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Good morning. This is Ashley Curtis, and I would like to welcome you to the Tanger Factory Outlet Centers First Quarter 2023 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, funds available for distribution, or FAD, 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, April 28, 2023. At this time, all participants are in listen-only mode. Following management's prepared comments the call will be opened for your question. [Operator Instructions]. On the call today will be Steven Tanger, our Executive Chair; Stephen Yalof, President and Chief Executive Officer; and Michael Bilerman, Chief Financial Officer and Chief Investment Officer. In addition, other members of our leadership team will be available for Q&A. I will now turn the call over to Steven Tanger. Please go ahead, Steve.

Good morning, and thank you for joining us for our first quarter 2023 earnings call. We had a very strong start to the year as we outperformed our expectations. Next month, we will be celebrating 30 years as a publicly traded company and to mark that milestone we will be ringing the closing bell on the New York Stock Exchange on May 10. It has been an incredible journey where Tanger Stock has delivered an above-market total shareholder return. Looking forward, we remain confident in our optimistic outlook as the team continues to execute on its growth strategy. I will now turn the call over to Steve Yalof.

Thanks, Steve, and good morning. I'm pleased to report another quarter of growth as we have delivered positive results ahead of our expectations. Same center NOI grew by 7.4% driven by robust leasing activity and expense management due in part to a mild winter. We continue to execute to our key strategic initiative of leveraging our platform to deliver reliable earnings and attractive growth opportunities. Leasing activity remains strong. We ended the quarter with occupancy of 96.5%, a 220 basis point improvement over the prior year. This reflects our leasing team's commitment to locking in higher fixed rents and expense recoveries, extending lease terms, elevating and diversifying our tenancy and maintaining high occupancy. We delivered improved rent spreads for the eighth consecutive quarter with our blended average rental rates increasing 13.8% for the trailing 12 months ending March 31, 2023. This represents a sequential improvement of 370 basis points of rent spread growth and up over 10x from the 1.3% spread we reported in the first quarter of 2022. Re-tenanting spreads grew 36.1% and renewal rent spreads grew 11.8%. Our ability to drive solid increases in renewal rents is the clearest demonstration of our retailer's commitment to the outlet channel and our ability to capture rent upside. This is further demonstrated by our higher occupancy cost, which as of the end of the quarter was 8.8%, up 20 basis points sequentially. As of the end of the first quarter, renewals executed or in process represented 57% of leases expiring this year approximately 10 percentage points ahead of last year and at double-digit rent spreads. Sales and traffic continue to gain positive momentum. Traffic for the quarter was up 60 basis points compared to the prior year's first quarter. Total gross sales grew in the first quarter of 2023 from the prior year quarter. Our average tenant sales for the trailing 12 months also improved sequentially from the end of the fourth quarter to $447 per square foot for the period ended March 31, 2023. This sequential improvement is driven mainly by stabilizing trends in our core retailers, plus productivity gains derived from our new partners that are outperforming brands for stores that have exited our portfolio. Our results also reflect the continued improvement to our marketing programs, which focus on media spend with clear measurable results designed to drive traffic and sales. We are focused on digital media, which provides a more targeted reach with greater efficiency. We have added digital assets to all of our centers, including digital directories, tenant signage and easily identified QR technology, directing customers to our Tanger digital channels and our virtual shopper services platform. Our enhanced platform provides shoppers with amenities and same-day access to every day and limited-time promotional offers from our retailers, plus the ability to earn personalized retailer-funded incentives as they continue to shop with us. As shoppers turn to our digital services, we can increasingly personalize their experience. We continue to leverage our media platform, which provides a unique revenue opportunity to Tanger given the scale and quality of our audience. In the first quarter, we enjoyed great success on Super Bowl weekend at our Glendale, Arizona Shopping Center, securing campaigns from national brands such as Nike and Under Armour as well as the NFL, which hosted a game day tailgate party on our site. Beyond adding more F&B and experiential retailers, we also continue to improve and update shopper amenity, and are investing in sustainable on-site initiatives across our portfolio. These investments accomplish multiple objectives. In addition to improving the shoppers on-site experience, we continue to drive operational efficiencies, revenue generation, and environmental benefits. A few examples include our state-of-the-art security enhancements, growing electric security vehicle fleet and increased solar and electric vehicle charging capacity. Finally, we continue to make leasing and construction progress on our Nashville development where we are over 90% lease committed and anticipate our grand opening this fall. I'm proud of our team and the strong results they continue to deliver and remain optimistic in our outlook. Earlier this month, our Board approved an 11.4% increase in our dividend, reflecting this continued confidence. Tanger open-air shopping centers offer engaging and value field experiences for our shoppers and a highly effective sales channel for our retail partners. We have a high quality and diversified roster of tenants increasing rents with more headroom for growth and a platform with an additional opportunities to grow NOI. I want to thank the entire team, our shoppers, retailers, and all of our stakeholders for their continued support. I'll now turn the call over to Michael.

