Standard and Poor's Raises Rating to Investment Grade
6.8% Increase in Same Center Net Operating Income
GREENSBORO, N.C., Oct. 20 /PRNewswire-FirstCall/ -- Tanger Factory Outlet
Centers, Inc. (NYSE: SKT) today reported funds from operations ("FFO"), a
widely accepted supplemental measure of REIT performance, for the three months
ended September 30, 2005, was $17.3 million, or $0.50 per share, as compared
to FFO of $15.8 million, or $0.47 per share, for the three months ended
September 30, 2004. For the nine months ended September 30, 2005, FFO was
$47.6 million, or $1.40 per share, as compared to FFO of $45.3 million, or
$1.36 per share, for the nine months ended September 30, 2004.
Tanger's FFO for the three and nine months ended September 30, 2004
included $172,000 and $1.4 million in gains on the sale of land parcels,
respectively, which are included in other income. These land parcel gains
represent $0.04 per share for the nine months ended September 30, 2004.
Excluding these gains, FFO for the third quarter and nine months ended
September 30, 2004 would have been $0.47 and $1.32 per share respectively.
Excluding the gains on the sale of land parcels in the comparable period in
2004, FFO per share increased by 6.4% in the third quarter of 2005, and 6.1%
for the nine months ended September 30, 2005.
For the three months ended September 30, 2005, net income was $4.4 million
or $0.15 per share, as compared to a net loss of $2.0 million, or $0.07 per
share for the third quarter of 2004. For the nine months ended September 30,
2005, net income was $5.0 million, or $0.18 per share, compared to $2.7
million, or $0.10 per share for the first nine months of 2004.
Net income and FFO per share amounts above are on a diluted basis. FFO is
a supplemental non-GAAP financial measure used as a standard 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.
Third Quarter Highlights
- Standard and Poor's raises rating to investment grade on outstanding
senior unsecured debt
- Minimum internal 50% pre-leasing requirement has been met on
Charleston, South Carolina project and is expected to be met on
Wisconsin Dells, Wisconsin project by the end of October 2005
- Planned acquisition of remaining 2/3 interest in Charter Oak portfolio
scheduled to close in November 2005
- Issued 3 million common shares on August 31, 2005 at a net price to the
company of $27.09 per share
- 6.8% increase in same center net operating income compared to 4.3% in
the second quarter of 2005
- Year to date leases for 1,302,498 square feet, or 72% of the square
feet scheduled to expire during 2005 have been renewed with the
existing tenants at an average increase in base rental rates of 6.8%
- 97% period-end portfolio occupancy rate compared to 96% as of September
30, 2004
- Comparative sales increased 2.8% to $317 per square foot in reported
same-space tenant sales for the rolling twelve months ended September
30, 2005
- 46,400 square foot expansion opened in Locust Grove, Georgia
- 21,000 square foot expansion under construction in Foley, Alabama to
open in the fourth quarter of 2005
Stanley K. Tanger, Chairman of the Board and Chief Executive Officer,
commented, "Our third quarter results came in as expected. Operating measures
continue to be strong as same center net operating income increased 6.8%
during the third quarter of 2005, continuing the positive momentum experienced
in the first half of the year. We are looking forward to closing on the
acquisition of the remaining two-thirds interest in the Charter Oak portfolio
in November of this year, as well as beginning construction on two of our new
development sites."
Portfolio Operating Results
Same center net operating income increased 6.8% for the third quarter of
2005 compared to the same period in 2004.
During the third quarter of 2005, Tanger executed 71 leases, totaling
301,689 square feet. Lease renewals for the third quarter of 2005 accounted
for 228,647 square feet and generated a 1.1% increase in average base rental
rates on a cash basis. Base rental increases on re-tenanted space during the
third quarter averaged 19.5% on a cash basis and accounted for the remaining
73,042 square feet. For the first nine months of 2005, 1,302,498 square feet
of renewals generated a 6.8% increase in average base rental rates, and
represented 72% of the 1,821,000 square feet originally scheduled to expire
during 2005. This compares to the first nine months of 2004, when 1,452,000
square feet of renewals generated a 6.0% increase in average base rental
rates, and represented approximately 81.0% of the 1,790,000 square feet
originally scheduled to expire during 2004.
