Executive Summary / Key Takeaways

• Tanger Inc. is actively transforming its portfolio beyond traditional outlets, strategically acquiring open-air lifestyle and mixed-use centers and aggressively remerchandising existing properties to attract a broader, more affluent, and younger demographic.
• Recent financial performance, including 2.3% Same Center NOI growth and $0.53 Core FFO per share in Q1 2025, builds on strong 2024 results (5.1% Same Center NOI growth, 8.7% Core FFO growth), demonstrating the early success of this strategic evolution despite macro uncertainties and specific quarterly expense timing impacts.
• The company maintains a robust balance sheet with low leverage (5.2x Net Debt to Adjusted EBITDAre as of Q1 2025, 4.9x-5x Pro Forma), ample liquidity ($481M available on credit lines, $69.7M in forward equity), and well-laddered debt maturities, providing significant flexibility for continued internal and external growth investments.
• Strong leasing momentum continues, marked by 13 consecutive quarters of positive rent spreads (over 30% on re-tenanting, over 10% on renewals as of Q1 2025) and high retention/re-leasing activity, driven by retailer demand for limited open-air space and Tanger's evolving tenant mix.
• Tanger has reaffirmed its 2025 guidance, targeting Core FFO of $2.22 to $2.30 per share and Same Center NOI growth of 2% to 4%, reflecting confidence in its operational execution, strategic initiatives, and the accretive impact of recent acquisitions.

Setting the Scene: An Outlet Pioneer Evolves

For over four decades, Tanger Inc. has been a prominent name in the retail real estate landscape, primarily known as a leading owner and operator of outlet shopping centers. Built on a foundation of providing value-oriented shopping experiences, the company established a portfolio of strategically located properties serving both tourist destinations and local communities across the United States and Canada. However, the retail environment is dynamic, shaped by evolving consumer preferences, the rise of e-commerce, and shifting demographics. Recognizing these changes, Tanger has embarked on a significant strategic evolution, pivoting beyond its traditional pure-play outlet model to embrace a broader identity as an owner and operator of diversified open-air retail destinations.

This strategic shift is not a sudden change but an acceleration of initiatives that began several years ago. It involves not only enhancing the core outlet portfolio by adding new uses and elevating the shopper experience but also actively pursuing external growth through the acquisition of complementary open-air lifestyle and mixed-use centers. The goal is to create vibrant, multi-faceted destinations that encourage more frequent visits, longer stays, and increased spending from a wider customer base, including younger and more affluent demographics, while still honoring the core value proposition that resonates with its established shoppers.

In the competitive retail real estate sector, Tanger operates alongside larger, more diversified REITs like Simon Property Group (SPG), which dominates premium malls and has a significant outlet presence, and other open-air specialists like Kimco Realty (KIM) and Federal Realty Investment Trust (FRT). SPG benefits from scale and a strong digital presence, often commanding higher revenue per square foot in premium locations, though facing higher operating costs in enclosed malls. KIM and FRT focus on necessity-based and affluent-market shopping centers, respectively, offering stability but potentially slower adaptation to rapid retail shifts. Tanger's historical competitive edge has been its specialized outlet expertise, operational efficiency, brand diversity within its niche, and cost leadership, resulting in potentially faster leasing cycles and higher ROIC compared to some peers. However, it faces vulnerabilities from the broader e-commerce trend impacting physical retail foot traffic and historically lagged in digital innovation compared to larger players like SPG.

In response to this landscape, Tanger is leveraging its operational platform – its in-house leasing, marketing, and property management teams – as a key differentiator. This integrated approach allows the company to be nimble, stay close to its retailers and shoppers, and execute its remerchandising and acquisition strategies effectively. While not possessing proprietary building technology in the manner of some industrial or energy companies, Tanger's "technology" lies in its increasingly sophisticated digital capabilities. These tools are crucial for enhancing customer insights and analytics, enabling targeted real-time promotions, and optimizing marketing initiatives. This focus on digital engagement is a strategic response to competition, aiming to drive traffic and sales by connecting with shoppers more effectively in the digital age, thereby supporting the physical retail experience. Management commentary highlights the value tenants see in utilizing Tanger's platform to reach sought-after shoppers, contributing to growing ancillary revenues.

