Tanger Inc. Price & Performance (SKT)

Request that everyone ask only one question and one follow-up question On the call today will be Stephen Yalop, President and Chief Executive Officer and Michael Billerman, Chief Financial Officer and Chief Investment Officer. In addition, other members of our leadership team will be available for Q and A. Will now turn the call over to Stephen Yaloff. Please go ahead.

Thank you, Ashley. Thank you for joining us today. I'm pleased to share that Tanger delivered a strong fourth quarter that culminated in a highly productive and successful year with full year performance at the top end of our guidance. Full year core FFO per share was up 8.7% from the prior year driven by a 5.1% increase in same center NOI. Traffic grew for the quarter and for the year. Our marketing efforts proved successful by focusing on on center events and targeted offers to our shoppers through our enhanced digital marketing channels. Comparable sales for the trailing twelve month period grew year over year by approximately [indiscernible] and were up 2% to $444 per square foot on a total portfolio basis. Our focus on improving the quality of our portfolio by adding new retailers, brands categories and new to Tanger centers continues to resonate with our growing shopper base as we diversify our mix and create a fun and engaging experience that influences more frequent trips, longer visits, and bigger spends New and expanded tenant categories including sought after restaurants, beauty and home brands, have contributed to this success. We ended the year with occupancy at 98%, up 70 basis points year over year and 60 basis points for the quarter.

The same period same center occupancy was 98.2%, up 90 basis points for the year and 80 basis points for the quarter. We have reported positive rent spreads for 12 consecutive quarters. For the year, we completed four seventy three transactions across 2,100,000 square feet, with total rent spreads of 50%. This includes 38% spreads on new tenanted space and 13% spreads on renewed space as retailers continue to reinvest and grow demonstrating the value Tanger centers have on their retail store portfolios. We continue to evolve and build on our digital marketing capabilities. Membership in our well established Tanger Shopper Club and Tanger Loyalty program continues to grow and the interaction with these valued customer provides us clear insight and analytics enabling us to strategically target our marketing initiatives which in turn drive sales, and traffic growth. Over the past two years, we've added five centers consisting of four through acquisitions and one new development. Which have added approximately 2,200,000 square feet of GLA to our portfolio and over $50,000,000 of first year NOI. Two of these open air centers were acquired since our last call. The Promenade at Chanel in the growing Sunbelt market of Little Rock, Arkansas and Pinecrest in one of the most desirable suburbs of Cleveland, Ohio.

The Promenade at Chanel is 270,000 square foot upscale open air lifestyle shopping center which we acquired in December 2024 for $73,000,000 This property is Central Arkansas's prominent destination for shopping, dining, entertainment and lifestyle and boasts a lineup of highly sought after national brands such as Lululemon, Sephora and Athleta and the state's only Apple Anthropologie, These Are Complemented By Regional And Local Retailers As Well As A Variety Of Elevated And Casual Dining Options And An AMC IMAX Theater. This Center Sits In The Middle Of A New Residential Hotel And Medical Uses Adding To The Market's Regional Drawing Power. Pinecrest is a 640,000 square foot open air mixed use center anchored by Whole Foods which we acquired for $167,000,000 earlier this month. As Northeast Ohio's premier retail and entertainment destination, Pinecrest has become the first choice for retailers seeking entry into this upscale market. The impressive Tanger roster includes top national regional and local brands including Alo Yoga, Madewell, Sephora, Warby Parker as well as an expansive roster of entertainment and dining options. Pinecrest is also home to upscale residential apartments, high end modern offices and AC Hotel is adjacent to a newly developed RH Mansion and Restaurant.

Contributing to seven day center foot traffic. Our scalable platform has positioned Tanger for continued growth. Through our existing portfolio and newly acquired centers. Our high quality well positioned assets in MSAs that serve both tourist trade and local populations should continue to benefit from outsized population and employment growth over time validating our strategic positioning value proposition and ability to grow our footprint across our existing platform.

