GREENSBORO, N.C., May 6,
2019 /PRNewswire/ -- Tanger Factory Outlet Centers, Inc.
(NYSE:SKT) today reported financial and operating results
for the three months ended March 31,
2019.
First Quarter Results
- Net income available to common shareholders was $0.66 per share, or $61.7
million, compared to $0.24 per
share, or $22.6 million, for the
prior year period. The current year period includes a gain on the
sale of four outlet centers totaling $43.4
million, or $0.44 per
share.
- Funds from operations ("FFO") available to common shareholders
was $0.57 per share, or $55.9 million, compared to $0.60 per share, or $59.3
million, for the prior year period
FFO is a widely accepted supplemental non-GAAP financial measure
used in the real estate industry to measure and compare the
operating performance of real estate companies. A complete
reconciliation containing adjustments from GAAP net income to FFO
is included in this release. Per share amounts for net income and
FFO are on a diluted basis.
"First quarter results were as anticipated. Our targeted
marketing programs and experiential events helped drive increased
traffic to our centers," said Steven B.
Tanger, Chief Executive Officer. "As a desired destination
for our shoppers, Tanger Centers
provide an important, proven and profitable distribution channel
for our tenants. Following the recent strategic sale of four
non-core, declining assets, we are better positioned to allocate
our resources towards our centers with more favorable growth
profiles. However, as the year progresses, we continue to
expect that our results will be impacted by previously announced
store closures. We remain focused on filling vacant space with high
volume brand name tenants which do not typically require
significant redevelopment capital. With a low 61% payout ratio
currently, we plan to maintain a secure dividend and to generate
solid cash flows. Supported by our strong balance sheet, these cash
flows provide Tanger with stability and allow us to fund selective
redevelopment and development projects as we strive to continue to
build shareholder value."
Operating Metrics
The Company's key portfolio results were as follows:
- Consolidated portfolio occupancy rate was 95.4% on March 31, 2019, compared to 95.9% on March 31, 2018
- Blended average rental rates improved 0.6% on a cash basis and
4.7% on a straight-line basis for all renewals and re-tenanted
leases that commenced during the trailing twelve months ended
March 31, 2019
- Lease termination fees totaled $1.1
million for first quarters of both 2019 and 2018
- Portfolio net operating income ("NOI") for the consolidated
portfolio decreased 0.8% for the quarter
- Same Center NOI for the consolidated portfolio decreased 0.5%
for the quarter
- Average tenant sales productivity for the consolidated
portfolio was $391 per square foot
for the twelve months ended March 31,
2019, compared to $384 per
square foot in the comparable prior year period. Average tenant
sales for the twelve months ended March 31,
2019 includes the Company's Fort
Worth, Texas center, which stabilized in the first quarter
of 2019.
- Same center tenant sales performance for the overall portfolio
increased 0.6% for the twelve months ended March 31, 2019 compared to the twelve months
ended March 31, 2018
- Occupancy cost ratio for the trailing twelve months ended
March 31, 2019 was 10.0%
Same Center NOI and Portfolio NOI are supplemental non-GAAP
financial measures of our operating performance. Complete
definitions of Same Center NOI and Portfolio NOI and a
reconciliation to the nearest comparable GAAP measure are included
in this release.
Leasing Activity
Total commenced leases for the trailing twelve months ended
March 31, 2019 that were renewed or released for all terms,
included 361 leases totaling approximately 1.8 million square
feet.
As of March 31, 2019, Tanger had
lease renewals executed or in process for 63.0% of the space in the
consolidated portfolio scheduled to expire during 2019, compared to
63.9% of the space scheduled to expire during 2018 that was
executed or in process as of March 31,
2018.
Tanger recaptured approximately 82,000 square feet within its
consolidated portfolio during the first quarter of 2019 related to
bankruptcies and brand-wide restructurings by retailers, most of
which closed at the end of the quarter. During the first
quarter of 2018, the Company recaptured approximately 37,000 square
feet.
Strategic Portfolio Management
Consistent with its long-standing history of financial
stewardship and strategic portfolio management, Tanger completed
the sale of four non-core outlet centers for total gross proceeds
of $130.5 million on March 29, 2019. The four properties were
located in Nags Head, North
Carolina; Ocean City,
Maryland; Park City, Utah;
and Williamsburg, Iowa and
represented 6.8% of Tanger's consolidated portfolio square footage
and approximately 5.1% of its forecasted 2019 Portfolio NOI.
