Tanger Inc at Nareit REITweek: Strategic Growth and Resilience

On Wednesday, 04 June 2025, Tanger Inc (NYSE:SKT) presented at the Nareit REITweek: 2025 Investor Conference. The company detailed its strategic initiatives aimed at growth and resilience amidst economic challenges. While highlighting its positive financial trajectory, Tanger also addressed potential risks, including tariffs affecting its retail tenants.

Key Takeaways

• Tanger Inc is focusing on a three-pronged growth strategy: internal growth, densification, and strategic acquisitions.
• The company has achieved consistent same-center NOI and FFO growth over the past four years.
• Tanger maintains a low-leverage balance sheet, providing liquidity for future investments.
• The company is proactively managing its tenant mix to include desirable brands and diverse uses.
• Tanger’s outlook remains optimistic, bolstered by a lack of new retail supply and strategic acquisitions.

Financial Results

• Same Center NOI Growth: Approximately 5% growth over the last four years; current year guidance is 2% to 4%.
• FFO Growth: Guidance suggests 4% to 8% growth, with a 7% compound annual growth rate over the past four years.
• Dividend: Recently increased by 6.5%, with a payout ratio of 60% of FAD/AFFO, lower than the sector average.
• Free Cash Flow: Generating nearly $80 million to $100 million annually.
• Leverage: Operating at a historic low of approximately 5x debt to EBITDA.
• Recent Acquisitions: Asheville and Huntsville had 8.5% initial yields; Little Rock and Pinecrest had 8% initial yields.

Operational Updates

• Portfolio Composition: 37 outlet centers and 3 lifestyle centers, with an average tenant size of 4,700 square feet.
• Remerchandising: Adding diverse uses like vertical retail, food and beverage outlets, and entertainment venues.
• Tenant Management: Replacing underperforming tenants with popular brands like Sephora and Ulta.
• Customer Base: Shifting focus to local shoppers with amenities and loyalty programs.
• Capital Expenditures: Tenant allowances and maintenance capital at about 15% of NOI.

Future Outlook

• Growth Strategy: Emphasizes internal growth, densification, and strategic acquisitions.
• Acquisition Strategy: Targeting high-yield acquisitions, leveraging Tanger’s operational platform.
• Balance Sheet Capacity: 5x debt to EBITDA, with $70 million in forward equity and capacity for $150 million to $200 million in acquisitions.
• Retail Landscape: Optimistic due to limited new supply and retailer growth strategies.

Q&A Highlights

• Tariffs: Retailers are diversifying supply chains to mitigate potential impacts.
• Value Proposition: Tanger’s outlets provide value-driven shopping, attracting over 125 million visitors annually.
• Densification Opportunities: Adding restaurants and amenities to meet customer demand.
• Location Benefits: Low gas prices encourage customers to drive to Tanger’s centers.

For more details, refer to the full transcript below.

Full transcript - Nareit REITweek: 2025 Investor Conference:

Craig Melman, Analyst, Citi: Good morning, everybody, and welcome. I’m Craig Melman with Citi. I am the analyst that covers retail and industrial reach for the team. And I am happy to be joined today by Tanger. Steve Yalov, CEO is in the middle Michael Bilerman, CIO and CFO is to my left and Doug McDonald, Treasurer and Head of Investments is at the end of the table.

I’m going to pass it off to Michael, who is going to give you guys a short intro, then I’ll kick it off with a few questions and open up to the crowd.

Michael Bilerman, CIO and CFO, Tanger: Great. Good morning, everybody. Just a couple of just quick points on who Tanger is, if you’re not familiar with us, Tanger has been around for forty four years, thirty two years listed on the NYSE. We are an open air retail focused REIT with a significant presence in the outlet sector with 37 outlets across The U. S.

As well as two up in Canada. And in 2023, we made a strategic expansion into the open air lifestyle business. We now have three Open Air lifestyle centers that sit in Huntsville, Alabama Little Rock, Arkansas and Cleveland, Ohio. And those centers sit in the wealthiest demographics with a lot of work, live and play drivers around them. We are about a $4,000,000,000 equity REIT, 5,700,000,000 enterprise value, so our balance sheet is low leveraged, running today at about 5x debt to EBITDA as well as having numerous liquidity sources between forward equity, a largely untapped line of credit and significant leverage capacity.

