Good morning. This is Cyndi Holt, Vice President and Investor Relations, and I would like to welcome you to the Tanger Factory Outlet Centers’ Year End and Fourth Quarter 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 page, investors.tangeroutlet.com. Please note that during this 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 the company’s filings with the Securities and Exchange Commission for a detailed discussion of the 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, and adjusted funds from operations or AFFO.

Reconciliation 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, February 10, 2016. At this time, all participants are in listen-only mode. Following management’s prepared comments, the call will be opened for your questions.

We ask 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 Steve Tanger.

Please go ahead Steve..

Thank you, Cyndi. Good morning, everyone. Outlets are a unique retail experience, unlike shopping off-price retailers, the clearance racks at department stores or any online format. Loyal shoppers enjoy the social experience of shopping Tanger Outlets with friends and family more than 185 million times each year.

In fact, traffic in our outlet centers was up about 2% during each of the last two months of 2015. Whether millennials, moms, fashionistas or savers, Tanger Outlet shoppers know they can get a great deal every day with 80 to 90 brand and designer name stores to choose from, each featuring a full product array.

No other retailer venue provides this combination of social experience, branded merchandise variety, and consistent value. Our popularity with shoppers, combined with the profitability of outlet stores, continues to generate retail demand for space in Tanger Outlet Centers.

In fact, our leasing team is currently in discussions with a prospect list of about 80 e-tailers that are currently either not yet in the outlet channel or just beginning to establish an outlet industry presence.

These dual forces of demand created another record year for Tanger in 2015, characterized by the delivery of four new outlet centers, the strengthening of our core portfolio through the sale of several non-core assets and growth of AFFO per share by 12.7%, which exceeds the growth achieved by any of the other high-quality mall REITs that have reported earnings to-date.

I’ll now turn the call over to Frank, who will take you through our financial results and a brief overview of our recent asset sales and financing activities. I’ll then follow up with a discussion of our operating performance, our external growth opportunities, and our outlook for 2016..

Thank you, Steve, and good morning, everyone. As Steve mentioned, 2015 AFFO per share increased 12.7% to $2.22 per share or $221.4 million from $1.97 per share or $194.9 million for 2014. 2015 AFFO per share was $0.02 per share above First Call consensus and represents three-year cumulative growth of 35% or a compounded annual growth rate of 13%.

For the fourth quarter of 2015, AFFO per share increased 9.4% to $0.58 per share or $58.1 million, compared to $0.53 per share, or $52.9 million for the fourth quarter 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% as of December 31, 2015. And we continue to maintain a strong interest coverage ratio of 4.5 times for 2015. As of December 31, there was $329.7 million of available capacity under our unsecured lines of credit and approximately 84% of our consolidated square footage was unencumbered by mortgages.

The next significant debt maturity on our balance sheet is in February of 2019. We have paid a cash dividend for 90 consecutive quarters and have raised our dividend each of the 22 years since becoming a public company in May of 1993.

On December 10 of 2015, our Board of Directors approved a special dividend of $0.21 per share, which was paid on January 15, 2016 to holders of record on December 31, 2015.

Together, this special dividend and the regular quarterly common dividends paid in 2015, represent a 38% increase over the dividends we’ve paid in 2014 and a three-year cumulative growth of 57%, or a 16.3% compound annual growth rate. Our dividend is well covered with an expected FFO payout ratio for 2016 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 reinvest in our business by upgrading our properties and funding most of our development needs. January 2016 is off to an exciting start.

On January 12, we completed the sale of a small non-core outlet center in Fort Myers, Florida, near Sanibel Island. The $26 million transaction represented a capitalization rate of approximately 7% for this bottom-tier asset.

We then executed a strategy for the use of proceeds from the sales – asset sales we completed in late 2015 that was not only tax efficient, but also expanded our unencumbered asset pool to 91% of our consolidated square footage, reduced our total leverage and our exposure of floating rate debt by $108.7 million and reduced our debt-to-total market capitalization ratio by 155 basis points.