With the completion of this sale, Tanger improved its overall
portfolio quality by disposing of non-core declining assets that it
did not expect would achieve the long-term growth targets for its
overall portfolio. Some characteristics that contributed to
Tanger identifying these particular assets as non-core include
demographic and competitive changes in the markets, incremental
capital expenditures related to asset age or market climate, and
small asset size without expansion capacity. The average age
of the properties sold was 24 years.
The key performance metrics of the four sold centers were well
below those of the Company's remaining portfolio, as follows:
Metric
|
2018
As
Reported
|
2018
Average
for
Sold
Properties
|
2018
Excluding Sold
Properties
|
TTM tenant sales per
square foot for consolidated portfolio
|
$385
|
$295
|
$392
|
TTM same center
tenant sales performance for the overall portfolio
|
+1.9%
|
-3.2%
|
+2.2%
|
Consolidated
portfolio year-end occupancy
|
96.8%
|
95.8%
|
96.9%
|
Consolidated
portfolio cash basis rent spreads for TTM lease
commencements
|
-1.4%
|
-10.2%
|
-0.7%
|
Consolidated
portfolio straight-line basis rent spreads for TTM lease
commencements
|
+5.3%
|
-3.3%
|
+6.0%
|
Tanger used the net proceeds of $128.2 million to repay outstanding balances
under its lines of credit, but may ultimately utilize a portion of
the related increase in line availability for common share
repurchases.
Tanger has generated gross proceeds of $402 million through the sale of thirteen
non-core assets comprising 2.1 million square feet since December
2014. During this time, the Company has invested over
$1 billion to create additional value
by expanding its footprint, reinvesting in its portfolio and buying
back its shares. This includes the addition of 2.6 million
square feet through the development of eight new outlet centers and
the acquisition of its joint venture partners' ownership interests
in three key assets, along with reinvesting in its existing
portfolio through renovations that attract new high-volume
retailers.
Dividend
In February 2019, the Company's
Board of Directors approved a 1.4% increase in the annualized
dividend on its common shares from $1.40 per share to $1.42 per share and simultaneously declared a
quarterly dividend of $0.355 per
share for the first quarter ended March 31,
2019. This cash dividend will be payable on May 15, 2019 to holders of record on April 30, 2019. Since becoming a public
company in May 1993, the Company has
paid a cash dividend each quarter and has increased its dividend
each year.
Balance Sheet and Capital Market Activity
As of March 31, 2019:
- Total enterprise value was $3.7
billion and debt-to-enterprise value ratio was 43%
- Total outstanding floating rate debt was approximately
$51 million, representing 3% of total
consolidated debt outstanding, or less than 2% of total enterprise
value
- Unused capacity under the Company's $600
million unsecured lines of credit was 97.5%, or $584.8 million
- Weighted average interest rate was 3.6% and weighted average
term to maturity of outstanding consolidated debt, including
extension options, was approximately 6.2 years
- Approximately 94% of the Company's consolidated square footage
was unencumbered by mortgages
- Interest coverage ratio was 4.2 times for the first quarter of
2019, compared to 4.4 times for the first quarter of 2018
- FFO payout ratio was 61% for the first quarter of 2019
FFO payout ratio is a supplemental non-GAAP financial measure of
the Company's operating performance. The Company's definition
of FFO payout ratio is included below in "Non-GAAP Supplemental
Measures."
Due to the pending asset sales, the Company did not repurchase
any shares during the first quarter. Cumulatively, the
Company has repurchased approximately 2.8 million common shares at
a weighted average price of $24.48
per share for total consideration of approximately $69.3 million since May 2017. In
February 2019, the Company's Board of
Directors approved an increase of the remaining authorization to
$100 million and an extension of the
expiration by two years to May
2021.
Tanger's priority uses of capital at this time include:
reinvesting in its assets, paying its dividend, repurchasing its
common shares opportunistically, and deleveraging its balance
sheet, while evaluating potential long-term opportunities for
growth.