Just from a growth perspective, our growth strategy is focused really on three legs of a stool. One is driving our internal growth. Our rents today are well below market, and as we continue to focus on remerchandising our centers and driving rents and operating efficiently. The second part of our growth strategy has been intensifying the real estate that we already own. Our centers sit typically on forty, fifty acres at the intersections of major highways and that peripheral land that we already own provides us the opportunity to densify through additional uses, and that’s another key component of creating long term value for shareholders.

And the third part of the stool has been our external growth strategy. And over the last eighteen months, we’ve deployed about $650,000,000 into five new assets. One was a development of an outlet center in Nashville, Tennessee that we delivered in the fourth quarter of twenty twenty three. And then we’ve purchased four assets, one of which was an existing outlet run by a private owner in Asheville, North Carolina, and then the three lifestyle centers that I mentioned earlier. All of this has translated into very positive top line growth.

And so over the last four years, we’ve delivered same center NOI growth of approximately 5%. Our initial guidance for this year that we maintained after 1Q earnings is 2% to 4%. And from a FFO growth perspective, our current guidance for this year that we also reiterated coming off of 1Q earnings implies 4% to 8% FFO growth, which at the midpoint would be the highest in the retail sector, and that comes after four years of 7% compound annual FFO growth. From a dividend perspective, we recently increased our dividend about 6.5% in line with our free cash flow, but we maintain our payout ratio at very low levels. So our dividend today sits at 60%, six-zero percent of FAD or AFFO or every acronym that you want to use relative to the sector being at close to 75 or greater.

And what that does is it provides us the free cash flow to be able to fund both our internal investments as well as external. So we are generating almost 80,000,000 to $100,000,000 of free cash flow a year that really supplements our overall growth profile. And we’re running at the lowest leverage level that we’ve ever had and well below the sector. So with that, Craig, I’ll turn it over to you for

Craig Melman, Analyst, Citi: some questions. Great, Michael. Appreciate the intro there. Maybe just kicking it off, Las Vegas, there was the recent ICSC Leasing Conference. Can you maybe just give us a rundown of what the activity looked like, what retailer mindsets are today, given the backdrop of tariffs and all the other issues going on in the news?

Steve Yalov, CEO, Tanger: Sure. And thanks for the question. So just having attended ICSC Las Vegas about two weeks ago, probably one of the best attended ICSCs I’ve been to and I’ve been to over 30 of them during my very short career in this business. What was what stuck out to me was as we spoke to over a hundred retailers during the course of the three days in our in our leasing suite, Top of mind obviously is the tariff question. So we’re always asking retailers, tell us what are the risks to your business?

What are the problems that you guys are facing? How is and how is that going to impact your ability to either open new stores, remodel existing stores and what does the portfolio look like going forward? It was a very optimistic group in that particular in those sessions. I think that the retailers as they related to tariffs spoke very, you know, I would say over 90% of them spoke about how COVID got them thinking about the diversity of supply chain. And I think that’s a critical piece.

Know, one of the retailers in particular said that the retailers that are going to win in this tariff environment are gonna be the ones that are the most agile, meaning they can move to market quickly, the time from placing an order to having the goods shipped to The United States, they keep those windows extraordinarily tight, you know, and there’s a lot of product currently in the market. I think a lot of retailers have placed larger orders thinking that there might be some issues in the back half of the year. Know, that said, you think about our value portfolio, know, should there be some of the big the tariff issues strike, see that sort of equated to 2021 when there was a lack of inventory in the marketplace, yet retailers had a tendency to keep their pricing relatively high and had very good sell throughs at the time. 2022 is completely different story as the supply chain logjams broke around the world and there was a lot of inventory shipped over to The United States. We saw the retail stores get that first inventory, but a lot of that excess moved through our channel.

And although the pricing was compressed because even in an inflationary environment, you found that there was price deflation in the outlets retailers were pricing the products to move. So we anticipate if tariffs are as on the worse side that you know we will still see a lot of product in our stores, but probably priced a little bit differently. If the tsunami of tariff is less than anybody anticipates it might be, then we’ll see a tremendous amount of product in the back half of the year and it be priced to sell.

