Good morning. This is Cyndi Holt, Senior Vice President of Finance and Investor Relations, and I would like to welcome you to the Tanger Factory Outlet Centers' First Quarter 2021 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 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; core FFO, same-center net operating income, and adjusted EBITDA. 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, May 6, 2021. [Operator Instructions] On the call today will be Steven Tanger, our Executive Chair; Stephen Yalof, Chief Executive Officer; and Jim Williams, Executive Vice President and Chief Financial Officer. I will now turn the call over to Steven Tanger. Please go ahead, Steve.

Good morning, and thank you for joining us for our first quarter 2021 earnings call. We are encouraged by a greater macro outlook over the past 90 days as vaccination rollout continues and an improving retail environment, as evidenced by the Consumer Confidence Index in late April, reaching its highest level since the onset of the pandemic. The improvement we are starting to see in some of our operating metrics reflects the excellent value proposition that our open-air centers provide for both retailers and shoppers. We are confident that, by continuing to make progress executing on our strategy, [we'll] position the company to return to sustained growth over time. I would now like to turn the call over to Steve Yalof to provide details on our first quarter performance and to discuss our strategic priorities.

Thank you, Steve. We're pleased to share that traffic to our domestic open-air centers in the first quarter nearly returned to 2019 levels and exceeded 2019 levels in April. We continued to make progress on our core priorities for the business: leasing, operating and marketing our outlet centers. We are focused on rebuilding our occupancy, driving leasing, and curating our merchandise mix to maximize shopper frequency and dwell time, and to bring new customers to Tanger Centers. Consolidated portfolio occupancy was 91.7% at the end of the quarter, up only 20 basis points from the end of 2020. This reflects the anticipated 61,000 square feet of space recaptured during the quarter related to bankruptcies and brand-wide restructurings. Blended average rental rates decreased 2.8% on a straight-line basis and 8.5% on a cash basis for all renewals and re-tenanted leases that commenced during the trailing 12 months ended March 31, 2021. However, this reflects a 300 basis-point improvement on a cash basis, a 390 basis-point improvement on a straight-line basis compared to our reported Q4 2020 spreads. We believe we will continue to see improvement longer-term as positive traffic and sales trends will support driving better rents. However, in the near term, we anticipate that we will continue to see pressure on re-tenanting spreads this year as we fill recaptured space that was at rental rates above the portfolio average. Collections of contractual fixed rents billed in the first quarter of 2021 were approximately 95%. Through April 30, 2021, we collected 96% of the deferred 2020 rents due to be repaid in the first quarter and had collected 83% of all deferred 2020 rents, leaving a balance of only $3.7 million. Given this run rate, we're comfortable with our outlook for future collections. Meaningful rebound in traffic that we discussed last…

Thank you, Steve. First quarter results showed continued positive momentum but reflect the ongoing impact of the pandemic, recent bankruptcies and brand-wide restructurings. First quarter core FFO available to common shareholders was $0.40 per share compared to $0.50 per share in the first quarter of 2020. Core FFO for the first quarter of 2021 excludes general and administrative expense of $2.4 million, or $0.02 per share for compensation costs related to a voluntary retirement plan and other executive severance costs. Same-center NOI for the consolidated portfolio decreased 8% for the quarter. This reflects the rent modifications and store closings from recent bankruptcies and brand-wide restructurings, partially offset by the reversal of approximately $1.6 million in reserves related to rents previously deferred or under negotiation. Collections of contractual fixed rents billed in the first quarter of 2021 were approximately 95%. We also continue to collect rent bill for prior periods, including amounts related to 2020 that we allowed our tenants to defer to 2021. As of March 31, 2021, remaining rental revenue reserves for 2020 rents deferred or under negotiation totaled $2.6 million. Since implementing our ATM program, in March we opportunistically raised capital to reduce debt and strengthen our balance sheet. During the first quarter, we issued 6.9 million common shares that generated $128.7 million in net proceeds at a weighted average price of $19.02 per share. We used the proceeds to reduce $25 million of borrowings under our $350 million unsecured term loan on March 11, 2021; and on April 30, completed the partial early redemption of $150 million aggregate principal amount of our 3.875% senior notes due December 2023 for $163 million in cash. Subsequent to the redemption, $100 million remains outstanding. We have no significant debt maturities until December 2023. As previously disclosed, we expect to take…

[Operator Instructions] The first question comes from Greg McGinniss with Scotiabank.

