EX-99.1 2 tfoc8k09302007ex99-1prsrls.htm PRESS RELEASE tfoc8k09302007ex99-1prsrls.htm
Tanger Factory Outlet Centers, Inc.

News Release

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

TANGER REPORTS THIRD QUARTER 2007 RESULTS
13.1% Increase in Total FFO, 12.3% Increase in FFO Per Share
6.2% Increase in Same Center Net Operating Income

Greensboro, NC, October 30, 2007, Tanger Factory Outlet Centers, Inc. (NYSE:SKT) today reported funds from operations available to common shareholders (“FFO”), a widely accepted measure of REIT performance, for the three months ended September 30, 2007 increased 12.3% to $0.64 per share, or $23.9 million, as compared to FFO of $0.57 per share, or $21.2 million, for the three months ended September 30, 2006.  For the nine months ended September 30, 2007, FFO increased 11.1% to $1.80 per share, or $67.4 million, as compared to FFO of $1.62 per share, or $59.8 million, for the nine months ended September 30, 2006.  

For the three months ended September 30, 2007, net income available to common shareholders increased 16.4% to $7.0 million or $0.22 per share, as compared to $6.0 million, or $0.19 per share for the third quarter of 2006.  During the first quarter of the previous year, Tanger recognized a net gain on the sale of real estate of $13.8 million.  As a result, the company reported net income available to common shareholders of $24.5 million, or $0.79 per share for the nine months ended September 30, 2006, compared to $13.9 million, or $0.44 per share for the first nine months of 2007.

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 press release.

Third Quarter Highlights
 
·  
6.2% increase in same center net operating income, 3.9% increase year to date
 
·  
30.9% average increase in base rental rates on 169,555 square feet of re-leased space during the third quarter of 2007, 37.6% increase year to date
 
·  
9.8% average increase in base rental rates on 107,010 square feet of signed renewals during the third quarter of 2007, 13.2% increase year to date
 
·  
97.3% occupancy rate for wholly-owned properties, up 1.3% from September 30, 2006
 
·  
$340 per square foot in reported same-space tenant sales for the rolling twelve months ended September 30, 2007, up 1.0% compared to the twelve months ended September 30, 2006
 
·  
30.5% debt-to-total market capitalization ratio, compared to 32.8% as of September 30, 2006
 
·  
3.40 times interest coverage ratio compared to 3.25 times last year
 

Stanley K. Tanger, Chairman of the Board and Chief Executive Officer, commented, “Our third quarter results were very positive.  Same center net operating income increased 6.2% for the quarter as a result of our continuing efforts to drive rental rates on the renewal and releasing of space as well as certain new high volume tenants exceeding their percentage rental breakpoints during the quarter.”


Portfolio Operating Results

During the first nine months of 2007, Tanger executed 414 lease documents, totaling 1,725,596 square feet within its wholly-owned properties.  Lease renewals accounted for 1,126,879 square feet, or 71.7% of the square feet which was scheduled to expire during 2007, and generated a 13.2% increase in average base rental rates on a straight-line basis. Base rental increases on re-tenanted space during the first nine months of 2007 averaged 37.6% on a straight-line basis and accounted for the remaining 598,717 square feet.

Same center net operating income increased 6.2% for the third quarter of 2007 and 3.9% for the first nine months of 2007 compared to the same periods in 2006.  Reported tenant comparable sales per square foot increased 1.0% for the rolling three months as well as the rolling twelve months ended September 30, 2007 to $340 per square foot.

Investment and Other Activities

Tanger continues the development and leasing of two previously announced sites located in Washington County, south of Pittsburgh, Pennsylvania and in Deer Park (Long Island), New York.  Construction at the Pittsburgh project is ongoing at this time.  In response to strong tenant demand for space, Tanger has increased the size of the initial phase from 308,000 square feet to 370,000 square feet, with leases for approximately 61% of the first phase signed and an additional 20% out for signature.  The company currently expects delivery of the initial phase in the second quarter of 2008, with stores opening in the third quarter of 2008.  The Pittsburgh center will be wholly owned by Tanger.

The company currently expects the Deer Park center will contain over 800,000 square feet upon final build-out.  Site work and construction continues on an initial phase of approximately 682,000 square foot.  The company has approximately 44% of the space signed and an additional 20% out for signature.  Tanger currently expects the project will be delivered in the second quarter of 2008, with stores opening in the third quarter of 2008.   The Deer Park property is owned through a joint venture of which Tanger and two venture partners each own a one-third interest.