In spite of sales at a number of our centers located along the East Coast
and the Gulf of Mexico being adversely affected by the hurricanes during the
third quarter of 2005, reported same-space sales per square foot for the
rolling twelve months ended September 30, 2005 were $317 per square foot.
This represents a 2.8% increase compared to the rolling twelve months ended
September 30, 2004. For the third quarter of 2005, same-space sales increased
by 1.4%, as compared to the same period in 2004. Same-space sales is defined
as the weighted average sales per square foot reported in space open for the
full duration of the comparative periods. Reported same-store sales decreased
0.7% for the three months ended September 30, 2005 resulting in an increase of
0.3% for the nine months ended September 30, 2005. Same-store sales are
defined as sales for tenants whose stores have been open from January 1, 2004
through the duration of the comparison period.
Investment Activities
On August 22, 2005, Tanger announced that it had agreed to acquire, for
$282.5 million, the remaining two thirds interests in the Charter Oak
portfolio owned by an affiliate of Blackstone Real Estate Advisors. The
Charter Oak portfolio, comprised of nine factory outlet centers (approximately
3.3 million square feet), was acquired in December 2003 by a joint venture
company, owned one third by Tanger and two thirds by Blackstone. Since then,
Tanger has provided operating, management, leasing and marketing services for
the properties. As a result of this transaction, the total amount of wholly-
owned square footage in Tanger's real estate portfolio will increase by 66%,
from 5.0 to 8.2 million square feet.
Closing of the transaction is subject to certain conditions including
those contained within an existing GMAC loan currently collateralizing the
properties. Tanger believes these conditions will be met and expects that the
transaction will close in November 2005.
Construction of a 46,400 square foot expansion is now complete at Tanger's
center located in Locust Grove, Georgia. The majority of stores opened during
the third quarter with the remaining stores scheduled to commence operations
during the fourth quarter of 2005. Tenants in the expansion include
Polo/Ralph Lauren, Sketchers, Children's Place and others. Including the
expansion, the company's Locust Grove center now totals approximately 294,000
square feet.
The company is also nearing completion of a 21,000 square foot expansion
at its center located in Foley, Alabama. The company currently expects to
complete the expansion with stores commencing operations during the fourth
quarter of 2005. Tenants in the expansion include Ann Taylor, Skechers, Tommy
Hilfiger and others. Including the expansion, the company's Foley center will
total approximately 557,000 square feet.
Tanger continues the pre-development and leasing of four previously
announced sites. The company's minimum internal 50% pre-leasing requirement
has been met on its Charleston, South Carolina project and is expected to be
met on the Wisconsin Dells, Wisconsin project by the end of October 2005. The
company is currently in the process of closing on the acquisition of the land
for both projects, subject to closing conditions within the respective
purchase agreements, and expects to begin construction prior to the end of
2005. Both projects are currently expected to open in the fourth quarter of
2006. The Pittsburgh, Pennsylvania and Deer Park, New York projects are
currently expected to be delivered in the fourth quarter of 2007.
Financing Activities
On September 2, 2005 Tanger completed the issuance of 3.0 million of its
common shares to certain advisory clients of Cohen & Steers Capital
Management, Inc. at a net price to the company of $27.09 per share, proceeds
of which were used to temporarily pay down amounts outstanding on the
company's unsecured lines of credit.
On September 10, 2005 the company repaid at maturity a $7.0 million,
9.125% mortgage with New York Life with amounts available under its unsecured
lines of credit. The repayment of this loan unencumbered the company's
185,750 square foot Commerce I, GA property.
On October 3, 2005 Tanger repaid in full its mortgage debt outstanding
with John Hancock Mutual Life Insurance Company totaling approximately $77.4
million, with interest rates ranging from 7.875% to 7.98% and an original
maturity date of April 1, 2009. As a result of the early repayment, Tanger
expects to incur a non-recurring charge for the early extinguishment of the
John Hancock mortgage debt of approximately $9.8 million, or $.27 per share to
both its funds from operations and its net income. The non-recurring charge
will be recorded in the fourth quarter of 2005 and will consist of a
prepayment premium of approximately $9.4 million and the write-off of deferred
loan fees totaling approximately $400,000.