Our external growth strategy is focused on targeting the dominant open air specialty retail center in the market where we can create additional value by leveraging our strengths across leasing, marketing and operations. Our confidence in the outlet channel is unwavering and is proven to deliver an unmatched value proposition [indiscernible] that meet our disciplined investment criteria and provide for sustained growth over time. Our well positioned low leverage balance sheet coupled with our track record of delivering strong annual free cash flow provides us with the flexibility to pursue these new opportunities. Over the past few years, we've made tremendous progress in differentiating our platform to unlock the embedded growth potential within our existing portfolio. While capitalizing on real estate value creation opportunities, through external growth. I want to thank our dedicated Tanger team members, retail partners, shoppers and financial stakeholders for your continued support. I'll now turn the call over to Michael to discuss our financial results and outlook in more detail. Thank you, Steve. Today, I'm going to discuss our fourth quarter financial results which came in at the high end of our expectations, our active external growth and balance sheet activity then outline our inaugural 2025 guidance which represents 4% to 8% core FFO growth.

In the fourth quarter, we delivered core FFO of $0.54 a share, compared to $0.52 a share fourth quarter of the prior year leading to core FFOs $2.13 a share for 2024 representing 8.7% growth over 2023.

Our strong financial results were driven by robust internal and ex [indiscernible] offset by the swap maturities earlier last year. Same center NOI increased 3% for the quarter driven by higher rental revenues from the continued strong retailer demand and leasing which has led to increased base rents and higher expense recoveries. Our full year same center NOI was up 5.1%. We've been active on the external growth front with the acquisition of the Promenade Chanel in Little Rock in December for $73,000,000 and the acquisition of Pinecrest in Cleveland last week for $167,000,000 Both acquisitions were made with cash on hand and available liquidity. We are excited to add both centers to our portfolio and estimate that these centers will deliver an approximate 8% return during their first year with future growth over time, as we leverage Tanger's operating leasing and marketing platforms. From a balance sheet perspective, pro form a for both acquisitions, our net debt to EBITDA would be between 4.9 versus ending 2024, at 4.8x and ending 2023 at 5.3x pro form a for a full year EBITDA from the three centers that we added, in late twenty twenty three. During the fourth quarter of twenty twenty four, we sold 2,600,000.0 shares under our ATM at a weighted average price of $35.57 generating gross proceeds of $91,000,000 which includes approximately $16,000,000 that we issued in October that we previously announced with 3Q results.

For the full year, we sold 3,400,000.0 common shares generating $116,000,000 of gross proceeds.

In addition, during the fourth quarter, we entered into forward sale agreements under our ATM for 1,900,000.0 shares at a weighted average price of $36.4 representing $70,000,000 of Future Chris, All of these shares remain unsettled and can be drawn down over the next twelve to sixteen months providing us with future From a sources and uses standpoint, we ended the year with low leverage, and pro rata cash and cash equivalents of $56,000,000 and full availability under our six twenty million unsecured lines of credit This year end liquidity reflected the $73,000,000 cash purchase in Little Rock and last week we used cash on hand and our line of credit to complete $167,000,000 acquisition of Pinecrest.

Overall, our balance sheet remains well positioned to fund our internal and external growth initiatives, with low leverage, largely fixed rate debt ample liquidity through last year's upsized lines of credit and the $70,000,000 of undrawn forward equity and additional free cash flow after dividends. Our annualized $1.1 cash dividend remains well covered with a continued low payout ratio ending 2024, with a 61% dividend payout, as a percentage of our funds available for distribution, turning to our guidance for 2025. We are introducing a core FFO per share range of $2.22 to $2.3 which represents growth between 48%. This guidance includes the recent Pinecrest and Chanel acquisitions, but does not assume any additional acquisition or financing activity. We expect same center NOI growth to be in a range of 2% to 4%. And note that for 2025, our same center NOI pool now includes Nashville, Asheville, and Huntsville. Our expected G and A will remain at consistent levels relative to the last two years, while interest expense is estimated at $63,500,000 to $65,500,000 For additional details on our key assumptions, please see our release issued last night. And just before we open the call for questions, we are excited to continue to engage with our financial stakeholders at conferences, property tours and various events.