Thank you, Steve. Today, I'm going to provide some color on our financial results, our balance sheet position, and provide an update on our increased 2023 guidance. Our first quarter results came in ahead of our expectations with Core FFO of $0.46 per share compared to $0.45 in the prior year period. Same center NOI for the total portfolio increased 7.4% for the quarter, which as a reminder, we present on a cash basis without lease termination fees. Our growth was driven by gains in occupancy from the robust leasing activity, strong rent spreads, which have led to higher base rents and higher expense reimbursements and operating expense savings in part from a milder winter. In addition, we achieved this growth even as we comp the majority of the reserve reversals recognized in 2022, which as a reminder, totaled $4.5 million last year. Our operating results reflect our strategy of structuring leases to grow total rental revenues and higher CAM contributions, while also converting percentage rents to fixed rents. We maintain a conservatively leveraged, well-laddered balance sheet with the liquidity and flexibility to pursue our growth objectives. We have no significant debt maturities into 2026, and we have been proactively addressing the February 2024 expiration of our current interest rate swaps. At the end of the first quarter, our cash and cash equivalents and short-term investments totaled $242 million or over $2 a share with full availability on our $520 million unsecured lines of credit. In addition, our net debt to adjusted EBITDAre was 5.2x for the 12 months ended March 31, one of the lowest in the retail sector, providing additional capacity to drive our growth, while staying below our target leverage levels. We will remain prudent in our approach to external growth. The weighted average rate on our debt at quarter end was 3.5% with 93% of our debt at fixed rates and a weighted average term to maturity of 5.4 years. As previously discussed, we do have $300 million of interest rate swaps that will be maturing in February 2024. We have been selectively addressing these and to date have executed attractive forward-starting agreements on $100 million of these expirations. We have locked in adjusted SOFR at a rate of 3.3% with an effective fixed interest rate of 4.5%, including our credit spread, extending duration for an additional 2.2 years taking us into the spring of 2026. We are pleased with this execution and thank our banking relationships, and we'll continue to look at various opportunities for the remaining expirations in the coming quarters. In terms of just thinking about our anticipated cash moves during the rest of the year, our biggest cash expense remains the funding of the rest of our development in Nashville. Through the end of the first quarter, we have deployed approximately $63 million with an additional $83 million remaining to fund at the midpoint. We also continue to anticipate deploying between $50 million and $60 million for recurring CapEx across our portfolio, which includes second-generation tenant allowances and capital improvements, with approximately $8 million of that spend that occurred in the first quarter. Our recently increased dividend remains well covered with a continued low payout ratio, providing the company with additional free cash flow after dividends to drive our growth. And now turning to our increased 2023 guidance. We are increasing our expectations for Core FFO by $0.02 a share to a range of $1.82 to $1.90. This is underpinned by a 75 basis point increase in our same center NOI growth to a new range of 2.75% to 4.75%. This increase incorporates our first quarter outperformance, including lower-than-anticipated operating expenses and is consistent with our strong operating performance. For additional details on our key assumptions, please see our release issued last night. We are looking forward to ringing the closing bell on May 10 for a 30-year anniversary as well as seeing many of our investors and analysts at upcoming property tours, meetings and conferences, which we outlined in our earnings release last night. I'd now like to open up the call for questions. Operator, can we please take our first question?

Ladies and gentlemen, we will now be conducting our question-and-answer session. [Operator Instructions]. Our first question is coming from the line of Greg McGinniss with Scotiabank. Please proceed with your question.

Hey, good morning. I just want to touch on the press release that you recently put out regarding a new tenant, Shake Shack and Dave & Buster's. And along that entertainment and food and beverage leasing, I'm just curious if you're starting to see any increase in visits or stay time, because of those types of tenants that you're bringing in?

