Good morning. This is Cyndi Holt, Vice President of Investor Relations. And I would like to welcome you to the Tanger Factory Outlet Centers' Third Quarter 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 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; adjusted funds from operations, or AFFO; same-center net operating income; and portfolio net operating income.

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, November 2, 2018. At this time, all participants are in listen-only mode. Following managements prepared comments; the call will be open 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, Chief Executive Officer; Jim Williams, Executive Vice President and Chief Financial Officer; and Tom McDonough, President and Chief Operating Officer. I will now turn the call over to Steve.

Please go ahead, Steve..

Good morning. Thank you for joining us today on our third quarter earnings call. We continue to execute on the strategic priorities that we have been focused on for a number of quarters.

These include, driving increased traffic to our centers, filling vacancies with new high-quality in-demand tenants and ultimately positioning Tanger for the long-term profitable growth.

We are pleased that our results from the third quarter were ahead of our expectations and reflect the rigorous efforts of our team along with the benefit of the timing of some operating expenses and the related recovery income.

Let me remind you that we typically experienced some variability in NOI quarter-to-quarter due to such factors as store openings, the timing of income and expenses, and the impact of events such as a shift in holidays and on seasonably or severe weather, which do not necessarily align year-over-year.

Our team has successfully increased occupancy by 80 basis points since the end of the second quarter to 96.4% of our consolidated portfolio. Additionally, sales at our centers are encouraging.

On an NOI weighted basis, sales for our consolidated portfolio were $409 per square foot in the trailing 12 months, up a healthy 2.3% from the prior year period. Unfortunately, seven of our centers or 13% of our portfolio were in the path of Hurricane Florence in September.

While we are thankful that our employees were safe and then we had no significant damage at our centers. We were impacted beyond just the day that Hurricane hit. Due to mandatory evacuations and severe weather in the affected areas, we had centers closed for a cumulative 27 days.

This was a slow moving storm with a lot of media build up, which resulted in a meaningful traffic slowdown leading up to during and after the hurricane. Tourists going to the area, cancelled their plans, and after the event, it took awhile for the local consumers to return.

We continue running successful marketing and engagement programs in conjunction with our tenants to help drive traffic and sales at our centers. We also remain diligent and expanding our loyalty program. Tanger club members are our best customers, shopping 50% more frequently and sending an average of 12% more than non-members.

Over the past year, new loyalty membership sales are up approximately 12% increasing our total paid Tanger club memberships to over 1,300,000 people. Beyond these marketing efforts, the most important thing we can do is to merchandise our centers with the most popular and productive tenants.

We have been diligently working to backfill the space that has been vacated over the past few years caused by bankruptcies and store closures. We are more comfortable with our tenant watch list relative to recent quarters and importantly do not have any big box or department store exposure in our portfolio.

We are actively having discussions with our tenant partners about increased open device and are seeing some tenants investing in, updating and renovating their stores as they are feeling more confident about the future.

Additionally, non-traditional retailers are opening stores and working to take their online presence direct to the consumer, where they can try on test and discuss the product real time and walk out that day with the item.

Over time and with our favorable occupancy cost, we provide a compelling solution for many online brands looking to add retail store component to their growth strategy. While this backdrop is encouraging, we remain conscious in our expectations going into next year. We anticipate that there will still need to be selective adjustments to rent in terms.

We believe it is important longer-term that we maintain high occupancy and keep our centers well merchandised and dynamic. As we have demonstrated through our history, the benefit our proven approach of working with specific tenants to maintain our occupancy allows us to be opportunistic in our pursuit of long-term growth.

Tanger continues to evolve along with the consumers. This includes tenant mix, amenities at our centers, digital, initiatives, and marketing programs with our tenants. However, the one thing that we continue to experience through every cycle is that consumers want the best brand at the best prices and that’s what Tanger is consistently providing.

Finally, in terms of our balance sheet and capital position, we are in good shape with adequate financial flexibility supported by stable cash flows. Our dividend is well covered with an FFO payout ratio of 56% for the quarter. We have a 94% unencumbered portfolio, maintain solid interest coverage and have no significant debt maturities until 2022.

