Cyndi Holt - VP, Finance and CFO Steve Tanger - President and CEO Frank Marchisello Jr. - EVP and CFO.

Samir Khanal - Evercore ISI Tayo Okusanya - Jefferies Todd Thomas - KeyBanc Christy McElroy - Citigroup Jeremy Metz - UBS Rich Moore - RBC Capital Markets Michael Bilerman - Citigroup.

Presentation:.

Good morning. I am Cyndi Holt, Vice President, Investor Relations, and I would like to welcome you to the Tanger Factory Outlet Centers Second 2015 Conference Call. Yesterday, we issued our earnings release as well as our supplemental information package and our investor presentation.

This information is available on our Investor Relations Web site, investors.tangeroutlet.com. Please note that during this conference call, some of management's comments will be forward-looking statements. These forward-looking statements are subject to numerous risks and uncertainties and actual results could differ materially from those projected.

We direct you to the company's 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.

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, August 5, 2015. At this time, all participants are in listen-only mode. Following management's prepared remarks, the call will be opened for your questions.

We ask that you to limit your questions to two, so that all callers will have the opportunity to ask questions.

On the call today will be Steven Tanger, President and Chief Executive Officer; Frank Marchisello, Executive Vice President and Chief Financial Officer; Tom McDonough, Executive Vice President and Chief Operating Officer; and Jim Williams, Senior Vice President and Chief Accounting Officer. I will now turn the call over to Steven Tanger.

Please go ahead Steve..

Thank you, Cyndi, and good morning everyone. The second quarter of 2015 was an outstanding quarter for Tanger Outlets. For the quarter, adjusted funds from operation per share increased 14.9% to $0.54 per share, compared to $0.47 per share for the second quarter of 2014.

This growth exceeds all other mall REITs that have reported second quarter earnings to-date. In addition, same center net operating income increased 4.6% during the quarter.

Any of you, who are interested in updates on the two new Tanger Outlet Centers that have opened since our last call, and the two new Tanger Outlet Centers, that are currently under construction. First, let me turn the call over to Frank, who will take you through our financial results.

I will then follow-up with a discussion of our operating performance, our external growth opportunities, and our outlook for the balance of the year..

Thank you, Steve, and good morning everyone. As Steve mentioned, second quarter AFFO increased 14.9% to $0.54 per share from $0.47 per share for the second quarter of 2014. For the first half of 2015, AFFO per share increased 13% to $1.04 compared to $0.92 per share for the same period of 2014.

Our balance sheet strategy remains conservative, targeting minimal use of secured financing, and a manageable schedule of debt maturities. Our debt to total market capitalization ratio was 32%, and we also continue to maintain a strong interest coverage ratio for the quarter of 4.67 times.

As of June 30, 2015, there was $343.7 million of available capacity under our unsecured lines of credit, and approximately 85% of our consolidated square footage was unencumbered by mortgages.

The next significant debt maturity on our balance sheet is in October 2017, when our unsecured lines of credit mature, but which we can extend by one year at our auctions.

We have paid a cash dividend for 88 consecutive quarters, and have raised our dividend, each of the 22 years since becoming a public company in May 1993, resulting in our inclusion in the S&P High Yield Dividends Aristocrat Index.

Cumulatively, we have increased our annualized dividend by 35.7% over the last three years, the equivalent of a compound annual growth rate of 10.7%. Our dividend is well covered, with an expected FAD payout ratio for 2015 in the mid-50% range.

At these levels, we expect to generate more than $100 million in excess cash flow over our dividend, which we plan to continue to invest in our business, by upgrading our properties and funding most of the equity required to complete our current development pipeline.

In addition, we and our Board of Directors remain focused on maintaining a balanced capital allocation strategy. We continue to consider alternatives, including the possible use of internally generated cash flows to repurchase our common shares. I will now turn the call back over to Steve..

Thanks Frank. As I mentioned earlier, same center net operating income increased 4.6% during the quarter, exceeding last year's second quarter increase of 3.3%. on a year-to-date basis, same center net operating income increased 4.3% compared to 3.3% in the first half of 2014.

