NAREIT Presentation June 9th and 10th, 2010

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NAREIT Presentation June 9th and 10th, 2010
Tanger Outlets at the Arches – Deer Park, NY
Management Presentation
June 2010
•
•
•
•
•
•
Business Overview
2010 YTD Summary
2009 Summary
Development Update
Financial Strategies
Historyy of Consistent Success
2
Business Overview
3
State of the Industry
¾ Industry consolidation continues to benefit owners of larger centers.
¾ Tanger, Simon, and Prime Retail combined own approximately 60% of
the total outlet gross leasable area.
¾ New supply continues to be limited.
¾ Each year new brand name manufacturers are opening stores and
existing manufacturers are opening new concepts
concepts.
¾ Outlet center occupancy levels have not been
impacted to the same extent as other retail
properties by recent bankruptcy and store closing
announcements among retailers.
¾ In a challenging retail environment, outlet stores
continue
ti
tto b
be a viable
i bl and
d profitable
fit bl channel
h
l off
distribution for retailers and manufacturers.
¾ Landlord revenues are protected by the relatively
long-term nature of tenant leases.
Tanger – Charleston, SC
4
Growth Prospects
¾ T
Tanger continues
ti
to
t be
b successful
f l in
i obtaining
bt i i iincreases iin rental
t l rates
t
on renewals and releasing of space.
¾ New development opportunities exist as there is still tenant demand for
outlet space.
¾ Acquisition opportunities still exist but are limited and timing is unknown.
¾ Tanger divests itself of under
under-performing,
performing
smaller assets and reinvests the proceeds
in new developments and expansions or
reduces debt
debt.
Tanger – Washington, PA
5
2010 YTD Hi
Highlights
hli ht
6
Recent Events
¾ Moody’s upgrade to Baa2 from Baa3 on May 20, 2010
¾ Successfully closed a $300 million 10 year bond offering with a 6.125%
coupon (priced at 99.3% of par to yield 6.219%) on June 7, 2010. Proceeds
used to repay $235 million unsecured term loan, terminate underlying
interest rate swaps, and pay down outstanding balances under unsecured
revolving lines of credit.
¾ Saks Off Fifth opened in our Washington, PA bringing occupancy at the
center to 94%
1Q 2010 Highlights
¾ 0.7% increase in same center net operating income.
¾ 8.8%
8 8% iincrease iin average b
base rentt on lleases renewed.
d
¾ 22.5% increase in average base rent on released space.
¾ 94.8%
94 8% occupancy rate for wholly
wholly-owned
owned portfolio as of March 31
31, 2010
2010.
¾ Tenant comparable sales of $342 per square foot for the rolling 12 months
ended March 31, 2010.
7
2009 Highlights
8
2009 Highlights
¾ Year end occupancy of 96% for stabilized, wholly-owned properties,
representing the 29th consecutive year of year-end average occupancy of
95% or greater.
¾ Increased common dividend as we have each year since our IPO.
¾ Only 2.5% of revenues came from overage rent based upon tenant sales.
¾ C
Completed
l d exchange
h
offer
ff related
l d to 3
3.75%
%E
Exchangeable
h
bl S
Senior
i N
Notes,
which reduced outstanding debt by $142.3 million, in exchange for
approximately 4.9 million common shares.
¾ C
Completed
l d3
3,450,000
4 0 000 common share
h
offering
ff i at a price
i off $3
$35.50
0 per
share, with net proceeds amounting to approximately $116.8 million.
¾ Moody’s rating upgraded from Baa3 stable to Baa3 positive in September.
¾ Welcomed to our portfolio 32 new tenants, including: Express, Talbots,
Dooney & Bourke, BCBG Girls, Papaya Clothiers, and QVC.
¾ Commenced construction on a 317,000
317 000 sf wholly-owned
wholly owned new development
in Mebane, NC in October.
9
Portfolio Diversification
63.5%
8.4%
The Gap
4.6%
PVH
3.8%
Dress
Barn
3.4%
Nike
Note: As of March 31, 2010
3.3%
VF
3.1%
Adidas
3.0%
Liz
2.6%
Carters
2.2%
Polo
2.1%
Jones
Retail
Corp
Other
Retailers
10
Geographic Diversification
Well positioned portfolio of 31 wholly-owned properties throughout 21
states, plus ownership interests in 2 joint venture properties.
DO NOT DELETE this nonprinting tracker. Without it your map cannot be edited.