In the short term, the company has used current available cash and amounts
available under its $125 million in unsecured lines of credit to repay the
John Hancock mortgage debt and the associated prepayment premium.
Following the early repayment of the John Hancock mortgage debt, Standard
& Poor's Ratings Service announced an upgrade of Tanger's senior unsecured
debt rating to an investment grade rating of BBB-, citing Tanger's progress in
unencumbering a number of its properties resulting in over half of the
company's fully consolidated net operating income being generated by
unencumbered properties. Moody's Investors Services had previously announced
on June 27, 2005 their upgrade of Tanger's senior unsecured debt rating to an
investment grade rating of Baa3.
2005 FFO Per Share Guidance
Based on current market conditions, the strength and stability of its core
portfolio and the impact of the $9.8 million non-recurring prepayment premium,
Tanger currently believes its net income for 2005 will be between $0.29 and
$0.33 per share and its FFO for 2005 will be between $1.66 and $1.70 per
share. The company's earnings estimates do not include the impact of any
potential gains on the sale of land parcels, the impact of any sales or
acquisitions of properties, nor the expected closing of the Charter Oak
transaction. The following table provides the reconciliation of estimated
diluted FFO per share to estimated diluted net income per share:
For the twelve months ended December 31, 2005
Low Range High Range
Estimated diluted net income per share,
excluding gain/loss on the sale of real estate $0.29 $0.33
Minority interest, depreciation and
amortization uniquely significant to real
estate including minority interest share and
our share of joint ventures 1.37 1.37
Estimated diluted FFO per share $1.66 $1.70
Third Quarter Conference Call
Tanger will host a conference call to discuss its third quarter results
for analysts, investors and other interested parties on Friday, October 21,
2005, at 10:30 A.M. eastern time. To access the conference call, listeners
should dial 1-877-277-5113 and request to be connected to the Tanger Factory
Outlet Centers Third Quarter Financial Results call. Alternatively, the call
will be web cast by CCBN and can be accessed at the "Tanger News" section of
Tanger Factory Outlet Centers, Inc.'s web site at http://www.tangeroutlet.com.
A telephone replay of the call will be available from October 21, 2005
starting at 12:00 P.M. Eastern Time through 11:59 P.M., October 28, 2005, by
dialing 1-800-642-1687 (conference ID # 1163915). Additionally, an online
archive of the broadcast will also be available through October 28, 2005.
About Tanger Factory Outlet Centers
Tanger Factory Outlet Centers, Inc. (NYSE: SKT), a fully integrated, self-
administered and self-managed publicly traded REIT, presently has ownership
interests in or management responsibilities for 33 centers in 22 states coast
to coast, totaling approximately 8.7 million square feet of gross leasable
area. Tanger is filing a Form 8-K with the Securities and Exchange Commission
that includes a supplemental information package for the quarter ended
September 30, 2005. For more information on Tanger Outlet Centers, visit our
web site at http://www.tangeroutlet.com.
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 re-merchandising strategy, the renewal and re-tenanting of
space, tenant sales and sales trends, interest rates, fund from operations,
the development of new centers, the opening of ongoing expansions, coverage of
the current dividend and the impact of sales of land parcels 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, the risks associated with general economic and
local real estate conditions, the availability and cost of capital, our
ability to lease our properties, our inability to collect rent due to 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, 2004.
