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 Second 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, August 4, 2021. At this time, all participants are in listen-only mode. Following management's prepared comments, the call will be open for your questions. We request that everyone ask only one question and one follow-up to allow as many of you as possible to ask questions. If time permits, we are happy for you to re-queue for additional questions. On the call today will be Steven Tanger, 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 second quarter 2021 earnings call. These results demonstrate the successful execution of our strategic initiatives and progress in continuing to evolve Tanger to drive improved profitability and shareholder value. We have seen traffic and sales return to pre-pandemic levels as our open-air centers offer an excellent value proposition for both retailers and shoppers. I would also like to welcome Sandeep Mathrani to Tanger's Board of Directors. Sandeep is currently the CEO of WeWork and previously was CEO of Brookfield Properties' retail group and their GGP. We are privileged to benefit from his experience and wisdom, and look forward to his ongoing counsel and guidance. I will now turn the call over to Steve Yalof to provide details on our second quarter performance and to discuss our strategic priorities.

Thank you, Steven. Our second quarter results demonstrate continued progress in the leasing, operating, and marketing of our open-air retail centers. Tenant sales in domestic traffic are now outpacing pre-pandemic levels. We've achieved a 130 basis point sequential increase in occupancy, and a meaningful rebound in same-center NOI. We are curating a compelling mix of brands and uses, creating a sense of place for experiential outings, connecting with shoppers in more personalized ways and monetizing the non-store elements of our centers. Same-center NOI in the second quarter was up 88% compared to the second quarter of 2020 and represents 93% of the same period in 2019. For the second quarter, traffic to our domestic centers was above the same period of 2019. This sustained rebound in traffic levels clearly reflects the attraction of our open-air shopping centers, their dominant market locations, and the value proposition that we offer to both our retailer partners and shoppers. Tenant sales have followed a similar trajectory. Average tenant sales productivity grew to $424 per square foot for the trailing 12 months, up 7.3% from $395 per square foot for the comparable 2019 period. On a same-center basis, average tenant sales increased 5.5%. Categories that are performing particularly well include athleisure, youth-oriented brands, jewelry, accessories, beauty and home. Consolidated portfolio occupancy at quarter end was 93%, a 130 basis point increase from the end of the first quarter. We have recaptured 80,000 square feet of space due to bankruptcies and retailer restructurings through the end of the second quarter. And shortly after, we recaptured an additional 55,000 square feet, which was expected and represents negotiated early terminations for our legacy outlet brands where we collected lease termination fees. When we were unable to achieve desired rents, our strategic approach to leasing included shortening term to…

Thank you, Steve. We delivered strong second quarter results showing continued positive momentum. Second quarter core FFO available to common shareholders was $0.43 per share compared to $0.10 per share in the second quarter of 2020. Core FFO for the second quarter of 2021 includes $0.02 per share dilution from the shares issued to date and excludes a charge of $14 million or $0.13 per share for the early extinguishment of debt since we redeemed $150 million of our 2023 bonds. Same-center NOI for the consolidated portfolio increased 87.6% for the quarter as the prior year reflects reductions in rental revenues due to the pandemic, along with higher variable rents driven by better-than-expected tenant sales performance this year. As we discussed last quarter, we have maintained high rent collections. We have collected approximately 98% of contractual fixed rents billed in the first half of 2021. We have also continued to collect rents build for prior periods, including amounts related to 2020 that we allowed our tenants to defer to 2021. Through July 30, 2021, we had collected 98% of the 2020 deferred rents due to be repaid in the first half of 2021. During the second quarter, we opportunistically raised capital using our ATM program to further reduce debt and strengthen our balance sheet. We issued 3.1 million common shares that generated $58 million in net proceeds at a weighted average price of $18.85 per share. Year-to-date, we sold 10 million shares and raised $187 million of equity at an average price of $18.97 per share. As previously announced, on April 30, we 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. This reduction in debt improves our leverage ratio and enhances our balance sheet…

[Operator Instructions] Our first question comes from Katy McConnell with Citi.

So, the percentage went up significantly this quarter and relative to history, how should we think about an annualized run-rate going forward? And can you talk about how you're structuring percentage rent into your new leasing deal today?