Tanger has signed an option on a potential new development site located in Mebane, North Carolina on the highly traveled Interstate 40/85 corridor.  The company also has an additional site under control in Port St. Lucie, Florida at Exit 118 on Interstate I-95.  Tenant interest in these two new locations appears to be strong and Tanger is continuing with its predevelopment work.  During the third quarter of this year, Tanger put on hold its plans to develop a center in Burlington, New Jersey due to numerous development and site access issues.

As of September 30, 2007, Tanger reclassified its center in Boaz, Alabama as held for sale.  Subsequently, in October 2007, the 79,575 square foot center was sold.  The Boaz center represents less than 1.0% of the company’s gross leasable area and less than 0.25% of its net operating income.  Net proceeds from the sale, which approximated the net book value of the property, were $2.0 million and were used to reduce amounts outstanding on the company’s unsecured lines of credit.


Financing Activities and Balance Sheet Summary

As of September 30, 2007, Tanger had $697.3 million of debt outstanding, equating to a 30.5% debt-to-total market capitalization ratio.  The company had $23.3 million outstanding on its $200.0 million in available unsecured lines of credit with 96.7% of Tanger’s debt bearing fixed interest rates.  During the third quarter of 2007, Tanger continued to maintain a strong interest coverage ratio of 3.40 times, compared to 3.25 times during the third quarter of last year.


1

2007 FFO Per Share Guidance

Based on current market conditions and the strength and stability of its core portfolio, the company currently believes its net income for 2007, excluding gains or losses on the sale of real estate, will be between $0.69 and $0.73 per share and its FFO for 2007 will be between $2.44 and $2.48 per share.  The company’s earnings estimates do not include the impact of any potential gains on the sale of land parcels or the impact of any potential sales or acquisitions of properties.  The following table provides the reconciliation of estimated diluted FFO per share to estimated diluted net income available to common shareholders per share:

For the twelve months ended December 31, 2007:
Low Range    High Range
Estimated diluted net income per share, excluding
gain/loss on the sale of real estate                   $ 0.69       $ 0.73
Minority interest, depreciation and amortization uniquely
significant to real estate including minority interest    
share and our share of joint ventures                     1.75          1.75
    
Estimated diluted FFO per share                          $ 2.44        $ 2.48

Third Quarter Conference Call

Tanger will host a conference call to discuss its third quarter results for analysts, investors and other interested parties on Wednesday, October 31, 2007, at 10:00 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 2007 Financial Results call.  Alternatively, the call will be web cast by CCBN and can be accessed at the company’s web site at http://www.tangeroutlet.com/investorrelations/news.

A telephone replay of the call will be available from October 31, 2007 starting at 11:00 A.M. Eastern Time through November 9, 2007, by dialing 1-800-642-1687 (conference ID # 18545795).  Additionally, an online archive of the broadcast will also be available through November 9, 2007.

About Tanger Factory Outlet Centers

Tanger Factory Outlet Centers, Inc.(NYSE:SKT), a fully integrated, self-administered and self-managed publicly traded REIT, presently owns 29 outlet centers in 21 states coast to coast, totaling approximately 8.3 million square feet of gross leasable area.  Tanger also manages for a fee and owns a 50% interest in two outlet centers containing approximately 667,000 square feet and manages for a fee two outlet centers totaling approximately 229,000 square feet.  Tanger is filing a Form 8-K with the Securities and Exchange Commission that includes a supplemental information package for the quarter ended June 30, 2007. 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, funds 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, the company’s ability to lease its properties, the company’s 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, 2006.



2

TANGER FACTORY OUTLET CENTERS, INC AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)
(Unaudited)
 
 
 
 
 
 
 
Three months ended
 
Nine months ended
 
 
September 30,
 
September 30,
 
 
            2007
 
           2006
 
           2007
 
         2006
REVENUES
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
  
 
Base rentals (a)
  
$
37,207
    
$
35,260
    
$
108,614
    
$
101,816
    
 
Percentage rentals
    
2,305
      
1,736
      
5,434
      
4,292
    
 
Expense reimbursements
    
16,719
      
14,866
      
47,496
      
41,271
    
 
Other income (b)
    
2,155
      
2,400
      
5,243
      
5,248
    
   
Total revenues
    
58,386
      
54,262
      
166,787
      
152,627
    
EXPENSES
                                  
 
Property operating
    
19,158
      
17,616
      
53,893
      
48,183
    
 
General and administrative
    
4,916
      
4,147
      
14,096
      
12,304
    
 
Depreciation and amortization
    
14,941
      
13,531
      
48,870
      
42,978
    
   
Total expenses
    
39,015
      
35,294
      
116,859
      
103,465
    
Operating income
    
19,371
      
18,968
      
49,928
      
49,162
    
 
Interest expense (including prepayment premium
                                  
     
and deferred loan cost write off of $917 in 2006)
    