Craig Melman, Analyst, Citi: And could you talk a little bit, I know there’s concern about inflation coming from tariffs and just the stress on the consumer, but maybe just walk through for those that aren’t familiar, kind of where you guys sit in the value chain with the outlets versus even the recent move into lifestyle differentiation?

Steve Yalov, CEO, Tanger: Look, the outlet business is really the foundation upon which this company was born, as Michael said, about forty four years ago. Tanger was a shirt manufacturer and you know, had some excess inventory in his manufacturing facilities and would sell the excess inventory to friends and family and that’s really how the outlet business evolved. It was really a giant the outlet business is really a giant friends and family sale. And that excess inventory turned into, you know, in some instances some first some first round product that that wound its way into the stores.

You know, right now we have 700 different brands that are in the outlet business currently and they use it for a whole host of different reasons. Some of them use it to clear their excess inventory, like a Lululemon or Nike. None of the products you see in those stores are manufactured for. Then you’ve got brands that are a little bit more sophisticated in that they are manufacturing some excess inventory or placing much bigger orders than they would to the department stores in order to have enough inventory to sell to the consumers that come through the outlet centers. You know in our 37 outlet centers, we see over 125,000,000 visitors a year.

That’s a lot of people coming in to buy a lot of things. You know the outlet business of yesterday was one where the centers were 40 to 50 miles away from a department store competitor. That was because these brands did not want to sell or did not want to market to the consumer to come and shop their off price channel. They wanted to make sure that that consumer was shopping their full price channel. They relied very heavily on us as the owners of that center to do the marketing on their behalf and get the customers to come and shop with us.

One of the major paradigms that have shifted particularly in our business and I would say going back to 2020 and 2021 is that we’re finding that you know a lot of the geographies that were formerly far away from that whole center of the unit center center of the universe, the regional malls and and the larger cities, we’re finding that the customers who had second homes in a lot of the markets where we had centers, those are now becoming the primary residences. And because a lot of work from home and just the way people are you know managing their real estate and where they choose to live and where they choose to raise their families, we’re finding that the local customer has gotten far more important to the success of outlet over the past couple of years. So for us, know we pivoted in a number of ways in order to accommodate that change in consumer profile. First of all, we’re adding a lot of different uses to our centers. So where an outlet shopping center fifteen or twenty years ago was routinely just outlet retail direct to the consumer, now you’re finding a lot more vertical retail, a lot more food and beverage outlets, you’re finding a lot more entertainment venues and a lot more experiential things in our centers.

Also, we’ve pivoted and we’ve gone after a number of different amenities and a loyalty program. You can’t really fund a loyalty program if it’s going to be based on tourist visits. It’s a very transient customer. So that requires a very localized marketing initiative and a very localized customer base.

Craig Melman, Analyst, Citi: Any questions from the audience? Perfect. Stephen, just on that remerchandising effort and what you and the team have done since you came in, can you talk about the customer experience, but also the revenue enhancement opportunities that you guys are driving with the remerchandising and outparcel developments and what you guys have been doing?

Steve Yalov, CEO, Tanger: Yeah. Look, joined the company five years ago and if you can look back at April 2020, we were 40 shopping centers, 15,000,000 square feet, 3,000 stores and everyone was closed. Fun day to start work. But what we thought was as centers started to open and particularly Open Air Lifestyle Centers were the first shopping venues to open, in fact they were the first venues to open. I mean if you think about concert venues, theaters, museums, enclosed malls, none of those were available to the customer.

So one of the first things that we did when I started and the stores were all still closed was we insisted on keeping the music on in the centers because we knew we had a very important group people that shopped locally that wanted to come and walk in our environments. They felt safe in a shopping center environment, and then we got the coffee stores back open. So now we have places for people to gather, we had places for people to exercise, we were alive, we were watering our flowers, we were mowing our lawns, we kept our shopping centers looking beautiful. And what we found was that big local population really considered these centers to be the center of their market and they might not have been customers of ours prior to COVID, but we were training them to now come to our venues because not only were they the only places open at the time, which kind of helps, but more importantly they were the places that they were gonna feel safe, that they were gonna get the products that they wanted, and we started to open some of the some of the brands that were considered you know acceptable to open earlier because they were you know, I forget the official term, but things that the consumer really needed in that time.

