U.S. Markets open in 8 hrs 38 mins

Edited Transcript of SKT earnings conference call or presentation 2-Nov-18 12:30pm GMT

Q3 2018 Tanger Factory Outlet Centers Inc Earnings Call

Greensboro Nov 8, 2018 (Thomson StreetEvents) -- Edited Transcript of Tanger Factory Outlet Centers Inc earnings conference call or presentation Friday, November 2, 2018 at 12:30:00pm GMT

TEXT version of Transcript

================================================================================

Corporate Participants

================================================================================

* Cyndi M. Holt

Tanger Factory Outlet Centers, Inc. - VP, IR

* James F. Williams

Tanger Factory Outlet Centers, Inc. - Executive VP & CFO

* Steven B. Tanger

Tanger Factory Outlet Centers, Inc. - CEO & Director

* Thomas E. McDonough

Tanger Factory Outlet Centers, Inc. - President & COO

================================================================================

Conference Call Participants

================================================================================

* Caitlin Burrows

Goldman Sachs Group Inc., Research Division - Research Analyst

* Christine Mary McElroy Tulloch

Citigroup Inc, Research Division - Director

* Craig Richard Schmidt

BofA Merrill Lynch, Research Division - Director

* Greg Michael McGinniss

Scotiabank Global Banking and Markets, Research Division - Analyst

* Todd Michael Thomas

KeyBanc Capital Markets Inc., Research Division - MD and Senior Equity Research Analyst

================================================================================

Presentation

--------------------------------------------------------------------------------

Cyndi M. Holt, Tanger Factory Outlet Centers, Inc. - VP, IR [1]

--------------------------------------------------------------------------------

Good morning. This is Cyndi Holt, Vice President of Investor Relations, and I'd like to welcome you to the Tanger Factory Outlet Centers Third Quarter Conference Call. Yesterday, we issued our earnings release as well as our supplemental information package and our investor presentation. This information is available on our Investor Relations website, investors.tangeroutlets.com.

Please note that during this conference call, some of management's comments will be 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, including funds from operations, or FFO, adjusted funds from operations, or AFFO, same-center net operating income and portfolio net operating income. 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, November 2, 2018. (Operator Instructions).

On the call today will be Steven Tanger, Chief Executive Officer; Jim Williams, Executive Vice President and Chief Financial Officer; and Tom McDonough, President and Chief Operating Officer.

I will now turn the call over to Steve. Please go ahead, Steve.

--------------------------------------------------------------------------------

Steven B. Tanger, Tanger Factory Outlet Centers, Inc. - CEO & Director [2]

--------------------------------------------------------------------------------

Good morning. Thank you for joining us today on our third quarter earnings call. We continue to execute on these strategic priorities that we have been focused on a number of quarters. These include, driving increased traffic to our centers, filling vacancies with new high-quality in-demand tenants and ultimately positioning Tanger for long-term profitable growth.

We are pleased that our result for the third quarter were ahead of our expectations and reflect a rigorous effort of our team, along with the benefits of the timing of some operating expenses and the related recovery income.

Let me remind you that we typically experienced some variability in NOI quarter-to-quarter due to such factors as store openings, the timing of income and expenses and the impact of events such as, as shift in holidays and unseasonably or severe weather, which do not necessarily align year-over-year.

Our team has successfully increased occupancy by 80 basis points since the end of the second quarter to 96.4% of our consolidated portfolio. Additionally, sales at our centers are encouraging. On the NOI weighted basis, sales for our consolidated portfolio were $409 per square foot in the trailing 12 months, up a healthy 2.3% from the prior year period.

Unfortunately, 7 of our centers or 13% of our portfolio were in the path of Hurricane Florence in September. While we are thankful that our employees were safe and that we had no significant damage at our centers, we were impacted beyond just the day the hurricane hit. Due to mandatory evacuations and severe weather in the affected areas we had centers closed for a cumulative 27 days. This was a slow moving storm, with a lot of media buildup, which resulted a meaningful traffic slowdown leading up to, during and after the hurricane. Tourists going to the area canceled their plans. And after the event, it took a while for the local consumers to return.