Guidance for 2019
The Company has updated its estimated net income and FFO
guidance due to the impact of the recent assets sales discussed
above. Due to the limited NOI contribution of these assets, the
Company does not anticipate any material impact to its Same Center
NOI trend assumptions for 2019. Management currently believes
its net income and FFO for 2019 will be as follows:
For the year ended
December 31, 2019:
|
|
|
|
Low
Range
|
High
Range
|
Estimated diluted
net income per share
|
$1.30
|
$1.36
|
Depreciation and
amortization of real estate assets - consolidated and the Company's
share of unconsolidated joint ventures
|
1.35
|
1.35
|
Gain on sale of
assets
|
(0.44)
|
(0.44)
|
Other
|
$0.01
|
$0.01
|
Estimated diluted
FFO per share
|
$2.22
|
$2.28
|
|
|
|
|
Tanger's estimates reflect the following key assumptions:
- Same Center NOI guidance for the consolidated portfolio between
(2.00)% and (2.75)%, which reflects the following:
-
- Projected 2019 store closings of up to 200,000 square feet for
the consolidated portfolio, including 82,000 square feet that
closed late in the first quarter and 86,000 square feet of
additional known closures that occurred in April
- Projected average occupancy for the year between 94.0% and
94.5%, with occupancy and same center NOI lower in the last nine
months than the first three months as a result of the store
closings referenced above
- Projected full year lease termination fees (which are not
included in Same Center NOI) of approximately $1.5 million for the consolidated portfolio
- Incremental revenue of approximately $5
million, or $0.05 per share,
from the straight-line recognition of fixed common area maintenance
related to the implementation of the new lease standard
- Average general and administrative expense of between
$12.3 million and $12.7 million per quarter, which includes
approximately $4 - $5 million, or $0.04 - $0.05 per
share, of incremental expense related to the implementation of the
new lease standard
- Interest expense for the year for the consolidated portfolio of
$61.0 million to $63.5 million, assuming all of the net proceeds
from the asset sales completed in March
2019 are used to repay outstanding debt balances
- The Company's share of interest expense in the unconsolidated
portfolio of $8.4 million to
$8.9 million
- 2019 weighted average diluted common shares of approximately
92.6 million for earnings per share and 97.5 million for FFO per
share
- Combined recurring capital expenditures and second generation
tenant allowances of approximately $36
million to $40 million
- Does not include the impact of any financing activity, the sale
of any outparcels, properties or joint venture interests, or the
acquisition of any properties or joint venture partner
interests
First Quarter Conference Call
Tanger will host a conference call to discuss its first quarter
results for analysts, investors and other interested parties on
Tuesday, May 7, 2019, at 8:30 a.m. Eastern Time. To access the
conference call, listeners should dial 1-877-277-5113 and provide
conference ID # 6486093 to be connected to the Tanger Factory
Outlet Centers First Quarter 2019 Financial Results call.
Alternatively, the call will be web cast by S&P Global Market
Intelligence and can be accessed at Tanger's web site,
investors.tangeroutlets.com. A telephone replay of the call
will be available from May 7, 2019 at
11:00 a.m. through May 14, 2019 at 11:59
p.m. by dialing 1-855-859-2056, conference ID #
6486093. An online archive of the web cast will also be
available through May 14, 2019.
About Tanger Factory Outlet Centers, Inc.
Tanger Factory Outlet Centers, Inc. (NYSE:SKT), is a
publicly-traded REIT headquartered in Greensboro, North Carolina that operates and
owns, or has an ownership interest in, a portfolio of 40 upscale
outlet shopping centers. Tanger's operating properties are
located in 20 states coast to coast and in Canada, totaling approximately 14.4 million
square feet leased to over 2,900 stores operated by more than 500
different brand name companies. The Company has more than 38
years of experience in the outlet industry. Tanger Outlet
Centers continue to attract more than 181 million shoppers
annually. Tanger is furnishing a Form 8-K with the Securities
and Exchange Commission that includes a supplemental information
package for the quarter ended March 31, 2019. For more
information on Tanger Outlet Centers, call 1-800-4TANGER or visit
the Company's web site at www.tangeroutlets.com.
Safe Harbor Statement
This news release contains certain forward-looking statements
within the meaning of Section 27A of the Securities Act of 1933, as
amended, and Section 21E of the Securities Exchange Act of 1934, as
amended. The Company intends such forward-looking statements to be
covered by the safe harbor provisions for forward-looking
statements contained in the Private Securities Litigation Reform
Act of 1995 and includes this statement for purposes of complying
with the safe harbor provisions. Forward-looking statements, which
are based on certain assumptions and describe the Company's future
plans, strategies and expectations, are generally identifiable by
use of the words "believe," "expect," "intend," "anticipate,"
"estimate," "project," "will," "forecast" or similar expressions,
and include the Company's expectations regarding its financial
results and the assumptions used to forecast such expected results,
uses of capital, dividend, cash flows, filling vacant space and
share repurchases.