Steve, if I'm not mistaken, the drop in occupancy this quarter was the smallest Q1 drop in Q4 in at least the last 20 years. Could you talk about some of the factors that led to maintaining that occupancy and whether this means that maybe we finally turned a corner and could start to see occupancy recovery from here, or maybe after absorbing a bit more space next quarter?

Well, Greg, as I said in our last quarter meeting, the leasing activity started to pick up in the fourth quarter of last year. And we're seeing that momentum continue now represented by a number of new deals that we've done in the portfolio. Some exciting new stores are actually going to be opening up this quarter that we're excited about; Bloomingdale's in Riverhead, Nantucket Meat & Fish in Hilton Head. But additionally, we think a lot of our national tenants are -- we're doing deals again. We've got a couple of portfolio-wide deals that we're doing with a number of retailers that are expanding into our portfolio. And we just took a look recently on our April occupancy. We're actually back up the 20 bps that we went backwards in the first quarter.

And then, with the rebound in foot traffic, are you starting to see a similar recovery in tenant sales as well?

Although we're not reporting our tenant sales right now we know anecdotally that the retailers are reporting better-than-anticipated and better-than-planned results. But obviously, with the increase in foot traffic, we're anticipating the sales will rebound, as well. What we're looking at right now we've got some variable rent deals, and we're seeing increases on those line items that are reflective of better-than-anticipated sales.

When do you think you might start reporting the tenant sales number again?

We'll discuss that after this call, but hopefully, shortly.

The next question comes from Katie McConnell with Citi.

So first, could you provide some more color on the decision to keep the guidance range unchanged and maybe walk us through some of the factors that are offsetting the dilution you previously expected for the ATM?

Katie, this is Jim. As we said, obviously, the equity issuances under the ATM had a dilutive impact of about $0.04 a share. But we also had in the quarter a reversal of the deferred rent reserves that we had carried for 2020 ramps. That was about $1.6 million, so that's helping offset that. Just based on our current outlook right now and the positive trends we're seeing not only from the foot traffic and the sales from what we're hearing anecdotally, just but also from the results we're seeing from decentralizing, empowering our GMs to help drive local leasing and drive other revenues; so based on our outlook, I think we wanted to leave our guidance the same, or where it is, and we'll revisit that as we move through the year.

And then, how much of a priority is it for you to continue to lower leverage from here in your discussion with the rating agencies? And what's your appetite to raise additional ATM proceeds just yet?

Well, Katie, we're so pleased that we put that ATM program in when we did, at the right time, and was able to have a great execution in issuing the shares and using those proceeds to bring down our leverage. And I think our net debt-to-EBITDA had climbed into the low 7s, and this debt paydown basically improves that by half a turn. I think we should be around in the mid-6s on a pro forma basis. Ideally, I think we'd like to get down to 6. And of course, there's 2 ways to do that. One is to grow EBITDA, and that's what we're laser-focused on. From all the comments you've heard Steve make in his prepared remarks and just on the positive trends and the things that we're doing, from ramping up leasing and all the positive results, growing EBITDA certainly is a part of that equation. But it's also nice just to have this tool in the toolkit with the ATM. So while there's not an imminent need to issue the proceeds, it's nice to have that, and we can be opportunistic when market conditions permit.

The next question comes from Caitlin Burrows with Goldman Sachs.

You guys mentioned that you're making an effort to increase the other income, I think, from things like sponsorship. So can you give some details kind of on this plan, where it is today, and where you think it could be in a year or more?

Sure. With regard to other income, I mentioned on prior quarters we've added a Executive Vice President, who's handling our property operations right now. One of our key focuses, particularly in the field, was to empower our field teams to help us through short-term leasing, marketing partnerships as well as on shopping center expense management. And obviously, with the onset of COVID and the inability for a lot of people to travel, having a field-based team out generating revenue was a great strategy for us that came at a great time. With all of that said, historically, we have over 150 million people a year visit our shopping centers. We think, through monetizing sponsorship opportunity, things like EV parking and some of the bright walls and digital boards that we have on our shopping center, we're able to provide these revenue sources that we hadn't explored in the past. And so far, they're bearing fruit for us. From a short-term leasing point of view, our short-term leasing numbers are up over historic levels. But again, we were opportunistic where we found the opportunity to take otherwise dark stores that we recaptured, through bankruptcy or brand-wide restructuring, and was able to go out to the marketplace and still with some pretty interesting and iconic retailers that were in that particular market who never had the opportunity to have space in our shopping centers before. And what we're hoping will come from some of these new relationships is future long-term leases, the short-term of which is we're providing variety for our customer. We're keeping our shopping centers vibrant. And through some of the food and beverage initiatives that are new to some of these centers, we're extending dwell time at each of our shopping centers. So we think it's a great strategy, one that we plan to improve on. And the big kicker is the fact that, with these short-term leases, once the market continues to stabilize, our traffic is increasing over our 2019 levels. Our sales continue to improve. We can replace some of the short-term leases with some of our longer-term tenants at far-improved rents.