We did so by repaying the $150 million floating rate mortgage loan secured by the Deer Park, New York property, and repaying a $28.4 million deferred financing obligation owed to our former partner, increasing our legal ownership interest to 100%.

The transactions were funded with a portion of the proceeds from the asset sales, and borrowings under our unsecured lines of credit. Immediately following the unencumbereds of the Deer Park asset, approximately $16.8 million of the 2015 asset sales proceeds remain in restricted cash.

We intend to invest these proceeds in qualified replacement property, including our wholly-owned new outlet center development project in Daytona Beach, Florida, currently under construction.

However, any proceeds we’re unable to reinvest using this strategy maybe used for the payment of an additional special dividend if required, with any residual proceeds utilized to pay down debt.

Last week, two publications highlighted the benefits of prudent balance sheet management, and as heard on the beach report, Mike Kirby of Green Street Advisors discussed the out performance of REITs with low leverage during the global financial crisis of 2007 to 2009.

He noted, however, that in today’s unsettling economic environment, the market is clearly not differentiating good balance sheets from bad once.

A study released by the real estate department of Penn’s Wharton School concluded that, historically REITs with low leverage at the beginning of a financial crisis generally generate higher returns during a financial crisis and REITs with higher leverage.

This type of conservatism mindset served Tanger well throughout 35 years of economic peaks and valleys. Maintaining a fortress balance sheet and investment grade credit is now our way of life. A natural stewardship has become a hallmark of Tanger Outlets that we do not intend to change. I’ll now turn the call back over to Steve..

Thank you, Frank. Since 2014, including both the consolidated and unconsolidated portfolio properties, we have sold eight properties totaling 1,300,000 square feet with an average age of 22 years and have added five brand new centers totaling 1,800,000 square feet.

While eliminating the properties recently sold from our portfolio does not have a significant impact on our current operating metrics, we believe these transactions improved our overall portfolio quality top to bottom, and strengthened our long-term internal growth profile.

We actively manage our assets and we’ll continue to prune the portfolio opportunistically over time to prudently allocate capital. However, we are not currently marketing any additional properties for sale and in our guidance does not include the sale of any additional assets.

Excluding all of the recently sold properties, 2015 same center net operating income which excludes lease termination fees, increased 3.5% on top of a 2.6% increase in 2014.

Same center net operating income increased 2.1% during the quarter, extending our streak to 44 consecutive quarters of same center net operating income growth, dating back to the first quarter of 2005 when we first began tracking this metric.

In addition, total 2015 property level net operating income, including the NOI generated by all of our consolidated properties and our share of the NOI for all of our unconsolidated joint ventures, increased 7.6% in 2015 compared to 2014, despite the dilution related to asset sales that closed in December 2014, September 2015, and in October 2015.

Blended base rental rates increased 22.4% during 2015, on top of a 23% increase for 2014. Lease renewals during 2015 accounted for 1,282,000 square feet or about 84% of the space coming up for renewal and generated a 19.7% average increase base rental rates.

Re-tenanting activity accounted for additional 444,000 square feet of leases executed during 2015. This space was released at an average increase in base rental rates of 29.4%. Keep in mind, that most of our consolidated portfolio leasing activity typically happens earlier in the year.

Later quarters, when only a small portion of the annual leasing activity takes place, may not be representative of our ongoing leasing performance because the mix of leases can easily skew rent spreads when the base activity for a given quarter is small.

For instance, the fourth quarter of 2015 only included about 12% of the total square feet renewed during 2015 and only five leases were re-tenanted. When analyzing rent spread trends, we recommend you always focus on year-to-date activity.

Also, we agreed to limit the renewal term for about half of the 36 leases renewed during the fourth quarter in order to maintain high occupancy and to have an opportunity to selectively re-merchandise the space and/or raise the rents during a more normalized year.

And during the fourth quarter, in keeping with our ongoing practice of strategically re-merchandise – strategically re-merchandising our centers, we executed leases to bring two upscale tenants to our Riverhead, New York center.

