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Tanger raised its full-year outlook as higher rents and stronger property income supported the outlet-center owner, even though occupancy remained slightly below its year-earlier level.
The retail landlord reported Wednesday that same-center net operating income rose 4.2% to $108.4 million in the third quarter. Occupancy reached 97.3% at the end of September, up from 96.6% in June but just below 97.4% a year earlier.
For property investors, the figures point to continued demand for Tanger’s space rather than a broad claim that all retail real estate is strengthening. For retailers, the leasing figures show that replacing or renewing space in this portfolio is becoming more expensive.
In its third-quarter release, Tanger said cash rents on comparable space rose 11% on a blended basis for leases signed over the preceding 12 months. Rents for re-tenanted space rose 28.6%, while renewal rents increased 8.3%.
Those rent spreads cover signed leases over a year, not just rent collected during the quarter. They also do not describe every tenant’s individual renewal.
Average tenant sales were $487 per square foot for the trailing year, compared with $475 a year earlier and unchanged from the trailing-year figure reported in June. The ratio of occupancy costs to tenant sales held at 9.7%.
Net income available to common shareholders rose to $33.4 million, or 29 cents a diluted share, from $31.8 million, or 28 cents. Funds from operations available to common shareholders increased to $77.1 million, or 64 cents a share, from $71.1 million, or 60 cents.
FFO is a supplemental real-estate measure that adjusts reported earnings for items including property depreciation. It is not the same as net income or cash available to spend.
Tanger now projects full-year FFO of $2.49-$2.53 a share, compared with $2.45-$2.52 previously. It also raised the bottom of its expected same-center property-income growth range to 3.5% from 2.75%, leaving the upper end at 4.25%.
The company repaid $350 million of notes that matured in September using cash and $150 million drawn under term loans. Including its share of joint ventures, Tanger reported about $1.8 billion in debt and $662 million of immediate liquidity at quarter-end.
Tanger’s portfolio includes 38 outlet centers and four open-air lifestyle centers. Its outlook excludes future property acquisitions or sales and additional financing activity, leaving those potential changes outside the current forecast.
JBizNews Desk | Greensboro, N.C.
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