TANGER FACTORY OUTLET CENTERS, INC AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)
Three months ended Nine months ended
September 30, September 30,
2005 2004 2005 2004
(unaudited) (unaudited) (unaudited) (unaudited)
REVENUES
Base rentals (a) $33,981 $32,879 $99,370 $96,380
Percentage rentals 1,815 1,289 3,968 2,958
Expense reimbursements 14,248 13,060 41,165 37,956
Other income (b) 1,595 1,816 3,747 5,054
Total revenues 51,639 49,044 148,250 142,348
EXPENSES
Property operating 16,060 14,953 46,911 43,095
General and administrative 3,578 3,346 10,333 9,757
Depreciation and
amortization 12,108 14,042 36,458 39,154
Total expenses 31,746 32,341 93,702 92,006
Operating income 19,893 16,703 54,548 50,342
Interest expense 7,932 8,919 24,327 26,684
Income before equity in
earnings of unconsolidated
joint ventures, minority
interests, discontinued
operations and loss on
sale of real estate 11,961 7,784 30,221 23,658
Equity in earnings of
unconsolidated joint
ventures(c) 255 359 714 799
Minority interests
Consolidated joint venture (6,860) (7,198) (20,211) (20,410)
Operating partnership (943) (175) (1,917) (743)
Income from continuing
operations 4,413 770 8,807 3,304
Discontinued operations,
net of minority interest(d) --- (2,785) --- (562)
Income before loss on sale
of real estate 4,413 (2,015) 8,807 2,742
Loss on sale of real estate,
net of minority interest --- --- (3,843) ---
Net income (loss) $4,413 $(2,015) $4,964 $2,742
Basic earnings
per common share:
Income from continuing
operations $.16 $.03 $.18 $.12
Net income (loss) $.16 $(.07) $.18 $.10
Diluted earnings per
common share:
Income from continuing
operations $.15 $.03 $.18 $.12
Net income (loss) $.15 $(.07) $.18 $.10
Funds from Operations
(FFO) $17,331 $15,837 $47,564 $45,336
FFO per common
share - diluted $.50 $.47 $1.40 $1.36
Summary of discontinued
operations (d)
Operating income from
discontinued operations $--- $135 $--- $777
Loss on sale of
real estate --- (3,544) --- (1,460)
Loss from discontinued
operations --- (3,409) --- (683)
Minority interest in
discontinued operations --- 624 --- 121
Discontinued operations,
net of minority interest $--- $(2,785) $--- $(562)
(a) Includes straight-line rent and market rent adjustments of $630 and
$358 for the three months ended and $1,940 and $946 for the nine months
ended September 30, 2005 and 2004, respectively.
(b) Includes gains on sale of outparcels of land of $172 for the three
months ended September 30, 2004 and $127 and $1,391 for the nine months
ended September 30, 2005 and 2004, respectively.
(c) Includes Myrtle Beach, South Carolina Hwy 17 property which is
operated by us through a 50% ownership joint venture.
(d) In accordance with SFAS No. 144 "Accounting for the Impairment or
Disposal of Long Lived Assets," the results of operations for properties
disposed of during the year in which we have no significant continuing
involvement have been reported above as discontinued operations for prior
periods presented. The current periods have no such dispositions.
TANGER FACTORY OUTLET CENTERS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands, except share data)
September 30, December 31,
2005 2004
(Unaudited) (Unaudited)
ASSETS:
Rental property
Land $113,284 $113,830
Buildings, improvements and fixtures 960,105 963,563
Construction in progress 8,797 ---
1,082,186 1,077,393
Accumulated depreciation (247,179) (224,622)
Rental property, net 835,007 852,771
Cash and cash equivalents 6,219 4,103
Short-term investments 20,000 ---
Deferred charges, net 52,873 58,851
Other assets 26,895 20,563
Total assets $940,994 $936,378
LIABILITIES, MINORITY INTERESTS AND
SHAREHOLDERS' EQUITY:
Liabilities
Long-term debt
Senior, unsecured notes $100,000 $100,000
Mortgages payable (including a
debt premium of $7,263 and
$9,346, respectively) 281,069 308,342
Unsecured note 53,500 53,500
Unsecured lines of credit --- 26,165
Total long-term debt 434,569 488,007
Construction trade payables 8,294 11,918
Accounts payable and accrued expenses 14,849 17,026
Total liabilities 457,712 516,951
Commitments
Minority interests
Consolidated joint venture 227,234 222,673
Operating partnership 42,220 35,621
Total minority interests 269,454 258,294
Shareholders' equity
Common shares, $.01 par value,
50,000,000 authorized, 30,725,216 and
27,443,016 shares issued and
outstanding at September 30, 2005 and
December 31, 2004 307 274
Paid in capital 349,287 274,340
Distributions in excess of earnings (130,955) (109,506)