Just clarifying on that short-term leasing, is that included in other income or the rental revenue?

It's in the rental revenue.

And then on the operating expense side, they are down versus the average of 2019. And I know you just mentioned that managing expenses is a focus of yours. So I was wondering if you could go through to what extent you expect these savings could continue and whether lower occupancy may or may not impact your NOI margin, if that's the metric that you're keenly focused on?

Caitlin, Jim. I think first, just keep in mind, we still are operating under reduced hours. It's been at 80% reduced. I think we just now increased that to 90%. So first quarter might be a run rate maybe a little bit higher, going forward, but I think we're certainly encouraged by the teams that we're putting in place and the strategies that we have and empowered our GMs to really manage and mitigate those expenses. We're going to not give a lot of guidance. We're going to restrict it right now to FFO. And in terms of the other metrics that go into that, we'll give you a little more color as we move through the year.

The next question comes from Todd Thomas with KeyBanc Capital markets.

This is Ravi Vaidya on the line for Todd Thomas. Saw the updated G&A range. Can you please break that down into the various investments that are being made into the platform? And how much of these expenses are recurring versus one-time? Would we be able to see this go back to historical levels? Or is this the new G&A range to model, going forward?

So just from a top line G&A, a lot of that expense is investing in people. So some of the investments that we've made, I mentioned earlier, the executive Vice President that joined us to manage property operations. We've added to our team somebody to handle our development on a going-forward basis who is also going to be focused on monetizing our peripheral land. We've added to our team an SVP of FP&A who is also going to help us on future merger and acquisition business that we're working on. So we're building a seasoned team over here, and we're investing in that team. Another line item is we're investing in our digital transformation, where we're creating a digital experience for our shoppers that creates a little bit more of a personalized experience. So as we market to our 1.5 million Tanger VIPs and our 11 million Tanger insiders, we do so in a very targeted manner. And we think that that's something that we're going to continue to invest in, and that's a business that will ultimately return in future years.

And Ravi, this is Jim. I mean just to point out, I think we pointed this out in the release. I'm sure you saw it, but just to make sure it's clear for everyone on the call, that in our guidance range of $59 million to $62 million is $2.4 million of compensation costs that was related to a voluntary retirement plan that would not be recurring.

And just can you please provide an update on the Nashville project? How is pre-leasing trending? And are we still forecasted to break ground later this year?

Yes. Look, the Nashville project, we're turning the marketing back on. A lot of our retailer partners are able to travel again. We've got a number of site visits planned in the next coming weeks and months. And we control the land. We're optimistic. But again, we're not going to break ground until we hit that 60% leasing threshold. That's our goal.

The next question comes from Floris Van Dijkum with Compass Point.

So first question, I guess, is regarding the leasing spreads. Encouraging that the negative spreads are getting smaller, I suppose. But Steve, can you comment on when you think that lease spreads will basically be flatline? Or when will they turn positive, in your view? Can you give some guidance around that, or some color around that?

Well, I'll give color, but I'm not going to give guidance, Floris. But with regard to color, look, we're encouraged that we're moving in the right direction. We're narrowing the spreads. We still have a lot of work to do. We got unprecedented levels of space back last year due to the accelerated bankruptcies from COVID, a lot of brand-wide restructuring. And again, our strategy has been to replace a lot of that space with short-term leases while we ride the market out. If we take a look, our traffic has increased over 2019 levels. We think our sales are coming back with the same energy. We'll be able to replace a lot of this space at higher rents because we're strategically waiting for that market to improve.

And then, as I think about some of the potential upside here as well, can you remind us again what the typical impact is to NOI converting temp tenants to permanent tenancies?