We remained disciplined in our capital allocation decisions with a singular focus on creating shareholder value over time. With that, I would like to turn the call now over to Tom McDonough, who will discuss the current sales and leasing environment..

As Steve mentioned, we are focused on our leasing activities and filling our centers with high-quality productive tenants. To that end, during the trailing 12 months ended September 30, we had 364 new and renewal leases commenced comprising 1.8 million square feet of GLA.

That represents a 21% increase compared to the square footage that commenced in the same period of the prior year. This leasing volume was slightly offset by 17,000 square feet of space that was vacated during the quarter. Bringing our year-to-date recapture related to bankruptcies and brand wide restructurings, to approximately 123,000 square feet.

We are seeing some benefit from our focus on leasing. As we achieved an 80 basis points sequential gain in occupancy, and in the quarter with the consolidated portfolio occupancy rate of 96.4%.

While seasonal tenants contributed to the gain this quarter, this improved occupancy demonstrates the ongoing successful execution of our long time strategy of maintaining well merchandised centers, while optimizing revenues in Tennessee over time.

In terms of rent spreads for leases which commenced in the 12 months ending September 30, which includes the impact of our remerchandising activities and leases of less than 12 months. Rents increased by 6.1% on a straight line basis, a decline slightly on a cash basis compared to the prior year period.

The leasing spreads appeared to be stabilizing, reflecting what we believe is increasing confidence of our tenants in the long-term growth and profitability of the outlet distribution channel. We continued to renew and retenant with extended terms that at market rents, the shorter-term leases we had previously signed.

These leases will commence over the next several quarters. As we have previously discussed, the selective use of leases less than 12 months has long been an effective strategy for us.

The magnitude of rent adjustments and their impact on our spreads compared to what we experienced in the first half of this year is moderating and returning to a more normalized historical level.

Traffic for our total portfolio was down 70 basis points for the quarter, despite at 6.6% decline in September at the centers impacted by hurricanes in both years. Additionally, the traffic we drove to the centers converted to sales growth.

Average tenant sales for the consolidated portfolio was $363 per square foot for the 12 months ended September 30, 2018, compared to $381 per square foot in a comparable prior year period. Same center tenant sales for the overall portfolio increased 1.1% over the same period.

We believe that the level of bankruptcies and restructurings that we saw in recent years in our portfolio is tapering. In addition, we are encouraged by the tone of discussions with tenants and prospects. But it is important to reiterate that we do not expect rental rate growth to meaningfully rebound next year.

That indicated by leases that have been executed for 2019, but not yet commenced cash spreads appeared to be stabilizing at flat to slightly positive. I want to emphasize that based on our historical pace, these leases represent less than a third, what we would ultimately commenced for the year.

In the average commenced rate might be meaningfully different relative to what we are seeing. Furthermore, as we mentioned, there could be selective lease adjustments, which could impact our NOI next year. I will now turn the call over to Jim to take you through our financial results and a balance sheet recap..

Third quarter adjusted funds from operations available to common shareholders was $0.63 per share, in line with the third quarter of 2017.

Incremental income from our new developments and expansions completed in 2017 and reduced G&A expense were partially offset by the same center NOI decrease of 1% compared to the prior year quarter, driven primarily by the 2017 and 2018 store closures and lease modifications. Our balance sheet remains strong.

As of September 30, 2018 approximately 94% of the square footage and our consolidated portfolio was not encumbered by mortgages. Only $203 million was outstanding under our unsecured lines of credit, leaving 66% unused capacity or approximately $391 million.

We maintained a substantial interest coverage ratio during the third quarter of 4.5x and net debt-to-EBITDA improved from the prior quarter. Our floating rate exposure represented 12% of total debt and about 5% of total enterprise value as of September 30, 2018.

The average term to maturity was 5.9 years and the weighted average interest rate for our outstanding debt as of quarter end was 3.5%.

Last week, we amended and restated our bank term loans, increasing the outstanding balance to $350 million from $325 million, extending maturity to April 2024 from April 2021, and reducing the interest rate spread to 90 basis points from 95 basis points over LIBOR.

