,851
|
|
|
$
|
168,567
|
|
|
$
|
180,251
|
|
FFO available to
common shareholders per share - diluted
(1)
|
|
$
|
0.58
|
|
|
$
|
0.63
|
|
|
$
|
1.68
|
|
|
$
|
1.83
|
|
AFFO available to
common shareholders per share - diluted
(1)
|
|
$
|
0.58
|
|
|
$
|
0.63
|
|
|
$
|
1.72
|
|
|
$
|
1.83
|
|
|
|
|
|
|
|
|
|
|
Weighted Average
Shares:
|
|
|
|
|
|
|
|
|
Basic weighted
average common shares
|
|
92,514
|
|
|
93,109
|
|
|
92,999
|
|
|
93,349
|
|
Diluted weighted
average common shares (for earnings per share
computations)
|
|
92,514
|
|
|
93,109
|
|
|
92,999
|
|
|
93,349
|
|
Exchangeable
operating partnership units
|
|
4,960
|
|
|
4,995
|
|
|
4,960
|
|
|
4,995
|
|
Diluted weighted
average common shares (for FFO and AFFO per share computations)
(1)
|
|
97,474
|
|
|
98,104
|
|
|
97,959
|
|
|
98,344
|
|
(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
President and Chief Operating Officer per the terms of a transition
agreement executed in connection with his planned retirement.
Reconciliation of
FFO to FAD (dollars and shares in thousands)
|
|
|
Three months
ended
|
|
Nine months
ended
|
|
|
September
30,
|
|
September
30,
|
|
|
2019
|
|
2018
|
|
2019
|
|
2018
|
FFO available to
common shareholders
|
|
$
|
56,837
|
|
|
$
|
61,851
|
|
|
$
|
164,231
|
|
|
$
|
180,251
|
|
Adjusted
for:
|
|
|
|
|
|
|
|
|
Corporate
depreciation excluded above
|
|
652
|
|
|
613
|
|
|
1,860
|
|
|
1,826
|
|
Amortization of
finance costs
|
|
749
|
|
|
748
|
|
|
2,246
|
|
|
2,280
|
|
Amortization of net
debt discount (premium)
|
|
113
|
|
|
105
|
|
|
333
|
|
|
309
|
|
Amortization of
equity-based compensation
|
|
3,571
|
|
|
3,769
|
|
|
14,371
|
|
|
10,814
|
|
Straight-line rent
adjustments
|
|
(2,518)
|
|
|
(1,450)
|
|
|
(7,404)
|
|
|
(4,744)
|
|
Market rent
adjustments
|
|
314
|
|
|
729
|
|
|
1,067
|
|
|
1,980
|
|
2nd
generation tenant allowances
|
|
(9,121)
|
|
|
(3,262)
|
|
|
(15,171)
|
|
|
(11,588)
|
|
Capital
improvements
|
|
(4,781)
|
|
|
(5,562)
|
|
|
(14,678)
|
|
|
(16,483)
|
|
Adjustments from
unconsolidated joint ventures
|
|
(50)
|
|
|
(456)
|
|
|
(1,254)
|
|
|
(875)
|
|
FAD available to
common shareholders (1)
|
|
$
|
45,766
|
|
|
$
|
57,085
|
|
|
$
|
145,601
|
|
|
$
|
163,770
|
|
Dividends per
share
|
|
$
|
0.3550
|
|
|
$
|
0.3500
|
|
|
$
|
1.0600
|
|
|
$
|
1.0425
|
|
FFO payout
ratio
|
|
61
|
%
|
|
56
|
%
|
|
63
|
%
|
|
57
|
%
|
FAD payout
ratio
|
|
76
|
%
|
|
60
|
%
|
|
71
|
%
|
|
62
|
%
|
Diluted weighted
average common shares (1)
|
|
97,474
|
|
|
98,104
|
|
|
97,959
|
|
|
98,344
|
|
(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
|
|
Nine months
ended
|
|
|
September
30,
|
|
September
30,
|
|
|
2019
|
|
2018
|
|
2019
|
|
2018
|
Net income
(loss)
|
|
$
|
24,809
|
|
|
$
|
(23,031)
|
|
|
$
|
105,107
|
|
|
$
|
24,944
|
|
Adjusted to
exclude:
|
|
|
|
|
|
|
|
|
Equity in earnings of
unconsolidated joint ventures
|
|
(2,329)
|
|
|
(1,833)
|
|
|
(5,604)
|
|
|
(6,233)
|
|
Interest
expense
|
|
15,197
|
|
|
16,367
|
|
|
46,638
|
|
|
48,348
|
|
Gain on sale of
assets
|
|
—
|
|
|
—
|
|
|
(43,422)
|
|
|
—
|
|
Other non-operating
(income) expense
|
|
(227)
|
|
|
(261)
|
|
|
2,966
|
|
|
(661)
|
|
Impairment
charge
|
|
—
|
|
|
49,739
|
|
|
—
|
|
|
49,739
|
|
Depreciation and
amortization
|
|
30,103
|
|
|
32,850
|
|
|
93,009
|
|
|
98,667
|
|
Other non-property
expenses
|
|
160
|
|
|
457
|
|
|
491
|
|
|
832
|
|
Corporate general and
administrative expenses
|
|
12,265
|
|
|
10,521
|
|
|
41,032
|
|
|
32,223
|
|
Non-cash adjustments
(1)
|
|
(1,729)
|
|
|
(702)
|
|
|
(5,829)
|
|
|
(2,707)
|
|
Lease termination
fees
|
|
(127)
|
|
|
(70)
|
|
|
(1,526)
|
|
|
(1,134)
|
|
Portfolio
NOI
|
|
78,122
|
|
|
84,037
|
|
|
232,862
|
|
|
244,018
|
|
Non-same center NOI
(2)
|
|
(82)
|
|
|
(4,579)
|
|
|
(4,190)
|
|
|
(13,505)
|
|
Same Center
NOI
|
|
$
|
78,040
|
|
|
$
|
79,458
|
|
|
$
|
228,672
|
|
|
$
|
230,513
|
|
(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.