We continue running successful marketing and engagement programs in conjunction with our tenants to help drive traffic and sales at or centers. We also remain diligent in expanding our loyalty program. TangerClub members are our best customers, shopping 50% more frequently and spending an average of 12% more than non-members. Over the past year, new loyalty membership sales are up approximately 12%, increasing our total paid TangerClub memberships to over 1,300,000 people.

Beyond these marketing efforts, the most important thing we can do is to merchandise our centers with the most popular and productive tenants. We have been diligently working to backfill the space that we have -- that has been vacated over the past few years caused by bankruptcies and store closures. We are more comfortable with our tenant watch list relative to recent quarters. And importantly, do not have any big box or department store exposure in our portfolios. We are actively having discussions with our tenant partners about increased open device and are seeing some tenants investing in, updating and renovating their store as they are feeling more confident about the future.

Additionally, non-traditional retailers are opening stores and working to take their online presence direct to the consumers where they can try on, test and discuss a product real-time and walk out that day with the item. Over time, and with our favorable occupancy costs, we provide a compelling solution for many online brands looking to add a retail store component to their growth strategy.

While this backdrop is encouraging, we remain cautious in our expectations going into next year. We anticipate that there will still need to be selective adjustments to renting terms. We believe it is important longer term that we maintain high occupancy and keep our centers well merchandised and dynamic. As we have demonstrated through our history, the benefit of our proven approach of working with specific tenants to maintain occupancy allows us to be opportunistic in our pursuit of long-term growth.

Tanger continues to evolve along with our consumers. This includes tenant mix, amenities at our centers, digital initiatives and marketing programs with our tenants. However, the one thing that we continue to experience through every cycle is that consumers want the best brand at the best prices. And that's what Tanger has consistently providing.

Finally, in terms of our balance sheet and capital position, we are in good shape with adequate financial flexibility supported by stable cash flows. Our dividend is well covered with an FFO payout ratio of 56% for the quarter. We have a 94% unencumbered portfolio, maintain solid interest coverage and have no significant debt maturities until 2022. We remain disciplined in our capital allocations decisions with a singular focus on creating shareholder value over time.

With that, I would like to turn the call now over to Tom McDonough, who will discuss the current sales and leasing environment.

--------------------------------------------------------------------------------

Thomas E. McDonough, Tanger Factory Outlet Centers, Inc. - President & COO [3]

--------------------------------------------------------------------------------

As Steve mentioned, we are focused on our leasing activities and filling our centers with high-quality productive tenants. To that end, during the trailing 12 months ended September 30, we had 364 new and renewal leases commenced, comprising 1.8 million square feet of GLA. That represents a 21% increase compared to the square footage that commenced in the same period of the prior year.

This leasing volume was slightly offset by 17,000 square feet of space that was vacated during the quarter. Bringing our year-to-date recapture related to bankruptcies and brand-wide restructurings to approximately 123,000 square feet.

We are seeing some benefit from our focus on leasing as we achieved an 80 basis point sequentially gain in occupancy and in the quarter with a consolidated portfolio occupancy rate of 96.4%.

While seasonal tenants contributed to the gain this quarter, this improved occupancy demonstrates the ongoing successful execution of our long-time strategy of maintaining well-merchandised centers, while optimizing revenues and tenants fee over time.

In terms of rent spreads, for leases which commenced in the 12 months ending September 30, which includes the impact of our remerchandising activities and leases of less than 12 months, rents increased by 6.1% on a straight line basis and declined slightly on a cash basis compared to the prior year period.

The leasing spreads appear to be stabilizing, reflecting what we believe is increasing confidence of our tenants in the long-term growth and profitability of the outlet distribution channel. We continue to renew and retenant with extended terms and at market rents, the shorter term leases we had previously signed. These leases will commence over the next several quarters.

As we have previously discussed, the selective use of leases less than 12 months has long been an effective strategy for us. The magnitude of the rent adjustment and their impacts on our spreads compared to what we experienced in the first half of this year is moderating and returning to a more normalized historical level.

Traffic for our total portfolio was down 70 basis points for the quarter despite a 6.6% decline in September at the centers impacted by hurricanes in both years. Additionally, the traffic we drove to the centers converted to sales growth. Average tenant sales for the consolidated portfolio was $363 (sic) [$383] per square foot for the 12 months ended September 30, 2018 compared to $381 per square foot in the comparable prior year period. Same center tenant sales for the overall portfolio increased 1.1% over the same period.