The additional $25 million of proceeds was used to paydown the balances outstanding under our unsecured lines of credit. With the extension now complete, the weighted average term maturity of our outstanding debt is approximately 6.4 years and we have no significant debt maturities until October of 2022.

We continue to generate strong levels of cash flow and with our plan to increase total shareholder return, we continually evaluate our priority use of the capital.

As we mentioned earlier this year, we are focused on reinvesting in our assets, paying the dividend, timely repurchases of common shares and deleveraging the balance sheet, while also evaluating potential opportunities for long-term growth.

During the third quarter, we reduced our consolidated debt by little more than $20 million, and improved our debt-to-EBITDA metric to 5.8x down from 6x last quarter.

In addition, while we didn’t make any share repurchases during the quarter, year-to-date we have repurchased approximately 990,000 shares or $20 million at a weighted average share price of $21.74. This leaves approximately $56 million remaining under our $125 million share repurchase authorization.

We also continue to demonstrate our commitment to a well covered dividend with an FFO payout ratio of 56% for the quarter. The strength of our balance sheet will allow us to take advantage of opportunities that arise as the cycle turns more positive.

Let me now provide some perspective on our center in Jeffersonville, Ohio where we took a non-cash impairment. Over the last three years, the center was particularly impacted by bankruptcy filings and brand-wide restructurings which resulted in store closures of 13 tenants.

To complement existing tenant by Kate Spade, Polo Ralph and Nike we have proactively remerchandised the center in light of a shifting competitive landscape by bringing in tenant, such as H&M, T.J. Maxx and West Town. We continue to position it to achieve long-term stability.

Although, the center ended the quarter at 97% occupancy, we anticipate that it will take additional time for the NOI to recover. Based on these expectations we drove the asset balance towards the estimated current value.

In terms of year end expectations, based on a slightly better than expected third quarter and further visibility into the remainder of the year, we are raising the midpoint of our range of FFO per share for 2018. We now expect FFO per share for the year will be between $2.43 and $2.46.

We are also raising the midpoint of our same-center NOI amounted down 1.5% to down 2%. Some of the variability and our expectations for the remainder of the year comes from the potential impact on sales and internal percentage rents from Hurricane Florence and Michael, which is not yet fully known.

I want to remind you that in a quarter 100 basis point of NOI equates to approximately $800,000. We are raising our expectations for average occupancy for the year to be between 95.5% and 96%.

And in terms of store closures, we are lowering our expectations for the year to a range of 125,000 to 150,000 square feet from the prior range of 150,000 to 175,000. Additional details assumed in our guidance can be found in the release we issued last night. This concludes our prepared remarks. I'd now like to open it up for questions.

Operator, can we take the first question?.

Thank you. Your first question comes from the line of Christine McElroy with Citigroup. Please go ahead..

Hi. Good morning, everyone. Just wanted to thank you for the color on the 2019 executed leases and the additional spread disclosure on the supplemental, it's extremely helpful.

Just with regard to the 80 basis points of occupancy growth during Q3, given that’s a lease trade, just trying to understand how that translated into actual move-ins in Q3 or should we expect sort of the bulk of that rent commencement in Q4 in terms of flowing through same-store NOI?.

Good morning, Christine. Thank you. Before we start, I just want to be sure that the record is correct. The average tenant sales for our consolidated portfolio was $383 per square foot for the 12 months ended September 30, 2018. I think in advertently it was stated as $363.

With regard to your question, most of the increase in occupancy will be benefiting both Q4 and the calendar year of 2018..

Okay. And then you’ve talked about it being more of a seasonal uptick or normal seasonal uptick. It seems like the pace of space recapture is moderating.

When do you sort of see that that level getting back closer to 97% more of a normal level in terms of how you're thinking about that space recapture rate into 2019?.

We don't really want to give any guidance here for 2019, but with the rate of bankruptcy continuing to moderate and our aggressive efforts to add terrific tenants to our portfolio. We're fighting to get that level back up to 97%, but we're not there yet..

