“We have always been contrarians,” says the younger Tanger,
who joined the Greensboro, N.C.-based company in 1986 as its
fourth employee and helped take it public in 1993. “When people
are buying and money is free, we are selling. Now that people are
trying to sell or refinance or re-equitize
their balance sheets, we are a growth company with access to capital to build.”
The Resiliency of a Bargain
AT A GLANCE
The 317,000-square-foot, upscale Tanger
Outlet Center in Mebane, N.C., is one of
only two new outlet centers expected to
open across the United States this year.
In a dismal economic climate for retailers, Tanger is a leader in one of the sector’s limited bright spots, outlet centers.
As has been the case in the past, outlet
centers have proved somewhat impervious to economic malaise in recent years.
While other segments of retail real estate
struggle to right themselves, the outlet
center business is actually growing, albeit
much more slowly than in the past. Fueling that expansion is the desire of major
retailers and manufacturers to sell off excess inventory and cater to
bargain-hungry consumers. Tanger estimates that there are about
150 major outlet centers in the United States, and the country can
support another 100 during the next five to 10 years.
“We have proven that outlets are a distribution channel that is
resilient,” says Tanger, whose company has some 400 employees
and a market capitalization of about $2.5 billion.
“In good times, people like a bargain,” Tanger says. “And in
tough times like these, they need a bargain.”
In 2008, as the Great Recession gained momentum, outlet
center sales per square foot fell by less than 2 percent for the year
to $301, according to the most-recent industry data published by
trade magazine Value Retail News. Outlet center occupancy hit a
low of nearly 94 percent in the first quarter of 2009, but went on
to post two consecutive quarters of improvement after that, ac-
cording to commercial real estate research firm CoStar Group.
In the third quarter of last year, the sector had an occupancy
rate of about 95 percent, outshining average rates of 90 to 92 percent for lifestyle, power, community and neighborhood centers,
according to CoStar. Regional and superregional malls had occupancy rates of about 92 percent and 96 percent, respectively.
Recently, CoStar predicted that outlet center occupancy could
return to pre-recession levels—upwards of 96 percent—by the
end of 2010’s second quarter.
largest outlet center owner in the country, behind Indianapolis-based Simon Property Group Inc. (NSYE: SPG). In 1993,
Tanger became the first outlet center developer to be listed on
the New York Stock Exchange as a publicly traded REIT.
Its IPO paved the way for about a half
dozen other outlet center developers to
go public in the early 1990s, but only
Tanger has survived as a stand-alone
publicly traded outlet center REIT. Over
time, others were either acquired, folded,
or went private, while Tanger quietly
amassed one of the best-performing portfolios in the business.
In 2009, Tanger’s same-center net operating income grew 1. 4 percent for the year,
and same-space tenant sales grew slightly
(0.9 percent) to $339 per square foot. Its 9. 2
million-square-foot portfolio had a year-end occupancy rate of 96 percent, continuing a 29-year track record of never ending a
year less than 95 percent occupied.
The company also has one of the lowest debt levels of all retail REITs, with a
total debt-to-market capitalization ratio
of 23. 7 percent at the end of last year. It has used only about $58
million of its $325 million unsecured line of credit and has no
major debt maturing until June 2011, when it must refinance its
line of credit and $235 million term loan.
3200 Northline Avenue, Suite 360
Greensboro, NC 27408
Stanley K. Tanger, Founder
Steven B. Tanger, President & CEO
Frank C. Marchisello, Jr., EVP, CFO
By the Numbers
Tanger presently operates and owns, or has an ownership interest
in, a portfolio of 33 upscale shopping centers in 22 states coast
to coast, totaling approximately 10. 2 million square feet leased
to over 1,900 operated by 330 companies. Tanger is the second-