Good morning. This is Ashley Curtis. And I would like to welcome you to the Tanger Factory Outlet Centers Third Quarter 2022 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; adjusted EBITDAre; and net debt. 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 3, 2022. [Operator Instructions] On the call today will be Steve Tanger, our Executive Chair; Stephen Yalof, President and Chief Executive Officer; and Doug McDonald, Senior Vice President, Finance and Capital Markets. In addition, other members of our leadership team will be available for Q&A. I’ll now turn the call over to Steve Tanger. Please go ahead, Steve.

Good morning. And thank you for joining us for our third quarter 2022 earnings call. The hard work of the entire Tanger team is evident in our result as we continue to provide a compelling value proposition to both consumers and retailers. Thank you to all of our stakeholders for your ongoing support. I’ll now turn the call over to Stephen Yalof.

Thanks Steve and good morning. I am pleased to announce another quarter of strong results. During the third quarter, we delivered solid cash flows, occupancy growth, and the sixth straight quarter of rent spread improvement. We executed our strategy of diversifying our tenant mix. Adding new to platform brands, digitally native retailers, and food and beverage concepts that attract new shoppers, extend dwell times and drive frequency of visits. We delivered new commercial activations that supported Tanger Club growth, marketing partnership revenues, and performance marketing initiatives. Based on our positive outlook, we're raising our full year guidance. And we recently increased our annual dividend for the second time this year bringing our year-to-date dividend growth to over 20%. We ended the third quarter at 96.5% occupancy, a 160 basis points sequential increase, and up 210 basis points year-over-year. We have recovered almost 500 basis points of occupancy since the drop we experienced during the pandemic. We have done so by curating our centers with popular brands, entertainment uses, and great local and national food and beverage outposts. All of which continue to enhance the Tanger shopping experience. With occupancy above 96%, we're optimizing the composition of our centers and repricing our space driving growth and rent spreads and lease duration. We're increasing the stability of our cash flows by converting variable rents to permanent fixed rent while maintaining or driving higher than previous percentage rates contributing to additional long-term upside. For the trailing 12 months ended September 30, we achieved positive blended rent spreads of 5.7% including an 18.6% spread on re-tenanted space. This is the sixth consecutive quarter of improvement with positive spreads for each quarter this year. We have also extended lease terms with an average term of 8.5 years for new leases. We continue to diversify and…

Thank you, Steve. We delivered solid results for the third quarter with core FFO per share of $0.47, which was consistent with the same period last year, although the prior year benefited from higher lease termination fees. Same center NOI for the total portfolio increased 2.4% to $82.2 million. We have further enhanced our well positioned balance sheet. In September, we refinanced the loan on our joint venture property in Columbus, Ohio, extending the term until October of 2032. at a fixed rate of 6.25%. Our share of outstanding debt remains at $35.5 million. As of September 30. Our net debt to adjusted EBITDAre was 5.3x for the trailing 12-month. Our weighted average interest rate was 3.3% with 95% of our outstanding debt fixed, and a weighted average term to maturity of five years. Subsequent to quarter end, we amended our $300 million term loan and increase the outstanding balance by $25 million to $325 million. We extended the maturity to January 2027 plus a one-year extension option reduced the pricing margin by five basis points and incorporated a sustainability metric. We also amended our LIBOR swaps to adjusted SOFR and realized additional interest savings of nearly seven basis points. In October, we refinanced the mortgage on our Southaven Center Mississippi near Memphis, extending the maturity to October of 2026 plus a one-year extension option. The new loan carries an interest rate of adjusted SOFR plus 200 basis points and we increase the proceeds from $40.1 million to $51.7 million dollars. With these financing activities our weighted average term to maturity is now 5.9 years and we have no significant debt maturities until September 2026. We have always prioritized maintaining a strong financial position by utilizing a disciplined and prudent approach to capital allocation. We currently have over $200 million…

[Operator Instructions] Our first question today is coming from Greg McGinniss with Scotiabank.

Hey, good morning. Just hoping you can help us understand the elevated level of remaining lease expirations in 2022 such as kind of more month-to-month leasing. And if you could also touch on expectations for more leasing to deal with in 2023 or more lease expirations to deal with in 2023, as well and how much of an opportunity you see there.

