GREENSBORO, N.C., May 11,
2020 /PRNewswire/ -- Tanger Factory Outlet Centers, Inc. (NYSE:
SKT) today reported financial results for the three months
ended March 31, 2020 and operating metrics for the first
quarter of 2020 and provided a COVID-19 update.
"During these unprecedented times, the health and well-being of
our team members, shoppers, tenants and communities are of utmost
importance," said Steven B. Tanger,
Chief Executive Officer. "We continue to follow health agency
guidelines and to offer our facilities to assist the communities we
serve. We are also proud to have kept our dedicated work force
employed with their health care benefits intact."
"Liquidity and capital preservation are crucial in times of
uncertainty. Due to our disciplined approach, we entered 2020 with
one of the strongest balance sheets in our peer group. Our
previously-undrawn $600 million lines
of credit provided an important source of liquidity that we believe
will sustain our business until there is more clarity regarding the
impact of the COVID-19 pandemic."
"Over many economic cycles during the past 39 years, we have
shown that in good times people love a bargain and in tough times
like these, they need a bargain. Outlet stores remain the ideal
distribution channel for retailers to monetize inventory. We are
currently working with several retailers with excess inventory due
to pandemic-related closures that are interested in opening
permanent stores and temporary pop-up stores as soon as possible.
The vast majority of Tanger Outlet Centers are open-air shopping
destinations, where customers are likely to be more
comfortable."
"With an exemplary leadership track record in the outlet
industry and extensive retailer relationships, the addition of
Steve Yalof as our new President
further strengthens our senior management team. His unique
perspective of having been both a landlord and a tenant is
invaluable as we navigate these extraordinary times," Mr. Tanger
added.
First Quarter Results
- Net loss available to common shareholders was $0.30 per share, or $27.4
million, compared to net income available to common
shareholders of $0.66 per share, or
$61.7 million, for the prior year
period. The current year period was impacted by a non-cash
impairment charge totaling $45.7
million, or $0.47 per share,
related to the Company's outlet center in Manshantucket, CT
(Foxwoods). The prior year period is inclusive of a gain on the
sale of four outlet centers totaling $43.4
million, or $0.44 per
share.
- Funds From Operations ("FFO") and Core Funds From Operations
("Core FFO") available to common shareholders were both
$0.50 per share, or $48.7 million, compared to $0.57 per share, or $55.9
million, for the prior year period.
FFO and Core FFO (previously referred to as Adjusted Funds From
Operations or 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 Core FFO, if applicable, are included in this release.
Per share amounts for net income (loss), FFO and Core FFO are on a
diluted basis.
Balance Sheet and Liquidity
As previously announced, the Company has taken several steps to
increase liquidity, preserve financial flexibility and to meet its
obligations for a sustained period of time until there is more
clarity about the impact of the pandemic. These steps are discussed
further below in the COVID-19 Update section.
In light of the importance of preserving liquidity, Tanger drew
down substantially all of the capacity under its $600 million unsecured lines of credit on
March 31, 2020 and did not repurchase
any common shares during the first quarter of 2020. At the end of
April, $594.0 million of cash
remained on the Company's balance sheet.
Other than its unsecured lines of credit, which mature in
October of 2021 and may be extended for one additional year, Tanger
has no significant debt maturities until December 2023.
As of March 31, 2020:
- The Company remained in compliance with all of its debt
covenants
- Weighted average interest rate was 3.1% and weighted average
term to maturity of outstanding consolidated debt, including
extension options, was approximately 4.5 years
- Approximately 94% of the Company's consolidated square footage
was unencumbered by mortgages
- Interest coverage ratio (calculated as Adjusted EBITDA divided
by interest expense) was 4.1 times for the first quarter of 2020
and 4.5 times for the trailing twelve months ended March 31, 2020
- Total outstanding floating rate debt was approximately
$611 million, representing
approximately 28% of total consolidated debt outstanding or 23% of
total enterprise value
- FAD payout ratio was 83% for the first quarter of 2020
Adjusted Earnings Before Interest, Taxes, Depreciation and
Amortization ("Adjusted EBITDA") and Funds Available for
Distribution ("FAD") are supplemental non-GAAP financial measures
of operating performance. Definitions of Adjusted EBITDA and FAD
and reconciliations to the nearest comparable GAAP measures are
included in this release.