Strategic Evolution and Operational Momentum

The narrative of Tanger's transformation is best illustrated through its recent strategic moves and operational performance. Over the past two years, the company has added five centers, including a new development and four acquisitions, significantly expanding its footprint and diversifying its property types. Key acquisitions like The Promenade at Chenal in Little Rock, AR (acquired Dec 2024), an upscale open-air lifestyle center, and Pinecrest in Cleveland, OH (acquired Feb 2025), a mixed-use center anchored by Whole Foods, represent a deliberate expansion into properties beyond traditional outlets. These centers are located in growing markets and offer a curated mix of national, regional, and local brands, including sought-after names like Sephora, Ulta (ULTA), Lululemon (LULU), and Apple (AAPL) (at Chenal), alongside diverse dining and entertainment options. Tanger believes it can add significant value to these acquired assets by leveraging its operating, leasing, and marketing expertise, aiming for returns above its core portfolio growth over time.

Simultaneously, Tanger is aggressively remerchandising its existing portfolio. This involves replacing less productive tenants with new, in-demand retailers and uses across various categories, including beauty (Sephora, Ulta), home, food and beverage, and entertainment (Planet Fitness (PLNT), Dave & Buster's (PLAY)). This strategy, while potentially causing some temporary frictional vacancy as old tenants vacate and new ones build out, is designed to elevate the tenant mix, attract a broader demographic, and ultimately drive higher sales productivity and rents. Management has explicitly stated they are strategically accepting some near-term occupancy impact to position the portfolio for the "long game."

The success of this operational execution is evident in key performance indicators. Tanger has achieved 13 consecutive quarters of positive rent spreads, a testament to the demand for its space and its ability to capture higher rents. As of Q1 2025, re-tenanting spreads were over 30%, significantly higher than renewal spreads (over 10%), highlighting the upside potential in replacing underperforming tenants. Leasing activity remains robust, with 2.5 million square feet executed over the trailing 12 months. The company is also ahead of its renewal pace for 2025 expirations, with 56.7% of space scheduled to expire already addressed by late April 2025. Occupancy ended Q1 2025 at 95.8%, reflecting an anticipated seasonal decline from the year-end high of 98%, but management attributes much of the modest sequential decline to the timing of tenant transitions related to the remerchandising strategy. Sales productivity for the total portfolio reached $455 per square foot for the trailing 12 months ending Q1 2025, up sequentially and year-over-year, indicating that the evolving tenant mix is resonating with shoppers.

Beyond tenant mix, Tanger is also focused on activating peripheral land at over half of its properties. This involves adding complementary uses like restaurants, entertainment venues, and other destinations that enhance the overall appeal of the center and drive additional revenue streams with relatively low capital investment. This initiative further supports the strategy of creating multi-faceted destinations that increase shopper frequency and dwell time.

Financial Performance and Balance Sheet Strength

Tanger's recent financial results underscore the positive momentum from its strategic initiatives. In the first quarter of 2025, total revenues increased by 9.7% year-over-year to $135.363 million, driven by strong rental revenue growth ($129.285 million, up 9.7%) and increases in management/other services and other revenues. Rental revenue growth benefited from higher rents at existing properties and contributions from recent acquisitions. Property operating expenses increased by $6.4 million, influenced by higher snow removal costs in Q1 2025 compared to Q1 2024 and the inclusion of acquired properties. Depreciation and amortization also rose due to acquisitions and renovations. Interest expense increased by $1.4 million, primarily due to higher interest rates on variable debt and new swaps, as well as increased borrowings to fund acquisitions. These factors led to a decrease in reported net income to $19.999 million in Q1 2025 from $23.306 million in Q1 2024, notably impacted by a $4.2 million impairment charge related to the Howell, Michigan property held for sale.

However, key operating metrics like Same Center NOI and Core FFO, which adjust for non-cash and non-recurring items, paint a clearer picture of underlying performance. Same Center NOI grew by a solid 2.3% in Q1 2025, following a robust 5.1% increase for the full year 2024. This growth reflects the strength in rental revenues from leasing activity and expense recoveries, partially offset in Q1 2025 by the timing of operating expenses (higher snow costs this year, expense refunds last year). Core FFO per share was $0.53 in Q1 2025, up from $0.52 in Q1 2024, contributing to an 8.7% Core FFO growth for the full year 2024. These figures demonstrate that the strategic focus on driving rents and operational efficiency is translating into bottom-line growth.