Good morning, Greg. So first of all, as far as the expiration activity that we saw this year, that was probably higher than most years because a lot of that COVID negotiation was burning off this year. We said in previous quarters, where we were put in a position to favor occupancy over rent. And we did shorter term leases thinking that we would reprice our real estate and will have the opportunity to reprice our real estate, fortunately for us, we feel that we've got pricing power at our real estate evidenced by the spread growth that we showed this quarter. So we see that the population of expiring leases opportunity for us to continue to push our rents.

And then just is that reflective of the elevated expirations for 2022? Or is that short term, like mark to market? Or sorry, short-term month to month leases? Or is it just I'm just trying to understand you've got like the 76% of leasing completed versus for 2022 versus last year where it was lower, but the expirations are higher. And so I'm just trying to understand the kind of delta between those two.

Sure, well, as rents continue to build, there's a lot of opportunity for us and our retailer partners to start making commitments for the ‘22 and the ‘23 leases right now. And obviously our retailer partners want to lock-in rents as rents continue to build. We've also done a really good job of sweeping a lot of that overage rent from a lot of the leases the COVID leases, into permanent fixed rent. So that's been a strategy of ours as well. So as you -- as we continue to have six straight quarters of spread growth, we're taking advantage with a relatively low OCR of about 8.5% versus historical high OCRs pre-COVID in the low double digits, we think we've got a lot of bandwidth to push our rents going forward and our leasing team is absolutely taking advantage of that opportunity. And our retailer partners had the tolerance to pay more rent, particularly in our platform.

Okay, just final one for me real quick, just as financing market, more challenge, generally you guys have always done a good job with your balance sheet. But do you expect that to create opportunities to utilize your balance sheet for external growth?

Sure, Greg, this is Doug. I think you're right. They, we do believe that will create opportunities. We're fortunate to have a strong balance sheet, we've got over $200 million of cash and short-term deposits. We've got the revolver capacity that we talked about. And we'll continue to evaluate opportunities to deploy that capital. And I do expect the capital market dislocation to create some opportunities.

Next question today is coming from Todd Thomas from KeyBanc Capital Markets.

Yes, hi, thanks. Good morning. I guess first, I just wanted to follow up on that. Hopefully, I'll still have a question, a follow up after that, but just related to the spending initiatives. I think, Steve, you mentioned that you might actually delay certain initiatives in your prepared remarks. Can you just elaborate on that? And I wasn't sure if that's new developments that are in the pipeline or sort of shadow pipeline, or certain redevelopment initiatives or something else?

Good morning, Todd. So the answer is the, what I was referencing in the prepared remarks was really some of the proactive work that we do on our shopping centers to just make sure our centers are always looking what we call Tanger appropriate, meaning we think we've got some of the best-looking shopping centers in the industry. And we've done a lot of proactive work, we were constantly reinvesting in the look and feel of the shopping centers. That being said, as we're sharing into this macro-economic environment that may change, we've said that we're going to be prudent with our spend, and we can, we will give ourselves the opportunity to maybe delay serve that spend. But it really is the -- you want to have as opposed to need to have in the event that there's like safety or any maintenance, we're always going to spend capital to make sure that our centers are in great condition to receive our shoppers and customers.

Okay, so that the comment it generally I mean it reflects the reduction in the CapEx that was updated with the guidance is that part of what you're referencing, okay, got it.

Yes.

And then just question around the guidance. So the revised guidance implies $0.44 in the fourth quarter, can you just walk us down from $0.47 in the third quarter to that $0.44 midpoint just so we can get a sense of, I guess, the run rate heading into ‘23 a little bit better to the extent that there's anything that we should be thinking about?

Sure, Todd, we continue, we remain optimistic about the fourth quarter of the holiday sales period. But we do have more variable rent exposure historically, in the fourth quarter, just given the larger volume of sales production that these stores do. And we wanted the guidance to incorporate the macro-economic uncertainty and allow for some volatility in that number.

Okay, so it's primarily around percentage rent that might come off a little bit just given the software sales environment.

Well, it’s right, variable rent with sales and just remember softer sales. We're still for the outlet channel, outlet channels are value channel, a lot of our retailer partners see that value channels opportunity to be very promotional to clear excess inventory. So we're not necessarily seeing softer sales, compared to last year, what we're seeing is lower price points compared to last year.

Okay, got it. And then just the last question, Steve, I just wanted to ask about your thoughts. More generally around the post-holiday season and potential for some fallout or some vacates which is typical after the holidays, right, so thoughts around that heading into ‘23. Obviously, we're coming off of a very muted year in terms of space recapturing. So just curious to get your take as we sort of turned the corner here in the ‘23. And then curious if you have any thoughts specifically that you might be able to share around Rue21, they represent 1.4% of your base rent. Any expectations there?