While the initial rents represent a negative spread compared to the former tenants, we believe these tenants will increase shopper tenant and create additional retailer demand. Our early 2016 leasing activity supports this thesis that retailer demand for space in Tanger Outlet Centers remains healthy.

As of January 31, 2016, we had executed leases or leases in process for 59% of the space expiring in 2016, which exceeds our renewal progress for 2015 expirations at the same time last year of 55%.

Furthermore, 2016 lease executions for space renewed and released within the consolidated portfolio through the end of January, resulted in an average increase of base rental rates of 22.4%, in line with our reported 2015 full year increase.

For the 132 leases totaling 621,000 square feet that we renewed in January, average base rental rates increased 19.8%. For the 33 leases totaling 95,000 square feet, re-tenanted in January, average base rental rates increased 37.9%.

While we have increased our occupancy cost ratio to 10% cumulatively over the past five years, our leases are still below market rents on an average.

While the lowest average tenant occupancy cost ratio among the high-quality REITs at just 9.3% for our consolidated portfolio in 2015, we have been successful at raising rents while maintaining a very profitable distribution channel for our tenant partners.

For the trailing 12 months ended December 31, 2015, average tenant sales within our consolidated portfolio were $395 per square foot, flat compared to the 12 months ended December 31, 2014.

Following the sale of the Barstow, California asset in October 2015, we believe our portfolio’s exposure to European and Asian tourists is minimal when compared to our peers. Some of our Southern, Southeastern centers have been mildly impacted by fewer Canadian snowbirds traveling south during the winter as a result of the strong U.S.

dollar and our center in San Marcos, Texas has recently attracted fewer Mexican nationals. 2015 was also characterized by a marked shift in consumption of durable goods. This shift has negatively impacted sales of soft goods throughout all distribution channels.

Real estate is a cyclical business and we have no reason to believe that this shift is anything other than cyclical. Headlines this earnings season have expressed concern over various brand name retailers. Retail is a competitive business.

Ebbs and flows in brand performance are simply the nature of the business and to be part of the cycle where consumers are allocating less of the wallet to soft goods, they simply are not going to buy apparel from a brand unless this product line resonance. That’s said, our tenant partners continue to perform at a relatively high-level.

And our occupancy increased 30 basis points during the quarter to 97.5% from 97.2% at the end of the third quarter. This marks our 35th consecutive year end with occupancy greater than 95%. Again this quarter, our occupancy is higher than any other high-quality mall REIT that has reported to-date.

Occupancy was down 50 basis points compared to the end of 2014, primarily as a result of approximately 200,000 square feet, we captured during 2015 and the second half of 2014, and as a result of tenant bankruptcies and brand-wide closings.

The majority of the space, about almost 80% has been leased to new tenants or we are currently negotiating with new prospective tenants to take over the space, with much of the remaining space is occupied by temporary tenants that we continue our – as we continue our re-merchandising efforts.

The average base rental rates for these leases executed to-date, increased 23.8% on a cash basis and 41.1% on a straight line basis, compared to the previous tenant. The average downtime for the space executed has averaged about 180 days.

Tenant demand for outlet space coupled with our reputation with retailers and having a quality portfolio of outlet centers and a refined skill set for developing, leasing, operating and marketing them, has afforded us a robust external growth pipeline.

We delivered four new Tanger Outlet Centers in 2015, totaling 1.4 million square feet, which represents a 10% increase in our footprint at the beginning of the year.

These new centers are located in Savannah, Georgia; Foxwoods Resort Casino in Mashantucket, Connecticut; Grand Rapids, Michigan; and Southaven, Mississippi; and Memphis, Tennessee market. We expect these new centers to generate a weighted average stabilized return of 10.1%.

All were at least 95% occupied at year end and continue to generate positive feedback from both shoppers and retailers. The total project costs for these four new developments was about $386.1 million. Substantially, all of our $153.1 million required equity contribution has been funded as of December 31, 2015.