We will be participating at Citi's thirtieth Annual Global Property CEO in Florida in early March Bank of America's Retail REIT Executive Summit in New York in late March, a tour of Tanger Outlets Charleston on May 8 in connection with Well Fargo's twentieth Annual Real Estate Securities Conference, We'll also be attending BMO's North American Real Estate Conference in New York in mid May and then a tour of Bridge Street Town Center in Huntsville on May 14 in connection with Evercore ISI's multi property retour. And with that, operator, we can take our first question.

Tanger you. And I'll be conducting a question and answer session. First question today is coming from Craig Mailman from Citi. Your line is now live. Hey, good morning, everyone. Can you guys just talk about capital needs for this year? Given that you have the forward is there anything in the acquisition pipeline that's closer to the finish line or anything on redevelopment of pad sites or other Can you just kind of walk through the decision here to pull that equity down and line of sight on deploying it? Great. Thank you, Craig. I think on the ATM side, that's really for a future look both from an internal and external perspective and just given the volume of things that we are having within the core portfolio as well as external, we can draw that down over the next twelve to fifteen months. And just given that outlook, we felt $70,000,000 was a reasonable amount and at a price and a yield that we felt was accretive to those potential uses. We only announced deals when we close them. But there are we are actively working on things. But we'll have a lot of time to deploy and take down that capital if it's needed.

The balance sheet, as you know, remains in outstanding shape.

With low leverage below five times.

So that equity would really be drawn if we were able to deploy capital And most of our CapEx that's targeted in the core portfolio with the free cash flow that we're generating is able to be used for that. I mean, you guys have been really successful at sourcing sort of ACAP initial yields going in.

How much more of that type of product that you guys would want geographically to sit the portfolio? Is there out there or should we assume that over time incremental acquisitions as you're cost of capital comes down a bit those yields could also drift a little bit lower. Craig, we really look at it on a long term basis, right? The current yield is just a factor where the NOI is in the purchase price. We're not buying it for year one. We're buying things the future growth And I think as evidenced just talking about Asheville and Huntsville and Little Rock and Pinecrest, we see tremendous opportunity to use our platform to drive growth in those assets. Just given our size, dollars 5,500,000,000.0 to $6,000,000,000 it's a really big country. We have both outlets as well as lifestyle centers. To look at It's a big country. And so we don't need to elephant hunt here. We can do smart deals deals that make sense both from a financial perspective as well as a strategic perspective and continue to grow the portfolio in the right way.

Great. And maybe slip one more in. You guys have been pretty insulated from kind of credit issues that the other OpenAir guys have dealt with. Could you just talk about your watch list kind of maybe on a percent of ABR or anything there? And then maybe just run through how much exposure within the 77 Catalyst [indiscernible] Sure. So we have nine for everyone ever 21 stores added at $77,000,000 so it's pretty small amount relative to the square footage and we believe there's significant upside in those rents. So as a percentage of our AVR, it's not a large [indiscernible] And then I would say just over tenant credit overall, our watch list remains at reasonable levels. There's obviously tenants that come in and come out and we try to get ahead of these Situations as evidenced last year when Rune Express and our ability to overcome those. Great. Thank you.

Thank you. Next question is coming from Andrew Ryals from Bank America. Your line is now live.

Good morning. Thanks for taking my questions.

I guess just on the consumer, can you talk about if you're seeing any change in demand or spending patterns across your various markets and income levels. Just curious if there's been any evidence of trading down or pullback beyond just expected seasonality?

We ended the quarter really strong. So we thought the consumer was in great shape and our sales numbers were up and our traffic was was up going into obviously going into January, a lot of weather issues in January. So I don't think that that's a good indication of future run rate. I think the best indication of the strength of the consumer, we look to the retailers We ask them how they're planning the year. We asked them to give us an update on their open to buys. The retailers are not looking to pull back They're looking to continue to grow their portfolios and I think that speaks as loudly about the strength of the consumer anything else I can share.

Okay. Thank you. And then you mentioned few times just the potential for additional growth beyond the eight percent first year yields that Pinecrest and the Promenade. Can you just quantify the level potential upside and maybe the steps it'll take to get there?

Andrew, we're not putting out sort of five year expectations. What we can say is those deals currently have some vacancies, some remerchandising and it takes time to execute that. But we feel that there is an ability as these assets come in to be able to produce [indiscernible] Things that are effective growth as they roll into the same center pool as we leverage our platform.

