Tanger Factory Outlets, a mainstay of Riverhead’s Route 58 commercial corridor since the mid-1990s, was hurt by pandemic shutdowns and tenant bankruptcies last year, company executives said this week.
“Clearly 2020 was a year like no other,” executive chair Steven Tanger said.
The publicly traded real estate investment trust, which operates 38 upscale outlet centers in 20 states and Canada, saw its share prices plunge more than 55% last March, as government-mandated shutdowns took effect. Some stores would never reopen.
Bankruptcies and restructurings of major tenants forced Tanger to “recapture” 8% of the total leasable area in its portfolio — about 903,000 square feet, Tanger CEO Steven Yalouf said during an earnings call yesterday. Tanger deferred rent payments due in April and May to help tenants forced to close their doors or operate at reduced capacities. It suspended shareholder dividends in May. By the end of 2020, its occupancy rate was down to 92%, down from 97% at then end of 2019.
Yesterday’s earnings call followed Tanger’s release on Wednesday evening of its results for the 2020 fourth quarter and year-end.
Company executives were upbeat. Yalouf said Tanger Factory Outlets’ business is stabilizing after a very challenging year.
“Our business continues to improve, with the consumer embracing open-air outlet centers as a preferred venue for shopping and entertainment,” said Yalouf, who was named CEO of the company Jan. 1, succeeding Steven Tanger, who held the position for 12 years and has transitioned to the role of executive chair of the company’s board of directors.
Over 99% of Tanger’s occupied stores are open. Most locations have seen customer traffic rebound to nearly what it was before the coronavirus pandemic, he said. Deferred rents are being paid as agreed, at a level “better than expected.”
With the rise of online shopping, the brick-and-mortar retail sector was struggling before the pandemic. Lockdowns and mandated store closings drove even more retail spending online, accelerating what many analysts call the “Amazon effect.” At least 30 retailers filed for bankruptcy in 2020, including some, like Lord & Taylor, J. Crew, Brooks Brothers and True Religion, that had a major presence at Tanger Factory Outlet Centers.
Tanger is expecting to recapture another 200,000 square feet of occupied space in the first half of 2021 due to additional retail bankruptcies, Yalouf said.
But Tanger is also adding new tenants at its centers and even new categories of tenants, including food, entertainment and experiential retailers, the CEO said.
At Tanger’s Deer Park center, which at 739,110 square feet of gross leasable area is the largest center in the company’s portfolio, Tanger is opening its first on-center shipping and distribution facility with its partner Filogic, a “last mile” distribution and logistics platform. Yalouf said the company expects it to be “a model for other locations going forward.”
The company is embracing the digital transformation, executives said. Tanger launched virtual shopping and offers curbside pickup. Shoppers can use FaceTime to interact with a “Tanger styler.”
Tanger management is forecasting net income of $0.30 to $0.40 per share for 2021, which is a little more than half its pre-pandemic forecast for 2020. Among its assumptions for its 2021 estimates are no further government-mandated retail shutdowns.
The company’s future is of great concern to the Town of Riverhead and Suffolk County as a whole. Sales at Tanger’s two locations in Suffolk generate millions of dollars in sales tax revenues for the county, which are shared with Riverhead and other towns through the land preservation program and public safety revenue sharing.
Even more important to Riverhead is the property tax revenues generated by Tanger I and Tanger II, a total of nearly $5 million per year. Other than LIPA and LILCO, the two Tanger properties, which occupy over 80 acres and have 729,558 square feet of gross leasable area, are, together, the biggest property tax payers in the Town of Riverhead, Riverhead assessor Laverne Tennenberg said. And then there are jobs: The stores at the Riverhead outlet center employ hundreds of people.
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