With regard to percentage rent, well, all we can say is percentage rent definitely is a reflection on our sales performance. And as our sales performance continues to improve, I'm sure we'll see a material impact to our percentage rent on a going-forward basis. With regard to deal structure, I mean, if you look back a year ago and consider the height of uncertainty around COVID, we structured deals, particularly renewal deals that leaned fairly heavily on variable rent. These were shorter term deals, but those variable rent deals included lower break points, higher pay rates, and where we exchange with our retailer partners some downside protection, restructured deals that gave us more upside if the market inflected in sales returned. And as our sales numbers would indicate, the sales across our portfolio came back far stronger than, I guess, we all had anticipated a year ago, and we find ourselves in that fruitful position to have a pretty big gate as far as variable rents are concerned.

Got it. Okay. Thanks. And then you lowered your CapEx guidance fairly significantly this quarter. So, can you provide some more background on what drove that change and how CapEx could trend next year?

Katy, this is Jim. The reduction in CapEx really sort of reflects our strategy and how we're approaching the leasing environment right now. Certainly, we're, as Steve said, we're very pleased to see the rebound in our traffic and sales, and we're trying to be very strategic on how we negotiate and enter these big leases. So, some of the leasing activity has been pushed to 2022, and that's reflective of the reduction in our CapEx spend.

So would you expect next year's level to be more similar to your original guidance for this year?

Yes. Yes, Katy, I think this is purely kind of a timing thing. And again, from a strategic point we're trying to negotiate these leases at the right time. I think next year, you'll see it probably normalize for something similar to what we guided to originally this year.

Our next question comes from Todd Thomas with KeyBanc.

This is Ravi Vaidya on the line for Todd Thomas. I just wanted to ask here, how much occupancy is temporary or short-term in nature? And can you talk about success in converting these short-term leases into permanent ones?

Ravi, so -- and we talked about in past quarters, but we're up to about 9.5% short-term right now. And again, let's just go back and talk about the fact that short-term leasing or temp leasing or pop-up leasing, as we like to call it, it was really a strategy for us. And going back to a year ago where times were most uncertain and our folks weren't traveling and our retailer partners weren't traveling. We empowered our general managers and really essentially deputized 36 new members of our leasing team to go out and help us fill space in shopping centers that was a vacancy that was created by brand-wide restructuring and other bankruptcies. And they did a pretty fantastic job. A number of things occurred as a result. We were able to -- first of all, turn lights on in a number of vacant rooms, get them to cash flow. And really, with our strategy of increasing the value of our real estate and driving our cash flow and delivering long-term growth, this went a long way. We've got new tenants in the shopping center that brought different customers. And some of those uses turned out to be great draw uses for our properties and ones that we're in discussions with right now to turn into longer-term deals. So, all in all, I find that the shopper, in general, probably doesn't know the difference between a short-term lease and a full-term lease, but they certainly know the difference between a closed or an open store. And with the strategy of keeping lights on, stores open, we've created an opportunity for ourselves to increase our near-term occupancy, but also test some new concepts in our shopping centers with improved full results.

Perfect. Just one more here for me. Are retailers reporting any changes to sales or traffic or any operating conditions related to the Delta variant and the rising in the cases? Just wondering if you're seeing or hearing anything from them since they're on the ground.

We have not heard any of that yet.

Our next question comes from Samir Khanal with Evercore.

It's Steve. So, you talked about how sales is up and traffic is up. Maybe give us a breakdown, maybe centers here or regions where you're maybe seeing a better return in traffic and sales than others? I know you talked about the initiatives you've ran in some of the center. Just trying to see if there's any differences you're seeing from center to center or regions to regions here?

Well, Samir, I would say that the centers that -- our core shopping centers are located in geographies that are drive tie -- drive to resort and in the top 50 MSAs. That's really the sweet spot of our portfolio, and those seem to be the markets that have shown the greatest amount of improvement. On the flip side of that, we've got a couple of shopping centers that are dependent on other things to drive traffic, whether it's international tourism or it's casino gambling or it's a hotel business or entertainment uses. And as you could probably imagine, although those are coming back, they're not coming back at the same pace as the other centers are.

Got it. And I guess my -- just a second question here. I mean, your occupancy was up quite a lot in the second quarter. But you still have some pressure on rents, and especially on the new lease on the new rent side. So I'm just trying to understand how do you think about spreads? How do you think that metric will trend, let's say, over the next 12 months as you guys think about balancing occupancy and rents over the next, I don't know, few quarters now?