Tanger you. [indiscernible] is coming from Steve Stockwell from Evercore ISI. Your line is now live. Thank you. This is Manuj on for Steve.

A quick question on lease expiration schedule, which I believe stands at 23% of GLA and ABR for 2025. Just wondering how the conversations are going with tenants that are up for renewal and if you are aware of any larger move outs that could potentially result in a lower retention rate for this year Obviously, I understand that the retention rate has been really high for you in recent years. So we just try to understand it a little bit better if there are any risk potentially coming from there.

Sure. There's no risk to speak of. So thank you for asking the question. From a retention rate point of view, our retention rate from renewal gone down over the last year or so. We've done that strategically. If you take a look at our 12 consecutive quarters of positive rent spreads, you look at our retenanting spreads versus our renewal spreads, there's a lot of upside opportunity in the retenanting. We're taking advantage of that. We're also taking advantage of replacing some of the weaker retailers that perhaps of loss of market share, whose sales performance hasn't kept up with our growth and we're looking to add new retailers that we think will add a number of benefits to our centers. [indiscernible] new uses, new variety, we lean fairly heavily over the last I would say, twelve to twenty four months on the health and beauty with adding Ulta and Sephora to our portfolio, I think that added a number of excellent benefits to our shopping center. We're going after what we believe is a much younger customer just to introduce them to our brand of shopping. Think Sephora and Ulta have done a really good job of drawing that customer getting them to shop with us more frequently staying longer when they're there and then ultimately spending more money.

So from a strategic point of view, we're going to continue to think about new brands, new uses, so we can diversify and continue [indiscernible] for our shopper base.

Tanger you. Next question is coming from Floris Van Dekel from Compass Point. Your line is now live. Obviously, you have pivoted nicely somewhat to lifestyle centers You've got four of them now.

I were to say fees in eighteen months' time or twenty four months' time, many of these types of centers would Tanger own? In your view? And what percentage of NOI do you think that we could reasonably expect you get from these types of of centers. Well, thanks for the question, Forrest. You talked about a pivot. I think the pivot started about four or five years ago when we started to add new uses to our outlet portfolio, recognizing that outlet shopper was looking for more of an experience when they came to visit with us simply the thrill of the hunt that one gets when they shop an outlet center. In that connection, we've added better food and beverage options for our customers. We've added more experiential options for our customers. We've done a better job of amenitizing our properties. We introduced loyalty. So our shopping centers the outlet component of our shopping centers really sort of gave us the sort of the strength and the pieces that we can move forward and start building or add a lot of value to these other types of properties. We're going to continue to look and to answer the question, going to continue to look at open air lifestyle full price shopping centers and we'll acquire them as they are to our portfolio we're an operating company So we're not looking to buy low yield shopping centers and flip coupons.

We're looking at centers where we know we can add tremendous value leveraging our leading, our operations, and our marketing muscle in order to get there.

Tanger. Maybe a follow-up and maybe this is more for Michael.

Michael, could you touch on your fixed cam and how does that impact your your ultimate results, what percentage upside could there be if you transition more tenants into fixed gam and how does that how do you deal with the temp tenants? And obviously, they wouldn't be on fixed chem. If you can give us some more details on that and some of the potential levers you have at your disposal?

Thanks, Floris. Tanger so largely, most of our tenants are now on a fixed CAM basis. And when you think about our rent spreads those rent spreads take into account Base rent and six can. And so as you've seen our rent spreads, move up over the last three years finishing 2024, 15% on 2,100,000 square feet that spread we're getting higher base, and we're getting higher fixed CAM. And that's why there were [indiscernible] averaged about 87% for the full year as we're growing that fixed as we're pushing the part of that total rent, and then as we're operating as efficiently as possible, we would expect that percentage to be relatively similar in 2025. And as we [indiscernible] and maybe reduce some of that 10 percentage There is some opportunity down the road for a little bit more, but that's just goes into NOI. Just total rent upside at the end of the day. And we've been very focused on remerchandising existing tenants overall. [indiscernible] Our next question today is coming from Juan Sabria from BMO Capital Markets. Your line is now live.