We believe these developments extend our proven track record of creating high-quality outlet centers at yields well above our cost of capital and should create significant long-term shareholder value. For 2016, we expect to deliver two new centers, both of which are already under construction.

In Columbus, Ohio, the new 355,000 square foot center is really starting to take shape as the June expected opening date draws near. In Daytona Beach, Florida, construction is well underway with the first walls of the new 352,000 square foot center already being erected.

We are planning to open this new center just in time for the holiday shopping season. Work is ongoing on a number of pre-development stage sites in our shadow pipeline, which we plan to announce upon successful completion of our underwriting process.

We are also planning an increase in capital expenditures of approximately $25 million during 2016 to complete major renovations of our highly productive top-tier centers located in Riverhead, New York and Rehoboth Beach, Delaware.

You may recall that in 2014 we renovated one phase of each of these properties to improve the customer experience and appeal to the most sought after tenants. Features include a dramatic exterior new signage, efficient LED lighting retrofit in our flagship asset in Riverhead.

Shopper friendly features like a fire pit fountain, soft seating areas, mobile device charging stations and an iPad equipped tech lounge. In the 2016 projects, we’ll upgrade the remaining phases of these projects to completely renovate these productive assets and provide shoppers a consistently upscale experience throughout these properties.

We are pleased to introduce our 2016 FFO guidance at $2.29 to $2.35 per share, which represents growth of 3.2% to 5.9% over 2015 AFFO per share, despite the $0.08 net dilutive impact of recent asset sales. Excluding this dilutive impact, our guidance represents growth of 6.8% to 9.5%.

We currently expect our 2016 estimated diluted net income to be between $1.07 and $1.13 per share. Our estimates are based on full year same center net operating income growth of 3% to 3.5% and assumed tenant sales remain stable.

Our estimates are based on average quarterly general and administrative expenses of approximately $11.4 million to $11.9 million. And average projected management leasing, and other services income of approximately $1 million per quarter.

Our floating rate assumptions are based on the forward LIBOR curve with a gradual increase during the year, resulting in a projected average 30-day LIBOR rate of 0.685% for 2016. Our estimates assume the Canadian dollar to U.S. dollar exchange rate will average 73% for 2016.

The company’s guidance is based on approximately $100.1 million weighted average diluted common shares for 2016. Our forecast does not include the impact of any termination rents, any additional refinancing transactions, any property acquisitions or the sale of any out parcels of land or any additional outlet centers.

We remain optimistic about the growth prospects for our company and our industry, as shoppers continue to seek Tanger’s unique shopping experience and a wide array of brand name merchandise direct from the 80 to 90 manufacturers that operate stores in each Tanger Outlet Center.

The tenant community continues to indicate its desire to expand into new markets with Tanger as a preferred partner. The resiliency of the outlet channel has been proven over the past 35 years through many economic cycles.

We have more than 3,000 long-term leases with good credit, brand name, and designer name tenants that have historically provided a continuous and predictable cash flow in good times and challenging times. No single tenant accounts for more than 6% of our base and percentage rental revenue, or 7.5% 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 take any questions. Operator, we’re ready..

[Operator Instructions] Your first question comes from Christy McElroy with Citi. Please proceed with your question. Christy McElroy, your line is open..

Hello?.

Yes, your line is open..

Thank you. Just if I think about that remaining bankruptcy safe yet to be leased. The 20% that you mentioned is occupied by temp tenants currently.

Am I correct in assuming that, that temp occupancy is not reflected in the reported occupancy rate, the 97.5%? And as we think about the economic impact of the remaining lease-up as you convert that space from temp to perm, how much NOI are you currently receiving from those temp centers?.

Well, the temp space is reflected in our occupancy at year end, as it always has been. And the NOI on the temp space is not a significant number. We are in negotiations to convert the temp to permanent, but we’re not going to give space away. Our space, to quote one of our peers, our space is not on sale.

