Tanger Factory Outlet Centers Inc. saw third-quarter profits drop due to the pandemic, though trends in shopper traffic, rent collection and occupancy rates are improving, according to the company.
Starting Saturday, Tanger’s outlet centers will be open 10 hours a day on average to accommodate holiday season shopping. Through the pandemic, the centers were open an average of eight hours a day, and pre-pandemic, the outlet centers operated an average of 12 hours a day.
Net income for the quarter ended Sept. 30 was 14 cents a share, or $12.9 million, compared to 25 cents a share, or $23.2 million, for the prior-year period. The latest period was “heavily impacted” by the pandemic and includes a 2 cent-per-share, or $2.3 million, gain on the sale of a “noncore” outlet center in Terrell, Tex.
Funds from operations, or FFO, available to common shareholders and core funds from operations were 44 cents a share, or $42.6 million, compared to 58 cents a share, or $56.8 million, for the prior-year period. Core FFO, previously referred to as adjusted funds from operations, excludes certain items the company does not consider indicative of its operating performance.
“Our business, which is primarily open-air outlet centers, has generated positive cash flow since the start of the quarter. Rent collections for the quarter improved sequentially to 89 percent of billed rents and we expect to collect another 3 percent,” said Steven B. Tanger, chief executive officer, on Friday. In the current world health crisis, many consumers are more inclined to shop open-air centers rather than enclosed malls.
“Our liquidity position is strong, with $40 million of cash and $600 million in unsecured lines of credit that were undrawn at the end of October. More than 99 percent of occupied stores in our consolidated portfolio have reopened. Traffic to our open-air centers during September rebounded to more than 98 percent of prior year levels, even with 30 percent fewer open hours per week.
“Many brands consider outlet stores a crucial component of the omnichannel ecosystem. We continue to pursue new and exciting brands to curate the tenant mix in our centers,” Tanger added.
In a recap of its operations, the company said consolidated portfolio occupancy rate was 92.9 percent as of Sept. 30, compared to 93.8 percent on June 30, and 95.9 percent on Sept. 30, 2019.
Blended average rental rates decreased 6.3 percent on a straight-line basis and 11.2 percent on a cash basis for all renewals and re-tenanted leases that commenced during the trailing 12 months ended Sept. 30. Lease termination fees totaled $8 million for the first nine months of 2020, including $6.3 million for the third quarter, compared to $1.5 million for the first nine months of 2019, including $0.1 million for the third quarter a year ago.
As of Sept. 30, Tanger had lease renewals executed or in process for 72.3 percent of the space in the consolidated portfolio scheduled to expire during 2020, compared to 74.2 percent of the space scheduled to expire last year by Sept. 30.
As of Oct. 31, more than 99 percent of total occupied stores in the portfolio had reopened, representing more than 99 percent of leased square footage and annualized base rent. Tanger owns, or has an ownership interest in, 38 outlet centers, which are considered among the most upscale in the outlet industry.
As previously announced, Tanger will step down as ceo on Jan. 1, and will be succeeded by Stephen Yalof, president and chief operating officer. Tanger is the son of the company’s founder, the late Stanley K. Tanger.