10,087
      
10,932
      
30,215
      
30,856
    
Income before equity in earnings of
                                  
 
unconsolidated joint ventures, minority
                                  
 
interest and discontinued operations
    
9,284
      
8,036
      
19,713
      
18,306
    
Equity in earnings of unconsolidated joint ventures
    
461
      
539
      
1,030
      
971
    
Minority interests in operating partnership
    
(1,370
)
    
(1,186
)
    
(2,716
)
    
(2,524
)
  
Income from continuing operations
    
8,375
      
7,389
      
18,027
      
16,753
    
Discontinued operations, net of minority interest (c)
    
22
      
25
      
76
      
11,797
    
Net income
    
8,397
      
7,414
      
18,103
      
28,550
    
Preferred share dividends
    
(1,406
)
    
(1,406
)
    
(4,219
)
    
(4,027
)
  
Net income available to common shareholders
  
$
6,991
    
$
6,008
    
$
13,884
    
$
24,523
    
                                   
Basic earnings per common share:
                                  
 
Income from continuing operations
  
$
.23
    
$
.20
    
$
.45
    
$
.42
    
 
Net income
  
$
.23
    
$
.20
    
$
.45
    
$
.80
    
                                   
Diluted earnings per common share:
                                  
 
Income from continuing operations
  
$
.22
    
$
.19
    
$
.44
    
$
.41
    
 
Net income
  
$
.22
    
$
.19
    
$
.44
    
$
.79
    
                                   
Funds from operations available to
                                  
 
common shareholders (FFO)
  
$
23,929
    
$
21,155
    
$
67,386
    
$
59,800
    
FFO per common share – diluted
  
$
.64
    
$
.57
    
$
1.80
    
$
1.62
    
                                   
Summary of discontinued operations (c)
                                  
 
Operating income from discontinued operations
  
$
26
    
$
30
    
$
91
    
$
309
    
 
Gain on sale of real estate
    
---
      
---
      
---
      
13,833
    
 
Income from discontinued operations
    
26
      
30
      
91
      
14,142
    
 
Minority interest in discontinued operations
    
(4
)
    
(5
)
    
(15
)
    
(2,345
)
  
Discontinued operations, net of minority interest
  
$
22
    
$
25
    
$
76
    
$
11,797
    
   
(a) Includes straight-line rent and market rent adjustments of $1,033 and $962 for the three months ended and $3,192 and $2,831 for the nine months ended September 30, 2007 and 2006, respectively.
  
(b) Includes gains on sale of outparcels of land of $177 for the three months ended September 30, 2006 and $402 for the nine months ended September 30, 2006.
  
(c) In accordance with SFAS No. 144”Accounting for the Impairment or Disposal of Long Lived Assets,” the results of operations for properties disposed of or classified as held for sale during the above periods in which we have no significant continuing involvement have been reported above as discontinued operations for all periods presented.
  

3

TANGER FACTORY OUTLET CENTERS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands, except share data)
(Unaudited)
 
 
 
 
 
 
 
 
 
 
 
 
  
 
 
September 30,
 
December 31,
  
 
 
2007
 
2006
  
ASSETS:
 
 
 
 
 
 
 
 
  
Rental property
                  
 
Land
 
$
129,921
 
 
$
130,137
 
  
 
Buildings, improvements and fixtures
 
 
1,074,310
 
 
 
1,068,070
 
  
 
Construction in progress
 
 
61,364
 
 
 
18,640
 
  
     
1,265,595
      
1,216,847
    
 
Accumulated depreciation
    
(302,411
)
    
(275,372
)
  
   
Rental property, net
 
 
963,184
  
 
 
941,475
    
Cash and cash equivalents
 
 
2,434
 
 
 
8,453
 
  
Assets held for sale
    
2,052
      
---
    
Investments in unconsolidated joint ventures
    
11,908
      
14,451
    
Deferred charges, net
 
 
47,306
 
 
 
55,089
 
  
Other assets
 
 
26,563
 
 
 
21,409
 
  
                           Total assets
 
 $
1,053,447
 
 
 $
1,040,877
 
  
 
LIABILITIES, MINORITY INTEREST AND SHAREHOLDERS’ EQUITY:
Liabilities
 
 
 
 
 
 
 
 
  