Dividends
Tanger intends to pay the dividend of $0.3575 per share declared in January 2020 as scheduled on May 15, 2020 to holders of record on April 30, 2020. Going forward, given the
current uncertainty related to the pandemic's near and potential
long-term impact, the Company's Board of Directors will temporarily
suspend dividend distributions to conserve approximately
$35 million in cash per quarter and
preserve the Company's balance sheet strength and flexibility. The
Board will continue to evaluate the potential for future dividend
distributions on a quarterly basis. Tanger intends to remain in
compliance with REIT taxable income distribution requirements for
the 2020 tax year.
Operating Metrics
The Company's key portfolio results were as follows:
- Consolidated portfolio occupancy rate was 94.3% on March 31, 2020, compared to 97.0% on December 31, 2019 and 95.4% on March 31, 2019
- Blended average rental rates decreased 1.5% on a straight-line
basis and 6.7% on a cash basis for all renewals and re-tenanted
leases that commenced during the trailing twelve months ended
March 31, 2020
- Lease termination fees totaled $0.2
million for the first quarter of 2020 compared to
$1.1 million for the first quarter of
2019
- Same center net operating income ("Same Center NOI") for the
consolidated portfolio decreased 3.7% for the quarter due primarily
to the impact of previously anticipated tenant bankruptcies, lease
modifications and store closures
- Average tenant sales productivity for the consolidated
portfolio was $387 per square foot
for the twelve months ended March 31,
2020, compared to $391 per
square foot in the comparable prior year period and $405 per square foot for the twelve months ended
February 29, 2020
- Same center tenant sales performance for the overall portfolio
decreased 0.8% for the twelve months ended March 31, 2020 and increased 4.0% for the twelve
months ended February 29, 2020
compared to the comparable prior year periods
- Occupancy cost ratio for the trailing twelve months ended
March 31, 2020 was 10.3%
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
March 31, 2020 that were renewed or re-leased for all terms
included 296 leases, totaling approximately 1.3 million square
feet.
As of March 31, 2020, Tanger had lease renewals executed or
in process for 62.7% of the space in the consolidated portfolio
scheduled to expire during 2020 compared to 63.0% of the space
scheduled to expire during 2019 that was executed or in process as
of March 31, 2019.
Tanger recaptured approximately 332,000 square feet within its
consolidated portfolio during the first quarter of 2020 related to
bankruptcies and brand-wide restructurings by retailers. During the
first quarter of 2019, approximately 82,000 square feet were
recaptured.
COVID-19 Update
- Community Support - Throughout the crisis, the Company's
centers have never closed and have been used for Red Cross blood
drives, food collection sites, curbside food pickup and as staging
areas for law enforcement and emergency medical services. In an
effort to provide a healthy environment for its team members,
tenants, shoppers and communities, Tanger has taken measures
operationally to comply with CDC and other applicable public health
guidelines as retailers begin to reopen their stores in applicable
locations. These include frequent cleaning of common areas and
other high-touch spaces, the closure of children's play areas and
other interactive features, the use of personal protective
equipment by the Company's customer service staff as well as third
party maintenance, janitorial and security staff and assistance for
retailers with managing social distancing guidelines when lines
extend out of stores and into outlet center common areas.
- Guidance - Due to limited visibility regarding the
duration and magnitude of the pandemic, Tanger previously withdrew
its guidance. The Company is not providing updated guidance at this
time.
- Reduction of Cash Outflows - Steps the Company has taken
to help preserve financial flexibility include base salary
reductions of 50% for Tanger's CEO, 25% for other named executive
officers, and lesser reductions for most other employees, as well
as a 25% reduction in cash retainers for the Board of Directors. In
addition, the Company reduced or deferred certain operating and
general and administrative expenses, and deferred the Nashville pre-development-stage project and
certain other planned capital expenditures.