Well, look, the leading indicators that we look at relative to retailers’ performance and how we think they're going to perform in the fourth quarter and what they're -- what our expectations are for their roommates, their tendency to remain our shopping centers has to do with the renewal rates. I mean, if you take a look at, we, I just mentioned in the last question, that we probably had a disproportionate amount of renewals this year versus other typical years just by virtue of the COVID adjusted leases burning off this year. And what we've found in years past, about 80% of our leases will renew this year, we'll probably have over 90%, very few retailers are closing stores right now, particularly in stores that are amortized because it's tough for them to replace a store that cash flows, they'll have to make sizable investments in order to do so. So because of that paradigm, we're finding retailers stepping up paying more rent, particularly on renewals in our platform. With regard to the watch list, which is a second sort of leading indicator as to where we see the health of our retailers, our watch list has never been smaller. And then you mentioned specifically Rue21 and in recent conversations with Rue21, I think they believe their business is going to be sustained the holiday shopping season, and we're very optimistic about them staying within our portfolio and ultimately growing.

Next question is coming from Craig Mailman from Citi.

Thanks. Good morning. Maybe, Steve, I'm just kind of curious, you guys have had some good momentum this year. On the occupant side and rent side, you have the new partnership on the kind of the management branding piece down in Florida. I'm just kind of curious, as we stand here today, how much more runway do you think you have, from the existing portfolio to drive AFFO growth here over the next few years, from either re-tenanting and kind of merchandising mix some of these partnerships, just trying to get a sense of your ability to sustain this momentum?

Well, first of all, there's a lot of new retailers that are starting to find the outlet channel, and looking to us to grow their portfolio. I would say probably, in the past four or five years, there were fewer retailers. So therefore, the supply and demand equation were a little bit tougher. Right now we're seeing with all this new interest, that we've got a great population, our leasing activity has never been stronger. I rattled off the name of a couple of brand-new brands to our platform as brand-new brands to outlet that have entered our or will be opening stores with us shortly. So we think that there's a lot of opportunity for new brands to join, I think a lot of those new brands will help us absorb some of that occupancy that we still have outstanding. And we're going to continue to push our rents0 I've had historically we're in the low double digits from an OCR point of view at 8.5. We're still relatively inexpensive, as low double digits will still be inexpensive. But we think there's great runway for us to push, we can only push based on the churn in our portfolio or ability to lease some of that available space, so that we can't turn the entire portfolio over at one particular point in time. But we've had some real consistency. I keep on going back to six successive quarters of a spread growth. We're focused on pushing rents. And in the past where occupancy was our strategy now, we're going to favor rent over occupancy on a going forward basis.

And you guys, you made the point CapEx is down because retention is up and you may have delayed some non-essential projects here, but from a kind of net effect is the same center NPV basis. I mean, how much better is the leasing coming in from a contribution to cash flow than maybe what you guys originally saw at the beginning of the year.

Some of the new deals you can look at our supplement. I've -- we've raised rents on permanent fields by $10 and TAs have gone up by the same $10. But what the important metric there is we're also growing the term of those leases. So that's a good trade for us.

Okay and then just last one as you guys think about future here, your cost of equity capital is still kind of high single digits, cost of debt is moving higher. Again, you're having some success here on the operating portfolio, which will hopefully improve that cost of capital. But you guys think about maybe the opportunity set coming out of some dislocation here. How are you guys positioning yourself from either sourcing capital partners, or trying to figure out how to best kind of stretch that capital to be as accretive or less diluted as possible to potentially grow the portfolio here?

Sure, Greg, I think Palm Beach is a good example of that, where very little capital investment, and we're going to partner with them grow value at the asset. And we'll continue to look for opportunities where we can partner with other capital providers that may have a lower cost of capital, and look for acquisition opportunities, development opportunities, opportunities to deploy capital. We're also focused on reinvesting in our own portfolio and enhancing the assets, investing in sustainability initiatives, investing in the outparcels strategies that we've talked about, obviously, Nashville's a piece of our growth, and we locked in a lot of our capital for that last year through the equity offerings and our bond transaction. That was able to lock-in the cost of capital against the yield that we've stated in our expectation, so we're continuing to evaluate a lot of opportunities, then obviously, keeping a close eye on the debt capital markets and equity markets. And will, we do have the ATM capacity still available, to the extent that our stock price is at a level where the issuance makes sense relative to the proceeds and the investment opportunities, they use to proceeds is what I meant to say.

