Tanger Notes High Footfall at Its Centers, Improves Liquidity

Tanger Factory Outlet Centers, Inc. SKT  issued a business update on the company’s liquidity and operations. The company also completed amendments to certain debt agreements and executive employment contracts.

Notably, government mandates have been relaxed or removed, facilitating in-store shopping for non-essential retail at all 39 of Tanger's centers. Further, as retail tenants reopen stores, the company is witnessing higher foot traffic at its centers.

As of Jun 14, its opened stores indicated 72% of total occupied stores in the consolidated portfolio, 69% of pre-COVID-19 annualized base rent (ABR) and 68% of total gross leasable area. This drove weekly traffic, which surpassed 85% of prior-year levels.

Moreover, at centers where in-store retail has been allowed for a month or more, weekly traffic exceeded 90% of previous-year levels, while open stores as a percentage of total occupied stores are approaching 90%.

Per management, high footfall at the company’s centers indicates the durability of its value proposition for retailers and consumers.

Additionally, on Jun 11, Tanger secured amendments to debt agreements for its lines of credit and bank term loan in a bid to improve future covenant flexibility. The amendments enable the company to access the existing high-leverage provision, which allows for an increase to the maximum limit to 65% from 60% for total leverage and unsecured leverage for a year, starting Jul 1, 2020. However, during this period, the company is restricted from share buybacks.

Moreover, the amendments allow the calculation of certain metrics on an adjusted annualized basis for a nine-month period beginning Oct 1, 2020. Further, some changes related to the calculation of certain covenants are permanent, inclusive of netting any cash balances more than $30 million (or debt due in the upcoming 24 months, if less) from liability as well as asset calculations for certain covenants.

Moreover, on Jun 15, Tanger paid down the outstanding balance of $100 million under its lines of credit. Post the repayment, the company’s cash on hand was around $433 million and available capacity under its lines of credit was around $100 million.

The company also amended executive employment agreements of several executives to eliminate single-trigger change-in-control benefitsupon voluntary resignation, following a change in control.

Essential retail businesses have been a saving grace of retail REITs, enabling properties to remain open, for the entirety of the pandemic. However, the pandemic has been most impactful for many non-essential businesses that are experiencing significant declines in customer traffic and temporarily store closures. This is expected to have a significant adverse impact on the tenants’ ability to pay rent obligations. As a result, there could be a significant increase in the number of tenants making late or partial rent payments, requesting rent deferrals, or defaulted on rent payments.

Moreover, shares of this Zacks Rank #5 (Strong Sell) company have tanked 54% over the past year compared with the industry’s decline of 22.8%.

 

Stocks to Consider

Alexander Baldwin Holdings, Inc.’s ALEX Zacks Consensus Estimate for 2020 funds from operations (FFO) per share has been unchanged at 83 cents over the past month. The company currently flaunts a Zacks Rank of 1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

City Office REIT, Inc.’s CIO FFO per share estimate for the ongoing year has been unchanged at $1.11 over the past 30 days. The company currently sports a Zacks Rank of 1.

Gladstone Land Corporation’s LAND FFO per share estimate for 2020 has been unchanged at 68 cents over the past month. It currently carries a Zacks Rank of 2 (Buy).

Note: Anything related to earnings presented in this write-up represent funds from operations (FFO) — a widely used metric to gauge the performance of REITs.

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