We believe that the level of bankruptcies and restructurings that we saw in recent years in our portfolio is tapering. In addition, we are encouraged by the tone of discussions with tenants and prospects. But it is important to reiterate that we do not expect rental rate growth to meaningfully rebound next year. As indicated by leases that have been executed for 2019, but not yet commenced, cash spreads appear to be stabilizing at flat to slightly positive. I want to emphasize that based on our historical pace these leases represent less than a 1/3 of what we had ultimately commenced for the year. And the average commenced rate might be meaningfully different relative to what we're seeing. Furthermore, as we mentioned, there could be selective lease adjustment, which could impact our NOI next year.

I will now turn the call over to Jim to take you through our financial results and a balance sheet recap.

--------------------------------------------------------------------------------

James F. Williams, Tanger Factory Outlet Centers, Inc. - Executive VP & CFO [4]

--------------------------------------------------------------------------------

Third quarter adjusted funds from operations available to common shareholders was $0.63 per share in line with the third quarter of 2017.

Incremental income from our new developments and expansions completed in 2017 and reduced G&A expense were partially offset by same-store NOI decrease of 1% compared to the prior year quarter, driven primarily by the 2017 and 2018 store closures and lease modifications.

Our balance sheet remains strong. As of September 30, 2018 approximately 94% of the square footage in our consolidated portfolio was not encumbered by mortgages. Only $203 million with outstanding under unsecured lines of credit leaving 66% unused capacity, or approximately $391 million.

We maintained a substantial interest coverage ratio during the third quarter of 4.5x and net debt to EBITDA improved from the prior quarter. Our floating rate exposure represented 12% of total debt and about 5% of total enterprise value as of September 30 2018. The average term at maturity was 5.9 years and the weighted average interest rate for outstanding debt as of quarter end was 3.5%.

Last week we amended and restated our bank term loan, increasing the outstanding balance to $350 million from $325 million, extending maturity to April 2024 from April 2021, and reducing the interest rate spread at 90 basis points from 95 basis point over LIBOR. The additional $25 million of proceeds was used to pay down the balances outstanding under our unsecured lines of credit. With the extension now complete, the weighted average term maturity of our outstanding debt is approximately 6.4 years and we have no significant debt maturities until October of 2022.

We continue to generate strong levels of cash levels of cash flow and with our plan to increase total shareholder return, we continually evaluate our priority uses of capital. As we mentioned earlier this year, we are focused on reinvesting in our assets, paying the dividend, timely repurchases of common shares and deleveraging the balance sheet, while also evaluating potential opportunities for long-term growth.

During the third quarter, we've reduced our consolidated debt by a little more than $20 million and improved our debt to EBITDA metric to 5.8x down from 6x last quarter. In addition, while we didn't make any share repurchases during the quarter, year-to-date we have repurchased approximately 990,000 shares for $20 million at a weighted average share price of $21.74. This leaves approximately $56 million remaining under our $125 million share repurchase authorization.

We also continue to demonstrate our commitment to a well-covered dividend with a FFO payout ratio of 56% for the quarter. The strength of our balance sheet will allow us to take advantage of opportunities that arise as the cycle turns more positive.

Let me now provide some perspective on our center in Jeffersonville, Ohio where we took a non-cash impairment. Over the last 3 years the center was particularly impacted by a bankruptcy filing and brand-wide restructuring, which resulted in store closures of 13 tenants. To complement existing tenants by case base, Polo Ralph Lauren and Nike we have proactively remerchandised the center in light of a shifting competitive landscape by bringing in tenants such H&M, T.J. Maxx and West Elm. We continue to position it to achieve long-term stability. Although the center ended the quarter at 97% occupancy, we anticipate that it will take additional time for NOI to recover. Based on these expectations, we wrote the asset down to its estimated current value.

In terms of year-end expectations, based on a slight better than expected third quarter and further visibility into the remainder of the year, we are raising the midpoint of our range of FFO per share for 2018. We now expect FFO per share for the year to be between $2.42 and $2.46. We are also raising the midpoint of our same-store NOI amounting down 1.5% to down 2%.