Good morning. The simple answer is yes. I mean, when you have sit down food and beverage, and we've been adding that for the last, I would say 18 months, it's been a great practice for us. We're finding that a lot of our shopping centers, which are now sort of the centers of the community that they serve. Those communities are really looking for places to come to spend time and the change to add more sit down, more entertainment, more experiential, has definitely served its purpose of drawing people to our shopping centers, they're shopping more frequently, and they're staying longer when they're there.

Great. Thanks. And then looking at some of the other leasing information you gave us like now double-digit leasing spreads, blended spreads. How -- what's the pace of leasing look like today versus six months ago? Sometimes it's just hard to kind of read between the lines on the trailing 12-month disclosure. So I'm just curious if you could give us a little more clarity on kind of the pace of leasing today and types of rents that those tenants are signing at now.

Yes, sure. Look, what it doesn't say on the page is the leasing activity in Nashville and leasing activity in the shopping center that we're managing and entered into a strategic partnership with Clarion Inn in Palm Beach. There's been a tremendous amount of leasing activity on both of those properties. But overall, across our portfolio, you hit the nail on the head when you talked about some of the new retailers that we're seeing at press release that we recently issued. There's a lot of new to platform and new to Tanger retailers that are coming to join us, and they're not just doing one store with us. They're doing several. Justin Stein sitting here, he's our Executive Vice President of Leasing. Sure, maybe he'll share a couple of names of some of the tenants that are doing business with us right now.

Yes, Greg. So, as Steve said, we're diversifying our portfolio in a big way and some of the brands that we've leased to recently, especially on the home furnishing sides on restoration hardware, design within reach Casper, Crate & Barrel, Invicta. And as Steve said, we're doing multiple deals with these tenants throughout our portfolio. So the leasing activity is definitely robust, and we look forward to continuing the progress with these guys.

I'm sorry, just to clarify on that leasing front, where I think there's someone speaking with investors and listen to some of the retailer management teams talk about store openings it seems like maybe there was just a greater hunger for opening stores last year, a year before. I'm just curious if you're seeing any sort of moderation in that demand in through Q1 and year-to-date.

Fortunately not. In our channel, what we're finding is a lot of our retailers are really optimizing outlet as a go-to destination for them. I don't want to be clear of excess inventory, but to get in front of a new customer. So there hasn't been much slowdown in leasing velocity over the past couple of quarters.

Great. Thank you.

Thank you. Our next question is coming from Todd Thomas with KeyBanc. Please proceed with your question.

Hi, thanks. Good morning. First question, Michael, you emphasized that leasing efforts have aimed to capture higher base rents, but also expense reimbursement revenue and expense recovery income was higher, while expenses were down dramatically in the quarter. So your expense reimbursement rate was up in the 90% range this quarter, which is where it had been historically, but it was in the mid to high 70s, I think a little bit more recently. Should we expect to see that stay in the 90% range going forward throughout the balance of the year and ahead?

Good morning, Todd. So you're right, our leasing strategy is really focused on driving base as well as expense reimbursements. And the first quarter benefited from the leasing strategy, but also the operating expenses, which were lower this quarter. And so we were able to get the fixed CAM, but our -- we've managed our expenses this quarter, and there was also a little bit of timing related to some of our advertising spend in the first quarter. And so it will come down from a recovery perspective, but be much higher than we were last year is in the leasing strategy overall.

Okay. So for the tenants that are on fixed CAM, which I suspect is the bulk of the portfolio, will there be sort of a reconciliation at the end of the year at all based on those actual results? I guess how does that work exactly in your portfolio? And will there be an adjustment in future periods? To the recoveries from tenants based on this quarter's operating expenses? And what was the impact versus your budget related to the warmer weather on the operating expense side?

So I'll take the second, and then I'll pass it to Steve to talk a little bit about the lease strategy. The milder winter, we probably had a $1.5 million to $2 million relative to our savings overall. And within that, there was a little bit of timing as well for the rest of the year.

And just on fixed CAM, fixed CAM was just that. Pro rata CAM that's an old model and a lot of businesses are pivoted to the fixed CAM, it's not easier for the retailers and certainly a lot easier for us. And you're hoping you're accurate in your numbers when you put out your CAM dollar amount getting each year, but in some years, you may lose a $0.01.