We were able to achieve this growth with occupancy of 96.8% as of June 30, 2015. Although this occupancy level exceeds that reported by each of the eight other mall REITs, it is slightly lower than is typical for Tanger, due largely to a disproportionate amount of store closings during the second half of 2014, and the first half of 2015.

This quarter's increase in the same center net operating income extends our streak to 42 consecutive quarters of same center net operating income growth, dating back to the first quarter 2005, when we first began fracking this metric.

One of the key drivers of this year's same center net operating income increase is the addition of high volume tenants in 2014, that are now comping, and as a result, are producing higher average rents. Other major driver of our same center net operating income growth, is leasing spreads.

I am pleased to report, that our leasing spreads continue to grow in the second quarter. Our blended base rental rates increased 25.8% during the first half of 2015, on top of a 24% increase for the first half of 2014.

We believe our ability to drive rents higher is a function of retailer demand for outlet space, and our leases being at the low market rents on average.

With the lowest average tenant occupancy cost ratio in the mall peer group at just 8.9% of our consolidated portfolio in 2014, we have been successful in raising rents, while maintaining a very profitable distribution channel for our tenant partners.

These renewals, during the first half of 2015 accounted for 1,059,000 square feet or about 68% of the space coming up for renewal during 2015, and generated a 22.9% average increase in base rental rates. Retenanting activity accounted for an additional 369,000 square feet of leases executed during the first half of 2015.

This space was released at an average increase base rental rate of 33%. After a soft April, tenant sales rebounded in May and June. For the trailing 12 months ended June 30, average tenant sales within our consolidated portfolio increased 2% to $391 per square foot.

Traffic into our centers continues to comp positively compared to 2014, up 1% from the second quarter, and 2% for the first half of 2015. Feedback from our tenant partners indicates that sales at any given week, month or quarter, have virtually no impact on their long term expansion plans, and their overall demand for space in our centers.

Tenants are telling us, that traffic is up, the number of transactions is growing, and it appears that the consumers are returning. This quarter's supplemental information, includes enhanced disclosure about the productivity of the assets in our consolidated portfolio from top to bottom.

All properties, open for at least 12 months were ranked, and grouped in tiers of five centers. Our five most productive assets generated average tenant sales of $542 per square foot for the trailing 12 months ended June 30, 2015. They were 97% occupied and are expected to contribute 25% of our 2015 net operating income.

In addition, 75% of our projected 2015 NOI is attributable to centers averaging $440 per square foot in tenant sales. We believe this data illustrates the strength of our portfolio and support a stronger valuation.

We expect to recapture a total of approximately 214,000 square feet by the end of 2015, related to bankruptcies and brand-wide store closing announcements. The retailers vacating this space, generated average tenant sales of only $231 per square foot.

As of June 30, we had executed leases with new tenants, representing approximately 45,000 square feet or 21% of the total space expected to recapture, at a 40% increase in average base rents. In addition, another 13,000 square feet or 6% of the total square foot expected to be recaptured, is committed with leases currently in negotiation.

Combination of our low cost of occupancy and more vacant space available to lease, provides us with what we consider to be a perfect opportunity to upgrade the tenant mix, increase average tenant sales within our portfolio over time, provide the consumer with an even better overall shopping experience, raised rents, and ultimately create incremental value for our shareholders.

As we are recapturing space from these bankrupt or underperforming tenants, demand for space in Tanger Outlet Centers is being generated by retailers such as rag and bone, TaylorMade, Alex and Ani, Mountain Warehouse, Yves Delorme, OROGOLD, Lululemon, Armani AAX and West Elm, just to name a few.

Tenant demand for outlet space, coupled with our reputation within the industry of having a high quality portfolio of outlet centers, and a refined skillset, for developing, leasing, operating and marketing them, has afforded us a robust external growth pipeline.

We are on track to deliver four new Tanger Outlet Centers in 2015, totaling 1,400,000 square feet, which will increase our total portfolio by 10%. After opening the Tanger Outlet Center at Savannah, Georgia, in April 2015, Tanger Outlet Centers and Foxwoods opened on May 21, at the Foxwoods Resort Casino, in Mashantucket, Connecticut.