And we would prefer to keep a temp in the space until we can find the right tenant that will generate significant volume and add to the tenant mix as opposed to just putting somebody in..

Okay. And then, Steve, you mentioned that e-tailers are looking to establish an outlet presence.

Are you in discussions with many of these – space in your centers and maybe you can give us specific examples of retailers that are thinking of making outlets a meaningful part of their distribution?.

Just don’t mention Amazon bookstores..

We have a prospect list of 80 to 90 e-tailers that we are in various stages of discussion with. We have no e-tailer in our existing portfolio, and we don’t have any leases out for negotiation, but we are in constant discussion with them. Keep in mind, we’re 97.5% occupied.

So this is just another group of perspective tenants that may or may not come into our centers, in the future. There’s been a lot of publicity about various e-tailers going into the malls and strip centers.

Historically, when this happens, and it happens with the catalog retailers 20 ago, as they start to develop a retail presence eventually, historically they’ve opened outlet stores in the second phase. We have no reason to doubt that will happen again. But, currently we are – we do not expect short-term to have any e-tailers open in the portfolio..

Thank you..

Your next question comes from the line of Jeremy Metz with UBS. Please proceed with your question..

Hey, Steve, it’s Ross Nussbaum here with Jeremy. Two questions for you. The first is, your largest tenant, Gap, has been struggling a bit lately with some poor same-store sales.

I guess the question is, can you give us a sense of what you think is going to be happening in your portfolio with respect to that tenant as their leases expire and are there any material lease expirations with Gap in 2016 and 2017?.

Hi, Ross. We’ve done business with the Gap for over 20 years. We have confidence in the skill set of the management team there. The Gap includes three powerful brands, as you know, Banana Republic, Gap, and Old Navy. We have outlet stores for each of the concepts.

Gap continues and we’re very happy to say continues to go into our new development properties and perform well.

We have a great experience with the Gap in renewing existing leases and we think that this short-term, is just our opinion, but we think that the short-term issues with the Gap comp sales historically have been turned around and we have no reason to doubt that the management team in place will turn around the comp and get the merchandise correct.

But it has not affected our occupancy with the Gap and the Gap concepts..

Okay. The second question is around FX and I guess it’s a two-part question. If I heard you correctly, you are modeling a Canadian to U.S. dollar exchange rate that is essentially assuming it remains flat from where currently is. I just want to make sure I heard that right.

And then the second part is, can you quantify on a year-over-year basis, what the negative impact to your same-store NOI growth or FFO was in the fourth quarter from the massive strength in the dollar?.

With respect to – Steve, if you don’t mind I will try to tackle that one. First, the RioCan properties are unconsolidated JVs and don’t go into our same center number.

However, if you look on our supplement, on page 15, you will see the – our share of the NOI that comes properties, then obviously those are adjusted for the exchange rate, for those U.S. dollars. So you can take that number at kind of back in to what the exchange rate shift would have done..

And on the assumption for FX? Am I correct – did I hear you correctly that you’re assuming it stays stable as to where it is now?.

There will be some fluctuation up and down. But on average we believe it will stay at around 74%..

Got you..

Your next question comes from Craig Schmidt with Bank of America. Please go ahead..

Hi, good morning. I wondered if you could talk about Atlantic City. I noticed that the occupancy dropped to 91%.

Maybe you could just tell us what you’re doing at that asset and what’s your long-term prospects there?.

Hi, Craig, we had a couple of tenants of major 40/40 Club which was kind of a restaurant nightclub terminate the lease and we are in discussions with a high-volume tenant to go in there and I hope to have that lease signed shortly. So we have a high-degree of confidence in Atlantic City.

It functions as a regional mall as opposed to basically dependent on only tourism. It has a large region in Southern New Jersey which we serve as the outlet center. So we hope in the next quarter or two to have that occupancy go back up as we execute the lease and put the tenant in place..

Okay, great. And maybe if you could do the same for Ocean City, Maryland, I see their occupancies at 79%..

