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Outlets Remain an Important, Profitable Channel of Distribution, Says Tanger CEO

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Tanger Factory Outlet Centers Inc. recently reported financial and operating results for the three and six months ended June 30, 2017.  For the second quarter of 2017, net income was $0.31 per common share, or $29.1 million, compared to $0.76 per common share, or $72.7 million, for the second quarter of 2016.

Net income was positively impacted in both periods by gains on the sale of assets or the acquisition of interests in previously held joint ventures. These gains totaled $0.07 per common share, or $6.9 million, during the second quarter of 2017 and $0.52 per common share, or $49.3 million, during the second quarter of 2016, according to a report.

“We have worked diligently improving the quality of our portfolio by re-merchandising six centers, strengthening our fortress balance sheet by successfully completing a $300 million bond offering, and continuing our AFFO growth during this challenging period for retailers. During the second quarter, we sold the least productive asset in our portfolio and invested the proceeds to buy back 1.5 million of our common shares, which offset the dilutive impact of the property sale on AFFO,” says Steven B. Tanger, Chief Executive Officer.

“Subsequent to quarter end, we completed a $300 million, 10-year bond offering with a 3.875% coupon, the proceeds of which will be used for the early redemption of $300 million of 6.125% bonds that mature June 1, 2020.  This financing will increase AFFO by $0.06 per share annualized, or about $0.015 per share in the second half of 2017.  In addition, it will extend our weighted average term to maturity to 6.7 years, reduce our weighted average interest rate by more than 40 basis points to 3.31%, and increase our cash flow by over $6 million annually.”

He adds that “Outlets remain a very important and profitable channel of distribution for brand name and designer retailers and manufacturers, as evidenced by our high level of occupancy, 96.1% as of June 30, 2017, and our streak of 55 consecutive quarters of same center net operating income growth.  Another indicator of the resiliency of the outlet channel is that if retailers announce plans to close stores, historically, outlets have accounted for a disproportionately small number of those stores compared to other retail formats.  Given the outlet channel’s appeal with retailers and our fortress balance sheet, we believe Tanger is well-positioned to weather the current headwinds in the retail environment and emerge stronger when the cycle turns positive.”

For the six months ended June 30, 2017, net income was $0.54 per common share, or $51.1 million, compared to $1.05 per common share, or $99.5 million, for the six months ended June 30, 2016.  Net income was positively impacted in both periods by gains on the sale of assets or the acquisition of interests in previously held joint ventures.  These gains totaled $0.07 per common share, or  $6.9 million, during the six months ended June 30, 2017 and $0.57 per common share, or  $54.1 million, during the six months ended June 30, 2016.

Funds from operations was $0.59 per common share for both the second quarter of 2017 ($59.4 million) and second quarter of 2016 ($59.2 million).

During the six months ended June 30, 2017, FFO increased 2.6% to $1.17 per common share, or $117.1 million, from $1.14 per common share, or $113.9 million, for the six months ended June 30, 2016.

Adjusted funds from operations, which excludes certain items that we do not consider indicative of our ongoing operating performance, was $0.59 per common share, or $59.4 million, for the second quarters of both 2017 and 2016.

For the six months ended June 30, 2017, AFFO increased 1.7% to $1.17 per common share, or $117.7 million, from $1.15 per common share, or $115.2 million, for the six months ended June 30, 2016.

FFO and AFFO, which do not include the gains that positively impacted 2017 and 2016 net income, 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 AFFO are included in this release. Net income, FFO and AFFO per share are on a diluted basis.