Deferred compensation (5,930) (3,975)
Accumulated other comprehensive income 1,119 ---
Total shareholders' equity 213,828 161,133
Total liabilities, minority
interests and shareholders' equity $940,994 $936,378
TANGER FACTORY OUTLET CENTERS, INC. AND SUBSIDIARIES
SUPPLEMENTAL INFORMATION
(in thousands, except per share, state and center information)
Three months ended Nine months ended
September 30, September 30,
2005 2004 2005 2004
FUNDS FROM OPERATIONS(a)
Net income (loss) $4,413 $(2,015) $4,964 $2,742
Adjusted for:
Minority interest in
operating partnership 943 175 1,917 743
Minority interest adjustment
- consolidated joint venture (441) 314 (549) 18
Minority interest, depreciation
and amortization attributable
to discontinued operations --- (518) --- 433
Depreciation and amortization
uniquely significant to
real estate - consolidated 12,041 13,986 36,275 38,985
Depreciation and amortization
uniquely significant to
real estate - unconsolidated
joint ventures 375 351 1,114 955
Loss on sale of real estate --- 3,544 3,843 1,460
Funds from operations $17,331 $15,837 $47,564 $45,336
Funds from operations
per share - diluted $.50 $.47 $1.40 $1.36
WEIGHTED AVERAGE SHARES
Basic weighted average common
shares 28,374 27,224 27,682 26,969
Effect of outstanding share
and unit options 209 121 191 196
Effect of unvested restricted
share awards 97 21 61 18
Diluted weighted average common
shares (for earnings per share
computations) 28,680 27,366 27,934 27,183
Convertible operating
partnership units(b) 6,067 6,067 6,067 6,067
Diluted weighted average
common shares (for funds from
operations per share
computations) 34,747 33,433 34,001 33,250
OTHER INFORMATION
Gross leasable area open at end
of period -
Wholly owned 4,956 5,066 4,956 5,066
Partially owned -
consolidated(c) 3,271 3,271 3,271 3,271
Partially owned -
unconsolidated(d) 402 391 402 391
Managed 65 432 65 432
Total gross leasable area open
at end of period 8,694 9,160 8,694 9,160
Outlet centers in operation -
Wholly owned 22 23 22 23
Partially owned -
consolidated(c) 9 9 9 9
Partially owned -
unconsolidated(d) 1 1 1 1
Managed 1 4 1 4
Total outlet centers in operation 33 37 33 37
States operated in at end of
period(c)(d) 22 23 22 23
Occupancy percentage at end of
period(c)(d) 97% 96% 97% 96%
(a) We believe that for a clear understanding of our operating results,
FFO should be considered along with net income as presented elsewhere
in this report. FFO is presented because it is a widely accepted
financial indicator used by certain investors and analysts to analyze
and compare one equity REIT with another on the basis of operating
performance. FFO is generally defined as net income (loss), computed
in accordance with generally accepted accounting principles, before
extraordinary items and gains (losses) on sale or disposal of
depreciable operating properties, plus depreciation and amortization
uniquely significant to real estate and after adjustments for
unconsolidated partnerships and joint ventures. We caution that the
calculation of FFO may vary from entity to entity and as such the
presentation of FFO by us may not be comparable to other similarly
titled measures of other reporting companies. FFO does not represent
net income or cash flow from operations as defined by accounting
principles generally accepted in the United States of America and
should not be considered an alternative to net income as an indication
of operating performance or to cash flows from operations as a measure
of liquidity. FFO is not necessarily indicative of cash flows
available to fund dividends to shareholders and other cash needs.
(b) The convertible operating partnership units (minority interest in
operating partnership) are not dilutive on earnings per share computed
in accordance with generally accepted accounting principles.
(c) Includes the Charter Oak portfolio which is operated by us through a
33% ownership joint venture. However, these properties are
consolidated for financial reporting under the accounting guidance of
FIN 46R.
(d) Includes Myrtle Beach, South Carolina Hwy 17 property which is
operated by us through a 50% ownership joint venture.
SOURCE Tanger Factory Outlet Centers, Inc.
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Related links:
http://www.tangeroutlet.com
CONTACT:
Frank C. Marchisello, Jr. of Tanger Factory
Outlet Centers, Inc., +1-336-834-6834
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