Business Context and Reporting Period
Company: Tanger Factory Outlet Centers, Inc.
Filing Type: Form 10-Q (Unaudited)
Reporting Period: Quarter and six months ended June 30, 1997
Business Overview: The Company operates factory outlet centers across the United States, growing through acquisitions, new developments, and expansions. As of June 30, 1997, the portfolio included 28 centers with approximately 3.99 million square feet of gross leasable area (GLA), achieving a 97% occupancy rate.
Key Financial Metrics
| Metric (Six Months Ended June 30, 1997) | Value (in thousands) |
|---|---|
| Total Revenues | $39,681 |
| Net Income | $5,672 |
| Funds From Operations (FFO) | $16,633 |
| Net Cash Provided by Operating Activities | $16,539 |
| Net Cash Used in Investing Activities | $(42,025) |
| Long-Term Debt | $214,890 |
| Cash and Cash Equivalents | $2,603 |
| Dividends Paid Per Common Share | $1.07 |
Material Changes vs. Prior Period
- Revenue Growth: Total revenues increased 9% to $39.7 million for the six months ended June 30, 1997, compared to $36.3 million in the prior year period. Base rentals rose 9% ($2.2 million) driven by an 8% increase in weighted average GLA.
- Expense Increases: Property operating expenses increased 7% ($783,000), though on a per-square-foot basis, they decreased slightly due to lower common area maintenance costs from a milder winter. Interest expense rose 17% ($1.1 million) due to higher average borrowings financing acquisitions and expansions.
- Acquisition Activity: The Company acquired Five Oaks Factory Stores in Sevierville, TN, for $18 million in February 1997. This acquisition contributed to the increase in base rentals and total assets.
- Development: Significant capital was deployed for construction, with $23.0 million in additions to rental properties and $18.0 million for property acquisitions during the six-month period.
Guidance, Outlook, and Risks
Outlook and Capital Resources: Management anticipates adequate cash to fund operations, debt service, and dividends. The Company has access to $95.0 million in revolving credit lines, with $29.7 million available as of June 30, 1997. Additionally, an active shelf registration allows for up to $100 million in equity and $100 million in debt issuance. Five expansions totaling approximately 400,000 square feet are under construction, with commitments of $7.7 million.
Dividends: On July 10, 1997, the Board declared a $0.55 cash dividend per common share payable August 15, 1997.
Risks and Contingencies:
- Leasing Risks: Approximately 164,000 square feet of space is up for renewal in the remainder of 1997. Occupancy dipped 2% since December 1996 due to tenant bankruptcies and store closings, though sales remain stable.
- Development Risks: Potential cost overruns, delays, and uncertainty regarding the accretive nature of new developments.
- Market Risks: Exposure to consumer confidence, unemployment rates, and interest rate fluctuations, though 74% of debt is fixed-rate or hedged.
- Legal/Environmental: No material litigation or known environmental liabilities are currently recorded.
Investor Verification Checklist
- Verify the occupancy rate trend and the specific impact of recent tenant bankruptcies on future renewal rates.
- Confirm the status of the $7.7 million in construction commitments and the timeline for the 400,000 square feet of expansions under construction.
- Review the utilization of the $29.7 million available credit line and the terms of the $75 million senior unsecured notes issued in March 1996.
- Assess the sustainability of the dividend payout relative to Funds From Operations (FFO) given the high capital expenditure requirements.
- Monitor the progress of pre-leasing for planned new centers in Concord, NC; Romulus, MI; and Ashburn, VA.