Okay. Got it. So nothing sort of variable in there related to the fixed CAM component. Okay. And then just last question, I guess, along those lines with your leasing strategy, capturing more expense recovery income, converting percentage rents to fixed rents. Does that change how we should think about base rent growth for here. I guess, base rent growth was up 2.5% in the same-store, but occupancy was up 220 basis points. You have rent escalators. You've talked about the positive leasing spreads, eight straight quarters of improvement there. I guess what's holding back base rent growth from accelerating? And are you expecting base rent growth to accelerate?

Our base rent number that we report is base rent and CAM. We've built a lot of other buckets when we do a deal, our triple nets include real estate taxes. The marketing fund, we talk a lot about marketing fund a lot of our retailers pay into that marketing fund. I mean that's a big part of how we drive shoppers to our shopping centers. I speak frequently about the fact the retailers don't necessarily use their own marketing capital to drive customers to an outlet shopping center and rely very heavily on us to do so. That's why our marketing team is robust as robust as it is, and that's why that's an important component. But it's not seen -- it's not reflected in those base rent numbers.

Okay. All right. Thank you.

Thank you. Our next question is coming from Samir Khanal with Evercore ISI. Please proceed with your question.

Good morning, everyone. Hey Steve, when I look at occupancy growth, certainly very strong year-over-year, close to 97%. Can you remind us how much of that is the sort of temp occupancy right now? And sort of how are you thinking about that pool of tenants the ability to do the conversion to perm given a sort of the macro environment a potential slowdown here?

So look, at a 97% occupancy, we still have 3% of unoccupied space in our portfolio. So to us, that's an important metric. That's one that we're looking to fill and grow. We've done a pretty good job of growing our occupancy by 220 basis points over the course of the last year. Our temp is probably somewhere in that 10% range probably twice as high as historic averages, pre-COVID. But again, back in those days, we weren't as decentralized as we are as a team today. So as a decentralized operating team, we rely really heavily on our general managers of each of our shopping centers to do localized leasing. And that's an important component part of our centers. It's -- we bring in the best of the best in the communities that we serve, whether it's food and beverage, entertainment, experiential or retailers that drive a customer. So we look to that tenancy not only to fill space and keep lights on, but also to provide a much needed variety to our shopping centers. We've also -- our leasing team, we've built a team that now just focuses on a lot of those short-term temp tenants that will take the best of the best of those retailers and see who could go from shopping center to shopping centers. So we can start growing that business, not only converting them from temp to a long-term, but increasing the number of stores that they have in our portfolio. And that's an important part of our business too. So we're focused on all aspects of that. But the one component part that's most important to remember is that our temp leases. We control that real estate. You've got 30 days to cancel those leases. So if they're sitting in a way of a long-term lease, considerably more rent than we've said in the past, somewhere between 2x to 4x the rent from temp to a perm. We can notify that tenant when we get that space back in short order, so it doesn't hold up any other long-term leasing activity, which is really our core business.

Thanks for that. And then I guess my second question is around the leasing environment and maybe the external growth opportunities that exist. You've talked about the strong demand. I guess how are you thinking about external growth you've got in Nashville. You got a pretty stable balance sheet here. So maybe any color would be helpful.

Yes. Well, look, our -- we've built this pretty impressive operating model, an operating business based on the results that you've seen, leasing, operational and marketing and a lot of one-off owners, asset managers and larger competitors have contacted us, and we're in discussions with a number of them, whether it's a JV partnership or acquisition opportunities that we can add to this value to those shopping centers. And if you take a look at the Palm Beach example, since we've been leasing Palm Beach, we've done over 25,000 square feet of transactions, and we've also taken some money out of the expense P&L just to manage the properties far more efficiently. I think those -- that narrative is playing out a lot of our discussions and our acquisitions team has been considering a number of opportunities. Obviously, we're not going to talk about anything until it's a done deal, but we're very active in that space.

Thank you.

Thank you. Our next question is coming from Caitlin Burrows with Goldman Sachs. Please proceed with your questions.

Hi, everyone. Good morning. Maybe on lease maturities. The earnings release mentioned and you mentioned earlier how you have renewals executed or in process for 57% of the space set to expire this year, which is 10 percentage points ahead of last year, but it is still a little below 2018 and '19. So I was just wondering what's driving the year-over-year pickup in pace for 2023, but limiting it from getting to kind of historical levels and there is a large amount of maturities in 2024. So wondering if you can kind of get to those early or not.