In Ocean City, through the A&P bankruptcy, we lost the Super Fresh grocery store which by the way is only one of the few grocery stores we have in our entire portfolio. That store vacated and we are talking to two or three high-volume, major brand name tenants to go into the space at much higher per square foot volume and much higher rents.

So we are in the process of re-merchandising that space and we’re happy to get it back..

Do you think you will get occupied by the end of the year – leased?.

Historically, it takes about 180 days to re-tenant space. So, yes, our expectation is that this space will be reoccupied, split between three tenants and reoccupied by the end of the year..

Okay. Thank you..

Your next question comes from Samir Khanal with Evercore ISI. Please go ahead..

HI, good morning, Steve.

Your same store growth for 2016, I mean, the 3% to 3.5%, I’m just trying to – wonder, I mean, what are you anticipating kind of in terms of store closing? What’s baked in that number? I mean, just trying to get a sense as to what’s kind of driving the deceleration here in the same store NOI growth kind of 3.5% to 4% in 2015 to kind of 3% to 3.5% in 2016?.

Well, we ended 2015 at 3.5%, which we’ve guided 3.5% – 3% to 3.5% at the upper end of the range for 2016. So it’s not a slow down. And we really don’t know which stores we’re going to get back. It’s the middle of February and so far we’ve been fortunate not to have a lot of bankruptcies.

So this is based on our lease-by-lease analysis and our zero budgeting process for the year. But at this stage, it’s our best guess as any of the budgeting number.

So, and it’s – it pretty much in line with our historical performance over the past 10 years, so we will, as the quarters go by, continue to update that, and as I highlighted the leasing activity was terrific for 2016, well above 2015 as of the end of January. So we’re optimistic, cautiously optimistic going into the year..

Okay, thanks..

Your next question comes from Todd Thomas with KeyBanc Capital Markets. Please go ahead..

Hi, good morning. Just back to the renewal spreads in particular, so about half of the leases signed in the quarter were completed on a limited basis, I think you noted.

Was this one retailer or multiple retailers that you provided some relief to? On the half of the leases that were renewed on this basis, are you able to share what the magnitude of the rent reduction was?.

Todd, we don’t talk about specific leases, the sample size as I mentioned is extremely small. I think you’re talking about five leases. And we are very happy to re-tenant with a major world class designer in Riverhead by the name of Georgia, Armani and Armani AX, we install both of those, one in each phase.

And in order to attract that major designer, we accepted a reduction from the previous tenant’s rent, but we feel the upgrading the co-tenancy over time will add to other leases coming in at market or above range. So, it was a strategic decision to upgrade the co-tenancy and candidly, we’re proud we did it..

So, I mean, it sounds like leasing in January has improved. I guess you’re not expecting renewal spreads to remain weak throughout the year ahead.

I mean, you’re not expecting any additional rent relief requests throughout the year here?.

Well, we’ve guided as – you have our guidance with regard to leasing for the year. The performance through the end of January with 2016 renewals is ahead of last year, which we’re happy with obviously. I think the Q4 was an anomaly. It would – I don’t, I think it would be a mistake to extend a very small sample size in Q4 looking forward.

And that’s why we gave the – the performance through the end of January on the release and the releasing spreads are still great. And we have no reason to expect the Q4 sample to extend into 2016..

Okay.

And then, I’m not sure if I missed it, but what was the average occupancy cost ratio for the portfolio at the end of 2015?.

Right now we’re at about 10.3% – 9.3%. Pardon me, Frank.

Did I get it wrong?.

9.3% is correct..

9.3%. And as we’ve told our investors, new leases we target and new development we target 10% to 11% cost of occupancy. We have been successful while growing our portfolio with our tenant partners. It’s still a very profitable distribution channel.

And over time we’ve been able to raise our occupancy costs, but at 9.3% it’s still substantially below our peers, in some cases 300 basis points to 400 basis points below our peers. So, we still feel there’s a long runway to grow. We are still in the process of marketing our portfolio to market as leases renewed. So we’re optimistic going forward..