- Stores Open - While Tanger's portfolio has remained
open, retailers began closing their stores in the Company's
portfolio in mid-March and by April 6,
2020, operations at all 39 Tanger Outlet Centers were
restricted by order of local and state authorities. At the lowest
point, on April 6, 2020, open stores
represented 6% of the consolidated portfolio in terms of gross
leasable area, or 2% in terms of annualized base rent. As of today,
these percentages had improved to 16% and 12%, respectively, as
mandates had eased or been lifted in jurisdictions where 20, or
63%, of the centers in Tanger's consolidated portfolio are located.
These totals include some stores that are open only for curbside
pickup or where maximum store occupancy is restricted by
governmental mandates. It remains unclear when mandates will be
lifted completely or eased in additional locations.
- Rent Collections - In late March, Tanger offered all
tenants in its consolidated portfolio the option to defer 100% of
April and May rents interest free, payable in equal installments
due in January and February of 2021. As expected, due to the
deferral offer, April rent receipts represented approximately 12%
of the amount billed. While the Company's preference is to work
with its tenant partners to reach a financial resolution that
positions both parties for long-term growth, it reserves all rights
under its lease agreements and will pursue legal remedies to
collect rent as appropriate.
- Ample Liquidity - Based on Tanger's estimated
pre-COVID-19 cash expenditures of approximately $25 million per month, the Company expects to
have sufficient liquidity to meet its obligations, even under its
most conservative rent collection scenario of not receiving any
rent, for approximately two years (assuming no dividend
distributions or debt maturities and the Company remains in
compliance with its debt covenants).
Management Succession
As previously announced, Stephen J.
Yalof joined the Company on April 10,
2020 as President and Chief Operating Officer. Mr. Yalof was
Chief Executive Officer of Simon Premium Outlets and will succeed
Steven B. Tanger as Chief Executive
Officer in January 2021. At that
time, Mr. Tanger will transition to become Executive Chair and
David B. Henry, current
Non-Executive Chair, will become Lead Independent Director. Mr.
Tanger's employment contract was also extended through January 1, 2024.
First Quarter 2020 Conference Call
Tanger will host a conference call to discuss its first quarter
2020 results for analysts, investors and other interested parties
on Tuesday, May 12, 2020, at 8:00 a.m.
Eastern Time. To access the conference call, listeners
should dial 1-888-317-6016 and request to join the Tanger Factory
Outlets Centers, Inc. SKT 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 May 12, 2020 at 11:00
a.m. through May 26, 2020 at 11:59 p.m. by dialing 1-877-344-7529, replay
access code # 10142484. An online archive of the webcast will also
be available through May 26, 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 ended March 31, 2020. 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 the impact of the
COVID-19 pandemic on the Company's business, financial results and
financial condition, the Company's estimated remaining months of
cash under various rent collection scenarios, the financial
condition of the Company's major tenants, its leasing strategy and
value proposition to retailers, occupancy and rent concessions,
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: risks related to the impact of the COVID-19 pandemic on
our tenants and on our business, financial condition, liquidity,
results of operations and compliance with debt covenants; 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, 2019, 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
|
|
|
March
31,
|
|
|
2020
|
|
2019
|
Revenues:
|
|
|
|
|
Rental
revenues
|
|
$
|
108,558
|
|
$
|
119,954
|
Management, leasing
and other services
|
|
1,443
|
|
1,342
|
Other
revenues
|
|
1,632
|
|
1,859
|
Total
revenues
|
|
111,633
|
|
123,155
|
Expenses:
|
|
|
|
|
Property
operating
|
|
38,627
|
|
42,377
|
General and
administrative
|
|
12,584
|
|
12,145
|
Impairment
charge
|
|
45,675
|
|
—
|
Depreciation and
amortization
|
|
29,417
|
|
31,760
|
Total
expenses
|
|
126,303
|
|
86,282
|
Other income
(expense):
|
|
|
|
|
Interest
expense
|
|
(15,196)
|
|
(16,307)
|
Gain on sale of
assets
|
|
—
|
|
43,422
|
Other
income
|
|
220
|
|
224
|
Total other income
(expense)
|
|
(14,976)
|
|
27,339
|
Income (loss)
before equity in earnings of unconsolidated joint
ventures
|
|
(29,646)
|
|
64,212
|
Equity in earnings of
unconsolidated joint ventures
|
|
1,527
|
|
1,629
|
Net income
(loss)
|
|
(28,119)
|
|
65,841
|
Noncontrolling
interests in Operating Partnership
|
|
1,427
|
|
(3,315)
|
Noncontrolling
interests in other consolidated partnerships
|
|
(190)
|
|
(195)
|
Net income (loss)
attributable to Tanger Factory Outlet Centers, Inc.