Hi, good morning. Just hoping you could talk a little bit more about Catalyst Brands and Forever twenty one, just kind of the average box size for Forever twenty one recognizing it's small and kind of how we should think about downtime and what your experience has been trying to backfill some of the spaces you've gotten back over the last couple of years, that would be helpful, please. Hey, Juan. This is Justin Stein. How are you? Thanks for the question. So our sizes with the Forever twenty one boxes range anywhere from six to 12,000 square feet. As Michael indicated, we have about nine left. But we've been slowly replacing them over the last several years, and we are we have multiple deals pending on these spaces. If we get them back, obviously, we know, we all know, we read what's going on out there, but we are being very proactive with not only Forever twenty one, but all retailers out there. So So one thing that we're really good at is keeping our eye on what's going on, what's coming in the future and we don't sit back and just wait for these tenants to go away.

We're very proactive in replacing them. And that is not like Forever twenty one, just like every other tenant in our portfolio. That is underperforming or under rent paying.

Great. And then you had very good success with same store NOI growth was 5.1% in 2024 and the midpoint for 2025 is 3%. So just curious if you could talk big picture, maybe this is a question for Michael about the puts and takes to the midpoint of the guidance for this year with regards to same store NOI?

Great. Thanks, Juan, and welcome to the Tanger calls. I'd say from a same center NOI perspective, as you start the year, you have the most variability. You have the most unknowns and the widest range of outcomes.

I think just from our business perspective, there's no moderation in our business as evidenced by all of the metrics that we put out, positive leasing, our rent spreads, supply is low, the tenant demand is high, all of that is positive, And we start the year at a guidance range that we feel comfortable with. We have a very operating intensive business We obviously have our role this year And just as you asked about downtime, right, our range contemplates [indiscernible] Different levels of spreads and downtime and timing range of credit outcomes, And so it all rolls into that 2% to 4% growth.

And we look at our enterprise from an FFO perspective, driving 4% to 8% FFO growth is really being healthy and continuing to drive value for our stakeholders. Within that two to four On a quarterly basis, there's obviously some seasonality relative to our operating expenses, look back to the first quarter of last year of twenty twenty four, our same center expenses were down 5% as we had some expense refunds. I don't know about you, but it's been snowing in a lot of different places that usually doesn't snow. [indiscernible] [indiscernible] a cadence perspective relative to that 2% to four we'll likely just be just given the comp on the expense side, a little bit lower from that perspective.

Appreciate it. Thank you.

Tanger you. Next question today is coming from Caitlin Burrows from Goldman Sachs.

Your line is now live.

Hi, good morning everyone. Maybe just a question kind of similar to Floriss's on lease structure, but about overage rents I guess if I look at like the five years before COVID percent rents, were in like the 3% range as a percent of base rents. They went up during COVID. Now they're down to the 5% range. Obviously, anything can happen with actual sales outcomes. But as you guys think about the lease structure, is there still a portion of that that's kind of going into base rents or are you at like a normalized level now? Does that make sense? Hi, Caitlin. This is Justin. So So as we've previously discussed, we are very focused as when leases come up for expiration, of sweeping that variable rent into fixed. We still feel like there's an opportunity to to continue to do that as leases continue to roll, as our sales continue to increase, our marketing team is doing a great job of driving sales and traffic to our portfolio. And as long as that keeps up, which we're optimistic that it will, we do feel strongly that we will be able to continue to drive and sweep variable into fixed.

Got it. Okay. And then maybe just on wondering if you guys could clarify a couple of things. One, the 98% that you guys report just is that lease versus [indiscernible] still at 10% or has it moved? And then also, I mean, like 98% occupied seasonal high versus sustainable? Yes. Well, first of all, at the end of the year, you're always going have far more occupancy just because some of those 10 tenants that fill space for the fourth quarter of the year But on our Tanger basis is probably pretty consistent with what we've been saying. It has been 10% -ish range. So that really hasn't changed materially Right. Like I've mentioned in the past, temp leasing is really a strategy for us. So embedded in that chunk of temp space is retailers that move from space to space as we fill it We're very diligent about making sure that spaces are cash flowing. So if there's is a retailer that signed lease that's waiting to take occupancy, will always keep that space filled with a temp tenant until the delivery of occupancy date. And keep it vibrant, lights on and obviously cash flowing. Embedded in that number also is some pop up deals.

