Tanger Outlets Jeffersonville, OH Management Presentation August 2, 2011
Disclaimer This presentation includes time sensitive information that may be accurate only as of today s date, August 2, 2011. Estimates of future net income per shareandffo and per share are by definition, and certain other matters discussed in this presentation regarding the state of the industry, our growth prospects, our remerchandising and financial strategies, the renewal and re tenanting of space, the development of new centers, redevelopment andacquisitionof acquisition of existing centers, tenant sales andsales trends, occupancy rates, interest rates, funds from operations and coverage of the current dividend may be forward looking statements within the meaning of the federal securities laws. These forward looking statements are subject to risks and uncertainties. Actual resultscould differ materially from those projected due to various factors including, but not limited to, the risks associated with general economic and local real estate conditions, the company s ability to meet its obligations on existing indebtedness or refinance existing indebtedness on favorable terms, the availability and cost of capital, the company s ability to lease its properties, the company s inability to collect rent due to the bankruptcy or insolvency of tenants or otherwise, and competition. For a more detailed discussion of the factors that affect our operating results, interested parties should review the Tanger Factory Outlet Centers, Inc. Annual Report on Form 10 K for the fiscal year ended December 31, 2010. 2
Business Overview 2011 Year to Date Highlights Summary Financial Results Summary Operating Results External Growth Update Financial Strategies Historyof of Consistent Results & InvestorRewards Summary 3
Business Overview 4
State of the Industry Economies of scale benefit owners of large portfolios Tanger and Simon combined own approximately 60% of the total outlet gross leasable area Each year new brand name manufacturers are opening outlet stores and existing manufacturers are opening new outlet concepts Outlet center occupancy levels have not been impacted to the same extent as other retail properties by bankruptcy and store closing announcements among retailers During challenging g retail environments, outlet stores continue to be a viable and profitable channel of distribution for retailers and manufacturers Landlord revenues are protected by the relatively long term nature of tenant leases Tanger Hilton Head I, SC 5
Growth Prospects Tanger continues to be successful in obtaining i increases in rental rates on renewals and releasing of space New development opportunities exist as there is increased tenant demand for outlet space Tanger currently has signed definitive agreements for the potential acquisition of existing outlet centers, pending satisfactory completion of due diligence Tanger has divested itself of many under performing, smaller assets and reinvested the proceeds in new developments and expansions or to reduce debt (11 properties totaling approximately1.3million million square feet since 2000) Tanger Mebane, NC 6
Portfolio Diversification 61.7% 8.2% 6.3% 3.6% 3.5% 3.2% 3.1% 2.8% 2.7% 2.6% 2.3% The Gap PVH Dress Nike VF Adidas Ann Taylor Barn Note: In terms of GLA as of June 30, 2011 Includes all retail concepts of each tenant group Polo Carter s Hanesbrands Other Retailers 7
Geographic Diversification Well positioned portfolio of 37 outlet centers in 25 states coast to coast, totaling approximately 11.4 million square feet. 8
2011 Year-to-Date t Highlights ht 9
2011 Highlights 4.9% increase in same center net operating income 25.5% increase in average base rents on combined renewal & released space 14.9% increase in average base rent on leases renewed 51.5% increase in average base rent on released space 97.8% occupancy rate for wholly owned portfolio as of quarter end Tenant comparable sales increased 4.6% to $361 per square foot for the rolling 12 months ended June 30, 2011 Increased common share cash dividend to $0.80 per share annualized from $0.775 per share Outlook revised to positive from stable by Standard & Poor s on June 24, 2011 10
2011 Financing Transactions On July 6, completed a public offering of 4.6 million shares at a price of $25.662 per share, using proceeds of $117.3 million, net of offering expenses, to repay borrowings under unsecured lines of credit On June 27, closed on a $150 million unsecured 90 day bridge loan with Wells Fargo, priced at LIBOR + 160 basis points, which includes three 90 day extension options, using proceeds to fund the acquisition of 410,000 sf outlet center in Jeffersonville, OH 11
