Tanger Inc. 10-Q Summary — Second Quarter 2021
Business context and reporting period
Unaudited results cover the three and six months ended June 30, 2021, for Tanger Factory Outlet Centers, Inc. and its operating partnership. Tanger is a self-managed REIT focused on owning and operating outlet shopping centers. At quarter-end, it operated 30 consolidated centers totaling approximately 11.5 million square feet and held interests in six unconsolidated centers totaling approximately 2.1 million square feet.
Key financial metrics
| Metric | Three months ended June 30 | Six months ended June 30 |
|---|---|---|
| Total revenue | $101.3 million, versus $64.0 million | $202.0 million, versus $175.6 million |
| Net income | $2.6 million, versus $(23.9) million | $6.9 million, versus $(52.0) million |
| Net income attributable to Tanger | $2.5 million, versus $(22.7) million | $6.6 million, versus $(49.6) million |
| Diluted EPS | $0.02, versus $(0.25) | $0.06, versus $(0.54) |
| FFO available to common shareholders | $32.4 million, versus $10.0 million | $70.6 million, versus $58.8 million |
| Core FFO available to common shareholders | $46.3 million, versus $10.0 million | $86.9 million, versus $58.8 million |
| Same-center NOI | $69.4 million, versus $37.0 million | $134.5 million, versus $107.7 million |
| Net cash from operating activities | Not separately provided | $91.3 million, versus $14.2 million |
Revenue increased 58% in the quarter and 15% year to date, primarily reflecting recovery from COVID-19-related store closures and rent reductions in 2020. Net income margins were approximately 2.6% in the quarter and 3.4% year to date, compared with negative margins in the 2020 comparable periods. Same-center NOI increased approximately 88% for the quarter and 25% year to date.
At June 30, 2021, cash and cash equivalents were $107.6 million, compared with $84.8 million at December 31, 2020. Total debt was $1.369 billion, down from $1.568 billion. Debt consisted primarily of $992.6 million of senior unsecured notes, $298.1 million of unsecured term debt and $77.9 million of mortgages. No amounts were outstanding under the unsecured lines of credit.
Total liquidity was approximately $707.6 million, consisting of cash and the full $600 million capacity of the then-existing unsecured lines of credit. The company reported that it was in compliance with its debt covenants. Approximately 95% of outstanding debt was unsecured and 92% of the gross book value of the real estate portfolio was unencumbered.
Material changes versus the prior comparable period
- Results benefited from the comparison with the heavily disrupted second quarter and first half of 2020, when government-mandated closures caused approximately $33.9 million of COVID-19-related rental revenue reductions.
- Rental revenue increased $34.6 million in the quarter and $23.5 million year to date. Variable rent tied to tenant sales was a significant contributor.
- Interest expense declined $3.6 million in the quarter and $4.4 million year to date due to debt repayments, lower swap rates and the absence of 2020 revolver borrowings.
- The company recorded a $14.0 million loss on early extinguishment of debt in 2021, including a $13.0 million make-whole premium, after redeeming $150 million of 3.875% senior notes. The remaining principal of those notes was $100 million.
- The 2020 year-to-date period included a $45.7 million impairment charge on the Foxwoods outlet center and a $3.1 million share of an impairment at the Saint-Sauveur joint venture; no comparable consolidated impairment was recorded in 2021.
- The company raised $180.9 million of net proceeds through its at-the-market equity offering, issuing approximately 9.7 million shares during the first six months.
- Capital expenditures on a cash basis declined to $11.8 million from $16.5 million, while net cash from operating activities increased substantially due in part to collection of deferred 2020 rents.
Guidance, outlook, risks and unusual items
Management did not provide a clear quantified earnings or FFO outlook in the filing. Management stated that traffic, sales and rent collections had improved, in some cases exceeding 2019 levels, but continued to expect pressure from vacancies, potential store closures and rent modifications. Consolidated occupancy was 93.0% at June 30, 2021, versus 93.8% a year earlier. Renewals and re-tenanting during the preceding twelve months produced a blended 2.4% decrease in average base rental rates.
COVID-19 remained the principal uncertainty, with potential effects on tenant solvency, rent collection, occupancy, property values, liquidity, debt covenant compliance, capital markets access and future impairment charges. Through July 30, 2021, the company had collected 94% of 2020 rents deferred until 2021; $1.4 million remained outstanding at June 30.
In July 2021, the company amended its unsecured credit facilities, reducing total capacity to $520 million but extending maturity from October 2021 to July 2025, with potential further extensions. The amendment included a $20 million liquidity line and a $500 million syndicated line. The Southaven mortgage maturity was also extended by 90 days in July 2021, with a potential extension to April 2023 subject to conditions.
Other notable items include the March 2021 sale of the Saint-Sauveur joint venture outlet center, which generated a $3.6 million foreign-currency loss, and a $2.4 million year-to-date charge for a voluntary retirement plan and executive severance. The Board declared a $0.1775 per-share dividend payable in August 2021. A share-repurchase authorization of up to $80 million remained available, but no shares were repurchased through June 30.
Important facts for investors to verify
- Whether post-pandemic tenant sales, rent collections and occupancy trends are sustained and translate into durable same-center NOI growth.
- The remaining maturity concentration, particularly approximately $555.1 million of debt scheduled for 2024 and the $104.8 million scheduled for 2023.
- Future compliance with leverage, coverage and distribution covenants as temporary COVID-era covenant flexibility expired or changed.
- The effect of the July 2021 credit-facility amendment on available liquidity, pricing and refinancing risk.
- Potential additional property or joint-venture impairments if retail conditions deteriorate.
- The sustainability of dividends and the extent to which dividend funding depends on distributions from the operating partnership.
- The company’s non-GAAP FFO, Core FFO, NOI and EBITDAre calculations and their reconciliations to GAAP results.