Tanger Inc. 2021 Form 10-K Summary
Business Context and Reporting Period
Tanger Factory Outlet Centers, Inc. is a self-administered REIT whose operations are conducted through Tanger Properties Limited Partnership. The filing covers the fiscal year ended December 31, 2021, with comparisons to 2020 and 2019. Tanger owns and operates outlet centers in the United States and Canada and reports one operating segment.
- 30 consolidated outlet centers totaling approximately 11.5 million square feet, with 95% year-end occupancy and more than 2,200 stores representing approximately 500 brands.
- Six unconsolidated joint-venture outlet centers totaling approximately 2.1 million square feet, including two in Canada.
- Rental revenue consists of fixed rent of $298.1 million and variable rent and expense reimbursements of $109.7 million.
Key Financial Metrics
| Metric | 2021 | 2020 | Change |
|---|---|---|---|
| Total revenue | $426.5 million | $390.0 million | +$36.5 million |
| Rental revenue | $407.8 million | $377.9 million | +$29.8 million |
| Net income | $9.6 million | $(38.0) million | +$47.6 million |
| Net income attributable to Tanger | $9.1 million | $(36.3) million | +$45.4 million |
| Diluted earnings per share | $0.08 | $(0.40) | Improved |
| FFO available to common shareholders | $138.1 million | $154.1 million | $(16.0) million |
| Core FFO available to common shareholders | $188.4 million | $153.7 million | +$34.7 million |
| Same-center NOI | $284.8 million | $246.2 million | +15.6% |
| Net cash provided by operating activities | $217.7 million | $164.8 million | +$52.9 million |
| Total debt, net | $1.397 billion | $1.568 billion | $(170.8) million |
Total revenue increased approximately 9.4%. Net income margin was approximately 2.2% versus a negative margin in 2020. Portfolio NOI was $286.3 million, or approximately 67% of total revenue. Core FFO benefited from the exclusion of the $47.9 million loss on early debt extinguishment and other unusual items; reported FFO declined because of the same debt-related charge and other adjustments.
- Cash and cash equivalents increased to $161.3 million from $84.8 million.
- Total liquidity was approximately $681.3 million, including cash and the undrawn $520.0 million unsecured credit facilities.
- Capital expenditures on a cash basis were $45.2 million in 2021, compared with $28.6 million in 2020.
- Year-end debt was approximately 96% unsecured, and 92% of the gross book value of real estate was unencumbered.
- Debt covenants were reported as compliant. Actual total debt to adjusted assets was 41%, versus a covenant maximum of 60%; unencumbered assets to unsecured debt were 232%, versus a minimum of 150%.
Material Changes Versus the Prior Comparable Period
- Operations rebounded from the COVID-19 disruption. Occupancy increased from 92% at December 31, 2020 to approximately 95% at December 31, 2021, while tenant traffic, tenant sales and rent collections returned to near or above pre-pandemic levels in some cases.
- Rental revenue from existing properties increased $43.0 million, partly offset by lower lease termination fees and the effect of property dispositions.
- Variable rental revenue increased to $109.7 million from $88.3 million, reflecting stronger tenant sales and traffic.
- Same-center NOI increased 15.6%, while occupancy cost declined to 8.1% from 10.0% in 2019; no comparable 2020 occupancy-cost ratio was provided because stores were closed for part of that year.
- General and administrative expense increased $18.1 million, primarily due to additional executives and key employees, higher professional fees, and $3.6 million of voluntary-retirement and executive-severance costs.
- Impairment charges declined to $7.0 million from $67.2 million, but Tanger recorded another impairment at the Foxwoods outlet center.
- Debt declined through a $50.0 million term-loan paydown and redemption of the 2023 and 2024 senior notes. Tanger issued $400.0 million of 2.75% senior notes due 2031 and incurred a $47.9 million loss on early extinguishment of debt.
- The company issued approximately 10.0 million common shares through its ATM program for net proceeds of approximately $187.0 million. The program had approximately $60.1 million of remaining capacity at year-end.
- The quarterly dividend was reinstated in 2021 after being suspended in 2020. Dividends paid in 2021 totaled $0.7150 per share, and a $0.1825 per-share dividend was declared for payment in February 2022.
Guidance, Outlook, Risks and Unusual Items
- Management expects approximately $125.0 million of capital expenditures in 2022, substantially above 2021 spending, and expects to fund the program from available liquidity.
- Management believes liquidity is sufficient for at least the next 12 months, based on estimated monthly cash expenditures of approximately $28.6 million excluding dividends and debt maturities.
- Approximately 2.1 million square feet, or 17% of the total portfolio including the company’s share of unconsolidated joint ventures, is scheduled for lease renewal during 2022. As of January 31, 2022, renewals were executed or in process for 29.8% of that space.
- Key risks include renewed COVID-19 disruptions, tenant bankruptcies and store closures, e-commerce competition, inflation and supply-chain or staffing issues, co-tenancy and sales-based rent reductions, impairment risk, development execution, joint-venture financing, climate and insurance exposure, cybersecurity and the phase-out of LIBOR.
- The Foxwoods property had an estimated fair value significantly below its recorded carrying value under current market conditions, although management concluded the carrying amount was recoverable under its current plan. Additional impairment charges remain possible.
- Debt maturities include $305.1 million in 2024, including the unsecured term loan, and $355.7 million in 2026. The company had $300.0 million outstanding under the term loan at year-end.
- Joint ventures had approximately $329.5 million of debt, with maximum company guarantees of approximately $21.9 million. The company also has exposure to Canadian currency and operating risks.
Investor Verification Priorities
- Verify the reconciliation of Core FFO to GAAP earnings and assess how much of the improvement reflects recurring operating performance versus excluded unusual items.
- Monitor 2022 lease expirations, renewal spreads, tenant allowances, occupancy and same-center NOI, particularly at lower-occupancy properties such as Foxwoods, Howell and Atlantic City.
- Review the refinancing plan for the 2024 term loan and other scheduled maturities, including the effect of interest rates, credit ratings and LIBOR replacement provisions.
- Evaluate whether the planned $125.0 million of 2022 capital expenditures produces sufficient incremental leasing, occupancy and NOI benefits.
- Assess potential additional impairment charges and the sensitivity of Foxwoods and other property valuations to capitalization rates, discount rates and holding periods.
- Confirm the sustainability of reinstated dividends against recurring cash flow, debt covenants and required REIT distributions.
- Review joint-venture debt extensions, guarantees and required capital contributions, particularly for Columbus and Galveston/Houston.