Tanger Inc. 2026 Q2 Earnings Call

Good morning. I'm Ashley Curtis, Assistant Vice President of Investor Relations, and I would like to welcome you to Tanger Inc.'s second quarter 2026 conference call. Yesterday evening, we issued our earnings release as well as our supplemental information package and investor presentation. This information is available on our IR website, investors.tanger.inc. Please note this call may contain forward-looking statements that are subject to numerous risks and uncertainties, and actual results could differ materially from those projected. We direct you to our filings with the Securities and Exchange Commission for a detailed discussion of these risks and uncertainties. During the call, we will also discuss non-GAAP financial measures as defined by SEC Regulation G. Reconciliations of these non-GAAP measures to the most directly comparable GAAP financial measures are included in our earnings release and in our supplemental information.

This call is being recorded for rebroadcast for a period of time in the future. As such, it is important to note that management's comments include time-sensitive information that may only be accurate as of today's date, August 5th, 2026. At this time, all participants are in listen-only mode. Following management's prepared comments, the call will be opened for your questions. We request that everyone ask only one question and one follow-up question. If time permits, we are happy for you to re-queue for additional questions. On the call today will be Stephen Yalof, President and Chief Executive Officer, and Michael Bilerman, Chief Financial Officer and Chief Investment Officer. In addition, other members of our leadership team will be available for Q&A. I will now turn the call over to Stephen Yalof.

Please go ahead. Thank you, Ashley, and good morning, everyone.

I'm pleased to report another strong quarter for Tanger, reflecting the continued strength and durability of our proven leasing, operating, and marketing platforms, and our accretive external growth initiatives. This momentum shows up directly in our results and gives us confidence to raise our full year 2026 guidance. Quarter end occupancy of 96.6% is in line with a year ago, and as expected, a slight moderation from the first quarter, reflecting our proactive recapture of the Saks Off 5th space we discussed last quarter. We're taking a strategic approach to these closures. Backfill deals are already in our pipeline, and we're leveraging our temp tenant program to bridge select spaces while we work to execute new long-term deals.

These boxes sit in some of our top-performing assets, and we see them as real opportunity to add more productive uses and in-demand retailers with meaningful upside in rents and return on our invested capital. Our leasing results demonstrate successful execution of our merchandising strategy and the continued demand to be in our centers. Over the last 12 months, we've executed over 650 transactions totaling 3.3 million square feet. Blended rent spreads were 10.5%, marking our 18th consecutive quarter of positive rent spreads. We have renewals executed or in process for 70% of our 2026 expirations and continue to make progress re-tenanting less productive space. We continue to expand and elevate our roster with popular and highly sought-after brands, food and beverage concepts, and service and entertainment uses, driving ongoing improvements in the quality and diversity of tenants seeking space in our centers.

Notably, retailers once focused on major metros are now increasingly adding stores in mid-tier markets where many of our centers are located. This demand is created by the continued consolidation of the department store business, the lack of new retail development across the country, and the substantial permanent population growth in our markets, coupled with strong tourism activity. As we grow our lifestyle portfolio, we are broadening our retailer base and seeing demand from brands native to each of our platforms, along with increasing opportunities for cross-platform growth. The successful execution of our initiatives has resulted in a more diverse and productive tenant roster, where the top 25 tenants, which represents more than 60 brands, now comprise approximately 50% of our rent, down substantially from over 60% five years ago. In the same time period, we've grown our portfolio to over 800 brands, up from approximately 500.

This quarter, we saw the benefit of increased international and domestic tourism. The World Cup demonstrated our ability to capture opportunity and traffic from major events in our markets, and we're excited to see even more sports and entertainment activity coming to our adjacencies, including the new Chiefs stadium in Kansas City and the Sphere Development at National Harbor. Through our early back-to-school promotions, our outlet centers have become the destination for this important shopping season, and we're particularly encouraged by continued engagement we're seeing from younger customers. Our marketing platform remains a real differentiator for Tanger, enabling us to reach shoppers where they prefer to engage with personalized offers delivered through their preferred channel. This approach is driving higher subscriber and engagement activity, while we also continue to build on our TangerClub loyalty cohort. Our investments in AI further strengthen these efforts.