2011 Acquisitions Expanded geographic reach into 3 additional states and increased portfolio size by over a million square feet with the following transactions On June 28, closed on the acquisition iiti of Prime Pi Outlets t at Jeffersonville in Jeffersonville, OH for $134.0 million in cash On July 15, announced closing on Tanger s admission as a member into 3 existing entities, which resulted in our acquisition of substantially all of the economic interests in Ocean City Factory Outlets and phases I & II of Atlantic City Outlets The Walk Tanger is currently under contract to purchase substantially all of the economic interests of Atlantic City phase III, which we expect to close by the end of 2011 Combined purchase price for all phases of Atlantic City & Ocean City is estimated to be $199.3 million, including $125.8 million in cash and the assumption of $73.5 million of debt 12
2011 Development News On June 30, announced a joint venture with Simon Property Group to develop a 350,000 sf Tanger Outlet Center located 30 miles south of Houston and 20 miles north of Galveston Gl On May 23, announced a joint venture with The Peterson Companies to develop Tanger Outlet tcenter at National Nti Harbor, a 350,000 sf development in Washington, DC s premier waterfront resort destination On January 24, announced a joint venture with Riocan REIT for the development of 10 12 Tanger Outlet Centers in Canada over the next 5 7 years, naming Halton Hills in the Toronto market as its first potential development site on March 14 13
Summary Financial Results 14
$115.68 FFO (in millions) $122.78 6% Increase $135.10 10% Increase 2009 Adj. (1) 2010 Adj. (2) 2011E Adj. (3) 1) Excludes $10.3 million charge for executive severance, $5.2 million impairment charge for Commerce I, $3.3 million gain on sale of Washington, PA outparcel, and a $10.5 million gain on early extinguishment of debt. 2) Excludes $6.7 million charge for write off of unamortized loan costs and settlement of interest rate swaps associated with the prepayment of a $235 million term loan, $2.5 million reduction in net income related to the redemption of preferred shares and $1.4 million in other charges related to impairment, demolition, and gain on sale of outparcels we believe are not indicative of our ongoing operations. 3) Represents midpoint of guidance multiplied by the weighted average budgeted common shares outstanding for 2011, adjusted to exclude $1,541,000 in acquisition costs and $158,000 in abandoned development costs. 15
FFO per share $1.37 $1.33 $1.42 84,157,000 Shares 92,523,000 Shares 95,312,000 Shares 2009 Adj. (1) 2010 Adj. (2) 2011E Adj. (3) 1) Excludes $0.125/share charge for executive severance, $0.06/share impairment charge for Commerce I, $0.04/share gain on sale of Washington, PA outparcel, and a $0.124/share gain on early extinguishment of debt. 2) Excludes $0.07/share charge for write off of unamortized loan costs and settlement of interest rate swaps associated with the prepayment of a $235 million term loan, $0.025/share 025/share reduction in net income related to the redemption of preferred sharesand and $0.01/share 01/share in other charges related to impairment, demolition, and gain or sale of outparcels we believe are not indicative of our ongoing operations. 3) Represents midpoint of FFO guidance, adjusted to exclude $0.02 in acquisition and abandoned development costs. 16
Total Enterprise Value (in billions) 11% Annual Compound Increase $3.08 $3.39 $2.20 $2.20 $2.30 $2.50 $2.61 $1.78 2005 2006 2007 2008 2009 2010 2Q 10 2Q 11 17
Total Enterprise Value (asofjune30 30, 2011) $886,644,000 26% 74% Common Equity Debt $2,501,637,000 18
Proforma (1) Total Enterprise Value (asofjune30 30, 2011) $1,102,644,000 30% 70% Common Equity Debt $2,624,779,000 19 1) To reflect the issuance of 4.6 million shares, and the acquisition of Jeffersonville, Atlantic City Phases I & II, and Ocean City as if they had occurred 6/30/11.
Summary Operating Results 20
Growth in Same Center NOI 3.1% 53% 5.3% 4.1% 1.4% 2.60% 1.7% 4.9% 2006 2007 2008 2009 2010 1H 10 1H 11 21
Rental Rate Increases on Renewals and Releasing (On a straight-line basis) 22.6% 25.9% 25.5% 14 3% 14.2% 14.3% 13.8% 12.4% 2006 2007 2008 2009 2010 1H 10 1H 11 22
Average Tenant Sales Per Square Foot (3% compound annual increase) $354 $345 $361 $339 $281 $226 1995 2000 2009 2010 2Q 10 2Q 11 23
Tenant Average Occupancy Cost 7.40% 7.70% 8.20% 8.50% 8.30% 2006 2007 2008 2009 2010 24
Occupancy (1) 98% 98% 97% 96% 98% 97% 98% 2006 2007 2008 2009 2010 2Q 10 2Q 11 1) For stabilized, wholly owned properties 25
External Growth Update 26
External Growth Strategy US Development Canadian Development Acquisitions 27
Development Update New Properties 28
Hilton Head I, SC 177,000sf GLA plus 4 outparcel pads $43 million investment Shopper friendly redevelopment is the 1 st LEED certified green shopping center in Beaufort County, SC Grand opening March h31, 2011 Occupancy of 96% as of June 30, 2012 Tenants include Adidas, BCBG, Brooks Brothers, J. Crew, Joe s Jeans, Kenneth Cole, New Balance, Saks Off Fifth, Talbots, Theory, Under Armour, & more 29