We facilitated curbside pickup, so the whole thing really started to evolve. So when we built our new center in Nashville, which was going to be a regular racetrack shopping center like a lot of the outlet centers were built in that era, we decided that this new customer, this local customer, the way the customer is going to shop really is going to inform how we’re going to lay out our new center, how we’re gonna merchandise our center and the uses that we’re gonna go after. And in Nashville, it’s a great example of a center that instead of it being a racetrack design, meaning you park on the outside and shop on the inside, it really is an open air shopping center, it shops like a loop, all the parking’s on the inside, it’s centered around a center court or a community gathering space, but more importantly we have about 20,000 feet of 300,000 which is really big for an outlet center of food and beverage users, and it’s a mix of local food and beverage from Prince’s Hot Chicken, which is a Nashville staple, to Shake Shack, which is now sort of growing around the globe.

So we’ve got the products people want to buy, we’ve got the experiential uses that people are looking for when they come and shop with us, we’ve got the food and beverage that people are looking for when they come and shop with us, and we also have amenities. So for example, we put in Ulta Beauty. Now Ulta Beauty isn’t typically a store that you’re gonna find in an outlet. Ulta Beauty is a multi brander, almost a small big box department store that’s selling beauty products, but Ulta really fit really well into this programming because the customer that’s looking for that category might not find it in a typical outlet center, but we figured if we brought it into our center, we would get that car, that car comes far more frequently, that car stays a lot longer when they’re there, and hopefully they’ll cross shop. So they’ll you know, I guess at the end of the day, if the if we could change the outlet shopping narrative to come for the food and stay for the shopping, you know, we flip the programming on its head and that’s what we’re looking to do.

Craig Melman, Analyst, Citi: You know, retail, well, last year, this year, bankruptcies have been ticking up. Discretionary has actually side stepped that a bit, but can you talk about Forever twenty one and some of the other tenants you have in your space and maybe some of the proactive steps that you’ve taken to ahead of some of these?

Steve Yalov, CEO, Tanger: Yeah, look you know we’re in a fairly enviable position right now in the retail real estate business because there’s not a lot of new development taking place in The United States. And as we sit in leasing meetings on a weekly basis, the one mantra that we chant to one another is every square foot of real estate in our portfolio is more expensive today than it was yesterday because there’s brands that want to be there, know going back to your ICSE question, nobody’s cutting back on open to buys. Brand new deals are seven to ten years, so a lot of these brands have seen these cycles come before and they’re definitely leasing into it. So for us, when you’ve got brands that wanna expand their portfolio, they wanna come into the markets where we are, brands like Sephora and Ulta who weren’t necessarily traditional outlet retailers, who’ve now said, hey put me in front of the 25,000,000 people that come through Tanger every year. We’re going after a whole new group of tenants to fill those spaces.

Food and beverage becoming far more important than it’s ever been before. You know seven and a half percent of one of our shopping centers leaning into food and beverage, that’s a big percentage of our of our area. That means that if a outlet retailer leaves, their negotiation isn’t like, well, we’re gonna leave, we’re gonna fill the space with. The answer is there’s 15 different categories of customers that can fill that space should a tenant leave. With that said, you mentioned Forever twenty one.

So Forever twenty one had over 15 stores in our portfolio since I joined the company and we’ve been replacing them. They’ve been on a watch list of ours, so we don’t wait until the watch list, until the brands file bankruptcy. We’re very proactive and especially in an environment where there’s not a lot of new real estate being added to the marketplace, you could be even more so. So when you have a brand like a Sephora who coincidentally takes the same size store as a Forever twenty one, there’s a deal to be made even before Forever twenty one raises their hand and says we’re gonna close all of our stores. We were able to lease a number of them at considerably more rents than they were paying And you know, as the other ones roll off, we’ve got a lot of traction on the rest of the portfolio as well from that group of people, whether it’s food, outlet retail or non traditional retailers that want to put themselves in front of 125,000,000 people a year that come through our shopping centers?

Craig Melman, Analyst, Citi: No, I think outlets used to be more equated with the mall group, but it feels like over the last few years that’s migrated towards open air as your peers.