Well, first of all, good morning. I have to say that we see renewals, and we see that 24% that you referenced in 2024, we see that as opportunity. We have eight quarters of continued increase in our own spreads. We think we've got pricing power. We've got the opportunity to drive additional rent. And so we get this space back, some of the negotiations are taking a little bit longer today than they might have taken in 2019 because we're holding out for rents and the results speak for themselves. We're getting our price.

Okay. And then just back to the press release from earlier this week that talked about the Shake Shack and Dave & Buster's out parcels. Could you talk about how those locations were selected for outparcel activity? And then to what extent you've gone through the portfolio to see how big the outparcel opportunity could be?

Well, without giving an actual number on how big the outparcel opportunity could be, we think it's pretty robust. It's -- as if we've got this portfolio of land in over 50% of our properties that will give us an opportunity to monetize over time. We also made the acquisition of the 7.5 acres in Glendale adjacent to our Arizona Shopping Center, which I talked about earlier, we hosted the NFL tailgate party on Super Bowl GameDay. That right now is under renovation to add all the relevant infrastructure to add a number of path on that space. So we find that -- the retailers are seeing our shopping centers sort of the center of the energy and the communities that we serve, and they want to have access to our shoppers. The flip side of that, particularly with the Shake Shack, yes, our shopping center will really enjoy the benefit of the customer, the Shake Shack draws. So it's a great symbiotic relationship between us and our retailers. And we've got a team that is just focused on driving peripheral land growth and monetizing the external piece of our portfolio.

Thanks.

Thank you. Our next question is coming from [indiscernible] with Bank of America. Please proceed with your question.

Hi, good morning. I was hoping if you could provide just a bit more color on the cadence of your $50 million to $60 million CapEx guide throughout the balance of the year, already realizing $8 million in the first quarter, what will the remainder of this earmark primarily come from -- whether that be second-gen tenant allowances or capital improvement and what do you anticipate as a more normal pace of CapEx going forward?

Thanks, Lise [ph]. This is Doug. I would say that more of that $50 million to $60 million is going to come from our renovations and maintenance CapEx than the leasing side. As you know, we primarily only offer tenant allowance on the re-tenanting piece, and we've been heavier recently on renewals. And with our occupancy levels where they're at, we expect the renewals will drive the bulk of the leasing. In terms of the renovations, there's a few specific projects at certain centers and timing of that and move around a little bit, but I'd say it's going to be fairly well-distributed throughout the rest of the year.

Okay. Great. Thanks. And I was hoping you guys could give an update on Rue21, which I know Justin really sort of communicated a couple of quarters ago about being optimistic about their turnaround. Are there any new thoughts on them potentially restructuring and -- is there anything assumed in the guide for 2023 regarding them?

Yes, Lise. So as we all know, they recently hired a restructuring firm to assist with seeking the deferral only. And what I'll say about our relationship with Rue21 is that it's strong. They're current on all of our rents. We feel that we're well-positioned to address the situation as needed, and they operate at a very healthy occupancy in our portfolio. So we believe that this is an isolated situation specifically to this tenant.

And Lise, we maintain appropriate levels of bad debt within our guidance to account for any tenant issues.

Got it. Thank you. And if I could ask one more. Just wondering on the conversations your General Managers have had with Temp tenants lately on converting to perm. Are there any new signs of reluctance on their end to stay longer or convert to perm or if there's anything new to make note of there?

I don't think that there's anything to call out. I just think that there's been some good success. What's interesting is we've added a number of direct-to-consumer brands that are new to our platform and new to outlet. Outlet is a slightly different animal. It's -- you're not selling full price retail, you're selling your off-price goods. It's clearance channel. And a lot of these retailers, it will take them a couple of quarters to find their footing. We have a team in place as part of our marketing team that actually helps retailers understand our channel better, understand the geographies, where they're operating stores, understand the consumer profile and how that consumer shops. So we rely very heavily on the retailer and their branding to bring customers into their store. But we, as a team are quite supportive of our retailer partners as we like to call them, because many of these leases have a percentage rent component and their success is our shared success.

Thanks for the time.

Thank you. Our next question is coming from the line of Floris van Dijkum with Compass Point. Please proceed with your question.

Thanks. Good morning. Obviously, encouraging set of results here. A couple -- I guess, a couple of questions. Number one, if you can touch on your other revenue, and obviously, that grew on -- in your same-store pool a little bit, but what the prospects for that look like? I know that that's been a big push of your Steve. Maybe if you can give a little bit more color into that and where that could go over time. I'll start there and then come back with my follow-up.

