Tanger Reports Second Quarter Results and Raises Full-Year 2023 Guidance

Grows Occupancy by 70 Basis Points Sequentially and 230 Basis Points Year over Year

Achieves 6th Consecutive Quarter of Positive Rent Spreads

Grand Opening Tanger Nashville on October 27, 2023 at 95% Leased

GREENSBORO, N.C., Aug. 3, 2023 /PRNewswire/ -- Tanger^® Outlets (NYSE:SKT, Financial), a leading owner and operator of upscale open-air outlet centers, today reported financial results and operating metrics for the three and six months ended June 30, 2023.

"We are pleased to announce another quarter of strong results that demonstrate the continued execution of our strategic plan to elevate and diversify our tenant mix, drive total rents, and leverage our platform to realize additional growth," said Stephen Yalof, President and Chief Executive Officer. "Our robust leasing activity – with double-digit rent spreads, occupancy growth and renewal rates trending above our historical average – demonstrates the strength of Tanger's open-air portfolio. We are increasing our full-year guidance following our better-than-anticipated performance in the quarter and outlook for the remainder of the year."

Mr. Yalof continued, "We are proactively managing our balance sheet and liquidity to reduce our cost of capital and provide Tanger with the flexibility to execute on our long-term growth strategies and unlock additional value for our shareholders. We are excited to announce the grand opening of our 37th center in Nashville on October 27, 2023 with a diverse mix of sought-after brands, including several new-to-portfolio and new-to-outlet retailers, and are pleased to be raising the range of our expected stabilized yield by 50 basis points."

Second Quarter Results

• Net income available to common shareholders was $0.23 per share, or $23.9 million, compared to $0.19 per share, or $19.7 million, for the prior year period.
• Funds From Operations ("FFO") available to common shareholders was $0.47 per share, or $52.4 million, compared to $0.45 per share, or $48.8 million, for the prior year period.
• Core Funds From Operations ("Core FFO") available to common shareholders was $0.47 per share, or $52.4 million, compared to $0.45 per share, or $48.8 million, for the prior year period. The prior year period excluded $0.02 per share, or $2.4 million, related to certain executive severance costs, offset by a gain on sale of the corporate aircraft of $0.02 per share, or $2.4 million. The Company does not consider these items indicative of its ongoing operating performance.

Year-to-Date Results

• Net income available to common shareholders was $0.45 per share, or $47.3 million, compared to $0.38 per share, or $40.0 million, for the prior year period.
• FFO available to common shareholders was $0.95 per share, or $104.4 million, compared to $0.90 per share, or $98.2 million, for the prior year period.
• Core FFO available to common shareholders was $0.94 per share, or $103.6 million, compared to $0.90 per share, or $98.3 million, for the prior year period. Core FFO for the first half of 2023 excluded the reversal of previously expensed compensation related to a voluntary executive departure of $0.01 per share, or $0.8 million. Core FFO for the first half of 2022 excluded the executive severance costs and gain on sale of the corporate aircraft discussed above. The Company does not consider these items indicative of its ongoing operating performance.

FFO and Core FFO are widely accepted supplemental non-GAAP financial measures used in the real estate industry to measure and compare the operating performance of real estate companies. Complete reconciliations containing adjustments from GAAP net income to FFO and Core FFO, if applicable, are included in this release. Per share amounts for net income, FFO and Core FFO are on a diluted basis.

Operating Metrics

Key portfolio results for the total portfolio, including the Company's pro rata share of unconsolidated joint ventures, were as follows:

• Occupancy was 97.2% on June 30, 2023, compared to 96.5% on March 31, 2023 and 94.9% on June 30, 2022
• Same center net operating income ("Same Center NOI"), which is presented on a cash basis, increased 4.3% to $83.0 million for the second quarter of 2023 from $79.5 million for the second quarter of 2022 and increased 5.9% to $166.6 million for the first half of 2023 from $157.3 million for the first half of 2022, driven by higher rental revenues from increased base rent and expense recoveries. In addition, Same Center NOI benefited from operating expense efficiencies, expense timing and the mild winter experienced in the first quarter of 2023
• Average tenant sales productivity of $443 per square foot for the twelve months ended June 30, 2023 decreased 0.9% compared to $447 per square foot for the twelve months ended March 31, 2023 and decreased 1.3% from $449 per square foot for the twelve months ended June 30, 2022
• On a same center basis, average tenant sales per square foot of $443 per square foot for the twelve months ended June 30, 2023 decreased 0.9% compared to $447 per square foot for the twelve months ended March 31, 2023 and decreased 1.8% from $451 per square foot for the twelve months ended June 30, 2022
• The occupancy cost ratio ("OCR"), representing annualized occupancy costs as a percentage of tenant sales, was 9.0% for the for the twelve months ended June 30, 2023 compared to 8.8% for the twelve months ended March 31, 2023 and 8.5% for the twelve months ended June 30, 2022
• Lease termination fees (which are excluded from Same Center NOI) for the total portfolio totaled $62,000 for the second quarter of 2023 and $75,000 for the first half of 2023, compared to $35,000 for the second quarter of 2022 and $2.7 million for the first half of 2022

Same Center NOI is a supplemental non-GAAP financial measure of operating performance. A complete definition of Same Center NOI and a reconciliation to the nearest comparable GAAP measure is included in this release.

Transaction Activity

Tanger Nashville, the Company's newest development, is expected to open on October 27, 2023. The center will be approximately 290,000 square feet and is 95% leased. The Company is increasing its projected stabilized yield to a range of 7.5% to 8.0% from a prior expectation of 7.0% to 7.5% and is updating its estimated total cost to $143 million to $147 million (previously $142 million to $150 million). Through June 30, 2023, Tanger had incurred costs of $89.3 million associated with this development.

The open-air center will offer shopping and dining across seven retail buildings and a unique, placemaking community space. Tanger Nashville reflects the Company's commitment to diversify and enhance the shopping experience for its customers with over one quarter of the center's dynamic assortment new to Tanger's portfolio or first to the outlet channel.

Leasing Activity

For the total portfolio, including the Company's pro rata share of unconsolidated joint ventures, as of June 30, 2023, Tanger has renewals executed or in process for 64.4% of the space scheduled to expire during 2023 compared to 64.5% of expiring 2022 space as of June 30, 2022.

The following key leasing metrics are presented for the total domestic portfolio, including the Company's pro rata share of domestic unconsolidated joint ventures.

• Total renewed or re-tenanted leases (including leases for both comparable and non-comparable space) executed during the twelve months ended June 30, 2023 included 513 leases, totaling over 2.1 million square feet
• Blended average rental rates increased for the sixth consecutive quarter, increasing 13.2% on a cash basis for leases executed for comparable space during the twelve months ended June 30, 2023. These blended rent spreads, which were up 910 basis points year over year, are comprised of re-tenanted rent spreads of 30.9% and renewal rent spreads of 12.1%

Dividend

In July 2023, the Company's Board of Directors declared a quarterly cash dividend of $0.245 per share, payable on August 15, 2023 to holders of record on July 31, 2023.

Balance Sheet and Liquidity

In May 2023, Fitch Ratings assigned a first-time 'BBB' long-term issuer default rating to Tanger Factory Outlet Centers, Inc. and Tanger Properties Limited Partnership, along with a Stable rating outlook. Fitch also assigned a 'BBB' rating to Tanger Properties Limited Partnership's senior unsecured debt, which includes its lines of credit, a term loan and senior notes. As a result, the applicable pricing margins on the Company's $520 million undrawn unsecured lines of credit and $325 million term loan were each reduced by 25 basis points (including a 5 basis point reduction in the facility fee on the unsecured lines of credit).

In June 2023, the Company refinanced the expiring mortgage at its Texas City, TX (Galveston/Houston) 50%-owned joint venture. The new loan amount is $58.0 million and has an initial maturity date of June 2026 with two one-year extension options available if certain metrics are achieved. The loan is subject to an interest rate of Daily SOFR plus 300 basis points, and the joint venture placed an interest rate swap on half of the outstanding principal that fixes Daily SOFR at 4.44% until December 2025. Tanger's share of the outstanding debt is $29.0 million.