You should not rely on forward-looking statements since they
involve known and unknown risks, uncertainties and other important
factors which are, in some cases, beyond our control and which
could materially affect our actual results, performance or
achievements. Important factors which may cause actual results to
differ materially from current expectations include, but are not
limited to: our inability to develop new outlet centers or expand
existing outlet centers successfully; risks related to the economic
performance and market value of our outlet centers; the relative
illiquidity of real property investments; impairment charges
affecting our properties; our dispositions of assets may not
achieve anticipated results; competition for the acquisition and
development of outlet centers, and our inability to complete outlet
centers we have identified; environmental regulations affecting our
business; risk associated with a possible terrorist activity or
other acts or threats of violence and threats to public safety; our
dependence on rental income from real property; our dependence on
the results of operations of our retailers; the fact that certain
of our properties are subject to ownership interests held by third
parties, whose interests may conflict with ours; risks related to
uninsured losses; the risk that consumer, travel, shopping and
spending habits may change; risks associated with our Canadian
investments; risks associated with attracting and retaining key
personnel; risks associated with debt financing; risk associated
with our guarantees of debt for, or other support we may provide
to, joint venture properties; the effectiveness of our interest
rate hedging arrangements; uncertainty relating to the potential
phasing out of LIBOR; our potential failure to qualify as a REIT;
our legal obligation to make distributions to our shareholders;
legislative or regulatory actions that could adversely affect our
shareholders, including the recent changes in the U.S. federal
income taxation of U.S. businesses; our dependence on distributions
from the Operating Partnership to meet our financial obligations,
including dividends; the risk of a cyber-attack or an act of
cyber-terrorism and other important factors set forth under Item 1A
- "Risk Factors" in the Company's and the Operating Partnership's
Annual Report on Form 10-K for the year ended December 31, 2018, as may be updated or
supplemented in the Company's Quarterly Reports on Form 10-Q and
the Company's other filings with the SEC. Accordingly, there is no
assurance that the Company's expectations will be realized. The
Company disclaims any intention or obligation to update the forward
looking statements, whether as a result of new information, future
events or otherwise. You are advised to refer to any further
disclosures the Company makes or related subjects in the Company's
Current Reports on Form 8-K that the Company files with the
SEC.
Contact
Information
|
|
|
|
Cyndi Holt
|
Jim
Williams
|
VP, Investor
Relations
|
EVP &
CFO
|
336-834-6892
|
336-834-6800
|
cyndi.holt@tangeroutlets.com
|
jim.williams@tangeroutlets.com
|
|
TANGER FACTORY
OUTLET CENTERS, INC. AND SUBSIDIARIES
CONSOLIDATED
STATEMENTS OF OPERATIONS
(in thousands,
except per share data)
(Unaudited)
|
|
|
|
|
Three months
ended
|
|
|
March
31,
|
|
|
2019
|
|
2018
|
|
Revenues:
|
|
|
|
|
Rental revenues
(1)
|
$
|
119,954
|
|
$
|
120,656
|
|
Management, leasing
and other services (2)
|
1,342
|
|
1,199
|
|
Other
revenues
|
1,859
|
|
1,680
|
|
Total
revenues
|
123,155
|
|
123,535
|
|
Expenses:
|
|
|
|
|
|
|
Property
operating
|
42,377
|
|
42,218
|
|
General and
administrative (3)
|
12,145
|
|
11,112
|
|
Depreciation and
amortization
|
31,760
|
|
33,123
|
|
Total
expenses
|
86,282
|
|
86,453
|
|
Other income
(expense):
|
|
|
|
|
Interest
expense
|
(16,307)
|
|
(15,800)
|
|
Gain on sale of
assets
|
43,422
|
|
—
|
|
Other
income
|
224
|
|
209
|
|
Total other income
(expense)
|
27,339
|
|
(15,591)
|
|
Income before
equity in earnings of unconsolidated joint ventures
|
|
64,212
|
|
21,491
|
|
Equity in earnings of
unconsolidated joint ventures
|
1,629
|
|
2,194
|
|
Net
income
|
65,841
|
|
23,685
|
|
Noncontrolling
interests in Operating Partnership
|
(3,315)
|
|
(1,217)
|
|
Noncontrolling
interests in other consolidated partnerships
|
(195)
|
|
370
|
|
Net income
attributable to Tanger Factory Outlet Centers, Inc.
|
62,331
|
|
22,838
|
|
Allocation of
earnings to participating securities
|
(611)
|
|
(263)
|
|
Net income
available to common shareholders of
Tanger Factory
Outlet Centers, Inc.