The 312,000 square foot center, features about 80 brand name and designer outlet stores and is suspended above ground to join the resort's two casino floors, which along with Foxwoods other various on-site entertainment venues, attract millions of visitors each year. As of June 30, the center was 93% leased.

Last week on Friday, June 31, the newest Tanger Outlet Center opened in the Grand Rapids, Michigan market. 350,000 foot center, which also features about 80 brand and designer outlet stores, was 89% leased at the opening.

The shopping turnout for the opening was so strong, that we backed up the interstate and we had to utilize off-site overflowed parking lots to accommodate the high volume of shopper traffic. Construction is well underway in the Memphis, Tennessee market to complete the next new Tanger Outlet Center, which we plan to open in November of 2015.

The total project cost for these four new developments is about $388.7 million. As of June 30, our remaining equity contribution necessary to complete these projects, net of construction loan proceeds, was only about $49.4 million, which we plan to fund with internally generated cash flow.

We believe, these developments will extend our proven track record of creating high quality outlet centers that yields well above our cost of capital, and should create significant long term shareholder value.

In addition to the projects that we expect to open this year, we and our joint venture partner, Simon Property Group, commenced construction of a new Tanger Outlet Center in the Columbus, Ohio market on June 25. We currently expect to complete construction, in time to open the 355,000 square foot center during the second quarter of 2016.

We continue to work on a number of pre-development stage sites in our pipeline. They will be announced upon successful completion of our underwriting process. As I have mentioned on previous earnings calls, we plan to deliver one to two new centers in each of the next two to three years.

Based upon our success in the first half of 2015, we are raising our same center net operating income guidance for the year, to 3.5% to 4%, an increase of 50 basis points. In addition, we are increasing our annual FFO guidance for 2015 by $0.07 per share.

The components of this increase include, $0.02 per share related to stronger than expected operations and lease termination fees during the second quarter of 2015; $0.01 per share due to the elimination of dilution during the second quarter of 2015, related to the previously proposed sale of certain assets; $0.01 per share related to better projected operating results in the second half of 2015, compared to our previous forecast, and $0.03 per share to eliminate dilution during the second half of 2015, related to the previously proposed sale of assets.

We currently expect our 2015 estimated diluted net operating income to be between $1.21 and $1.27 per share, and our 2015 FFO to be between $2.16 and $2.22 per share.

Our guidance assumes, average general [indiscernible] to $12 million per quarter, and does not include the impact of any potential refinancing transactions, or the sale of any outparcels of land or outlet centers. We remain optimistic about the growth prospects for our company and for our industry.

As shoppers continue to seek brand names direct from the manufacturer. The tenant community continues to indicate its desire to expand into new markets, where Tanger is a preferred partner. The resiliency of the outlet channel has been proven over the past 34 years through many economic cycles.

We had nearly 3,000 long term leases with good credit, brand name tenants, that have historically provided a continuous and predictable cash flow in good times and in challenging times. No single tenant accounts for more than 4.8% of our base in percentage rental revenues, or 7.8% of our gross leasable area.

In addition, approximately 90% of our total revenues are expected to be derived from contractual base rents and tenant expense reimbursements. And now I'd be delighted to turn the call over to any questions..

[Operator Instructions]. Your first question comes from Samir Khanal with Evercore ISI. Your line is open..

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Your next question comes from Todd Thomas with KeyBanc Capital Markets. Your line is open..

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Your next question comes from Christy McElroy with Citi. Your line is open..

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Your next question comes from the line of Jeremy Metz with UBS. Your line is open..

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Your next question comes from Rich Moore with RBC Capital Markets. Your line is open..

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We have a question from Christy McElroy with Citi. Your line is open..

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There are no further questions at this time..

Thank you all for participating in our call today, and for your interest in Tanger Outlet Centers. We are very pleased with our second quarter results, and believe we are well positioned to continue the momentum in the second half of 2015. Frank and I are always available to answer any questions you may have.

Have a great day, and enjoy the rest of the summer..

This concludes today's conference call. You may now disconnect..