The following balance sheet and liquidity metrics are presented for the total portfolio, including the Company's pro rata share of unconsolidated joint ventures. As of June 30, 2023:

• Net debt to Adjusted EBITDAre (calculated as net debt divided by Adjusted Earnings Before Interest, Taxes, Depreciation and Amortization for Real Estate ("Adjusted EBITDAre")) remained stable at 5.2x for the twelve months ended June 30, 2023 from 5.1x for the year ended December 31, 2022, reflecting incremental Nashville development spending
• Interest coverage ratio (calculated as Adjusted EBITDAre divided by interest expense) was 4.5x for the first half of 2023 and 4.6x for the twelve months ended June 30, 2023
• Cash and cash equivalents and short-term investments totaled $233.8 million with full availability on the Company's $520 million unsecured lines of credit
• Total outstanding debt aggregated $1.6 billion with $91.2 million (principal) of floating rate debt, representing approximately 6% of total debt outstanding and 2% of total enterprise value
• Weighted average interest rate was 3.4% and weighted average term to maturity of outstanding debt, including extension options, was approximately 5.2 years
• Approximately 88% of the total portfolio's square footage was unencumbered by mortgages
• Funds Available for Distribution ("FAD") payout ratio was 51% for the first half of 2023

As of June 30, 2023, $300 million of the outstanding balance of the Company's $325 million unsecured term loan, which matures in January 2027 plus a one-year extension, is fixed with interest rate swaps at a weighted average Adjusted SOFR rate of 0.5%. These swaps expire on February 1, 2024. As of August 3, 2023, the Company has entered into $125 million of forward-starting swaps that commence February 1, 2024, with $60 million expiring in February 2026, $40 million expiring in August 2026 and $25 million expiring in January 2027. Collectively, these swaps fix the Adjusted SOFR base rate at a weighted average of 3.4%.

Adjusted EBITDAre, Net debt and FAD are supplemental non-GAAP financial measures of operating performance. Definitions of Adjusted EBITDAre, Net debt and FAD and reconciliations to the nearest comparable GAAP measures are included in this release.

Guidance for 2023

Based on the Company's better-than-anticipated performance in the second quarter and its outlook for the remainder of 2023, management is increasing its full-year 2023 guidance with its current expectations for net income, FFO and Core FFO per share for 2023 as follows:

Tanger's estimates reflect the following key assumptions (dollars in millions):

Weighted average diluted common shares are expected to be approximately 106 million for earnings per share and 111 million for FFO and Core FFO per share. The estimates above do not include the impact of the acquisition or sale of any outparcels, properties or joint venture interests, or any additional financing activity.

Second Quarter 2023 Conference Call

Tanger will host a conference call to discuss its second quarter 2023 results for analysts, investors and other interested parties on Friday, August 4, 2023, at 8:30 a.m. Eastern Time. To access the conference call, listeners should dial 1-877-605-1702. Alternatively, a live audio webcast of this call will be available to the public on Tanger's Investor Relations website, investors.tanger.com. A telephone replay of the call will be available from August 4, 2023 at approximately 11:30 a.m. through August 18, 2023 at 11:59 p.m. by dialing 1-877-660-6853, replay access code #13739144. An online archive of the webcast will also be available through August 18, 2023.