Mebane, NC 319,000 sf development $64.9 million investment Grand opening November 5, 2010 Opened fully leased Tenants include Saks Off Fifth, Coach, Polo, J Crew, GAP, Banana Republic, Nike, Tommy Hilfiger, & more 30
Pre-development Update 31
Houston JV with Simon 50/50 joint venture for development of a Tanger Outlet Center 30 miles South of Houston and 20 miles North of Galveston in Texas City, TX Located on Interstate 45 daily traffic count of 100,000 55 acre site will accommodate a 350,000 sf phase I development, with ample room for future expansion to 470,000 sf Ground breaking ceremony scheduled for August 30, 2011 Grand opening currently projected for approximately 12 months following ground breaking 32
RioCan Joint Venture Halton Hills site 50/50 joint venture for outlet development in Canada Properties will be branded as Tanger Outlet Centers Potential development of 10 12 outlet centers over the next 5 7 years Tanger will be responsible for leasing Riocan will be responsible for development & management Firstpotential development site identified in the greater Toronto marketin Halton Hills, located on Highway 401 at the James Snow Parkway interchange Excellent access to Brampton, Mississauga, and Metro Toronto Development expected to begin in 2012 with targeted opening date 12 monthslater 33
Other U.S. Predevelopment Currently in predevelopment stages in these additional markets: West Phoenix, Arizona Scottsdale, Arizona National lharbor, Washington, DC Joint venture with ihpeterson Companies Tenant interest is strong for these sites as pre leasing continues Have identified other domestic markets that are either not served or are underserved by the outlet industry and site selection is ongoing in these markets 34
Overbuilding? Strong performance relative to other retail property types has resulted in outlet project development announcements by new entrants to the outlet space Excluding Tanger and Simon, few projects that are announced ever open for business 10 years ago (May 2001 VRN) : 12 announced, 1 completed 5 years ago (May 2006 VRN): 9 announced, 1 completed Last year (May 2010 VRN): 31 announced, 1 completed August 2011 VRN data supports thesis of disciplined development in the outlet industry Single digit grand openings per year since 1997 All outlet centers opened since 2001 are still open and operating as outlet centers Tenants want a developer that can deliver, and Tanger has a proven, 30 year track record of delivering quality outlet centers 35
Internal Criteria for Development Predevelopment costs are limited to those associated with: Costs to control the land (option contract costs) Pre leasing costs Due diligence costs Criteria required to purchase land and begin development Positive results of the due diligence process Pre leasing of 50% or greater with an acceptable tenant mix and visibility of leasing of the remaining leasable space to 75% Receipt of all non appealable permits required to obtain a building permit Acceptable return on cost analysis 36
Acquisition Update 37
Jeffersonville, OH Formerly Prime Outlets Jeffersonville 410,000 sf $134.0 million purchase price June 28, 2011 acquisition date 99% occupancy asofjune 30, 2011 Over 90 brands including: Ann Taylor, Banana Republic, Brooks Brothers, Coach, J. Crew, Gap, Kate Spade, Nike, Polo, Pottery Barn, Under Armour, and more Located in the tri city area of Cincinnati, Columbus, & Dayton 4.4 million population within a 60 mile radius 38
Atlantic City, NJ Formerly known as The Walk 3 phases totaling 491,000 sf July 15, 2011 acquisition date Occupancy upon acquisition: iii Phases I & II 99% Phase III 80% (1) Over 100 brands including: Adidas, Banana Republic, Brooks Brothers, Calvin Klein, Coach, Donna Karan Gap Generation, H&M, J. Crew, Kenneth thcole, Nike, Polo, St. John, and more Streetscape center is spread out across 3 city blocks and located across from The Boardwalk Atlantic City welcomes 34 million tourists annually 1) Expansion phase expected to close later this year 39
Ocean City, MD 200,000 sf July y 15, 2011 acquisition date 93% occupancy upon acquisition Located alongroute 50in Ocean City, a popular vacation destination for the DC & Baltimore areas Approximately 40 brands including: Aeropostale, Calvin Klein, Carter s, The Children s Place, Gap, Izod, Jos. A. Bank, Justice, Oshkosh B Gosh, Reebok, Rue 21, Tommy Hilfiger, and more 40
Other Potential Acquisitions Signed definitive agreements for additional existing outlet centers in the U.S. Closing pending satisfactory completion of negotiations, due diligence, and lender approvals Should they close, we anticipate that each acquisition will be accretive in the first year of ownership Objective is to be able to announce one or more closings by year end 41