We spent a lot of time thinking about rent and rent spreads, and obviously, prioritizing leasing our centers. And if you take a look at some of the legacy vacancy caused by some of those brands that had gone out in recent years. Stores that had been -- stores that closed at the high-rent pay mark that we're now replacing with different uses to the portfolio. So, in an effort to be a little bit less dependent on the apparel and the footwear, we're pivoting to new uses. We talked about some of those uses in the opening remarks, do deals like Dick's Sporting Goods, Purple Mattresses, Nantucket Meat and Fish. These are brands that are iconic, great draws to our shopping center, new uses in both the direct-to-consumer space, going with grocery uses in some of our shopping centers, which, in fact, we're seeing great results from a traffic draw point of view, but also with the frequency of customer. Historically, folks would come to an outlet center, maybe once on their trip to a particular resort community, but with the grocery store in this particular center, we're seeing far more frequency of visit by that same customer. So, these uses are working, they're enhancing and they're replacing old legacy space, but -- and might be doing so at a lower base rent, but we're being strategic in the variable rent component of these deals. And in many instances, the sum of those two parts is higher than the old base rents that we were collecting, although those numbers aren't reflected in our rents spreads.

Our next question comes from Caitlin Burrows with Goldman Sachs.

I just first had a quick follow-up on the recent leases that were more reliant on the percent rents. Over the life of those leases, does that sales threshold change or is it consistent over the life of that lease?

Caitlin, I'm sure you know all leases are written differently. But rents that have a base rent component and a percentage rent component to it, as the base rent grows, whether it's a CPI or a fixed annual increase, so does that natural breakpoint commensurately with the growth of the base rent.

Okay. Got it. And then I was wondering, on the recapture estimate of 200,000 square feet for the year. I know you guys gave that estimate back with 4Q earnings. So, I was just wondering if you could give some commentary on how that's playing out versus initial expectations in terms of the timing, exact stores that are impacted or anything like that?

We mentioned that we've got another 55,000 square feet back early this quarter from one of the legacy brands that was expected that it was coming back. But that was really the bulk of our known space coming back beginning of the quarter. We made -- we shared 200,000 square feet of guidance. But in that remainder is definitely some buffer.

Got it. Okay. And then maybe just the last one. Wondering if you could give any updated commentary if there is some on the Nashville development. I guess, given the strength in retail that we've seen this year, just wondering if there's been progress there or not quite yet?

Yes. We announced, when we get to 60% lease, we'll put a shovel in the ground. We anticipate we'll probably get there at the beginning of next year. But we think it's a great market, and there's definitely some interest from our retailer partners, and we'll certainly keep you updated as the progress moves forward on that development.

Our next question comes from Craig Schmidt with Bank of America.

My question surrounds the chart outlet center ranking. I'm wondering if the -- within the fifth and sixth tier, I know that you periodically call the portfolio. But looking at the occupancy still hasn't really worked its way up, and just the difference between square footage percent of total and portfolio NOI percent of total, I'm just wondering if these are assets that maybe you might want to consider disposing off?

Craig, thanks for the question. First of all, the center is still cash flow. But again, we're not currently marketing any of our centers.

Okay. So all the centers in that list that -- you're seeing positive cash flow still?

I'm sorry, you -- I think what you said is all those centers are cash flowing?

I'm just conforming. I'm sorry. I was just confirming that all 30 of the centers that list, they're positive cash flow?

Yes.

[Operator Instructions] The next question comes from Mike Mueller with JPMorgan.

Looking at what you've done year-to-date for FFO in the full year guidance, it implies an average quarterly FFO of about $0.36 to get to the mid-point of the range. Can you walk through what the major moving parts are from the $0.43 Q2 print, down to that $0.36? It looks like there may have been a couple of cents, one-time property tax benefit. But just if you could bridge that gap, that would be helpful.

Sure, Mike. This is Jim. So you did identify one of the major things there. The refund of property taxes was around $0.02 a share. There's also another $0.01 a share per quarter that we expect from the dilution of the ATM shares we issued in the second quarter. That's on top of the $0.04 dilution that we had built into the guidance last time. I think the remaining things, really, that's driving that is, you've got the effect of the 55,000 square feet that came back in July, that Steve just mentioned. And that potential 65,000 additional feet that may come back before the end of the year. And then the final component is we do have higher operating expenses in the second half as we go to the advance, like back-to-school and the holiday seasons. Those are your main components.

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

Good morning. I want to thank each of our colleagues on the Tanger team for their tireless efforts to produce these excellent results. Have a wonderful summer, and I hope to see you soon. Goodbye.

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