Next question is coming from Floris Dijkum from Compass Point.

Good morning, guys, thanks for taking my question. I noticed there's a lot of skepticism still in a lot of these questions. And a lot of the investors still out there despite the fact that you guys have performed pretty well year-to-date relative to the REIT index, or frankly, to your more peers as well. Just I was curious and maybe we're asking the question the wrong way. But outlets should have a cruising speed of around 3% based on fixed rent bumps and based on your tam, obviously your cruising speed near term is going to be higher or your growth and underlying NOI should be higher. Because of your SNO your further occupancy gains, similar REIT revenues, the higher OCR, the variable to fixed, all of those initiatives. Maybe if you can touch on the SNO pipeline, touch on the how we measure going forward your ancillary revenues? And also when can you get back to the ‘19 levels of NOI. I think you've reported $304 million of NOI in ‘19. Obviously, you're going to be short of that this year. Can you achieve that next year? Maybe if you can give us some more color on that that would be very helpful.

Sure. We don't want to provide guidance for next year's NOI or the growth rates, but you raised some good points. We do have contractual escalators. And a lot of these leases are standard built in annual rent bumps, often around 3%. We do have opportunities to continue to grow our occupancy or replace lower productivity occupancy, the short-term type tenants with more permanent higher rent payers. We also have the 8.5% occupancy cost ratio that Steve referenced, we believe that average there's a tolerance from a lot of these retailers that want to stay in Tanger centers and our valued partners. And they're willing to step up to market rents to retain their space. So we think there's an opportunity to grow the occupancy, grow the rents, and continue driving, same center NOI growth.

What is your SNO pipeline today? Your signed not open pipeline.

It's about half a percentage point.

So 50 basis points.

That's right.

That's consistent with I guess last quarter as well. But in terms of -- while, I'm not asking you to provide guidance for next year, obviously. But are you guys internally focused on trying to get back to that? And do you have a goal to get back to the ‘19 levels of NOI over the medium term.

That's the north star. We want to beat that number, Floris. I mean, we're doing, look, our results are proving out our strategy, we've been talking about our strategy fairly consistently. And we shape our operations, we're going after new brands new uses to fill our space. What we're finding is we're absorbing a lot of space, we're monetizing our peripheral lands, where we think there's a whole new revenue stream for us that will push our cash flowing in ‘23. And well on into ’24 and beyond. So we're going after organic growth of the existing portfolio, then adding Nashville, which will come online at the end of next year. And we're seeing great results in North Palm Beach partnership as well. And we think that there's many other opportunities for us ahead. But once again we're very focused on our core business and our core strategy. And I think that's where most of these results are coming from today. We're going to continue pushing hard on that.

Thanks, Steven, if I can have one follow up. You talked a little bit about new to market tenants. And some digitally native brands in particular, you mentioned that are coming to your presumably you're competing with Simon for some of these, and they're also opening and Simon outlets, I would imagine as well. Maybe if you could touch on one of the strengths in retail has been the luxury element. Obviously, outlets are not necessarily perceived as luxury, but you do have some luxury tenants, particularly Tapestry brands that are in your outlets. Do you see the potential for you to bring other luxury tenants to the outlets, and particularly now that with the ESG they can't burn their excess inventory anymore, and not that they have a whole lot of excess inventory typically, but as they want to dispose of things that aren't selling that season, potentially increasing or getting the revenues from that by selling through an outlet. Do you see an opportunity there for you going forward.

Definitely.

Great, presumably what that could show up in additional leasing going forward?

Yes. I think we've got some elevated centers, between Palm Beach, Nashville, and a number of our other centers across the portfolio. We've got a great opportunity to push into new categories. We've proven that we can do that. We continue to do it. We have a whole team that's focused on going after brand new, new brands, new brands to outlet and where you keep on proving success, and very willing to share the names of those brands as we ultimately open those stores.

Next question is coming from Samir Khanal from Evercore.

Thank you. Hey, Steve. Good morning. Can you provide more details on the occupancy pickup in the quarter? I mean, just curious that -- saw that there are a few properties in kind of your listing Atlantic City, Riverhead that saw a big jump, maybe provide further details on kind of what you're doing with those assets. What was driving that occupancy? And now that you're sort of at that 96.5% range, which was much higher than I thought sequentially, kind of what the upside is here.

