“Its stock price wasn’t nearly as depressed as the mall REITs, due to its
properties holding up so well during the
downturn and its very strong balance
sheet. So it didn’t deliver the outsized
returns of its peers,” Block says.
Historically, Tanger is also among the
top performers in the entire REIT industry. Based on compound annual total
returns, it ranked fourth for the five-year
period ending in March and third for the
10-year period, according to NAREIT
Back in Fashion
Tanger is surely enjoying the spotlight,
but outlets haven’t always been a darling
among investors, or leading retailers for
In the 1980s, when the industry was in
its infancy, the centers were barebones operations. Typically, they
were built far away from towns and cities, where retailers and
manufacturers quietly sold their excess inventory and seconds
on the cheap.
“Retailers were a little embarrassed (to be in the centers) and
often cut the labels out of their products” sold there, Sullivan says.
Stanley Tanger’s first project, the former Burlington Manufacturer’s Outlet Center, was a mere 35,000 square feet when it
opened in 1981. It marked the first time that outlet stores, which
had previously been located in manufacturers’ warehouses, were
combined in a traditional retailing cluster. The center, no longer
owned by the company, was so successful that within three years
it had grown to more than 300,000 square feet.
“The industry was founded on a simple and elegant busi-
ness model: brand names sold directly to the consumer,” Steven
Tanger says. “The outlets cut out the middle man and the middle
Although Tanger underwent tremendous growth after its IPO,
some other publicly traded outlet center developers eventually
ran into trouble. Investors soured on the sector.
“The industry got a black eye. A lot of [the publicly traded outlet
center REITs] took on too much debt, and a lot of them promised
aggressive growth that they couldn’t deliver,” Block says.
Tanger Outlet Center, Park City, u T
According to Block, investors also began to wonder whether
the concept itself was a fad, given that many early centers were
populated by marginal retailers. They also worried that shoppers
might be turned off by low-priced lines manufactured specifically for outlet centers, merchandise that is often sold alongside
discounted goods formerly offered at full-priced stores.
“The whole outlet center sector was a squeaky backwater of
the REIT industry,” Block recalls.
Location, Location, Vacation
Over time, though, outlet centers continued to attract steady
streams of shoppers. Greater numbers of retailers and manufacturers came to view them as viable alternatives to malls and other
traditional shopping centers, where rents are typically higher.
The no-frills outlet centers of earlier years eventually gave
way to larger, better-designed centers populated by name-brand
concepts, situated closer to metro areas. They began to house
food courts, full-service restaurants, theaters and playgrounds.
However, outlet centers are still typically located at least 10 miles
from major markets so that retailers and manufacturers avoid
cannibalizing their full-price stores.
As shopping is among the most popular activities for vacationers, the centers have proliferated in tourist markets. Tanger has
As shopping is among the most popular activities for
vacationers, The CeNTerS hAve PrOLIferATeD
IN TOurIST mArkeTS.