Good morning. This is Cyndi Holt, Vice President of Investor Relations. And I would like to welcome you to the Tanger Factory Outlet Centers' Second Quarter Conference Call. Yesterday, we issued our earnings release as well as our supplemental information package and investor presentation. This information is available on our Investor Relations website, investors.tangeroutlets.com. Please note that during this 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 metrics -- 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, August 1, 2018. [Operator Instructions]. 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 Steven Tanger. Please go ahead, Steve.

Thank you, Cyndi. And thank you for joining us on another earnings call, a practice we started 100 quarters ago. Our second quarter results were in line with our expectations as we remain focused on driving traffic to our centers and filling vacancies caused by multiple tenant bankruptcies over the past 2 years with a high, new quality -- with new high-quality in-demand tenants. As we continue to adapt to the evolving retail landscape and consumer shopping behaviors, it is encouraging to see positive results from our focused efforts. We are pleased with the ongoing sales growth at our centers and the positive consumer reactions to our proactive marketing and engagement efforts. Traffic has been stable with 12 of the last 13 weeks posting flat or positive traffic growth. Sales for the 12 months ended June 30 were up 1% compared to the same period last year for our same-center portfolio. We are also heartened by our progress in leasing, but acknowledge it will take additional patience as we work through the current vacancies. While the decline in same-center NOI we experienced in the quarter was anticipated and communicated, it does not mean we are satisfied with where we are. We obviously can't control bankruptcies and store closures for struggling tenants. What we can control is the quality of our assets, the brands, value and the experience that we offer to our tenants and our shoppers, along with a lower occupancy cost solution and proactive engagement with these tenants and prospects. Store closures during the quarter were as anticipated and we remain in line with our guidance for the year. Through the end of the quarter, store closings have totaled 105,000 square feet, including the Toys "R" Us, Nine West and Easy Spirit closings we detailed last quarter. Subsequent to…

Thanks. As Steve mentioned, we saw the cadence of traffic build as we moved from April to June, ending the quarter essentially flat compared to last year. Average tenant sales productivity for the consolidated portfolio was $383 per square foot for the 12 months ended June 30, 2018, flat to the prior year period. For the 12 months ended June 30, 2018, average tenant sales includes our Daytona center, which stabilized in the first quarter of 2018. On an NOI weighted basis, average sales productivity was $409 per square foot for the 2018 period, up 1.5% from $403 for the 2017 period. Same-center tenant sales performance for the overall portfolio increased 1% for the 12 months ended June 30, 2018, compared to the 12 months ended June 30, 2017. We believe this performance demonstrates the strength of the consumer, the value of our established brand and the consumers' desire to shop at our centers. For the second quarter of this year, sales performance was down slightly due to in part to the negative impact of the shift in Easter from April last year to March this year. In the quarter, we saw strength in apparel, particularly juniors and denim, athletic, accessories and active wear. The key reason that shoppers come to Tanger Centers is the attractive brand value proposition that we provide. In today's more experience-based economy, our value shopping experience is what attracts many of our customers. However, we are always striving to provide more. Therefore, foremost, we continue to curate the optimal mix of tenants that will excite our customers. We have also shifted some of our marketing efforts to focus more on customer experience and engagement. For example, in recent months, we have hosted a number of food truck festivals, family fun nights with games and entertainment…

Thank you, Tom. Second quarter FFO available to common shareholders was $0.60 per share, an increase of 2% over the second 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 1.9% compared to the prior year quarter, driven primarily by the 2017 and 2018 store closures as previously mentioned. On a year-to-date basis, same-center NOI was down 1.7%. There were no material lease termination fees in the consolidated portfolio during the second quarter of 2018. However, from the second quarter of 2017, we recognized $1.5 million of lease termination fees, which are not included in the same-center and portfolio NOI. Our balance sheet remains strong. During the quarter, our Charlotte joint venture closed on a $100 million mortgage loan with a fixed interest rate of 4.27% that matures in July 2028. The proceeds from the loan were used to repay existing $90 million mortgage loan with an interest rate of LIBOR plus 1.45% that had an original maturity date of November 2018. Our share of the excess cash of about $4.7 million was used to pay down our floating rate line of credit. As of June 30, 2018, approximately 94% of the square footage in our consolidated portfolio was not encumbered by mortgages. Only $224 million was outstanding under our unsecured lines of credit, leaving 62% unused capacity or approximately $370 million. We maintained a substantial interest coverage ratio during the first quarter of 4.4x and net debt-to-EBITDA was approximately 6.0x at quarter-end. Our floating rate exposure represented 13% of our total debt and less than 6% of total enterprise value as of June 30, 2018. The average term of maturity was 6.1 years and the weighted average interest rate for our…

[Operator Instructions]. Your first question comes from the line of Craig Schmidt from Bank of America.

Regarding your objective of reinvesting in your assets, will this take the form of redevelopment efforts? Or is this going to be more along the lines of re-tenanting?