Upcoming Events

The Company is scheduled to participate in the following upcoming events:

• Evercore ISI's Real Estate Conference on September 8, 2023 (virtual)
• Bank of America's Global Real Estate Conference 2023 held at the Westin New York at Times Square in New York, NY on September 12, 2023
• Tour of Tanger Charleston on September 21, 2023 as part of BMO Capital Markets investor tour of Charleston, SC
• Tour of Tanger San Marcos on September 28, 2023 as part of US Bancorp's 2023 Fixed Income Austin REIT Tour
• Grand Opening of Tanger Nashville on October 27, 2023

About Tanger^® Outlets

Tanger Factory Outlet Centers, Inc. (NYSE: SKT), a leading operator of upscale open-air outlet centers, fully or partially owns and/or manages a portfolio of 37 centers, including one center under development. Tanger's operating centers, which comprise approximately 14 million square feet, are located in 20 states and in Canada and are leased to over 2,700 stores operated by more than 600 different brand name companies. Tanger has more than 42 years of experience in the outlet industry and has been a publicly traded REIT since 1993. Tanger is furnishing a Form 8-K with the Securities and Exchange Commission ("SEC") that includes a supplemental information package for the quarter ended June 30, 2023. For more information on Tanger, call 1-800-4TANGER or visit tanger.com.

Safe Harbor Statement

This news release contains certain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. The Company intends such forward-looking statements to be covered by the safe harbor provisions for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995 and includes this statement for purposes of complying with the safe harbor provisions. Forward-looking statements, which are based on certain assumptions and describe the Company's future plans, strategies and expectations, are generally identifiable by use of the words "believe," "expect," "intend," "anticipate," "estimate," "project," "will," "forecast" or similar expressions, and include the Company's expectations regarding future financial results and assumptions underlying that guidance, long-term growth, trends in retail traffic and tenant revenues, development initiatives and strategic partnerships, the anticipated opening of the Company's Nashville development and related costs and anticipated yield, expectations regarding operational metrics, renewal trends, new revenue streams, its strategy and value proposition to retailers, participation in upcoming events, uses of and efforts to reduce costs of capital, liquidity, dividend payments and cash flows.

You should not rely on forward-looking statements since they involve known and unknown risks, uncertainties and other important factors which are, in some cases, beyond our control and which could materially affect our actual results, performance or achievements. Important factors which may cause actual results to differ materially from current expectations include, but are not limited to: our inability to develop new outlet centers or expand existing outlet centers successfully; risks related to the economic performance and market value of our outlet centers; the relative illiquidity of real property investments; impairment charges affecting our properties; our dispositions of assets may not achieve anticipated results; competition for the acquisition and development of outlet centers, and our inability to complete outlet centers we have identified; environmental regulations affecting our business; risks associated with possible terrorist activity or other acts or threats of violence and threats to public safety; risks related to the impact of macroeconomic conditions, including rising interest rates and inflation, on our tenants and on our business, financial condition, liquidity, results of operations and compliance with debt covenants; our dependence on rental income from real property; our dependence on the results of operations of our retailers and their bankruptcy, early termination or closing could adversely affect us; the fact that certain of our properties are subject to ownership interests held by third parties, whose interests may conflict with ours; risks related to climate change; increased costs and reputational harm associated with the increased focus on environmental, sustainability and social initiatives; risks related to uninsured losses; the risk that consumer, travel, shopping and spending habits may change; risks associated with our Canadian investments; risks associated with attracting and retaining key personnel; risks associated with debt financing; risks associated with our guarantees of debt for, or other support we may provide to, joint venture properties; the effectiveness of our interest rate hedging arrangements; uncertainty relating to the potential phasing out of LIBOR; our potential failure to qualify as a REIT; our legal obligation to make distributions to our shareholders; legislative or regulatory actions that could adversely affect our shareholders, including the recent changes in the U.S. federal income taxation of U.S. businesses; our dependence on distributions from the Operating Partnership to meet our financial obligations, including dividends; the risk of a cyber-attack or an act of cyber-terrorism and other important factors set forth under Item 1A - "Risk Factors" in the Company's and the Operating Partnership's Annual Report on Form 10-K for the year ended December 31, 2022, as may be updated or supplemented in the Company's Quarterly Reports on Form 10-Q and the Company's other filings with the SEC. Accordingly, there is no assurance that the Company's expectations will be realized. The Company disclaims any intention or obligation to update the forward-looking statements, whether as a result of new information, future events or otherwise. You are advised to refer to any further disclosures the Company makes or related subjects in the Company's Current Reports on Form 8-K that the Company files with the SEC.