Okay. Thank you..

Your next question comes from Caitlin Burrows with Goldman Sachs. Please go ahead..

Hi good morning. It seems like one concern of the market might be your sales. Like you mentioned, your 2014 sales per-square-foot number was $393 and now you’ve sold a number of your secondary assets and are at $395.

I was just wondering when you look out for 2016, do you foresee progress on that metric, particularly as your JVs come online?.

We do, we’re optimistic as you know we sold some of our lower tier assets. The assets that we have left, we feel have got greater growth potential, both in NOI and in sales plus this is not include any of the new assets we brought online in 2015 that in some instances we’re performing significantly above our portfolio average.

So as those come online I think the sales numbers will increase also. We’re very excited about the four new assets that we added. And I might just reiterate, we added 10% to our portfolio in one year through internal development at a 10.1% yield, which is significant. So, yes we are optimistic about sales.

Yes, I think that the FX headwinds, the tourism, the shift from durable to non-durable will go back into our favor. And hopefully our tenant partners will have compelling merchandising so that our consumers will buy more product..

And then, also, it seems like $400 a square foot might be some sort of psychological threshold.

Do you think you might be able to get there by the end of this year?.

We don’t guide on sales per square foot, and I don’t have no reason to believe that $400 would be a psychological or any sort of guide post. And we just report what the sales are from our tenants. So we’re optimistic, the initial trends look good and we’ll just report accurate information as time goes on..

Okay, thank you..

Your next question comes from Michael Mueller with JPMorgan. Please go ahead..

Yes, hi, thanks.

So, in terms of thinking about tenant demand, I mean, do you notice any difference in demand coming from tenants when you are building a center that’s a more touristy, say like a Daytona or Foxwoods, compared to a center on one side of a belt way around a major city or something?.

We try to keep a balanced portfolio, tourism and market driven. And we really have not seen a significant difference in occupancy and that’s why we mentioned the 1,400,000 square feet that we delivered in 2015, I think the average of the occupancy – average occupancy for the four assets in the first year was 95%.

So, that includes market – close to market centers like Grand Rapids and Memphis, and tourism markets like Savannah and Foxwoods. So we keep a balance in our portfolio, and there’s no reason for us to believe that there’s any significant difference in traffic between the two..

Got it. Okay.

And then, I apologize if I missed this, but can you give some color on just the shadow pipeline beyond Columbus, beyond Daytona and just how it feels? Is it full?.

We still feel the outlet industry is relatively slow compared to regular retail. We feel there’s a long runway to grow domestically. We have guided back to our historical norm of one to two new centers a year. The two centers in 2016 are currently in under construction.

And we hopefully will be able to announce based on leasing and our underwriting criteria being met, centers for 2017. But we are not going to change our underwriting criteria. We have always managed the portfolio conservatively and we don’t build on speculation.

So when all of the permitting is non-appealable, and when we meet our leasing thresholds, and it meets our return on investment criteria, we’d be happy to buy land and start construction..

Got it. Okay. Thank you..

Your next question comes from Carol Kemple with Hilliard Lyons. Please go ahead..

Good morning. Your property operating expenses in the quarter were a little higher than what I thought in my – and the expense reimbursements were a little lower as a percent of property you are operating than I was expected.

Was there anything one-time in property operating expense?.

Excuse me. In November, we had a grand opening at our Southaven property near Memphis.

And we typically spend additional marketing fees for grand opening, so that may have bump that up slightly in the fourth quarter, as well as additional common area expenses for traffic control and security for these grand openings as we tend to back up the highway all the way to the interstate.

So, we spent quite a bit of additional money to ensure a successful grand opening, and we did have one in that quarter, and obviously, part of those expenses are not recovered..

Okay..

Particularly in the advertising portion..

Okay. Thank you..

Your next question comes from Floris van Dijkum with Boenning. Please go ahead..