Steve Yalov, CEO, Tanger: And

Craig Melman, Analyst, Citi: could you walk through kind of the growth profile of your centers versus maybe even a power center, a grocery anchored and kind of the growth trajectory that you guys have had internally, what you guys are doing with rents as they’re rolling, your ability to get at rents versus maybe some of the other peers that have anchor boxes with extension options? And just talk through some of the benefits of your format versus some of the peers from a growth perspective.

Steve Yalov, CEO, Tanger: So Michael, why don’t you take everybody through the Michael will take you through sort of our growth strategy and what that looks like. And then afterwards, I guess if I can share some rent.

Michael Bilerman, CIO and CFO, Tanger: Yeah. I mean, we think about our portfolio, I said we had 40 centers, 37 outlets, three lifestyle centers. Our average tenant size is 4,700 square feet. And so Craig, when you talk about those other formats, you know, there’s a place for all different forms of retail, but we are unique in that ecosystem where we’re open air, so we’re not burdened by roofs and large common areas and elevators and escalators. And so just the cost of operation in an outlet is lower because of that.

We’re unburdened by large boxes, whether those are department store boxes that have to be backfilled or all of the large boxes that have filed for bankruptcy, which, you know, whether it’s Joann’s, Big Lots, At Home, Party City, was gonna say Circuit City, but that was a long time ago. But you you have a long roster, and we’ve had no exposure to that because that’s not the type of tenancy that’s in our portfolio. The other aspect in addition to the operating cost is just the CapEx load. You know, when how many people have been to an outlet center in the crowd? Alright.

So you’ve been there. So it is just from a just you think about just the facades of the stores. It’s not these largely built out. And so from a CapEx perspective, we’re running at about mid teens, about 15% of our NOI is our tenant allowances and just our normal maintenance capital. And that’s well below the other retail formats that range from 20 to 30 and even greater percent.

And so just the net economics, the return on invested capital is very positive within our outlet business. And then just from an overall channel perspective, it is different because the brands and the retailers are using it as a utility, as Steve talked about, whether it was to clear excess inventory, make product for outlet or bring in full price product into that outlet format. And it really is an experience driven trip, a value driven trip where, you know, said value never goes out And you and I may have very different views of what that value is, but you know when you come shop one of our outlets, you’re gonna get value for your favorite brands every day, and increasingly through other things that we’re doing to remerchandise the centers to bring more uses and more retailers to that carload of a family that comes to visit with us, whether they’re on vacation because we’re in a lot of drive to tourist destinations, or as these centers have become their local shopping center as some of the regional malls in those areas have weakened or the department stores have closed, and then we’re getting that ancillary benefit as well.

Craig Melman, Analyst, Citi: And just from a location standpoint, I think the traditional view of an outlet was it was sort of in the ex herbs that were land was cheaper and maybe that value shopper was more located. But as kind of some of your markets have expanded, right the ring of residential. Could you just talk about how you guys view the opportunity for that densification and the opportunity that comes from that from a value and merchandising perspective?

Steve Yalov, CEO, Tanger: Yeah, sure. You know if you take a look at outlet centers of the past, are you know I explained earlier why they were so far away. You know it was really interesting because the success of an outlet center in years past was always you know had a lot to do with the price of gasoline because that customer was making that trip and you know if the gasoline prices were low, we wound up seeing a lot more traffic in the centers. You know it just so happens that gasoline prices are extraordinarily low right now, which correlates which will correlate really well for a lot of the folks that are doing the driving this summer. Know, they said 71% of the people that are traveling in The United States this summer will do so by car.

Now Michael mentioned that a number of our shopping centers are in these drive to American cities, places like Sevierville, Tennessee that’s anchored by Dollywood or Myrtle Beach, South Carolina, which is beach and golf, Hilton Head, Daytona, Fort Worth. So we’ve we’ve you know, I mentioned earlier that we’ve seen a lot of first homes pop up in a lot of these geographies. Pooler, Georgia where our Savannah shopping center is located is a great example of this. So the densification of our centers has really evolved to meet the customer demand and meet the customer where they are. You know, it’s hard enough to get the customer off the couch and into a shopping center, especially a younger consumer who’s gotten very used to doing a lot of that shopping online.