Those are national tenants that come into markets that they want to make sure that there's a customer base for them before they go long term. We've had great success using pop up as a strategy to get retailers into markets and ultimately convert them into permanent tenants in the same space. And we've mentioned a number of those brands that we've had success within the past like UGG and Vineyard Vines, and we're going to continue to use that as a strategy going forward.

Got it. And the last one, realize there might not be a large spread, but that 98% a lease number economic occupancy?

Hey, Caitlin, that's occupancy. Okay. Thanks. Not least percentage.

Tanger you. Our next question today is coming from Hong Zhang from JPMorgan.

Your line is now live.

Yes. Hey, I guess expense recoveries were calling it like in the high 80s as a percent of operating expenses this year. I guess just ring between the lines you're commentary about about just moving tenants to fixed can. Is the expectation that that ratio will pretty much remain constant for the near term. Or do you see further upside?

Thanks, Hong. A lot of it is just driving that total rent. So when you're driving 15% rent spreads and we're driving both base and the CAM, that's what's growing our revenue overall denominator, the operating expense over the course of the year we have been able to be very efficient on our operating expenses. Right. So as you the numerator is growing, because we're growing our total rents, and the denominator has been relatively flat to up a couple of percent that's what's really causing the ratio to move. We did end 2024 at about 87% And just from a cadence, typically you're a little bit higher in the front half of the year than the back half of the year just given higher seasonal expenses that we have relative to the cam part being flat throughout the year Yes, I mentioned to Juan's question, the first quarter just relative to last year will likely come down a little bit just because our operating expenses last year given the expense refunds that we had talked about on the first quarter call last year, the affected the expense base. But over the course of the year, we should be in and around 87% level, give or take.

Got it. Thank you. [indiscernible] Thank you. Next question is coming from Naysal Shah Green Street. Your line is now live. Hey, good morning. This is Michael on today for Vince.

Thank you for taking my question.

I was curious if you could discuss the building blocks of 2025 same store NOI NOI guidance a bit further. So maybe with regards to what is assumed in terms of renewal spreads, occupancy changes and expense growth.

Thanks, Nishal. Look, we are 2% to 4%. It's got a lot of different assumptions. I mentioned before, We are a very operationally intensive business. I may we're not going to shy away from it. We got 20% roll this year. Right? And so just dealing with that amount of roll in terms of the different expectations on spread, the timing, when we deliver, how we may use different strategies that aspect. We have a range of different credit outcomes over the course of the year. We have obviously the timing of our expenses and what we can do. So we're not going to sort of detail every single line item because every one of those has got different ranges and we have to get comfortable with a range that we feel can deliver towards and that two to four is something At this stage of the year, we're very comfortable with and we're going to work [indiscernible] to deliver it and hopefully be able as the year goes on, narrow and potentially depending how things go, list that guidance Performance is Got you. That's helpful. And then maybe just one more on the expense side. So Tanger has been pretty effective at managing their operating expenses in recent years.

And I was curious if management expects same store expense growth to return to levels near inflation? Do we think the current run rate is sustainable moving forward? Any color on that would be helpful.

Hi, it's Leslie Swanson. We can continue to look at every efficiency we can from an operational expense. Certainly, we continue to have providers that need to have cost to living adjustments for their teams that keep our properties very clean and safe. But we continue to to find efficiencies year over year to mitigate extreme expense growth and we're committed to doing that. And that's part of being part of operational excellence that we provide out to our retailers and to our shoppers.

Got you. Thank you very much.

Thank you. Next question is coming from Collar Peake from Deutsche Bank. Your line is now live. Hi.

Thank you for taking my question.

Wanted to talk about The Capri and Tapestry merger not going through. Maybe if you could talk to any about the updates around this? Or maybe any adjustments to your real estate strategy as a result?