Sure, good morning. Look, we talked earlier in the prepared remarks about a lot of the new digital initiatives that we're adding to our shopping centers. And I think that's an important component part. Look, we can -- you can add carts and you can add kiosks and you can charge all this additional rent. But at the end of the day, we want to make sure that the shopping experience is one that the shoppers actually enjoy. And we're trying to be real selective with regard to how we pursue that additional revenue stream. We've had a lot of success, I would say, in the last three or four quarters with national brands and for us, national brands are -- they're a lot easier to do business with because they look at our 36 shopping center portfolio, and they want to take over in each of those centers. So one deal to do 36 shopping centers of exposure are always great deals for us to make and far less clutter. So -- we continue to pursue these nationals capped only by our desire to keep our shopping centers a little less cluttered with external noise.

And then I guess my follow-up, obviously, sales are, I guess, up marginally sequentially, but they're down year-over-year, the tenant sales. But if I look at your portfolio, you've got a number of assets that are 100% leased. I mean, Deer Park, Sevierville obviously two of your premier assets, but also commerce, Branson, Gonzales, South Haven, your Hilton Head. I mean, how can you grow your sales and bring in higher -- maybe walk us through, how you plan to grow sales of the portfolio when a number of your assets are already essentially 100% leased? And how are you going to grow NOI in those assets as well?

Well, I would -- as far as after the mantra of leasing, leasing, leasing is the mantra of marketing, marketing, marketing. We've got a great machine over here. And the way we market to our shopping centers, performance-based marketing, we actually know what's working, what's not working. We accelerate the things that are working and we take our foot off the gas pedal on the things that are not working. What's important for us from a traffic driving point of view is knowing our customers doing a better job of communicating with that customer. So whether it's new technology, digital initiatives, interaction with them on the -- on our digital web -- our app or other digital initiatives that we have -- we're learning as much from the customers as the customers learning from us.

Sorry, have you -- we've talked about this in the past as well, and I've asked questions on this on previous calls, but we haven't heard any updates in terms of bringing higher productivity, luxury tenants to your outlets. I know Simon has been doing that to its outlets. And I guess it's just starting, but can you give us any more updates on your discussions and progress on that front? And how many of your assets you think are suitable for that kind of tenants?

I think a lot of that has to do with the retailer's choice. Look, you take a look at our asset base, and we want to build the shopping centers with the retailers that we think are going to be the most successful in our geographies and although we have a handful of geographies that I think that we can continue to push the tenancy, we are pushing that tenancy. You also know that Nashville, which we'll open in the next couple of months. We haven't announced a lot of the retailers there. So I think you'll be pretty surprised when you see the roster of tenants that are coming to join us in Nashville. But a push for us, we lean a little bit more heavily into the digital initiatives right now because a lot of those are household names and the communities that we serve. And again, we're a community-driven organization that's looking to bring the best possible brands to serve the communities where our shopping centers reside. And we want to give our retailers the best chance for success in those markets as well. So as important as luxury is as a component part and the handful of shopping centers that we have that -- have luxury retailers in them, we'll continue to lease around that, but we're going to be extremely laser-focused on make sure -- making sure that we merchandise our shopping centers for the consumers that are shopping in those shopping centers so they can have the best shopping experience when they're there and the retailers can be as successful as they can be.

Thanks, Steve.

Thank you. The next question is coming from Craig Mailman with Citigroup. Please proceed with your question.

Hi, good morning. I got Joseph in the line with me, also. I'm just kind of curious, there's been some talk on the outparcels on this call. Just as you guys are getting done with Nashville, you have a little bit more capacity, a little bit more capital. Kind of how should we think about spending on this initiative on an annual basis going forward and your thoughts on kind of returns here and also sources of your funds?

Well, let's start with the returns. We just had a deal committee a couple of weeks ago and -- the returns on the outparcel leasing are pretty astronomical. We're in at a very low basis. We've owned that real estate for quite some time. The capital improvement dollars that's required in order to bring that space up to a leasable condition is relatively nominal with -- and if you take a look at the rents that we're getting, we're looking at high teens and low 20% return on some of those investments.

Okay. And then how should we think about kind of dollar volume here as you guys identify candidates and then also maybe a mix or targeted mix? Or how you guys think it could play out from a kind of ground lease opportunity where you're not necessarily putting out the capital to opportunities where you're kind of funding most of the construction?

