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A Rare REIT for the Ages

Stocks in this article: SKT

One of the strengths of the premium brand are tenant sales. Since 2000, Tanger's long-term tenant sales have grown from $281 per square foot to $371 per square foot (March 2012), a 32% increase in 12 years.

Another Tanger strength, also related to demand, is the long runway for external growth by development. The oulet sector is small with about 50 million square feet of space (compared with less than 50 million square feet of retail space in all of Chicago). Recently, Tanger completed new projects in Hilton Head, South Carolina ($43 million cost and 177,000 square feet) and Mebane, North Carolina ($64.9 million cost and 310,000 square feet).

Tanger also has projects under construction in Houston, a joint venture with Simon and in Glendale, Arizona. Also, Tanger has proposed new projects in Washington, D.C., and Phoenix.

Premium Brand Goes International

Tanger recently entered the new frontier in Canada where the premium outlet brand has closed on several strategic joint ventures (50-50) with RioCan. That new frontier promises to be provide Tanger with multiples of success as Canada is significantly under-retailed as compared with the U.S. (Canada has 16 retail square feet per person compared with 24.5 in the U.S.)

Tanger has closed on a development project in Cookstown (Innisfil, Ontario) and the REIT has announced several other pre-development projects in Cookstown and Kanata. The strength of Tanger's Canadian pipeline is strong as the premium brand has suggested growth of 10 to 12 new projects over the next five to seven years.

Intelligent Bears Risk for Profit

One of the most important attributes for Tanger investors are the premium ingredients that distinguish the remarkably consistent returns from other REITs. These key ingredients evolve around exceptional risk management fundamentals and conservative financial stewardship practices.

Tanger is investment-grade-rated (S&P BBB and Moody's Baa2) and the premium brand has sound leverage ratios (47% debt-to-total assets) and low (5%) secured-debt-to-total assets. In addition, Tanger maintains modest interest coverage (4.3 times) and the company has significant unused capacity on its lines of credit (121.1 million outstanding and 398.9 million unused capacity).

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