Form: 8-K

Current report filing

October 20, 2005

Documents

 
Tanger Factory Outlet Centers, Inc.

News Release          
For Release: IMMEDIATE RELEASE    
Contact: Frank C. Marchisello, Jr.   
            (336) 834-6834

TANGER REPORTS THIRD QUARTER 2005 RESULTS
Standard and Poor’s Raises Rating to Investment Grade
6.8% Increase in Same Center Net Operating Income
 
 
Greensboro, NC, October 20, 2005, 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.


3200 Northline Avenue, Suite 360 · Greensboro, NC 27408 · 336-292-3010 · FAX 336-297-0931
TANGER REPORTS THIRD QUARTER 2005 RESULTS
--

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 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 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.


3200 Northline Avenue, Suite 360 · Greensboro, NC 27408 · 336-292-3010 · FAX 336-297-0931
TANGER REPORTS THIRD QUARTER 2005 RESULTS
--


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.
                                 
                                 
                                 

3200 Northline Avenue, Suite 360 · Greensboro, NC 27408 · 336-292-3010 · FAX 336-297-0931
TANGER REPORTS THIRD QUARTER 2005 RESULTS
--


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
  
                 



3200 Northline Avenue, Suite 360 · Greensboro, NC 27408 · 336-292-3010 · FAX 336-297-0931
TANGER REPORTS THIRD QUARTER 2005 RESULTS
--

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.