Tanger Inc. 2021 Q1 SEC Filing Summary
Business context and reporting period
Tanger Factory Outlet Centers, Inc. is a self-managed REIT that owns and operates outlet shopping centers through Tanger Properties Limited Partnership. The combined unaudited Form 10-Q covers the three months ended March 31, 2021, compared with the same period in 2020.
- Portfolio at March 31, 2021: 30 consolidated outlet centers totaling approximately 11.5 million square feet and six unconsolidated centers totaling approximately 2.1 million square feet.
- Consolidated portfolio occupancy was 91.7%, down from 94.3% at March 31, 2020.
- The Company had 100.8 million common shares outstanding as of April 30, 2021.
Financial performance and key metrics
| Metric | Q1 2021 | Q1 2020 | Change |
|---|---|---|---|
| Total revenue | $100.7 million | $111.6 million | Down $10.9 million |
| Rental revenue | $97.5 million | $108.6 million | Down $11.1 million |
| Property operating expense | $35.3 million | $38.6 million | Down $3.3 million |
| General and administrative expense | $16.8 million | $12.6 million | Up $4.2 million |
| Net income attributable to Tanger | $4.1 million | $(26.9) million | Improved $31.0 million |
| Diluted EPS | $0.04 | $(0.30) | Improved $0.34 |
| Net cash from operating activities | $31.3 million | $27.3 million | Up $3.9 million |
| Same Center NOI | $65.0 million | $70.7 million | Down 8.0% |
| Core FFO per diluted share | $0.40 | $0.50 | Down $0.10 |
Net income margin was approximately 4.1% in Q1 2021, compared with a negative margin in Q1 2020. The prior-year period included a $45.7 million impairment charge related to the Foxwoods outlet center; the absence of that charge was the principal reason for the year-over-year improvement in GAAP earnings. Core FFO available to common shareholders was $40.6 million, or $0.40 per diluted share, versus $48.7 million, or $0.50 per share, in the prior-year period.
Balance sheet, debt and liquidity
- Total assets were $2.26 billion and total equity was $483.0 million at March 31, 2021.
- Total debt was $1.543 billion, down from $1.568 billion at December 31, 2020, primarily reflecting a $25.0 million repayment of the unsecured term loan.
- Debt consisted primarily of $1.141 billion of senior unsecured notes, $322.8 million of an unsecured term loan and $78.9 million of mortgages. No borrowings were outstanding under the $600.0 million unsecured lines of credit.
- Cash and cash equivalents were $201.7 million, compared with $84.8 million at year-end 2020. Management reported total liquidity of approximately $802 million, including cash and full undrawn line capacity.
- Debt maturities included $56.3 million for the remainder of 2021, $254.8 million in 2023 and $580.1 million in 2024.
- Management stated that the Company was in compliance with debt covenants at March 31, 2021. Reported covenant metrics included total consolidated debt to adjusted total assets of 45%, total liabilities to adjusted asset value of 37%, and EBITDA to fixed charges of 3.3.
Cash flow, capital allocation and material changes
- Operating cash flow increased because the Company collected deferred rent from 2020 during the first quarter of 2021.
- Investing activities provided $2.7 million, including approximately $8.1 million of proceeds from the sale of the Jeffersonville, Ohio outlet center. Capital additions to rental property were $7.4 million, down from $10.6 million.
- Financing activities provided $83.0 million, including $128.7 million of net proceeds from the issuance of 6.9 million shares under the new at-the-market program. The Company paid $16.9 million in common dividends, compared with $33.0 million in Q1 2020.
- The quarterly dividend was reduced to $0.1775 per share from $0.355 per share in Q1 2020. An additional $0.1775 per-share dividend was declared in April 2021.
- Share repurchases remained suspended under debt agreement restrictions; approximately $80.0 million remained authorized but unused.
- In April 2021, the Company redeemed $150.0 million of its 3.875% senior notes due 2023 for $163.0 million, including a $13.0 million make-whole premium. The remaining principal on those notes was $100.0 million.
- In April 2021, Moody’s lowered the Company’s rating to Baa3 with a stable outlook, increasing applicable pricing over LIBOR beginning May 1, 2021.
Outlook, commentary, risks and unusual items
- Management said its 2021 outlook remained unchanged but continued to anticipate pressure from vacancies, potential store closures and rent modifications.
- COVID-19 continued to affect tenant sales, rent collections, occupancy, leasing, liquidity, capital markets access, debt covenant compliance and potential property impairments.
- Collections of contractual fixed rents billed in Q1 2021 were approximately 95% through April 30, 2021. The Company had collected 83% of deferred 2020 rents outstanding at that date and 96% of deferred rents due in Q1.
- Remaining rental revenue reserves were $2.6 million at March 31, 2021. The Company recorded a $1.6 million reversal of prior rental revenue reserves based on collections.
- General and administrative expense included $2.4 million of voluntary retirement and executive severance costs. The Company also recorded a $3.6 million foreign-currency loss associated with the sale of a Canadian joint-venture property.
- Two Canadian centers in the RioCan joint venture were subject to mandated closures through May 19, 2021. Additional domestic closures could materially affect results.
- The Galveston/Houston joint venture amended its mortgage in February 2021, extending maturity to July 2023 and reducing principal from $80.0 million to $64.5 million. The Company’s maximum guarantees of unconsolidated joint-venture debt totaled $21.9 million.
- Management cautioned that further deterioration in economic or market conditions could result in additional impairment charges and could affect future covenant compliance or access to capital.
Most important facts for investors to verify
- Whether occupancy, same-center NOI and rent spreads stabilize or deteriorate further after the pandemic-related disruption.
- The sustainability of approximately 95% rent collection and the recovery of remaining deferred or negotiated rents.
- Liquidity and refinancing plans surrounding the October 2021 line-of-credit maturity, 2023 and 2024 debt maturities, and the April 2021 senior-note redemption.
- The effect of the Moody’s downgrade on borrowing costs, covenants and future capital-market access.
- Whether additional tenant bankruptcies, store closures, rent concessions or property impairments reduce cash flow and FFO.
- The coverage of the reduced dividend by recurring operating cash flow and Core FFO, recognizing that non-GAAP measures are not substitutes for GAAP results.