Our AI-powered communications match our subscribers with relevant messaging from the brands they select and contribute to increased open rates, wallet downloads, and shopper visits. Beyond marketing, our AI-enabled customer service tools now handle the majority of all inquiries, and the volume continues to grow. Looking ahead, we're focused on expanding these initiatives to streamline operations, sharpen our marketing and consumer engagement, and free up our team for higher value work. The value of this engagement, combined with the impact of our on-center events, activations, and partnerships, is directly visible in our results. Traffic remained positive in the second quarter, and the momentum has continued into July and the important back-to-school season. Average tenant sales reached $487 per sq ft on a trailing 12-month basis, up 5% year-over-year.

This performance reflects our strategic improvements to the portfolio through new development, acquisitions, dispositions, and peripheral land activation, along with our continuous merchandising across both existing and newly added centers. We still have continued runway for growth with a relatively low occupancy cost ratio of just 9.7%. Our disciplined external growth strategy continued this quarter with the acquisition of Levis Commons Town Center, an open air lifestyle center in a vibrant mixed use district in the Perrysburg submarket of Toledo, Ohio. This market dominant center has an expected first year return of roughly 8.5%, with room to grow over time. This is the seventh open air center and the fourth lifestyle center we've added in the past three years, and across all of them, we've proven our ability to apply our platforms and drive real growth.

Across our portfolio, we continue to benefit from favorable demographics and population growth in the markets we serve. Over the past 15 years, the areas around our centers have grown at roughly twice the national average. Growth within a 10-mile ring of our centers has exceeded their MSAs by about 25%. We expect that trend to continue, driving incremental demand and traffic over time, reinforcing our centers as the anchors of the thriving communities they serve, and creating additional long-term opportunities to increase rents, invest capital, and unlock value. Our balance sheet gives us the flexibility to take advantage of this growth. We remain conservatively levered with substantial capacity to fund both our external growth and our reinvestment in the existing portfolio.

I want to thank our dedicated Tanger team members, retail partners, shoppers, and shareholders for your continued support. I'll now turn the call over to Michael to discuss our financial results, capital market activity, and updated guidance in more detail.

Thank you, Steve. For the second quarter, Core FFO was $0.64 a share, compared to $0.58 a share in the prior year period, an increase of 10.3%, driven by our strong internal growth and our accretive external growth. Same Center NOI increased 3.5% for the quarter, driven by increased base rents and tenant reimbursements from our continued strong leasing activity, along with ongoing growth in our other revenue streams. Our tenant watch list remains at low levels. We are encouraged with the momentum that we're seeing in our business. We have raised our FFO and Same Center NOI guidance. Our balance sheet is extremely well-positioned, with low leverage, ample liquidity, and a largely fixed rate debt structure. At quarter end, net debt to adjusted EBITDA was at 4.7 times, flat with year-end 2025. That provides us capacity relative to our 5 to 6 times target.

100% of our debt is at fixed rates, including swaps. Our weighted average interest rate is just about 4%. Our weighted average term to maturity is 3.3 years. We ended the quarter with approximately $1 billion of total liquidity. This includes $355 million of cash, short-term investments, and our delayed draw term loan commitments, the full availability on our $620 million unsecured lines of credit. $24 million of proceeds available to us from the forward equity that we issued under our ATM program. This liquidity gives us the capital that we need to redeem the $350 million of unsecured bonds maturing in early September, as well as to be able to continue to fund our internal and external growth initiatives.

In July, our board authorized a quarterly dividend of $0.3125 a share, which reflects a 7% increase over last year, reflecting our continued FFO growth and the confidence in the durability of our cash flow. Our payout ratio remains at low levels, in the low 60% range, providing additional liquidity to fund our growth and serve as a basis to continue to grow the dividend over time. Based on our year-to-date performance, the acquisition of Levis, and our outlook for the balance of the year, we are raising our full year 2026 guidance. We now expect Core FFO per share of $2.45-$2.52, which is up from $2.42-$2.50 a share previously, and our new midpoint represents 7% growth over last year.