Some of the variability in our expectations for the remainder of the year comes from the potential impact on sales and in turn percentage rents from Hurricanes Florence and Michael, which is not yet fully know. I want to remind you that in the quarter 100 basis points of NOI equates to approximately $800,000.

We are raising our expectation for average occupancy for the year to be between 95.5% and 96%. And in terms store closures, we are lowering our expectations for the year to a range of 125,000 to 150,000 square feet from the prior range of 150,000 to 175,000.

Additional details assumed in our guidance can be found in the release we issued last night.

This concludes our prepared remarks. I'd now like to open it up for questions. Operator, can we take the first question.

================================================================================

Questions and Answers

--------------------------------------------------------------------------------

Operator [1]

--------------------------------------------------------------------------------

Your first question comes the line of Christine McElroy with Citigroup.

--------------------------------------------------------------------------------

Christine Mary McElroy Tulloch, Citigroup Inc, Research Division - Director [2]

--------------------------------------------------------------------------------

Just wanted to thank you for the color on the 2019 executed leases and the additional spread disclosure on the supplemental, it's extremely helpful. Just with regard to the 80 basis points of occupancy growth during Q3. Given that that's lease rate, just trying to understand how that translated into actual move-ins in Q3 or should we expect through the bulk of that rent commencement in Q4 in terms of flowing through same-store NOI?

--------------------------------------------------------------------------------

Steven B. Tanger, Tanger Factory Outlet Centers, Inc. - CEO & Director [3]

--------------------------------------------------------------------------------

Good morning, Christine, thank you. Before we start, I just want to assure the record is correct. The average tenant sales for our consolidated portfolio was $383 per square foot for the 12 months ended September 30, 2018, I think inadvertently it was stated as $363. With regard to your question, most of the increase in occupancy will be benefiting both the Q4 and the calendar year of 2018.

--------------------------------------------------------------------------------

Christine Mary McElroy Tulloch, Citigroup Inc, Research Division - Director [4]

--------------------------------------------------------------------------------

And then you talked about it being more of a seasonal uptick or normal seasonal uptick. It seems like the pace of space recapture is moderating. When do you sort of see that level getting back closer to 97% more of a normal level in terms of how you are thinking about that space recapture rate into 2019?

--------------------------------------------------------------------------------

Steven B. Tanger, Tanger Factory Outlet Centers, Inc. - CEO & Director [5]

--------------------------------------------------------------------------------

We don't really want to give any guidance yet for 2019. But with the rate of bankruptcy continuing to moderate, and our aggressive efforts to add terrific tenants to our portfolio, we're fighting to get that level back up to 97%, but we are not there yet.

--------------------------------------------------------------------------------

Christine Mary McElroy Tulloch, Citigroup Inc, Research Division - Director [6]

--------------------------------------------------------------------------------

And then, just lastly on share repurchases, you mentioned that briefly maybe you can just update us on how you are thinking about buybacks versus other uses of free cash flow here given that you were more active earlier in the year in share repurchases?

--------------------------------------------------------------------------------

Steven B. Tanger, Tanger Factory Outlet Centers, Inc. - CEO & Director [7]

--------------------------------------------------------------------------------

Well, you know us for a long period of time. We try to be thoughtful in our capital allocation and we have a number of factors to balance, one is the share repurchase, second is the pay down of our existing debt. Third is continuing to raise our dividend and the fourth is continuing to invest in our assets to be sure we have the best presentation possible to our visitors at our properties. We, so far this year, have repurchased about $20 million of our stock and we pay down our debt by about $20 million and we've raised our dividend and we will invest somewhere between $35 million and $40 million into our assets. So we've -- we will continue to be thoughtful going forward. We have not come up with a 2019 capital allocation strategy yet. I just want to underline that we are very proud and we value our investment grade rating with both agencies. We are very happy that one of the agencies turned positive on retail. But you should consider that we will remain thoughtful and continue to pull all those levers with the free cash flow we generate.

--------------------------------------------------------------------------------

Operator [8]

--------------------------------------------------------------------------------

Your next question comes from the line of Greg McGinniss with Deutsche Bank (sic) [Scotiabank].