|
|
(26,882)
|
|
62,331
|
Allocation of
earnings to participating securities
|
|
(516)
|
|
(611)
|
Net income (loss)
available to common shareholders of
Tanger Factory
Outlet Centers, Inc.
|
|
$
|
(27,398)
|
|
$
|
61,720
|
|
|
|
|
|
Basic earnings per
common share:
|
|
|
|
|
Net income
(loss)
|
|
$
|
(0.30)
|
|
$
|
0.66
|
|
|
|
|
|
Diluted earnings
per common share:
|
|
|
|
|
Net income
(loss)
|
|
$
|
(0.30)
|
|
$
|
0.66
|
TANGER FACTORY
OUTLET CENTERS, INC. AND SUBSIDIARIES
|
CONSOLIDATED
BALANCE SHEETS
|
(in thousands,
except share data)
|
(Unaudited)
|
|
|
March
31,
|
|
December
31,
|
|
2020
|
|
2019
|
Assets
|
|
|
|
Rental
property:
|
|
|
|
Land
|
$
|
266,537
|
|
$
|
266,537
|
Buildings, improvements and fixtures
|
2,564,224
|
|
2,630,357
|
|
2,830,761
|
|
2,896,894
|
Accumulated depreciation
|
(1,007,922)
|
|
(1,009,951)
|
Total rental property,
net
|
1,822,839
|
|
1,886,943
|
Cash and
cash equivalents
|
600,454
|
|
16,672
|
Investments in unconsolidated joint ventures
|
86,478
|
|
94,691
|
Deferred
lease costs and other intangibles, net
|
97,560
|
|
96,712
|
Operating lease right-of-use assets
|
83,764
|
|
86,575
|
Prepaids
and other assets
|
100,674
|
|
103,618
|
Total assets
|
$
|
2,791,769
|
|
$
|
2,285,211
|
|
|
|
|
Liabilities and
Equity
|
|
|
|
Liabilities
|
|
|
|
Debt:
|
|
|
|
Senior, unsecured
notes, net
|
$
|
1,139,093
|
|
$
|
1,138,603
|
Unsecured term loan,
net
|
347,531
|
|
347,367
|
Mortgages payable,
net
|
82,856
|
|
83,803
|
Unsecured lines of
credit, net
|
598,074
|
|
—
|
Total debt
|
2,167,554
|
|
1,569,773
|
Accounts payable and
accrued expenses
|
90,659
|
|
79,562
|
Operating lease
liabilities (1)
|
91,017
|
|
91,237
|
Other
liabilities
|
94,881
|
|
88,530
|
Total liabilities
|
2,444,111
|
|
1,829,102
|
Commitments and
contingencies
|
|
|
|
Equity
|
|
|
|
Tanger Factory
Outlet Centers, Inc.:
|
|
|
|
Common shares, $.01
par value, 300,000,000 shares authorized, 93,076,701 and 92,892,260
shares issued and outstanding at March 31, 2020 and December 31
2019, respectively
|
931
|
|
929
|
Paid in
capital
|
778,062
|
|
775,035
|
Accumulated distributions in excess of net income
|
(410,532)
|
|
(317,263)
|
Accumulated other comprehensive loss
|
(38,228)
|
|
(25,495)
|
Equity attributable to Tanger Factory Outlet Centers,
Inc.