Thanks Samir. And I think a lot of that increase has to do with our pivoting into new uses. So as you take a look at Riverhead as an example, we recently opened, Mitchell Gold and Crate and Barrel and our restoration hardware store. So we're essentially what we're doing is we're building a destination for home in that particular location. Same with our center in San Marcos where we've been very successful doing a number of big home deals in that market as well. Atlantic City is a location where we were able to do some entertainment uses, we signed a big lease with Dave and Busters. So we're are taking each of these individual centers were vital to our customer is in those centers, what they're looking for, when they come in, they visit and what role our center plays in those communities, and where those communities are underserved with particular uses. Those are the uses that we're going after. We're still pure play outlet. But it's great to round out that merchandising, with other uses that give other folks that come to visit our shopping centers, things to do. And again, what it does, it gets people arrive more frequently, draws a new customer gets them to stay longer when they're there, and ultimately build bigger baskets, which drive bigger sales.

And then remind me, but I think temporary tenants are going to be part of that number, right. And I guess if so, what percentage make up sort of temporary tenants there.

No, we tend to pass the temporary tenancy was over 10%, we don't break the numbers out, that number is actually going to start to come down as we convert a lot of these temporary or pop-up tenants into long term permanent deals. And we start to absorb a lot of that space with retailers, successful retailers that are expanding, we've seen a lot of that through the portfolio, particularly this year. And again these new brands that are finding outlet, we're doing long term permit deals with lot of these brands, and they're going to make exciting new addition to our shopping center. So we feel pretty optimistic about our occupancy growth. But more importantly, we're really optimistic about our rent growth. And I think those two things together are the key fundamentals to us growing our business on an organic basis.

And just one last for me, one last question for me on pricing power into next year. Certainly when you think about leasing spreads. I mean, it sounds like you'll see continued improvement in that number. I mean, is that correct? And I guess the reason I'm asking is I know occupancy costs are low. But when you look at sales, sales are relatively flat year-over-year. So I guess how much -- I mean, how much more upside or improvement do you think you can see on pricing power into next year?

Well, first of all, we're cheap, right, our space is cheap, we definitely have pricing power, we have opportunity to push rents, you can see it in the numbers. But you look at the flat sale, and then just want to make sure that we understand, we're an outlet center. So when you have one of the largest national retailers announced that in order to keep their full price channels clean with brand new inventory, and that they're going to close all -- they are going to close out all of this excess inventory to the outlet channel, essentially, what's happening is, they're being more promotional in our channel, so that they can be more clean and push prices in the full price retail channel. In those instances, our channels doing exactly what these retailers are paying for. They're looking for customer traffic, to have promotional selling in a value-oriented environment, where we're joining customers to the shopping center, and they have the ability to clear that excess inventory. So not every retailer is looking at outlet the same way. It's not all about the high watermark of sales. It's being promotional, clearing excess inventory, and making sure that it's serving a purpose to the entire omni-channel retail ecosystem for each of those individual retailers. We have a number of retailers that only select us in our channel. And they're promotional, and it serves a great purpose and keeps their margins high in their full price business. And that's why there's many of our retailer partners have served in multiple channels.

Our next question today is coming from Craig Schmidt from Bank of America.

Thank you. Steve, I was wondering if you could tell us the national tenants that Tanger brought to Tanger Outlets Palm Beach? And are there any operational changes that you might bring to the asset?

Well, the reason why we made the partnership was because of our operational excellence and what we bring to the table. I mean, first of all branding the shopping center Tanger has national reach. We've got a sizable Tanger club, where our Tanger members pay into that club, but get returned additional discounts, shopping days and through our digital marketing strategies we communicate with these customers in a very personal way, and drive them not only to the shopping center in their particular geography, but make sure that when they're traveling, that they know that there's a Tanger shopping center close by. So that's number one. Number two, from an operational efficiency point of view with 36 now with Palm Beach, 37, and national will be 38 shopping centers, we've got great buying power, and pricing power as it relates to national contracts. And those have served us extremely well. Whether it's repairs and maintenance, janitorial, national landscaping, or national security contracts, our partners definitely benefit from that buying power. We also have a leasing team, that is a national leasing team that we can leverage when we add additional centers to our portfolio without growing the size of that leasing team, we can expand our reach, particularly with that national tenant population that's starting to join us. With regard to Palm Beach in particular, we have over 25,000 square feet of new tenants to that center, that are in various stages of LOI to executed. And we have our partner and we will release those names in the shared press release as those stores open. So we're not announcing stores, we're in a very competitive environment. We choose not to announce the stores until those stores are open, or their signs go up.