Look, we'll share with you what what we know and what we know is probably similar to what you know, any other information, I would obviously refer you to those brands. But as far as Coach is concerned, our Tanger Street brands, look, we're we have a great working relationship with the folks over at Tapestry. They continue to grow within our portfolio and they had a great last quarter selling last quarter, we read like you did of the sale of the Stuart Weitzman brand to Calares which just happened last couple of days for us. We find that to be really exciting. Stuart Weitzman hadn't been growing and now perhaps under Claris' operations and under their excellence, we might see some more stores. We're anxious to speak to them and find out what their plans are for the brand and what the open to buy is And we know that our customer loves to shop that brand and we're hoping we can bring that product to them. With regard to Capri, they had their Investor Day yesterday. I think their outlook looks pretty good going into 'twenty six and 'twenty seven as they talked about. Again, they're a very important retailer with us.

Our customer loves that brand, continues [indiscernible] And although they've had some challenges over the last couple of quarters, we feel pretty strongly that they're going to be able to continue to grow their business and continue to be really important brand inside of our portfolio. Thank you. Our next question today is from Greg McGinniss from Scotia Bank. Your line is now live.

Hey, good morning. Looking at acquisitions, obviously, have been more non outlet focused. Is that due to limited outlet opportunities or is this more of a does shift the balance of the portfolio to more traditional open air retail. I think we got we're focused on acquisitions primarily because the cost of buying a new buying these shopping centers is far less expensive than building a new shopping center. Obviously, we we learned that with our our latest development in Nashville and when we're buying centers at sort of $0.5 on the replacement dollar, it's a great use of our capital to look for available properties. I also said earlier in the call that we really built some muscle to go after alternative use that aren't just outlet uses for outlet centers, and that success and that strength has given us the confidence that we can continue to add additional value in the full price in the full price business. Lastly, what I'd say is that there's far more product available In that oil price business than there is in the outlet business. We have looked at other [indiscernible] marketed for sale But unless we think that we can come in and add real value to those centers, we're not going to move forward on any acquisition.

Right. Okay. And is there any do you see any limit in terms of how much non outlet you're willing to own or is the kind of what we should expect to see kind of going forward because we recognize that there's very few high quality outlet opportunities out there.

Yes. I mean, just the the paradigm may change that development makes sense again. Obviously, we've we've been looking at markets where we think new outlet center We definitely be beneficial to that marketplace, the customer and obviously our overall business. In the meantime, we're going to continue to look at all available real estate that we think we can add value to As far as a number, we really it's not about the numbers, it's about making sure that every acquisition is one that we know to our leveraging our operations, our marketing, and our leasing team we can go in and we can add tremendous amount of value downstream. That's how we're looking at it. Okay. Thank you.

Thank you. Next question today is coming from Todd Thomas from KeyBanc Capital Markets. Your line is now live.

Good morning. I just wanted to go sticking with acquisitions a little bit and pricing, I realize you're not focused on the initial yield solely, but is the 8% year one yield still achievable on new deals that you're underwriting today? And does your improved cost of capital enable you to expand the universe of assets that you're looking at even further today as you look ahead?

Yes.

Look, I think the only rule Todd is that we're looking at property where we can add value. That 8% yield We've been fortunate to be able to get really good going in economics If those numbers are below 8%, and we decide to move forward with an acquisition, it's because we believe that there's tremendous amount of upside in that project and that's really where we think we as a company an operating company, we think we can add more value.

Okay. And when you're executing on new acquisitions after closing, the opportunities that you see to leverage the Tanger platform does the yield go backwards at all initially as you're sort of implementing some of your strategies? Or are you able to grow the yield initially right out of the gate Our underwritten yield is a forward one year yield, so it takes to account some of that remerchandising activity and just we'll look at these deals on a five to ten year basis as we execute the plans A lot of it has to deal with the existing vacancy that may be there and the role in those centers to how quickly we can get after those opportunities. But we would expect it does take a couple of years to build over time.

Okay.