F:\Jobs\DTP-NY\60000\63900\63982\Artwork\63982-Tanger Outlets\63982-Tanger Outlets.wor
Corporate HQ
Wholly-owned
Unconsolidated JV
Current development
11
Summary Financial Results for the
Year Ended 12/31/09
12
FFO ((in millions))
$114.95
$118.34
$98.26
17%
Increase
2008 Adj.
j (1)
( )
2009 Adj.
j (2)
( )
3%
Increase
2010E Adj.
j (3)
( )
1)
Excludes $2.9 million termination rents, $3.3 million abandonment of due diligence costs, $8.9 million charge for
settlement of T-locks, $406,000 debt prepayment premium.
2)
Excludes $1.5 million lease termination fees, $800,000 abandonment of due diligence costs, $10.3 million charge for
executive severance, $5.2 million impairment charge for Commerce I, and $3.3 million gain on sale of Washington, PA
outparcel.
3)
Represents the midpoint of $2.37 to $2.47 revised guidance range (See Appendix), adjusted to exclude $6.7 million
charge for write-off of unamortized loan costs and settlement of interest rate swaps associated with prepayment of
13
$235 million term loan.
FFO per share
$2.64
37,429,000
Shares
2008 Adj. (1)
$2.73
$2.56
42,079,000
Shares
2009 Adj. (2)
46,227,000
Shares
2010E Adj. (3)
1)
Excludes $0.11/share termination rents, $.08/share abandonment of due diligence costs, $0.24/share charge for settlement of Tlocks & debt prepayment premium.
2)
Excludes $0.04/share lease termination fees, $0.02/share abandonment of due diligence costs, $0.25/share charge for
executive severance, $0.12/share impairment charge for Commerce I, and $0.08/share gain on sale of Washington, PA
outparcel.
3)
Represents the midpoint of $2.37 to $2.47 revised guidance range (see Appendix), adjusted to exclude $0.14 charge for write14
off of unamortized loan costs and settlement of interest rate swaps associated with prepayment of $235 million term loan.
15
Total Enterprise Value
(as of March 31, 2010)
$584,812,000
24%
$75,000,000
73%
3%
$
$2,008,506,000
Common Equity
Preferred Equity
Debt
16
Summary Operating Results
17
Growth in Same Center NOI
5.30%
4.10%
3.10%
1.40%
0 70%
0.70%
2006
2007
2008
2009
1Q 2010
18
Rental Rate Increases on Renewals and Releasing
Straight-line releasing spreads =
22.5% in 1Q2010, 30.9% in 2009,
44.1% in 2008
(On a cash basis)
19.9%
%
Straight-line renewal spreads =
8.8% in 1Q2010, 9.7% in 2009,
17.5% in 2008
17.5%
10.3%
9.8%
6.6%
5 5% 6.3%
5.5%
2004
2005
2006
2007
2008
2009 1Q2010
19
Average Tenant Sales Per Square Foot
(3% compound annual increase)
$339
$342
$
$281
$226
1995
2000
2009
1Q 2010
20
21
Development Update
22
Mebane, NC
¾ 317,000 sf development
¾ $64.9
$64 9 million budget
¾ Projected opening in time for 2010
holiday shopping season
g
or out for signature
g
for
¾ Leases signed
approximately 86% of GLA as of
June 1, 2010
¾ Tenants include Saks Off Fifth, Coach,
J Crew
Crew, GAP
GAP, Banana Republic,
Republic Nike
Nike,
Tommy Hilfiger, & more
23
Current
Hilton Head I, SC
Redevelopment
¾ Currentlyy 162,000
,
sf GLA
¾ Shopper unfriendly design
24
Redeve
eloped
Hilton Head I, SC
p
Redevelopment
¾ 176,000 sf GLA plus 4 outparcel pads when redeveloped
¾ Shopper-friendly redevelopment will be 1st LEED certified green shopping
center in Beaufort
f County
C
¾ $50 million investment
¾ Projected opening in second half of 2011
25
Internal Criteria for Development
¾Predevelopment costs are limited to those associated with:
¾ Costs to control the land (option contract costs)
¾ Pre-leasing costs
¾ Due diligence costs
¾Criteria required to purchase land and begin development
¾ Positive results of the due diligence process
¾ Pre-leasing of 50% or greater with an acceptable tenant mix and visibility of
leasing of the remaining leasable space to 75%
¾ Receipt of all non-appealable permits required to obtain a building permit.