Okay. And then just lastly on share repurchases.

You mentioned it briefly, maybe you can just update us on how you're thinking about buybacks versus other uses of free cash flow here given that you were more active earlier in the year in share repurchases?.

Well you know us for a long period of time, we try to be thoughtful in our capital allocation and we have a number of factors to balance. One is the share repurchase. Second is the pay down of our existing debt. Third is continuing to raise our dividend and the fourth is continuing to invest in our assets.

To be sure, we have the best presentation possible to our visitors at our properties. We so far this year have repurchased about $20 million of our stock and we paid down our debt by about $20 million and we've raised our dividend and we will invest somewhere between $35 million and $40 million into our assets.

So we will continue to be thoughtful going forward. We have not come up with 2019 capital allocation strategy yet. I just want to underline that we are very proud and we value our investment grade rating with those agencies.

We are very happy that one of the agencies turn positive on retail, but you should consider that we will remain thoughtful and continue to pull all those levers with the free cash flow we generate..

Thanks Steve..

Your next question comes from the line of Greg McGinniss with Scotiabank. Please go ahead..

Good morning, everyone. Tom, echoing Christy’s comments, we do appreciate the clarity you're giving on leasing expectations. And I just wanted to kind of dig into that a bit more. I think the language last quarter was the expectation to be flat to slightly down on 2019, which is now flat to slightly positive.

Just curious, would changed over the last quarter that's giving you confidence this trend is going to continue, and if that expectation is inclusive of yours and Steve's comments on select lease negotiation as well going into next year?.

Good morning, and thanks for your compliment of the clarity we're providing. We appreciate that notice. We are turning a little bit more constructive on next year's leasing spreads. We’re still – let me say, optimistically cautious as the lawyers look at me.

We have increased the size of the pool of our executed leases from last quarter from 20% to about a third so far at the end of this quarter to commence next year, where this number could possibly change obviously as we execute more leases. But we are very encouraged by the tone of our conversation with our attendance and our prospects..

So that is inclusive of what your expectations are, then on when you talked about some of these select negotiations?.

Well, negotiations are not signed leases. So I want to be very clear what we're with our discussion includes is executed leases..

Okay and then the 30% or a third of leases that you've signed that typical for this time of the year?.

It's consistent with prior years..

Great, thanks.

And just one final question, on the impairment charge, is that related to a potential disposition?.

We're studying all the alternatives available to us with that asset..

Okay. Thank you..

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

Hi, good morning. Just maybe on the occupancy, which as you’ve mentioned increased nicely in the quarter.

Could you just discuss, who those incremental tenants have been and whether they're generally what you guys have in terms of off price concepts of national brands or if you're doing any expansion into more local and regional retailers?.

Good morning, Caitlin. We're very happy to have opened several great tenants either in the third quarter or maybe early in the fourth. We recently welcomed Tory Burch in Sevierville, Tennessee. Polo Ralph Lauren has opened a wonderful new store in several of our centers.

We installed our first Carolina Pottery store, which is a 52,000 foot unique tenant in Myrtle Beach, South Carolina. So I think as you can see, the traditional outlet tenants are expanding and feeling more comfortable with the long-term prospects of our distribution channel and we also are attracting a wonderful existing retailers such as T.J.

Maxx, Marshalls, HomeGoods, H&M, Forever 21, I know I'm going to get in trouble because I'm not mentioning some, but we've expanded the reach of the co-tenancy in our centers to give our guests, the shopping experience that they want..

Got it, okay.

And then maybe could you just talk about tenant allowances and what you're seeing in terms of what retailers are looking for when they opened new stores in your centers now?.

It obviously is dependent upon the tenant. I think the requests for assistance are pretty consistent by tenant as it has been in the past couple of years..

Okay.

And then maybe last one, in terms of just average store box size, would you say there's any trend there in terms of increasing or decreasing size and just kind of on the definition, does that impact your leasing spread info or is the leasing spreads shown just so that irregardless of size, just kind of one space and what the new rent is versus the old rent?.