Steve, a question for you on your expected growth in the outlets market as you look 10 years ahead. I know that’s a long runway, but you seem to be very positive about the outlook fundamentals. How big can this market get and are you concerned at all about retailers such as T.J.

Maxx and Ross and offering value products in other property types besides the traditional outlet?.

Well, there’s actually two questions. First you’re right, a 10-year window is a very long period of time, and I’d hate to speculate that far out. Our crystal ball is cloudy unfortunately, we have guided one to two new centers in year, this year and next year and I think that we will meet that.

I think the size of our industry relative to other retail, there are many markets that are underserved or not served by outlet centers and we are cautiously going around the country, working with our tenant partners to identify exciting sites where they will open stores.

So we’re optimistic about the growth certainly for the next one or two years and it would be inappropriate for me to look out 10 years. With regard to off-price retailers, you mentioned like T.J. Maxx and some of the other off-price retailers. T.J.

Maxx is highly sophisticated extremely successful off-price retailer with I believe about 2,500 stores around the country. They have grown over the past 10 to 15 years, well, we have grown over the past 10 to 15 years.

There is very little – there are very few markets where we compete with TJX, they are great merchants and but a different property type than ours. Our business model and the outlets were based upon brand and designer retailers selling direct to the consumer and cutting out the middleman. TJX is a middleman.

They carry some of the products but in a limited assortment. The outlets attract large groups of consumers. We had 185 million shopping visits last year, people looking for broad assortments in sizes and colors of their favorite designers. So T.J.

Maxx has been successful, and we been successful, but I have no reason to believe that their site location criteria is going to change dramatically affect – compete with us..

Thanks..

Your next question comes from Rich Moore with RBC Capital Markets. Please go ahead..

Hi, good morning guys. I’m curious if you are seeing, over this past year, any change in consumer habits, maybe with regard to length of stay or different kinds of stores becoming popular in a changed way.

Anything like that, Steve?.

What we’ve seen is the shift to durable products, cars, washing machines, buying new houses, major expenditures that happen every three or four or five years cyclically as opposed to non-durable, like buying a new sweater.

We’ve also seen weather patterns that are unusual, the warm weather during the holiday season, the fourth quarter makes it difficult to sell winter coats and winter sweaters when its 70 degrees at Christmas time in New York. So I think these are hopefully non-recurring. We believe the cycle, durable and non-durable is indeed a cycle.

And as people buy a new car, this year hopefully they will buy a new sweater. But these are macro types of events, we also think that the strong dollar – I don’t know if the dollar will remain strong during this year and next year. But it’s really never been stronger and it’s affected tourism. So, hopefully the tourism will come back..

Okay..

And our tenant partners are trying hard to provide compelling products that consumers want. There really is in the apparel business right now other than what they call athleisure, which are basically athletic clothes they wear during the day, there’s really no compelling fashion item that the consumers must have.

There’s no bell-bottom jeans versus straight leg jeans or khaki pants versus this or this type of dress versus that type of dress and that may change also. So 2015 I think was a year in transition. And candidly, we’re pretty excited about the prospects for 2016..

Okay, good. Thanks.

Do you know what percentage of the portfolio now has annual rent bumps in the leases?.

Frank, you want to take that?.

I don’t technically have an exact number. My guess would be around 50% to 60%..

Okay.

So that’s up from where it was historically, right, Frank?.

It probably was closer to 30 to 40 years ago and as leases renew we are getting rent bumps, annual rent bumps on the majority of those renewals..

Okay, great. Thank you, guys..

[Operator Instructions] And there are no further questions at this time. I will now turn the call back over to the presenters..

I want to thank you all for participating on the call today and your interest in Tanger Outlets. Frank, Jim, Tom, Cyndi and I are always available to answer any other questions you may have. We look forward to seeing many of you in the weeks to come at the upcoming conferences in New York and Florida. Take care and good bye..

Ladies and gentlemen this concludes today’s conference call. You may now disconnect..