|
330,233
|
|
433,206
|
Equity
attributable to noncontrolling interests:
|
|
|
|
Noncontrolling
interests in Operating Partnership
|
17,425
|
|
22,903
|
Noncontrolling
interests in other consolidated partnerships
|
—
|
|
—
|
Total equity
|
347,658
|
|
456,109
|
Total liabilities and equity
|
$
|
2,791,769
|
|
$
|
2,285,211
|
TANGER FACTORY
OUTLET CENTERS, INC. AND SUBSIDIARIES
|
CENTER
INFORMATION
|
(Unaudited)
|
|
|
|
March
31,
|
|
|
2020
|
|
2019
|
Gross leasable
area open at end of period (in thousands):
|
|
|
|
|
Consolidated
|
|
12,044
|
|
|
12,047
|
|
Partially owned -
unconsolidated
|
|
2,212
|
|
|
2,371
|
|
Total
(1)
|
|
14,257
|
|
|
14,418
|
|
|
|
|
|
|
Outlet centers in
operation at end of period:
|
|
|
|
|
Consolidated
|
|
32
|
|
|
32
|
|
Partially owned -
unconsolidated
|
|
7
|
|
|
8
|
|
Total
|
|
39
|
|
|
40
|
|
|
|
|
|
|
States operated in at
end of period (2)
|
|
19
|
|
|
19
|
|
Occupancy at end of
period (2)
|
|
94.3
|
%
|
|
95.4
|
%
|
|
|
(1)
|
Due to rounding,
numbers may not add up precisely to
the totals provided.
|
(2)
|
Excludes the centers
in which the Company has ownership interests but are held in
unconsolidated joint ventures.
|
NON-GAAP SUPPLEMENTAL MEASURES
Beginning with the three months ended March 31, 2020, we have elected to supplement our
disclosure with three additional non-GAAP measures, Adjusted
EBITDA, EBITDAre and Adjusted EBITDAre (each as defined below),
that are commonly provided in the REIT industry. See "Adjusted
EBITDA, EBITDAre and Adjusted EBITDAre" below for more information.
We also now refer to Adjusted Funds from Operations ("AFFO") as
Core Funds From Operations ("Core FFO"), but there has been no
change to the definition of this measure.
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 generally accepted
accounting principles in the United
States ("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 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 Core FFO, 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.
Core FFO
If applicable, we present Core FFO (formerly referred to as
AFFO) as a supplemental measure of our performance. We define Core
FFO 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, if applicable. You are encouraged to evaluate these
adjustments and the reasons we consider them appropriate for
supplemental analysis. In evaluating Core FFO 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 Core FFO should not be construed as an inference
that our future results will be unaffected by unusual or
non-recurring items.
We present Core FFO 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 Core FFO 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 Core FFO when determining incentive
compensation.
Core FFO has limitations as an analytical tool. Some of these
limitations are:
- Core FFO does not reflect our cash expenditures, or future
requirements, for capital expenditures or contractual
commitments;
- Core 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 Core FFO does not reflect any cash
requirements for such replacements;
- Core FFO 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 Core FFO
differently than we do, limiting its usefulness as a comparative
measure.
Because of these limitations, Core FFO 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 Core FFO 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 Core FFO. 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.
Adjusted EBITDA, EBITDAre and Adjusted EBITDAre
We present Earnings Before Interest, Taxes, Depreciation and
Amortization ("EBITDA") as adjusted for items described below
("Adjusted EBITDA"), EBITDA for Real Estate ("EBITDAre") and
Adjusted EBITDAre, all non-GAAP measures, as supplemental measures
of our operating performance. Each of these measures is defined as
follows:
We define Adjusted EBITDA as net income/(loss) available to the
Company's common shareholders computed in accordance with GAAP
before interest expense, income taxes, depreciation and
amortization, gains and losses on sale of operating properties,
gains and losses on change of control, impairment write-downs of
depreciated property and of investment in unconsolidated joint
ventures caused by a decrease in value of depreciated property in
the affiliate, gains and losses on extinguishment of debt, net and
other items that we do not consider indicative of the Company's
ongoing operating performance.