Now we’re okay if the customer wants to window shop online, in fact we’re online. Know we’ve got a great app, we’ve got a great website, one of which will make the shopping experience far easier for that consumer who likes to window shop online and actually do their their product pickup or execution in store. But I think what’s become increasingly more important for us particularly as developers of shopping centers regardless of value or other is to make sure that you’ve got the diversity of uses. You know the food I spoke I spoke about, the restaurants, the experiences, the the the entertainment movie theaters, Dave and Buster’s main event, things of that nature. You know, gyms in some instances, we’re putting gyms on outparcels because what that does it gets the car in the parking lot several times a week.

We bought a shopping center with a Whole Foods and now we’re seeing the the benefit of the traffic that a Whole Foods drives. You know when your cars are parked very close to the Whole Foods store, which happens to be very close to one of your biggest retailers, that retailer seems to do pretty well. So we’re learning a lot from the new centers that we’ve bought. We’re using a lot of those strategies in the older centers in our portfolio, we’re spending a lot of money on some of the older centers to upgrade them, we just took a bank tour of Deer Park on Monday of this week that we’ve recently renovated and you can see the difference. It’s not just paint and new landscaping, it really is the amenities and the things that we offer back to the consumer, but also that local customer who we count on coming to visit us far more frequently, stay longer when they’re there, and when they’re there they’ll ultimately spend a lot more money with us.

Craig Melman, Analyst, Citi: And Michael you had you had talked about about $650,000,000 of capital deployment over the last year and a half, call it. Can you talk about what the landscape looks like today, maybe some of the return characteristics of what you are targeting? And then just give us an update on kind of balance sheet capacity and your ability and capacity to deploy.

Michael Bilerman, CIO and CFO, Tanger: Thanks, Craig. So historically, Tanger was a big developer of product. We talked about Nashville being our latest development. What we found just from an acquisition perspective is the ability to buy at a substantial discount to replacement cost and achieve very strong going in yields with growth was very advantageous over the last couple of years. And so being able to deploy that capital, but really leverage the platform that we’ve built.

And as we’ve talked about, our platform is focused on leasing, operating and marketing our centers so that we can drive traffic. And that platform wrapped in a balance sheet that is low leverage really provides us the opportunity of where can we add value in an acquisition. And so for the four acquisitions that we’ve bought, we really see the opportunity to leverage our leasing to bring in newer tenants. In the case of our outlets in Asheville, within the first year, we were able to bring Crocs, Simply Southern, Columbia, Victoria Secret will be opening later this year, and a number of others and instituting it into our loyalty program with a customer base that really understands the Tanger brand and what it brings. We’ve looked at a tremendous amount, but we’ve only leaned into where we really can find that value.

From a returns perspective, our first two acquisitions, Asheville and Huntsville, were 8.5% initial yields with growth. And then our recent acquisitions in Little Rock and Pinecrest were 8% initial yields with growth. And that growth outlook, we’re looking to buy things that are at or above our core portfolio so that it continues our ability to grow and drive value for our stakeholders. And I think there’s a lot of institutional capital that is now looking at retail real estate, and that’s been growing over the last two years, which is certainly a positive and I think an indication of how the sector has evolved and how a lot of institutions are underweight the retail asset class, and they’re looking at the fact that there’s no new supply. Craig, you do a supply report every month that shows that retail is running today at thirty, forty basis points of stock, and that’s been that way for seventeen years.

And at the same time, we’ve had massive population growth. And so that lack of supply combined with retailers and their growth strategies, and we haven’t even talked about obsolescence in that time period, is really what’s creating the health overall. Yes, there’s noise and some uncertainty around tariffs, but the retail real estate business overall has been has a very sound backdrop, and we want to be able to continue to deploy and find unique acquisitions. And then from a capacity standpoint, I mentioned at the beginning, we’re running today at 5x debt to EBITDA, and we have $70,000,000 of forward equity that we issued in the fourth quarter that could support $150,000,000 to $200,000,000 of leverage neutral acquisition activity.

Craig Melman, Analyst, Citi: Perfect. So we brought Brent down to the wire. I want to thank the Tanger team for their time and thank all of you.

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