¾ Acceptable return on cost analysis
26
Financial Strategies
27
Summary of Financial
Strategies
The following are strategic objectives of Tanger’s financial decision
making process:
¾ Focus on improving investment grade rating
quality
y coverage
g and leverage
g ratios
¾ Maintain q
¾ Continue the use of unsecured financing
g on lines of credit
¾ Maintain relativelyy low usage
¾ Use off balance sheet joint ventures only when necessary
¾ Maintain manageable levels of debt maturities
¾ Recycle capital through the sale of non-core assets and land
parcels
¾ Generate capital internally (cash flow in excess of dividends paid)
28
Limited Exposure
p
to Rising
g Interest Rates
As of March 31, 2010,
only 16% of total debt at
variable rates
$93 400 000
$93,400,000
$491 529 000
$491,529,000
Fixed Rate
Variable Rate
29
Financial Capacity
Current capacity of $325 million under lines of credit
¾ Bank of America, $100 million, 06/30/2011 maturity
¾ Wells Fargo, $125 million, 06/30/2011 maturity
¾ SunTrust, $40 million, 08/31/2011 maturity
¾ BB&T, $35 million, 06/30/2011 maturity
¾ Citicorp, $25 million, 06/30/2011 maturity
As of March 31
31, 2010
2010, Tanger’s
Tanger s usage was only 29% of total
available capacity under lines of credit. On a proforma basis after
use of proceeds from the $300 million bond issuance on June 7th,
usage
sage would
o ld ha
have
e been onl
only 11%
11%.
30
Proforma Maturities of Debt Outstanding as of 3/31/10 ((1))
1)
2)
Assumes use of proceeds of $300M bond offering on March 31, 2010 for repayment of $235M term loan
due June 2011 and reduction of line of credit balances.
Represents convertible debt, which is puttable at holders’ option beginning 08/15/2011.
31
Reinvesting in the Company
Excess cash flow over the dividend is reinvested
in existing centers, new expansions, new
developments, acquisitions or to pay down debt
– 2009 payout ratio of 56%
$56.4 Million Dividends
$56.4 Million Dividends
32
Financial Profile
Key Financial Ratios as of March 31, 2010:
Calculation
Limit
Key Bond Covenants (based on GAAP consolidation):
• Total debt to adjusted total assets
36%
60%
0%
40%
• Unencumbered assets to unsecured debt
280%
135%
• Interest coverage
4.77 x
1.50 x
• Secured debt to adjusted total assets
33
History of Consistent Results and
Investor Reward
34
35
Summary
36
Whyy
?
¾Investment Diversification
Only public REIT with pure outlet portfolio
¾Conservatively Structured Balance Sheet
22% debt to market cap at March 31, 2010
100% unencumbered portfolio
¾Brand Recognition
Recognized & respected by tenants and shoppers alike
¾Tenured Management Team
Executives average 15 years of Tanger service
¾Disciplined
p
Development
p
Approach
pp
Will not build on speculation
¾Strong Portfolio of Operating Properties
Geographic diversification
Tenant diversification
High credit quality tenants
Stable annual lease rollover
Properties built to easily reconfigure
No big boxes
37
Disclaimer
Estimates of future net income per share and FFO per share are by
definition, and certain other matters discussed in this press release
regarding our remerchandising strategy
strategy, the renewal and re
re-tenanting
tenanting of
space, the development of new centers and redevelopment of existing
centers, tenant sales and sales trends, interest rates, funds from
operations and coverage of the current dividend may be forward-looking
statements within the meaning of the federal securities laws. These
forward-looking statements are subject to risks and uncertainties. Actual
results could differ materially from those projected due to various factors
including but not limited to
including,
to, the risks associated with general economic
and local real estate conditions, the company’s ability to meet its
obligations on existing indebtedness or refinance existing indebtedness on
favorable terms, the availability and cost of capital, the company’s ability to
l
lease
it
its properties,
ti
th
the company’s
’ iinability
bilit tto collect
ll t rentt d
due tto th
the
bankruptcy or insolvency of tenants or otherwise, and competition. For a
more detailed discussion of the factors that affect our operating results,
interested parties should review the Tanger Factory Outlet Centers, Inc.
Annual Report on Form 10-K for the fiscal year ended December 31, 2009.
38
A
Appendix
di
39
(1):
Reconciliation
R
ili ti off Guidance
G id
Net income to FFO
Estimated diluted net income per common share
Noncontrolling interest, gain/loss on the sale of real
estate, depreciation and amortization
uniquely significant to real estate including
noncontrolling interest share, and our share
of joint ventures
Estimated diluted FFO per share
1)
Low
Range
High
Range
$0.62
$0.72
1.75
1.75
$2.37
$2.47
Includes $0.14 charge for write-off of unamortized loan costs and settlement of interest rate swaps associated
with prepayment of $235 million term loan.
40