Okay, thank you for that. And then just are there any Rue21 stores that leases expire in 2023?

Justin Stein, who's our EVP of leasing is sitting in the room, I asked him to answer that question.

Hey, Craig, how you doing? Yes, we're communication with all of our retailers on a monthly basis. In fact, I personally speak with the CEO of Rue21, every three to four weeks, and our portfolio was very clean with Rue21 through ‘23. And we look forward, as Steve mentioned earlier, to continuing to watch them turn their business around and grow.

Next question today is coming from Michael Mueller from JPMorgan.

Yes. Hi. So two quick ones here, I guess first, for the 160 basis points in sequential lease rate pickup. Can you give us a sense as to how much of that was permanent occupancy versus temp? And then the second question when Nashville opens next fall what sort of occupancy do you expect it to open at? And about how long to stabilize?

Sure, Mike, I'll take the first one. I'll let Steve answer the Nashville one. But while we don't break out the temp versus permanent to that level, we do acknowledge that the second to third quarter is often when we see some of the seasonal the holiday tenants that are coming in. So that is a component of the 160 basis points of sequential gain. But we have strong momentum on the permanent side and have continued to lock-in long term leases. That's a meaningful part of that number.

Look, we're not going to stop using temp leasing as a strategy. We've talked about the fact that we've decentralized our operations team. Therefore, with 37 open centers, we've got 37 general managers and operations team on the ground. And if there is a square foot of unoccupied space, it's incumbent on them to find a retailer, a suitable retailer to take that space to keep the lights on. And for us, I call it a strategy because with a great retailer in one of those spaces comes a potential for a long-term tenant, maybe a new food and beverages, or some local retailer that does a great job of drawing a new customer to the shopping center that hadn't visited before. And that's important to us, it's important to our strategy. And it's important to the communities that we serve. So as we talk about Nashville, we're 75% committed with a year to go in Nashville. We've been extremely selective with regard to the brands that are going into that center, we've made a very real effort to make sure that we get some new brands so that it isn't just the same lineup that you'll see at every outlet across the country. We're inviting brand new retailers into the portfolio, and some of their new debuts will happen in that shopping center. There's a number of brands we're going to do a release shortly. But there's a number of very interesting brands that will be joining us there and we're really excited to welcome them to the Tanger family of brands.

Got it. And do you have a sense as to when that project opens about roughly what the initial occupancy could be just a rough range?

I don't want to sort of get out over my skis here, but I know it'll be in the 90s.

Our next question is a follow up from Greg McGinniss from Scotiabank.

Hey, thank you so much. I just want to quickly touch on base and percent rent in the context of the guidance raise, but also performance in Q3. So base rent was flat to Q2, despite the increase in occupancy. So it's kind of percent rent, the piece leading into Q4, you expect to see kind of the upside driving the beat. Are you ahead on your breakpoints there in the leases? And if you could also just kind of touch on again, the base rent kind of being flat to Q2, it'd be appreciated.

Sure, you're saying base rent –

Base rent of $71.7 million in Q2 and q3. So it was kind of unexpected, given the occupancy increase. And then is that -- is the expectation, then just that percent rent is going to be kind of the driver of the performance in Q4, in regards to the be in race?

Well, Q2, base rent included some of the reserve reversals that we talked about last quarter. So there were some nonrecurring items that overstated the Q2 run rate, if you will, there was -- there was growth in the base rent from Q2 to Q3. And then on the variable side, that is something where we continue to convert variable into fixed that contributes to the base rent growth. But that also de-risks the stability of these cash flows going into potential periods of macro-economic uncertainty. So that's the strategy we'll continue employing. But we continue to see growth in the base rent, the fixed rent category, and also the recovery category as we convert some of these leases into more of the full breadth style.

Thank you. We've reached the end of our question-and-answer session. I'd like to turn the floor over to Mr. Tanger, for any further closing comments.

Thank you for joining us this morning. We appreciate your ongoing interest in our company. We will see some of you NAREIT in San Francisco shortly. And if you have any additional questions, please feel free to call Steve, Doug or Ashley and we'd be happy to respond. Be well and happy early holidays. Bye-bye.

Thank you. That does conclude today's teleconference and webcast. You may disconnect your line at this time. And have a wonderful day. We thank you for your participation today.