Tanger's financial strength is further highlighted by its well-managed balance sheet. As of March 31, 2025, the company maintained a Net Debt to Adjusted EBITDAre ratio of 5.2x, which is expected to be even lower (4.9x-5x) on a Pro Forma basis reflecting a full year of EBITDA from recent acquisitions and the sale of the Howell center. This leverage metric is competitive within the retail REIT sector.

The debt profile is largely fixed-rate (96% unsecured as of Q1 2025) with ample liquidity. The company had $481 million available on its $620 million unsecured lines of credit and $69.7 million in future proceeds available from unsettled forward ATM agreements as of Q1 2025.

The next significant debt maturity is not until September 2026 ($350 million), providing significant runway. The recent refinancing of the Southaven joint venture mortgage in April 2025 further extended a maturity, demonstrating proactive debt management. Tanger's strong balance sheet and free cash flow generation (supported by a low dividend payout ratio, recently increased by 6.4% to $1.17 annualized in April 2025) provide substantial flexibility to fund capital expenditures for portfolio enhancements and pursue opportunistic acquisitions.

Outlook and Risks

Looking ahead, Tanger has reaffirmed its full-year 2025 guidance, projecting Core FFO per share between $2.22 and $2.30, representing growth of 4% to 8%. Same Center NOI growth is expected to be in the range of 2% to 4%. This guidance incorporates the contributions from the Promenade at Chenal and Pinecrest acquisitions and assumes continued operational momentum. Key assumptions include the ability to maintain positive rent spreads, manage tenant downtime during transitions, and control operating expenses. Interest expense is projected between $63.5 million and $65.5 million for the year.

Management's confidence in this outlook stems from the continued strong retailer demand, the positive results from the remerchandising strategy, and the benefits of operating in a market with limited new retail supply. The inclusion of Nashville, Asheville, and Huntsville in the 2025 Same Center NOI pool reflects the maturation of these recently added assets and their expected contribution to organic growth.

However, the outlook is not without risks. The overall macroeconomic environment, including potential inflationary pressures, rising interest rates, and shifts in consumer spending habits, remains a key concern. While Tanger's value proposition is often resilient in uncertain times, a significant downturn could impact tenant sales, potentially affecting percentage rents and the ability of some tenants to meet lease obligations. Lease expirations remain a factor, with 20% of the portfolio expiring in 2025, requiring successful renewal or re-leasing to maintain occupancy and drive rent growth. Co-tenancy and sales-based clauses in leases could also be triggered by declining occupancy or sales. International trade relations and tariffs could impact tenants relying on imported goods, potentially affecting their profitability and ability to pay rent. Increased focus on ESG reporting may impose additional compliance costs. While Tanger's balance sheet is strong, access to capital on favorable terms could be constrained in volatile markets, potentially impacting the ability to fund future growth or refinance debt, although the next major maturity is over a year away. Joint venture debt and guarantees also present potential, albeit currently manageable, risks.

Conclusion

Tanger Inc. is navigating a deliberate and strategic transformation, successfully evolving from a pure-play outlet operator into a diversified owner of open-air retail destinations. The company's focus on elevating its portfolio through active remerchandising, attracting new brands and uses, and pursuing accretive acquisitions is yielding tangible results, as evidenced by consistent Same Center NOI growth, increasing Core FFO, and robust leasing activity with strong rent spreads.

Supported by a conservative balance sheet, ample liquidity, and a management team focused on operational excellence and value creation, Tanger appears well-positioned to continue executing its strategy. While macroeconomic uncertainties and the inherent risks of retail real estate persist, the company's proactive approach to portfolio enhancement, its differentiated value proposition, and its strong financial foundation provide a compelling narrative for investors seeking exposure to the evolving open-air retail sector. The reaffirmed 2025 guidance signals confidence in the trajectory, suggesting that Tanger's strategic pivot is set to unlock further value in the years ahead.