--------------------------------------------------------------------------------

Greg Michael McGinniss, Scotiabank Global Banking and Markets, Research Division - Analyst [9]

--------------------------------------------------------------------------------

Tom echoing at Christy's comments, we do appreciate the clarity you are giving on leasing expectations, and I just want to kind of dig into that a bit more. I think the language last quarter was the expectation to be flat slightly down on 2019, which is now flat to slightly positive. I'm just curious what changed over the last quarter, that's given you confidence this trend is going to continue. And if that expectation is inclusive of yours and Steve's comments on select lease negotiation as well going into next year?

--------------------------------------------------------------------------------

Steven B. Tanger, Tanger Factory Outlet Centers, Inc. - CEO & Director [10]

--------------------------------------------------------------------------------

Good morning, and thanks for your compliment of the clarity we are providing. We appreciate that notice. We are turning a little bit more constructive on next year's leasing spreads. We are so, let me say, optimistically cautious as the lawyers look at me. We have increased the size of the pool of our executed leases from last quarter from 20% to about a 1/3 so far at the end of this quarter to commence next year. We are -- this number could possibly change obviously as we execute more leases. But we are encouraged by the tone of our conversation with our tenants and our prospects.

--------------------------------------------------------------------------------

Greg Michael McGinniss, Scotiabank Global Banking and Markets, Research Division - Analyst [11]

--------------------------------------------------------------------------------

So that is inclusive of what your expectations are then on -- when you talked about some of these selected negotiations.

--------------------------------------------------------------------------------

Steven B. Tanger, Tanger Factory Outlet Centers, Inc. - CEO & Director [12]

--------------------------------------------------------------------------------

Well negotiations are not signed leases. So I want to be very clear what we are -- what our discussion includes is executed leases.

--------------------------------------------------------------------------------

Greg Michael McGinniss, Scotiabank Global Banking and Markets, Research Division - Analyst [13]

--------------------------------------------------------------------------------

And then the 30% or 1/3 of leases that you've signed, is that typical for this time of the year?

--------------------------------------------------------------------------------

Steven B. Tanger, Tanger Factory Outlet Centers, Inc. - CEO & Director [14]

--------------------------------------------------------------------------------

It's consistent with prior years.

--------------------------------------------------------------------------------

Greg Michael McGinniss, Scotiabank Global Banking and Markets, Research Division - Analyst [15]

--------------------------------------------------------------------------------

And just one final question. On the impairment charge, is that related to a potential disposition?

--------------------------------------------------------------------------------

Steven B. Tanger, Tanger Factory Outlet Centers, Inc. - CEO & Director [16]

--------------------------------------------------------------------------------

We are studying all the alternatives available to us with that asset.

--------------------------------------------------------------------------------

Operator [17]

--------------------------------------------------------------------------------

Your next question comes from the line of Caitlin Burrows with Goldman Sachs.

--------------------------------------------------------------------------------

Caitlin Burrows, Goldman Sachs Group Inc., Research Division - Research Analyst [18]

--------------------------------------------------------------------------------

Just maybe on the occupancy, which as you've mentioned increased nicely in the quarter. Could you just discuss who those incremental tenants have been and whether there -- generally what you guys have in terms of off-price concepts of national brands or if you're doing any expansion into more local and regional retailers?

--------------------------------------------------------------------------------

Steven B. Tanger, Tanger Factory Outlet Centers, Inc. - CEO & Director [19]

--------------------------------------------------------------------------------

Good morning, Caitlin. We are very happy to have opened several great tenants either in the fourth quarter --- third quarter or maybe early in the fourth. We recently welcomed Tory Burch in Sevierville, Tennessee, Polo Ralph Lauren has opened a wonderful new store in several of our centers. We installed our first Carolina Pottery store which is a 52,000-foot unique tenant in Myrtle Beach, South Carolina. So I think as you can see, the traditional outlet tenants are expanding and feeling more comfortable with the long-term prospects of our distribution channel and we also are attracting wonderful existing retailers such as T.J. Maxx, Marshalls, HomeGoods, H&M, Forever 21. I know I'm going to get in trouble, because I'm not mentioning some, but we've expanded the reach of the co-tenancy in our centers to give our guests the shopping experience that they want.