|
$
|
61,720
|
|
$
|
22,575
|
|
|
|
|
|
|
|
|
Basic earnings per
common share:
|
|
|
|
|
Net income
|
$
|
0.66
|
|
$
|
0.24
|
|
|
|
|
|
|
Diluted earnings
per common share:
|
|
|
|
|
Net income
|
$
|
0.66
|
|
$
|
0.24
|
|
(1)
|
In connection with
our adoption of ASC 842 on January 1, 2019, rental revenues
includes base rentals, percentage rentals, and expense
reimbursements for both periods presented. Additionally, for
the three months ended March 31, 2019, rental revenues is presented
net of uncollectible tenant revenues and includes a straight-line
rent adjustment of $1.5 million to record contractual payments
received as consideration from certain executory costs on a
straight-line basis.
|
|
|
(2)
|
Upon adoption of ASC
842, expense reimbursements from joint ventures of $586,000
previously included in expense reimbursements for the three months
ended March 31, 2018, which are not related to leases, have been
reclassified to management, leasing and other services on the
consolidated statements of operations to conform to the current
year presentation.
|
|
|
(3)
|
Upon adoption of ASC
842, indirect internal leasing costs previously capitalized are now
expensed. For the three months ended March 31, 2019, lease costs of
approximately $1.1 million were expensed as general and
administrative expenses which would have been capitalized under the
previous accounting standard.
|
TANGER FACTORY
OUTLET CENTERS, INC. AND SUBSIDIARIES
CONSOLIDATED
BALANCE SHEETS
(in thousands,
except share data)
(Unaudited)
|
|
|
March
31,
|
|
December
31,
|
|
2019
|
|
2018
|
Assets
|
|
|
|
Rental
property:
|
|
|
|
Land
|
$
|
267,910
|
|
$
|
278,428
|
Buildings, improvements and fixtures
|
2,639,764
|
|
2,764,649
|
Construction in progress
|
—
|
|
3,102
|
|
2,907,674
|
|
3,046,179
|
Accumulated depreciation
|
(941,193)
|
|
(981,305)
|
Total rental property,
net
|
1,966,481
|
|
2,064,874
|
Cash and
cash equivalents
|
1,616
|
|
9,083
|
Investments in unconsolidated joint ventures
|
97,654
|
|
95,969
|
Deferred
lease costs and other intangibles, net
|
106,170
|
|
116,874
|
Operating lease right-of-use assets (1)
|
87,679
|
|
—
|
Prepaids
and other assets
|
94,224
|
|
98,102
|
Total assets
|
$
|
2,353,824
|
|
$
|
2,384,902
|
|
|
|
|
|
|
Liabilities and
Equity
|
|
|
|
Liabilities
|
|
|
|
Debt:
|
|
|
|
Senior, unsecured
notes, net
|
$
|
1,137,145
|
|
$
|
1,136,663
|
Unsecured term loan,
net
|
346,950
|
|
346,799
|
Mortgages payable,
net
|
86,572
|
|
87,471
|
Unsecured lines of
credit, net
|
12,117
|
|
141,985
|
Total debt
|
1,582,784
|
|
1,712,918
|
Accounts payable and
accrued expenses
|
87,536
|
|
82,676
|
Operating lease
liabilities (1)
|
92,354
|
|
—
|
Other
liabilities
|
87,707
|
|
83,773
|
Total liabilities
|
1,850,381
|
|
1,879,367
|
Commitments and
contingencies
|
|
|
|
Equity
|
|
|
|
Tanger Factory
Outlet Centers, Inc.:
|
|
|
|
Common shares, $.01
par value, 300,000,000 shares authorized, 94,102,666 and 93,941,783
shares issued and outstanding at March 31, 2019 and December 31,
2018, respectively
|
941
|
|
939
|
Paid in
capital
|
780,936
|
|
778,845
|
Accumulated distributions in excess of net income
|
(276,491)
|
|
(272,454)
|
Accumulated other comprehensive loss
|
(27,153)
|
|
(27,151)
|
Equity attributable to Tanger Factory Outlet Centers,
Inc.
|
478,233
|
|
480,179
|
Equity
attributable to noncontrolling interests:
|
|
|
Noncontrolling
interests in Operating Partnership
|
25,210
|
|
25,356
|
Noncontrolling
interests in other consolidated partnerships
|
—
|
|
—
|
Total equity
|
503,443
|
|
505,535
|
Total liabilities and equity
|
$
|
2,353,824
|
|
$
|
2,384,902
|
(1)
In connection with our adoption of ASC 842 on January 1, 2019,
operating lease right-of-use assets and operating lease
liabilities were recorded.