We determine EBITDAre based on the definition set forth by
NAREIT, which is defined as net income/(loss) available to the
Company's common shareholders computed in accordance with GAAP
before interest expense, income taxes, depreciation and
amortization, gains and losses on sale of operating properties,
gains and losses on change of control and impairment write-downs of
depreciated property and of investment in unconsolidated joint
ventures caused by a decrease in value of depreciated property in
the affiliate and after adjustments to reflect our share of the
EBITDAre of unconsolidated joint ventures.
If applicable, Adjusted EBITDAre is defined as EBITDAre
excluding gains and losses on extinguishment of debt, net and
other items that that we do not consider indicative of the
Company's ongoing operating performance.
We present Adjusted EBITDA, EBITDAre and, if applicable,
Adjusted EBITDAre as we believe they are useful for investors,
creditors and rating agencies as they provide additional
performance measures that are independent of a Company's existing
capital structure to facilitate the evaluation and comparison of
the Company's operating performance to other REITs and provide a
more consistent metric for comparing the operating performance of
the Company's real estate between periods.
Adjusted EBITDA, EBITDAre and Adjusted EBITDAre have significant
limitations as analytical tools, including:
- They do not reflect our interest expense;
- They do not reflect gains or losses on sales of operating
properties or impairment write-downs of depreciated property and of
investment in unconsolidated joint ventures caused by a decrease in
value of depreciated property in the affiliate;
- Adjusted EBITDA and Adjusted EBITDAre do not reflect gains and
losses on extinguishment of debt and other items that may affect
operations; and
- Other companies in our industry may calculate these measures
differently than we do, limiting its usefulness as a comparative
measure.
Because of these limitations, Adjusted EBITDA, EBITDAre and
Adjusted EBITDAre 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 Adjusted EBITDA, EBITDAre and Adjusted
EBITDAre 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 (Loss) to FFO:
|
|
|
|
Three months
ended
|
|
|
March
31,
|
|
|
2020
|
|
2019
|
Net income
(loss)
|
|
$
|
(28,119)
|
|
$
|
65,841
|
Adjusted
for:
|
|
|
|
|
Depreciation and
amortization of real estate assets - consolidated
|
|
28,801
|
|
31,148
|
Depreciation and
amortization of real estate assets - unconsolidated joint
ventures
|
|
3,018
|
|
3,130
|
Impairment charge -
consolidated
|
|
45,675
|
|
—
|
Gain on sale of
assets
|
|
—
|
|
(43,422)
|
FFO
|
|
49,375
|
|
56,697
|
FFO attributable to
noncontrolling interests in other consolidated
partnerships
|
|
(190)
|
|
(195)
|
Allocation of
earnings to participating securities
|
|
(516)
|
|
(611)
|
FFO available to
common shareholders (1)
|
|
$
|
48,669
|
|
$
|
55,891
|
FFO available to
common shareholders per share - diluted
(1)
|
|
$
|
0.50
|
|
$
|
0.57
|
|
|
|
|
|
Weighted Average
Shares:
|
|
|
|
|
Basic weighted
average common shares
|
|
92,500
|
|
93,303
|
Diluted weighted
average common shares (for earnings per share
computations)
|
|
92,500
|
|
93,303
|
Exchangeable
operating partnership units
|
|
4,911
|
|
4,961
|
Diluted weighted