And just one last question. I just wanted to follow-up think it was Caitlin's question around the temp tenant space. Which I guess is still around 10%. Seems like that's a strategy going forward. But I just wanted to ask about the rents for that space which I think historically you've discussed being lower in the temp tenant pool versus those for permanent leases. Are rents and economics for the 10 tenant pool still below permanent leases today or has there been some change around rents and pricing for the 10 tenant pool? And the 10% level expected to remain fairly consistent going forward? Or is there a point at which the merchandising of the centers and the portfolio as such that the tenant exposure does decrease and you convert those leases to perm with better economics Yes. So Todd, as you can probably imagine, higher performing assets, there's less In assets that don't perform as well, there's probably a little bit more. That being said, those numbers will and the position that the temp tenant takes in that particular center. But we did talk as part of that temp strategy were pop up retailers. And pop up retailers typically being national retailers the rents that they pay for that short term look on the space is not much dissimilar to what a permanent deal might ultimately be.

So it's very variable. I think that the cheapest rent deals in our space are in space where the retailer has the fewest rights. So for example, if a retailer wants to come in on a thirty day month to month we have the right to recapture that space on thirty days notice For us, to keep that space occupied with a vibrant tenant that keeps lights on the property cash flowing that's probably the cheapest deal. But that particular retailer needs to be prepared that if I've got a long term tenant that's looking to take that space or the retailer that door wants to expand into it that they're going to need to move either another location in that shopping center or if nothing is available, we'll have to leave altogether. So that's sort of how we use temp as a strategy and try to give you both ends of the spectrum. Some of the higher Rent paying tenants in the pop up field some of the lower rent paying tenants in those monthly retail that give us maximum flexibility, repurpose our real estate as we need to. Thank you. Next question is a follow-up from Caitlin Burrows from Goldman Sachs.

Your line is now live.

Yes. Earlier, somebody asked about downtime and I just had a follow-up on that. I was wondering if you could give some color on, I know historically you guys have talked about one of the benefits of your outlet center property type is that you can move tenants in and out pretty quickly. So I was wondering if you think about like a 3,000 versus 5,000, 10,000, 12,000 square foot box like how does that timing to backfill vary if you have like a permanent tenant that's ready to go if that makes sense? Yes. Caitlin, it's Justin. So yes, in the outlet channel, there's tends to be a little bit less downtime, but that's where the beauty of the temp program comes in. So if we're going to anticipate, let's assume a tenant can't open until November of this year, a tenant now recently expired, we're going to use that 10 program to fill that to avoid as much downtime as possible. In the full price channel build outs take typically a little bit longer than they do in the outlet channel. But we are going to do everything we can to utilize the temp program to mitigate downtime and mitigate exposure with revenue as well.

Got it. And just on the temp program, which I know was a lot about today in the past. Is that something that works just as well in the full price format? Or is that more of like an outlet strategy?

It works in both platforms for us extremely well and we're implementing vacancy in Pinecrest. But if and when we have it there, we will implement the temp program there as well. Tanger. Thank you. Next question is a follow-up from Juan Sinabria from BMO Capital Markets.

Line is now live. Hi. Thanks for the extra time. Just curious if you guys have any thoughts on the potential impact down the track proximity, etcetera, of Simon's planned development in Nashville versus your existing center?

We have competition in every market that we serve. So as far as we're concerned, we're 100% leased in Nashville. We're excited the retailers and the business that they're doing in that market There's other shopping centers, there's other outlet centers in that market. And we're going to continue grow our business.

What's exciting about where we're positioned in the market is that we're part of a 300 acre entertainment complex where Tiger Woods just announced and broke ground on a new pop stroke So Tiger and Tanger on the same 300 acre parcel, we're excited for that and we're excited for their their ground, their opening.

Also the Nashville Soccer Club is on Arlo location and they're currently expanding the number of fields that they have. We're across the street from where the predators have their practice facility. And other ice rinks So there's a tremendous amount of residential, hotel, restaurant, medical use, entertainment use, new residential being planned and developed, and a lot of the what we love in most of our markets that's that sports tourism business where folks travel from across the country for tournaments in both soccer and hockey and bringing that to our our site as well. Only help us continue to grow our business over time.

Tiger and Tanger sounds like a nice combo. Thank you.

I should be a marketing guy.

Okay.

Thank you. Thank you. We've reached the end of our question and answer session.

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