|
TANGER FACTORY
OUTLET CENTERS, INC. AND SUBSIDIARIES
CENTER
INFORMATION
(Unaudited)
|
|
|
March
31,
|
|
2019
|
2018
|
Gross leasable
area open at end of period (in thousands):
|
|
|
|
Consolidated
|
|
12,047
|
12,920
|
Partially owned -
unconsolidated
|
|
2,371
|
2,370
|
Total
|
|
14,418
|
15,290
|
|
|
|
|
Outlet centers in
operation at end of period:
|
|
|
|
Consolidated
|
|
32
|
36
|
Partially owned -
unconsolidated
|
|
8
|
8
|
Total
|
|
40
|
44
|
|
|
|
|
States operated in at
end of period (1)
|
|
19
|
22
|
Occupancy at end of
period (1), (2)
|
|
95.4%
|
95.9%
|
(1) Excludes the centers
in which we have ownership interests but are held in unconsolidated
joint ventures.
|
(2) Excludes centers not
yet stabilized at period end. The 2018 period excludes our
Fort Worth outlet center (which
opened during
the fourth quarter of 2017).
|
NON-GAAP SUPPLEMENTAL MEASURES
Funds From Operations
Funds From Operations ("FFO") is a widely used measure of the
operating performance for real estate companies that supplements
net income (loss) determined in accordance with GAAP. We
determine FFO based on the definition set forth by the National
Association of Real Estate Investment Trusts ("NAREIT"), of which
we are a member. In December 2018,
NAREIT issued "NAREIT Funds From Operations White Paper - 2018
Restatement" which clarifies, where necessary, existing guidance
and consolidates alerts and policy bulletins into a single document
for ease of use. NAREIT defines FFO as net income/(loss) available
to the Company's common shareholders computed in accordance with
generally accepted accounting principles in the United States ("GAAP"), excluding (i)
depreciation and amortization related to real estate, (ii) gains or
losses from sales of certain real estate assets, (iii) gains
and losses from change in control, (iv) impairment write-downs of
certain real estate assets and investments in entities when the
impairment is directly attributable to decreases in the value
of depreciable real estate held by the entity and (v) after
adjustments for unconsolidated partnerships and joint ventures
calculated to reflect FFO on the same basis.
FFO is intended to exclude historical cost depreciation of real
estate as required by GAAP which assumes that the value of real
estate assets diminishes ratably over time. Historically, however,
real estate values have risen or fallen with market conditions.
Because FFO excludes depreciation and amortization of real estate
assets, gains and losses from property dispositions and
extraordinary items, it provides a performance measure that, when
compared year over year, reflects the impact to operations from
trends in occupancy rates, rental rates, operating costs,
development activities and interest costs, providing perspective
not immediately apparent from net income.
We present FFO because we consider it an important supplemental
measure of our operating performance. In addition, a portion
of cash bonus compensation to certain members of management is
based on our FFO, which is described in the section below. We
believe it is useful for investors to have enhanced transparency
into how we evaluate our performance and that of our
management. In addition, FFO is frequently used by securities
analysts, investors and other interested parties in the evaluation
of REITs, many of which present FFO when reporting their results.
FFO is also widely used by us and others in our industry to
evaluate and price potential acquisition candidates. We believe
that FFO payout ratio, which represents regular distributions to
common shareholders and unit holders of the Operating Partnership
expressed as a percentage of FFO, is useful to investors because it
facilitates the comparison of dividend coverage between REITs.
NAREIT has encouraged its member companies to report their FFO as a
supplemental, industry-wide standard measure of REIT operating
performance.
FFO has significant limitations as an analytical tool, and you
should not consider it in isolation, or as a substitute for
analysis of our results as reported under GAAP. Some of these
limitations are:
- FFO does not reflect our cash expenditures, or future
requirements, for capital expenditures or contractual
commitments;
- FFO does not reflect changes in, or cash requirements for, our
working capital needs;
- Although depreciation and amortization are non-cash charges,
the assets being depreciated and amortized will often have to be
replaced in the future, and FFO does not reflect any cash
requirements for such replacements; and
- Other companies in our industry may calculate FFO differently
than we do, limiting its usefulness as a comparative measure.
Because of these limitations, FFO should not be considered as a
measure of discretionary cash available to us to invest in the
growth of our business or our dividend paying capacity. We
compensate for these limitations by relying primarily on our GAAP
results and using FFO only as a supplemental measure.