Financial Strategies 42
Summary of Financial Strategies The following are strategic objectives of Tanger s financial decision making process: Focus on improving investment grade rating Maintain quality coverage and leverage ratios Continue the use of unsecured financing Maintain significant unused capacity under our lines of credit Use off balance sheet joint ventures only when necessary Maintain manageable levels of debt maturities Recycle capital through the sale of non core assets and land parcels Generate capital internally (cash flow in excess of dividends paid) 43
Limited Exposure to Rising Interest Rates $332,000,000 As of June 30, 2011, 63% of total debt at fixed rates $886,644,000 Fixed Rate Variable Rate 44
Financial Capacity Current capacity of $400 million under new unsecured lines of credit $385 million syndicated line with a total of 9 lenders led by Bank of America and Wells Wll Fargo $15 million cash management line with Bank of America As of June 30, 2011, Tanger s unused capacity was 54.5% 5% of total capacity Proforma unused capacity of 55.4%, adjusted to reflect the 4.6 million common share offering and the Atlantic City and Ocean City acquisitions as if they had closed on June 30, 2011 45
Debt Maturity Schedule (in millions as of 6/30/11) ' '11 $15 50.0 $ 182.0 $250.0 '12 $300 0.0 '13 '14 '15 '16 '19 '20 $7.0 Exchangeable Notes (1) Lines of Credit Bridge Loan 2015 Notes 2020 Notes 1) Represents exchangeable debt, which we have called for redemption on 08/18/2011 46
Proforma (1) Debt Maturity Schedule (in millions as of 6/30/11) $7.0 0 '11 '12 '13 '14 '15 '16 '17 '19 '20 '21 '22 '23 '24 '25 $19.0 $23.2 $10.6 $20.6 '26 $1 150.0 $178.5 $250.0 $300. Exchangeable Notes (2) Lines of Credit Bridge Loan Atlantic City Mtg Ocean City Mtg 2015 Notes 2020 Notes 1) Adjusted to reflect the issuance of 4.6 million common shares and the acquisition of Jeffersonville, Atlantic City I &II, & Ocean City as if they had occurred 6/30/11 2) Represents exchangeable debt, which we have called for redemption on 8/18/11 47
Reinvesting in the Company (in millions) Excess cash flow over the dividend is reinvested in existing centers, new expansions, new developments, acquisitions or to pay down debt 2010 payout ratio of 64% $56.4 Million Dividends Excess Cash Flow, $56.4 $42.9 Million Dividends Common Dividends, $71.9 Preferred Dividends, $6.2 48
Financial Profile Key Financial Ratios as of June 30, 2011: Key Bond Covenants (based on GAAP consolidation): Calculation Limit Total debt to adjusted total assets 47% < 60% Secured debt to adjusted total assets 0% < 40% Unencumbered assets to unsecured debt 213% > 135% Interest coverage 4.40 x > 1.50 x 49
History of Consistent Results and Investor Rewards 50
220 200 180 160 140 120 100 80 60 Total Return to Shareholders 2005 2006 2007 2008 2009 2010 Tanger NAREIT All Equity REIT Index SNL REIT Retail Shopping Ctr Index 51
Summary 52
Why? Investment Diversification Only public REIT with pure outlet portfolio Conservatively Structured Balance Sheet 26% debt to market cap at June 30, 2011 94% of portfolio unencumbered by mortgages at June 30, 2011 Brand Recognition Recognized & respected by tenants and shoppers alike Tenured ManagementTeam Executives average 15 years of Tanger service Disciplined p Development Approach Will not build on speculation Strong Portfolio of Operating Properties Geographic diversification Tenant diversification High credit quality tenants Stableannuallease annual lease rollover Properties built to easily reconfigure No big boxes 53
Appendix 54
Reconciliation of Guidance: Net income to FFO (1) Low Range High Range Estimated diluted net income per common share $0.46 $0.50 Noncontrollinginterest interest, gain/loss onthesale ofreal estate, depreciation and amortization uniquely significant to real estate including noncontrolling interest share, and our share of joint ventures 0.92 0.92 Estimated diluted FFO per share $1.38 $1.42 1) Includes $1,699,000 ($0.02 per share) in acquisition costs & abandoned development costs 55
Tanger Factory Outlet Centers, Inc., (NYSE:SKT) is a publicly traded REIT headquartered in Greensboro, North Carolina that operates and owns or has ownership interests in, a portfolio of 37 outlet centers in 25 states coast to coast, totaling approximately 11.4 million square feet, leased to over 2,400 stores that are operated by more than 415 different brandnamename companies. Morethan 175 million shoppers visittanger Outlet Centers annually. For more information on Tanger Outlet Centers, call 1 800 4 TANGER or visit the company s web site at www.tangeroutlet.com CORPORATE HEADQUARTERS 3200 Northline Avenue, Suite 360 Greensboro, NC 27408 336.292.3010 www.tangeroutlet.com A New York Stock Exchange Listed Company: SKT