--------------------------------------------------------------------------------

Caitlin Burrows, Goldman Sachs Group Inc., Research Division - Research Analyst [20]

--------------------------------------------------------------------------------

And then, maybe could you just talk about tenant allowances and what you are seeing in terms of what retailers are looking for when they open new stores in your centers now?

--------------------------------------------------------------------------------

Steven B. Tanger, Tanger Factory Outlet Centers, Inc. - CEO & Director [21]

--------------------------------------------------------------------------------

It obviously is dependent upon the tenant. I think the request for assistance are pretty consistent by tenant as it has been in the past couple of years.

--------------------------------------------------------------------------------

Caitlin Burrows, Goldman Sachs Group Inc., Research Division - Research Analyst [22]

--------------------------------------------------------------------------------

And then maybe last one in terms of just average store box size, would you say that there's any trend there in terms of increasing or decreasing size? And just kind of on the definition, does that impact your leasing spread info or is the leasing spreads showing just so that irregardless of size just kind of one space and what the new rent is versus the old rent?

--------------------------------------------------------------------------------

Steven B. Tanger, Tanger Factory Outlet Centers, Inc. - CEO & Director [23]

--------------------------------------------------------------------------------

Answering your last question first. The spreads reflect comparable sized space with the same tenant. If they change and get larger against smaller, we would adjust the spreads accordingly. The -- you know what, I forgot the other 2 parts of your question. If you want to tell me again, I'm happy to answer.

--------------------------------------------------------------------------------

Caitlin Burrows, Goldman Sachs Group Inc., Research Division - Research Analyst [24]

--------------------------------------------------------------------------------

It was just on that average store size. Do you see any trend in terms of getting larger or smaller?

--------------------------------------------------------------------------------

Steven B. Tanger, Tanger Factory Outlet Centers, Inc. - CEO & Director [25]

--------------------------------------------------------------------------------

Again that is dependent upon the tenant. We have some tenants doing so well that they continue to look to expand their footprint and we have some tenants that are still viable exciting brands, but they've decided to narrow the presentation or take out certain categories of product and they would like to right size their store. So it's a combination of both. But as you can see overall, at 96.4% occupancy, we're doing just fine. Thank you.

--------------------------------------------------------------------------------

Operator [26]

--------------------------------------------------------------------------------

Your next question comes from the line of Todd Thomas from KeyBanc Capital.

--------------------------------------------------------------------------------

Todd Michael Thomas, KeyBanc Capital Markets Inc., Research Division - MD and Senior Equity Research Analyst [27]

--------------------------------------------------------------------------------

Just, Tom, what did the -- you mentioned the seasonal tendencies, I was curious what that amounted to in the quarter in terms of occupancy. And then, I'm not sure if that contributed to the big percentage rent increase in the quarter, but maybe you could just comment on that as well and what we should expect in the fourth quarter?

--------------------------------------------------------------------------------

Thomas E. McDonough, Tanger Factory Outlet Centers, Inc. - President & COO [28]

--------------------------------------------------------------------------------

Well, roughly half of the increase was due to the tenant -- seasonal tenants, and that's part of our total, slightly elevated from historical levels, which are generally in the 3% to 4% range.

--------------------------------------------------------------------------------

Todd Michael Thomas, KeyBanc Capital Markets Inc., Research Division - MD and Senior Equity Research Analyst [29]

--------------------------------------------------------------------------------

And in terms of the percentage rent, in terms of what we should think about in the fourth quarter?

--------------------------------------------------------------------------------

Steven B. Tanger, Tanger Factory Outlet Centers, Inc. - CEO & Director [30]

--------------------------------------------------------------------------------

Well, I think that tough to the state. We're still -- we still have not seen the impact of Hurricane Matthew, which came in October and Hurricane Florence which came in September on our percentage rent number, which will be reflected in the fourth quarter. And that's why -- that's part of our cautious approach to giving you year-end guidance, because a component part of our NOI is the percentage rent, and we haven't seen that flow through yet.

--------------------------------------------------------------------------------

Todd Michael Thomas, KeyBanc Capital Markets Inc., Research Division - MD and Senior Equity Research Analyst [31]

--------------------------------------------------------------------------------

Okay. And then in the comments around the impairment that you took at Jeffersonville, you mentioned the expanded reach that you've had at some of your centers with the addition of like TJX and H&M and a few others, but you characterize that leasing as part of the repositioning at Jeffersonville which caused the impairment. I'm just curious you remerchandised other centers with those tenants, and some other non-factory outlet center tenants, does that leasing activity have implications for some other centers that are in the portfolio where there's been some similar leasing?