Funds Available for Distribution
Funds Available for Distribution ("FAD") is a non-GAAP financial
measure that we define as FFO, excluding corporate depreciation,
amortization of finance costs, amortization of net debt discount
(premium), amortization of share-based compensation, straight-line
rent amounts, market rent amounts, less 2nd generation tenant
allowances, capital improvement expenditures, and our share of the
items listed above for our unconsolidated joint ventures.
Investors, analysts and the Company utilize FAD as an indicator of
common dividend potential. The FAD payout ratio, which represents
regular distributions to common shareholders and unit holders of
the Operating Partnership expressed as a percentage of FAD,
facilitates the comparison of dividend coverage between REITs.
We believe that net income (loss) is the most directly
comparable GAAP financial measure to FAD. FAD does not represent
cash generated from operating activities in accordance with GAAP
and should not be considered as an alternative to net income (loss)
as an indication of our performance or to cash flows as a measure
of liquidity or our ability to make distributions. Other companies
in our industry may calculate FAD differently than we do, limiting
its usefulness as a comparative measure.
Portfolio Net Operating Income and Same Center Net Operating
Income
We present portfolio net operating income ("Portfolio NOI") and
same center net operating income ("Same Center NOI") as
supplemental measures of our operating performance. Portfolio
NOI represents our property level net operating income which is
defined as total operating revenues less property operating
expenses and excludes termination fees and non-cash adjustments
including straight-line rent, net above and below market rent
amortization and gains or losses on the sale of outparcels
recognized during the periods presented. We define Same Center NOI
as Portfolio NOI for the properties that were operational for the
entire portion of both comparable reporting periods and which were
not acquired or subject to a material expansion or non-recurring
event, such as a natural disaster, during the comparable reporting
periods.
We believe Portfolio NOI and Same Center NOI are non-GAAP
metrics used by industry analysts, investors and management to
measure the operating performance of our properties because they
provide performance measures directly related to the revenues and
expenses involved in owning and operating real estate assets and
provide a perspective not immediately apparent from net income,
FFO. Because Same Center NOI excludes properties
developed, redeveloped, acquired and sold; as well as non-cash
adjustments, gains or losses on the sale of outparcels and
termination rents; it highlights operating trends such as occupancy
levels, rental rates and operating costs on properties that were
operational for both comparable periods. Other REITs may use
different methodologies for calculating Portfolio NOI and Same
Center NOI, and accordingly, our Portfolio NOI and Same Center NOI
may not be comparable to other REITs.
Portfolio NOI and Same Center NOI should not be considered
alternatives to net income (loss) or as an indicator of our
financial performance since they do not reflect the entire
operations of our portfolio, nor do they reflect the impact of
general and administrative expenses, acquisition-related expenses,
interest expense, depreciation and amortization costs, other
non-property income and losses, the level of capital expenditures
and leasing costs necessary to maintain the operating performance
of our properties, or trends in development and construction
activities which are significant economic costs and activities that
could materially impact our results from operations. Because of
these limitations, Portfolio NOI and Same Center NOI should not be
viewed in isolation or as a substitute for performance measures
calculated in accordance with GAAP. We compensate for these
limitations by relying primarily on our GAAP results and using
Portfolio NOI and Same Center NOI only as supplemental
measures.
TANGER FACTORY
OUTLET CENTERS, INC. AND SUBSIDIARIES
RECONCILIATION OF
GAAP TO NON-GAAP SUPPLEMENTAL MEASURES
(in thousands,
except per share)
(Unaudited)
|
|
|
Below is a
reconciliation of net income to FFO:
|
|
|
|
Three months
ended
|
|
|
|
March
31,
|
|
|
|
2019
|
|
2018
|
|
Net
income
|
|
$
|
65,841
|
|
$
|
23,685
|
|
Adjusted
for:
|
|
|
|
|
|
|
|
Depreciation and
amortization of real estate assets - consolidated
|
|
31,148
|
|
32,542
|
|
Depreciation and
amortization of real estate assets - unconsolidated joint
ventures
|
|
3,130
|
|
3,229
|
|
Gain on sale of
assets
|
|
(43,422)
|
|
—
|
|
FFO
|
|
56,697
|
|
59,456
|
|
FFO attributable to
noncontrolling interests in other consolidated
partnerships
|
|
(195)
|
|
370
|
|
Allocation of
earnings to participating securities
|
|
(611)
|
|
(477)
|
|
FFO available to
common shareholders (1)
|
|
$
|
55,891
|
|
$
|
59,349
|
|
FFO available to
common shareholders per share - diluted
(1)
|
|
$
|
0.57
|
|
$
|
0.60
|
|
|
|
|
|
|
|
Weighted Average
Shares:
|
|
|
|
|
|
Basic weighted
average common shares
|
|
93,303
|
|
93,644
|
|
Diluted weighted
average common shares (for earnings per share
computations)
|
|
93,303
|
|
93,644
|
|
Exchangeable
operating partnership units
|
|
4,961
|
|
4,996
|
|
Diluted weighted
average common shares (for FFO per share computations)
(1)
|
|
98,264
|
|
98,640
|
|
(1)
|
Assumes the Class A
common limited partnership units of the Operating Partnership held
by the noncontrolling interests
are exchanged for common shares of the Company. Each Class A
common limited partnership unit is exchangeable for
one of the Company's common shares, subject to certain limitations
to preserve the Company's REIT status.