Debt
                  
 
Senior, unsecured notes (net of discount of $778 and 
                  
               $832, respectively)  
$
498,722
    
$
498,668
    
 
Mortgages payable (including a debt premium of $1,654 and 
                  
               $3,441, respectively)    
175,312
      
179,911
    
 
Unsecured lines of credit
    
23,300
      
---
    
 
Total debt
    
697,334
      
678,579
    
Construction trade payables
    
27,943
      
23,504
    
Accounts payable and accrued expenses
    
35,237
      
25,094
    
                Total liabilities    
760,514
      
727,177
    
                   
Commitments
                  
Minority interest in operating partnership
    
35,366
      
39,024
    
                   
Shareholders’ equity
                  
Preferred shares, 7.5% Class C, liquidation preference $25 per
                  
 
share, 8,000,000 shares authorized, 3,000,000 shares issued
                  
 
and outstanding at September 30, 2007 and December 31, 2006
    
75,000
      
75,000
    
Common shares, $.01 par value, 150,000,000 shares authorized,
                  
 
31,317,401 and 31,041,336 shares issued and outstanding
                  
 
at September 30, 2007 and December 31, 2006, respectively
    
313
      
310
    
Paid in capital
    
350,701
      
346,361
    
Distributions in excess of earnings
    
(169,419
)
    
(150,223
)
  
Accumulated other comprehensive income
    
972
      
3,228
    
                   Total shareholders’ equity    
257,567
      
274,676
    
                           Total liabilities, minority interest and shareholders’                  
                           equity  
$
1,053,447
    
$
1,040,877
    
                   

4

TANGER FACTORY OUTLET CENTERS, INC. AND SUBSIDIARIES
SUPPLEMENTAL INFORMATION
(in thousands, except per share, state and center information)
(Unaudited)
 
 
 
 
 
 
 
Three months ended
 
Nine months ended
 
 
September 30,
 
September 30,
 
 
                  2007
 
                   2006
 
           2007
 
                2006
FUNDS FROM OPERATIONS (a)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
  
 
Net income
  
$
8,397
    
$
7,414
    
$
18,103
    
$
28,550
    
 
Adjusted for:
                                  
 
Minority interest in operating partnership
    
1,370
      
1,186
      
2,716
      
2,524
    
 
Minority interest, depreciation and amortization
                                  
 
attributable to discontinued operations
    
52
      
52
      
160
      
2,604
    
 
Depreciation and amortization uniquely significant to
                                  
 
real estate – consolidated
    
14,865
      
13,465
      
48,641
      
42,780
    
 
Depreciation and amortization uniquely significant to
                                  
 
real estate – unconsolidated joint ventures
    
651
      
444
      
1,985
      
1,202
    
 
(Gain) loss on sale of real estate
    
---
      
---
      
---
      
(13,833
)
  
 
Funds from operations (FFO)
    
25,335
      
22,561
      
71,605
      
63,827
    
 
Preferred share dividends
    
(1,406
)
    
(1,406
)
    
(4,219
)
    
(4,027
)
  
 
Funds from operations available to common
                                  
 
shareholders
  
$
23,929
    
$
21,155
    
$
67,386
    
$
59,800
    
 
Funds from operations available to common
                                  
 
shareholders per share - diluted
  
$
.64
    
$
.57
    
$
1.80
    
$
1.62
    
                                   
WEIGHTED AVERAGE SHARES
                                  
 
Basic weighted average common shares
    
30,847
      
30,619
      
30,805
      
30,582
    
 
Effect of exchangeable notes
    
235
      
---
      
235
      
---
    
 
Effect of outstanding share and unit options
    
188
      
229
      
217
      
234
    
 
Effect of unvested restricted share awards
    
130
      
135
      
144
      
107
    
 
Diluted weighted average common shares (for earnings
                                  
 
per share computations)
    
31,400
      
30,983
      
31,401
      
30,923
    
 
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)
    
37,467
      
37,050
      
37,468
      
36,990
    
                                   
OTHER INFORMATION
                                  
Gross leasable area open at end of period -
                                  
 
Wholly owned
    
8,363
      
8,389
      
8,363
      
8,389
    
 
Partially owned – unconsolidated
   
667
      
667
      
667
      
667
    
 
Managed
    
229
      
293
      
229
      
293
    
                                   
Outlet centers in operation -
                                  
 
Wholly owned
    
30
      
30
      
30
      
30
    
 
Partially owned – unconsolidated
    
2
      
2
      
2
      
2
    
 
Managed
    
2
      
3
      
2
      
3
    
                                   
States operated in at end of period (c)
    
21
      
21
      
21
      
21
    
Occupancy at end of period (c) (d)
    
97.3
%
    
96.0
%
    
97.3
%
    
96.0
%
  
                                   


5


(a)  
FFO is a non-GAAP financial measure.  The most directly comparable GAAP measure is net income (loss), to which it is reconciled.  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)  
Excludes Myrtle Beach, South Carolina Hwy 17 and Wisconsin Dells, Wisconsin properties which are operated by us through 50% ownership joint ventures and two centers for which we only have management responsibilities.

(d)  
Excludes our wholly-owned, non-stabilized center in Charleston, South Carolina.

6