Yes. Look, the only sort of concrete point that I can give you is that we're not sellers. We're leasers. And when you do an outparcel deal, whether it's we provide the capital in order to build it or we just ground lease the land and allow the customer to do the construction. We basically are focused on return. And that whole deal is really a return-oriented deal, and we consider the credit worthiness of the retailer that we're doing business with. So there's a number of outparcel deals that we've done, Dave & Buster's, we talk about a lot, Shake Shack, we talk about a lot, where we've made deals that are good deals for our customers, but also really good deals for us.

Thanks. It's Nick here with Craig. Michael, just on the balance sheet, you've dealt with, I guess, a third of the interest rate swaps that are expiring thus far. How are you thinking about execution on the remainder or kind of running with a bit more floating rate debt?

Good morning, Nick. So we've effectively fixed $100 million of anticipated floating rate debt exposure for an additional 2.2 years, which would take us to the Spring of 2026. And as you're pointed out, we have $200 million of effective floating rate debt that will come next February. And we're going to continue to look at opportunities over the next several quarters to potentially fix more of that debt or we can leave some of it floating and let that go to floating rate. And I think if you just step back from it for a second, we talked about our current cash capacity of $242 million and we've anticipated spend between Nashville and the FAD capital of about $130 million. So we sort of end the year before we even take into account the significant free cash flow generation after we pay our dividends with cash almost equivalent to our current floating rate debt. And so as we think about as we move into 2024, having some level, and I think if you look at your 100 comp sheet, the average REITs out there have about 20% floating rate debt. And so we're mindful of our balance sheet strategy of having some floating, but also providing reliable earnings and fixing additional amount as we go forward.

Thank you very much.

Thank you. [Operator Instructions] Our next question is coming from the line of Mike Mueller with JPMorgan. Please proceed with your question.

Yes, hi. Just a couple of quick tweaks on a couple of prior questions. First, is there any meaningful CapEx that goes into temp tenants? Or is it just that happens once you convert them to permanent and then the second question is on the development. Is there anything in the works where we could possibly see here about another start in the next year or two?

Unfortunately, nothing to talk about right now. We don't like to talk about things that we're working on until they're inked ready to go. And then with regard to temp tenants, there's really no capital involved in the temp tenant deal. They're short-term leases, with mutual rights of terminations of 30 days.

Got it, okay. Thank you.

Thank you. Our next question is coming from Samir Khanal with Evercore ISI. Please proceed with your questions.

Hey, Michael, I guess a question for you. What's been sort of the biggest misconception here you think? What's been misunderstood by the analyst or investor community about Tanger or Outlets in general now that you sort of have time to look under the hood. Just trying to get view from you on that. What are you seeing that's the base misconception here?

I mentioned it quickly last quarter, where I talked about perception versus reality of our assets, where they are, how they perform and how much the retailer community values us and how much the consumers value us. And I felt that there was a little bit of a disconnect on the investment community side in terms of that quality of our asset base and the growth opportunities that we have in front of us. And I feel like -- we're getting more out there as we tour investors and analysts through our assets as people spend the time really understanding how strong the platform is from a leasing, marketing and operations perspective and I think a better appreciation now for our balance sheet, which at 5x debt-to-EBITDA which also is a little bit elevated because we spent money on Nashville without the commensurate EBITDA yet. But having that cash capacity on the balance sheet to us is a really distinguishing factor relative to another company that would have to go out and raise new capital to execute their external growth. And that external growth, we don't want to be a buy-and-hold company. We want to be a buy and add value. And that really takes into account the operating platform that we have. And that to me, at the end is really what's differentiated is how operationally intensive this company is and our asset base with very small suites and a significant amount of velocity. And so overall, we're excited to continue to show to the Street our team, our assets and our platform.

Thank you, Michael.

Thank you. We have reached the end of our question-and-answer session. So I would like to turn the floor back over to Mr. Tanger for any additional closing remarks.

Thank you very much, everybody, for participating today. Samir, I might want to add to what Michael Bilerman said, I believe the biggest misperception is that we are open-air shopping centers. Our platform is not in closed malls and we may be considered by the analyst community in the wrong neighborhood. We should be listed and compared to the other open-air shopping center group. So we will see you and the rest of the analyst community at various different events that we have planned in the next couple of months and look forward to showing you our properties and exactly how and why we believe that they are open air centers. I wish you a great day, and good luck. Goodbye.