|
Reconciliation of
FFO to FAD (dollars and shares in thousands)
|
|
|
|
Three months
ended
|
|
|
March
31,
|
|
|
2019
|
|
2018
|
FFO available to
common shareholders
|
|
$
|
55,891
|
|
$
|
59,349
|
Adjusted
for:
|
|
|
|
|
|
Corporate
depreciation excluded above
|
|
612
|
|
581
|
Amortization of
finance costs
|
|
747
|
|
783
|
Amortization of net
debt discount (premium)
|
|
109
|
|
101
|
Amortization of
equity-based compensation
|
|
3,818
|
|
3,392
|
Straight-line rent
adjustments
|
|
(1,970)
|
|
(1,948)
|
Market rent
adjustments
|
|
480
|
|
562
|
2nd
generation tenant allowances
|
|
(2,974)
|
|
(2,926)
|
Capital
improvements
|
|
(3,049)
|
|
(2,723)
|
Adjustments from
unconsolidated joint ventures
|
|
(406)
|
|
(271)
|
FAD available to
common shareholders (1)
|
|
$
|
53,258
|
|
$
|
56,900
|
Dividends per
share
|
|
$
|
0.3500
|
|
$
|
0.3425
|
FFO payout
ratio
|
|
61%
|
|
57%
|
FAD payout
ratio
|
|
65%
|
|
59%
|
Diluted weighted
average common shares (1)
|
|
98,264
|
|
98,640
|
(1) Assumes the
Class A common limited partnership units of the Operating
Partnership held by the
noncontrolling
interests are exchanged for common shares of the Company.
Each Class A common
limited
partnership unit is exchangeable for one of the Company's common
shares, subject to certain
limitations
to preserve the Company's REIT status.
|
|
|
|
|
|
|
|
|
|
Below is a
reconciliation of net income to Portfolio NOI and Same Center NOI
for the consolidated portfolio:
|
|
|
|
|
|
Three months
ended
|
|
|
March
31,
|
|
|
2019
|
|
2018
|
Net
income
|
|
$
|
65,841
|
|
$
|
23,685
|
Adjusted to
exclude:
|
|
|
|
|
|
|
Equity in earnings of
unconsolidated joint ventures
|
|
(1,629)
|
|
(2,194)
|
Interest
expense
|
|
16,307
|
|
15,800
|
Gain on sale of
assets
|
|
(43,422)
|
|
—
|
Other non-operating
income
|
|
(224)
|
|
(209)
|
Depreciation and
amortization
|
|
31,760
|
|
33,123
|
Other non-property
expenses
|
|
161
|
|
388
|
Corporate general and
administrative expenses
|
|
12,118
|
|
10,754
|
Non-cash adjustments
(1)
|
|
(1,472)
|
|
(1,367)
|
Lease termination
fees
|
|
(1,130)
|
|
(1,051)
|
Portfolio
NOI
|
|
78,310
|
|
78,929
|
Non-same center NOI
(2)
|
|
(4,084)
|
|
(4,367)
|
Same Center
NOI
|
|
$
|
74,226
|
|
$
|
74,562
|
(1) Non-cash items
include straight-line rent, above and below market rent
amortization, straight-line rent
expense on land leases and gains or losses on outparcel sales, as
applicable.
|
(2) Excluded from
Same Center NOI:
|
Outlet centers
sold:
|
Nags Head, Ocean
City, Park City, and
Williamsburg March
2019
|
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SOURCE Tanger Factory Outlet Centers, Inc.