Answering your last question first, the spreads reflect comparable size space with the same tenant. If they change and get larger and get smaller, we would adjust the spreads accordingly. What? I forgot the other two parts to your question. So if you want to tell me again, I'm happy to answer..

It was just on that average store size.

Do you see any trend in terms of getting larger or smaller?.

Again, that is dependent upon the tenants. We have some tenants doing so well that they continue to look to expand their footprint and we have some tenants that are still viable, exciting brands, but they're decided to narrow the presentation or take out certain categories of product and they would like to right size their store.

So it was a combination of both, but as you can see overall at 96.4% occupancy. We're doing just fine..

Okay. Thanks for the commentary..

Thank you..

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

Hi, thanks. Good morning. Just Tom, what did you mentioned the seasonal tendencies. I was curious what that amounted to in the quarter in terms of occupancy. And then I'm not sure if that contributed to the big percentage rent increase in the quarter, but maybe you could just comment on that as well. And what we should expect in the fourth quarter..

Well, roughly half of the increase was due to the tenant – seasonal tenants and that's part of our total slightly elevated from historical levels, which are generally in the 3% to 4% range..

Okay, and in terms of the percentage rent, in terms of what we should think about in the fourth quarter?.

Well, I think Todd, this is Steve. We still have not seen the impact of Hurricane Matthew, which came in October and Hurricane Florence, which came in September on our percentage rent number, which will be reflected in the fourth quarter.

And that's why – that's part of our cautious approach to giving you year-end guidance because a component part of our NOI is the percentage rent. And we haven't seen that flow through yet..

Okay. And then in the comments around the impairment that you took at Jeffersonville, you mentioned the expanded reach is that you've had at some of your centers with the addition of like TJX and H&M and a few others, but you characterize that leasing as part of the repositioning at Jeffersonville, which caused the impairment.

I'm just curious you've re-merchandised other centers with those tenants and some other non-factory outlet center tenants? Does that leasing activity have implications for some other centers that are in the portfolio where there's been some similar leasing?.

I don't believe, so Todd. We carefully assess each of our properties every quarter. And with regard to Jeffersonville, this was a property we purchased.

So the basis was higher and we are thrilled with the tenancy that's signed now and actually opened, but it's going to take a little time for the – it's going to take a little longer than we had anticipated for the NOI to get back to historical levels. So we decided it was prudent to take the impairment at this time..

Okay. Thank you..

And your next question comes from the line of Craig Schmidt with Bank of America. Please go ahead..

Thank you.

Your sales metrics and then sales productivity metrics, does that include the seven centers that a last I guess 27 days as well as traffic before and after the event?.

It does Craig. We don't have any exceptions to our numbers. You can see in our supplement, you have everything, including everything..

So barring that event, that you'd expect your numbers to be somewhat higher..

I think that's a reasonable conclusion considering we had zero sales during the time of the Hurricane was impacted our properties..

Okay, great.

And then on your re-tenanted tenants, do you happen to know what percent are apparel?.

I could easily get you that number, but I think we can get you an exact number offline. But our leasing still continues to be primarily apparel and footwear, and we have some jewelry presentation, and some food, but I don't think that our retenanting is different than the historical levels..

Great. Okay. And then, I understand the priority here is still filling vacancies.

But is – are you still looking at opportunities that could possibly give you a new outlet center by the end of 2020?.

Yes. We continue to study markets. We have a shadow pipeline that we are ready to move when our tenant partners are ready to invest in new assets. I think everybody would agree there's not much need for additional retail at this time. We have always maintained a very cautious disciplined approach to new development.

We will not buy a single square inch of property until we're ready to break ground and build a great new center. That discipline requires 60% pre-leasing and all not [indiscernible]. I don't see that happening. It certainly not going to happen I don't believe in 2019. It's too early for us to even talk about 2020.

But yes, we have a shadow pipeline ready to go when our tenants are ready to start expanding again..

Great. Thank you. End of Q&A.

And there are no further questions in the queue..

I want to thank everybody for joining us today. We look forward to seeing you next week at NAREIT. And have a good day. Goodbye now..

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