--------------------------------------------------------------------------------

Steven B. Tanger, Tanger Factory Outlet Centers, Inc. - CEO & Director [32]

--------------------------------------------------------------------------------

I don't believe so, Todd. We carefully assess each of our properties every quarter. And with regard to Jeffersonville, this is a property we purchased, so the basis was higher. And we're thrilled with the tenancy that's signed now and actually open. But it's going to take a little time for the -- it's going to take a little longer than we had anticipated for the NOI to get back to historical levels. So we decided it was prudent to take the impairment at this time.

--------------------------------------------------------------------------------

Operator [33]

--------------------------------------------------------------------------------

And your next question comes from the line of Craig Schmidt from Bank of America.

--------------------------------------------------------------------------------

Craig Richard Schmidt, BofA Merrill Lynch, Research Division - Director [34]

--------------------------------------------------------------------------------

Your sales metrics and sales productivity metrics, does that include the 7 centers that lost, I guess, 27 days as well as traffic before and after the event?

--------------------------------------------------------------------------------

Steven B. Tanger, Tanger Factory Outlet Centers, Inc. - CEO & Director [35]

--------------------------------------------------------------------------------

It does Craig. We don't have any exceptions to our numbers. You can see in our supplement. You have everything -- including everything.

--------------------------------------------------------------------------------

Craig Richard Schmidt, BofA Merrill Lynch, Research Division - Director [36]

--------------------------------------------------------------------------------

So barring that event that you'd expect your numbers to be somewhat higher?

--------------------------------------------------------------------------------

Steven B. Tanger, Tanger Factory Outlet Centers, Inc. - CEO & Director [37]

--------------------------------------------------------------------------------

I would. I think that's a reasonable conclusion considering we had zero sales during the time of the hurricane was impacted our properties.

--------------------------------------------------------------------------------

Craig Richard Schmidt, BofA Merrill Lynch, Research Division - Director [38]

--------------------------------------------------------------------------------

And then on your retenanted tenants, do you happen to know what percent are apparel?

--------------------------------------------------------------------------------

Steven B. Tanger, Tanger Factory Outlet Centers, Inc. - CEO & Director [39]

--------------------------------------------------------------------------------

I could easily get you that number. But I think we can get you an exact number offline. But our leasing still continues to be primarily apparel and footwear and we have some jewelry presentation and some food. But I don't think that our retenanting is different than the historical levels.

--------------------------------------------------------------------------------

Craig Richard Schmidt, BofA Merrill Lynch, Research Division - Director [40]

--------------------------------------------------------------------------------

And then, just I understand the priority here is still filling vacancies. But are you still looking at opportunities that could possibly give you a new outlet center by let's say the end of 2020?

--------------------------------------------------------------------------------

Steven B. Tanger, Tanger Factory Outlet Centers, Inc. - CEO & Director [41]

--------------------------------------------------------------------------------

Yes, we continue to study markets. We have a shadow pipeline that we are ready to move when our tenant partners are ready to invest in new assets. I think everybody would agree there's not much need for additional retail at this time. We have always maintained a very cautious, a disciplined approach to new development. We will not buy a single square inch of property until we are ready to break ground and build a great new center. That discipline requires 60% preleasing and all non-appealable permits, I don't see that happening. It certainly not going to happen, I don't believe, in 2019. It's too early for us to even talk about 2020. But, yes, we have a shadow pipeline ready to go, when our tenants are ready to start expanding again.

--------------------------------------------------------------------------------

Operator [42]

--------------------------------------------------------------------------------

And there are no further questions in the queue.

--------------------------------------------------------------------------------

Steven B. Tanger, Tanger Factory Outlet Centers, Inc. - CEO & Director [43]

--------------------------------------------------------------------------------

I want to thank everybody for joining us today. We look forward to seeing you next week at Nareit, and have a good day. Goodbye now.

--------------------------------------------------------------------------------

Operator [44]

--------------------------------------------------------------------------------

This concludes today's conference call. You may now disconnect.