average common shares (for FFO per share computations)
(1)
|
|
97,411
|
|
98,264
|
|
|
(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 FFO to FAD:
|
|
|
|
Three months
ended
|
|
|
March
31,
|
|
|
2020
|
|
2019
|
FFO available to
common shareholders
|
|
$
|
48,669
|
|
|
$
|
55,891
|
|
Adjusted
for:
|
|
|
|
|
Corporate
depreciation excluded above
|
|
616
|
|
|
612
|
|
Amortization of
finance costs
|
|
757
|
|
|
747
|
|
Amortization of net
debt discount (premium)
|
|
118
|
|
|
109
|
|
Amortization of
equity-based compensation
|
|
3,789
|
|
|
3,818
|
|
Straight-line rent
adjustments
|
|
(1,872)
|
|
|
(1,970)
|
|
Market rent
adjustments
|
|
362
|
|
|
480
|
|
Second generation
tenant allowances
|
|
(5,729)
|
|
|
(2,974)
|
|
Capital
improvements
|
|
(5,146)
|
|
|
(3,049)
|
|
Adjustments from
unconsolidated joint ventures
|
|
(32)
|
|
|
(406)
|
|
FAD available to
common shareholders (1)
|
|
$
|
41,532
|
|
|
$
|
53,258
|
|
Dividends per
share
|
|
$
|
0.3550
|
|
|
$
|
0.3500
|
|
FFO payout
ratio
|
|
71
|
%
|
|
61
|
%
|
FAD payout
ratio
|
|
83
|
%
|
|
65
|
%
|
Diluted weighted
average common shares (1)
|
|
97,411
|
|
|
98,264
|
|
|
|
(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 (Loss) to Portfolio NOI and Same
Center NOI for the consolidated portfolio:
|
|
|
|
Three months
ended
|
|
|
March
31,
|
|
|
2020
|
|
2019
|
Net income
(loss)
|
|
$
|
(28,119)
|
|
$
|
65,841
|
Adjusted to
exclude:
|
|
|
|
|
Equity in earnings of
unconsolidated joint ventures
|
|
(1,527)
|
|
(1,629)
|
Interest
expense
|
|
15,196
|
|
16,307
|
Gain on sale of
assets
|
|
—
|
|
(43,422)
|
Other non-operating
(income) expense
|
|
(220)
|
|
(224)
|
Impairment
charge
|
|
45,675
|
|
—
|
Depreciation and
amortization
|
|
29,417
|
|
31,760
|
Other non-property
expenses
|
|
139
|
|
150
|
Corporate general and
administrative expenses
|
|
12,579
|
|
12,132
|
Non-cash adjustments
(1)
|
|
(1,502)
|
|
(1,472)
|
Lease termination
fees
|
|
(164)
|
|
(1,130)
|
Portfolio
NOI
|
|
71,474
|
|
78,313
|
Non-same center NOI
(2)
|
|
—
|
|
(4,081)
|
Same Center
NOI
|
|
$
|
71,474
|
|
$
|
74,232
|
(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
|
Below is a
reconciliation of Net Income (Loss) to Adjusted
EBITDA:
|
|
|
|
Three months
ended
|
|
|
March
31,
|
|
March
31,
|
|
|
2020
|
|
2019
|
Net income
(loss)
|
|
$
|
(28,119)
|
|
$
|
65,841
|
Adjusted to
exclude:
|
|
|
|
|
Interest
expense
|
|
15,196
|
|
16,307
|
Depreciation and
amortization
|
|
29,417
|
|
31,760
|
Impairment charge -
consolidated
|
|
45,675
|
|
—
|
Gain on sale of
assets
|
|
—
|
|
(43,422)
|
Adjusted
EBITDA
|
|
62,169
|
|
70,486
|
Below is a
reconciliation of Net Income (Loss) to EBITDAre:
|
|
|
|
Three months
ended
|
|
|
March
31,
|
|
March
31,
|
|
|
2020
|
|
2019
|
|
|
|
|
|
Net income
(loss)
|
|
(28,119)
|
|
65,841
|
Adjusted to
exclude:
|
|
|
|
|
Interest
expense
|
|
15,196
|
|
16,307
|
Depreciation and
amortization
|
|
29,417
|
|
31,760
|
Impairment charge -
consolidated
|
|
45,675
|
|
—
|
Gain on sale of
assets
|
|
—
|
|
(43,422)
|
Pro-rata share of
interest expense - unconsolidated joint ventures
|
|
1,867
|
|
2,067
|
Pro-rata share of
depreciation and amortization - unconsolidated joint
ventures
|
|
3,018
|
|
3,129
|
EBITDAre
|
|
67,054
|
|
75,682
|
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SOURCE Tanger Factory Outlet Centers, Inc.