Well, our typical long-term deals are fixed-rent deals with triple-nets and a percentage rent kicker. They're longer-term. They're more secure. And once again, we're seeing a lot of that long-term lease activity take place right now. Hopefully, we'll announce some more real exciting deals in the next quarter. But our leasing pipeline is extremely strong, and our retailers, they love our outlet venues. They love the outlet format. And we anticipate replacing a lot of the short-term leasing with long-term leasing in the foreseeable future.

And my perspective is more on the mall side. And typically, converting a temp tenant to permanence, and going from a gross rent to a net or more of a net type structure, you could see an uptick in NOI of 25% to 35% on that space. Is that the kind of thing that we could be expecting on your 8.5% temp tenancies?

Well, again, we're not providing guidance on rent. But what I can say is that, with the increase in traffic levels and with the sales improvement, we feel pretty good that our rents will follow.

The next question comes from Victoria Francis with Bank of America.

Given many of your properties are near popular drive-to travel destinations, what is your outlook on domestic tourism heading into the summer months? And to what extent could this drive sales for your tenants if tourism does pick up?

Victoria, I'm sorry, I missed the second part of your question. Can you ask that again?

Yes. Just to what extent do you think that, if tourism does pick up, could that drive sales for your tenants?

Well, as we saw as early as third quarter of last year, our drive-to tourist destination shopping centers were extremely popular. With very little else to do, no sporting events or concerts, et cetera, our open-air shopping centers seemed to be the go-to destination for a lot of folks that were doing traveling in those particular regions. I mentioned in the last quarter, as I traveled from the Northeast to the South during the holiday period, the amount of people that were out and about Q4 shopping in our shopping centers was pretty staggering. And once again, open-air shopping venues being a great go-to location for people to not only enjoy the sport of shopping, but also the entertainment component, some of the experiential stores that we've stood up as well as some of the new food and beverage installations that we have. So we think this trend is going to continue, particularly into the summer months. A lot of our marketing initiatives and our targeted digital initiatives are focused on speaking to those particular shoppers that are traveling into those destinations. And we're very optimistic about the traffic, particularly going into the summer, continuing to build as it has in April and in Q1.

The next question comes from Mike Mueller with JPMorgan.

You talked about 8% of, I think, square footage, or tied to shorter-term tenants. How does that 8% number compare when you think of it on an ABR basis? Is that portion that's shorter-term in nature, is that smaller than the 8%?

This is Jim. If I understand your question, are you saying how does the ABR from the temp tenants compare to normal?

Well, I'm saying I think it was 8% of square footage was on shorter-term leases. So if you think about that in terms of ABR that you're looking at on the P&L, is the short-term component significantly different than 8% of revenues, if you follow me?

Mike, this is Cyndi. So it's 8% in terms of GLA for tenants is going to be less ABR than 8%.

Is it a lot less? Or is it kind of in that same zip code, just a little bit less?

It's less.

Mike, the shorter-term leases will pay lower rents. But just remember that it's also a lower capital investment for us. It gives us a chance to cash-flow the property. And they're all over the board, and some of them really have a variable rent component. So if they drive sales and [then] successful, then they can drive the revenues, as well.

I got that. That all makes sense. I just wasn't sure if we're looking at the income statement, maybe 2%, if it's 2% or 3% of the revenues are really tied to that shorter-term stuff where, optically, when you hear 8%, it's a much bigger number on a square footage basis.

Next question comes from Samir Khanal with Evercore.

Steve, you mentioned a couple of times that you're looking at sort of selected growth opportunities. Maybe expand on that a little bit. Just trying to see where sort of the potential upside that can come to your portfolio as we think about the long-term here.

Well, look, we're not going to make a practice of talking about things that we're looking at until we're under contract and we announced them. But we definitely think there is great opportunity. I've mentioned on previous calls that 1% of the nation's retail is outlet, and we think there's certainly opportunity to expand on that. So with the addition of Steve Dworkin, who's our SVP of Development, a large part of his job is going to be to help us build our pipeline. There's a number of things that we're currently looking at and working on, and I'm hopeful that we can make those announcements in the near future.

This concludes our question-and-answer session. I would like to turn the conference back over to Steve Tanger for any closing remarks.

Thank you, everyone, for joining us this morning. We look forward to seeing you virtually at NAREIT in June but more importantly, being able to greet you in person as soon as possible. So be safe. We're all available to answer any additional questions, and thank you for your interest. Goodbye.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.