We have spent about $350 million in the last 10 years upgrading, renovating and re-tenanting our centers. We have reduced the average days of our properties to about 15 years. So our properties are beautiful, well-maintained, up-to-date and tenanted appropriately. As far as redevelopment, we completed five redevelopment projects in the last year or so, successfully completed them. We have no major redevelopment projects slated for the near future. Our focus is on filling our vacancies, which were created by the highly publicized, unexpected bankruptcies of several tenants. And that's our short-term plan, is to create value by filling vacancies and create demand in our property for space.

Great. And then just as a follow-up, thanks for the discussion on store closing, appreciated. Just curious, looking at store closings on a national level, the pace has slowed significantly in the last 2 months. I wonder if you're experiencing the same. Or is it a little more lingering in the outlet space?

As we mentioned, the only stores that have closed due to bankruptcy in the last couple of weeks or actually this week were 7 Rockport stores, totaling 17,000 square feet. We have known closures so far this year of about 122,000 square feet. We don't know what's going to happen tomorrow, obviously. But the body language with our tenants appears much better than it was 90 days ago.

Your next question comes from the line of Christy McElroy from Citi.

Tom, I just wanted to go back to your comments on re-leasing spreads. And we've talked about this before. We calculate that the rents on the shorter-term lease deals that you're doing, so converting the marked to short term, are rolling down by about 25%. And I'm wondering if you've started to make progress on converting any of those leases, so those that were marked down by that much, back to permanent leases at market rents such that it would -- and I'm wondering if that flows through that re-tenanted space or the renewed space greater than 12-month spreads. So I'm just wondering how to reconcile that in your slides.

With respect to those short-term leases, we have re-leased about 1/3 of the short-term leases that we did in 2017 and we've re-leased those pretty much at market rates. And I'm not sure if that answers your question, but that's what happened so far.

Well, I think the ones that you -- I think the ones that you converted -- go ahead.

Christy, this is Jim. To answer the second part of your question, we've -- as Tom said, we've executed about a 1/3 of those leases back to market, about 15% on that has commenced. So they are in those spreads that you mentioned in the top portion. Just as a note, those come in -- they are coming in -- they will be coming in the spreads at a slower pace than how they come out. What we do point here, and to remind you that we are doing and showing you -- showing you the all-in spreads which shows the roll down and the roll back up.

Right. I guess, I'm just wondering to the 1/3 that you mentioned that you've re-leased those are the 17 -- those are the 2017 that you lost, right? You roll down it, I think about 10% on average. I'm wondering about those that you are rolling down this year at about 25%. And as those start to flow through, the re-leasing spreads, the greater than 12-month re-leasing spreads, how that might start to impact that number and inflate that number given that there's probably going to be meaningful mark-to-market on those.

Well, as Jim said, we think they're going to come in over time as opposed to go up quickly. So I think that, that will distribute and dilute the impact of those spaces rolling back into our spreads. And again if -- but in any case, if the issue is still concerned, we point you to the all-in spreads that would take all that into comp.

Okay. And then just -- in thinking about the full year same-store NOI growth range, you've maintained it at down 2.5% to 1.5%, and then in looking at the first half pace of down 1.7%, it seems like the midpoint of guidance suggests that NOI growth will get more negative in the back half of the year. How should we be thinking about the biggest drivers of that given that you've lost -- you've closed a lot of stores in the first half?

Good morning, Christi. Again, I want to thank you for your acknowledging our additional disclosures. We've got a business right now that's very dynamic and there's lots of unknowns. We acknowledge that there's going to be challenges in the second half of the year, that's why we have a range. Candidly, the third quarter -- the third quarter maybe a little bit softer. But as things change, we'll update our guidance as appropriate. But again as I've said, we are cautiously optimistic. It's going to take several more quarters for things to stabilize. But we're encouraged by what we're seeing. And we are committed to giving you appropriate disclosure so that you can track our progress and we welcome your comments.

Your next question comes from the line of Todd Thomas from KeyBanc Capital Markets.

Just following up on the cash re-leasing spreads. Tom, I think some of your comments were about the year ahead, so 2019. You commented that you'd expect cash re-leasing spreads to be flat, slightly negative, I guess, in 2019. Is that right? And can you provide more context there maybe just touching on your expectations around the first quarter of '19 just given conversations you're having and also just given the outsized leasing volume that takes place in the first quarter each year.

Yes, Todd, good morning. You're right, I did say and we are expecting the spreads in '19 will be flat to slightly negative. We're hopeful and optimistic that we'll do better than that. As I mentioned, we did see some real positive in Q2 executed numbers versus the Q1 executed numbers. But beyond that, I don't know that I can give you anymore color, we are not specifically providing any kind of guidance for 2019 and particularly for the first quarter of 2019.

Todd, what we wanted to do is based on a very small sample size of only 20% or so of leases that are executed, we wanted to give you what we're seeing, when we're seeing it, so you can plan appropriately as you put together your 2019 model. Obviously, we are working every day and in 90 days we'll update what we're seeing. But this is the first time we've looked ahead so far and we hope that based upon a small sample, it will be useful to you as you construct your model.

Okay. And then, I was just wondering if you could talk a little bit more about tenant sales growth in the quarter. Looks like it slowed a little bit, the trailing 12-month result was just slightly lower on a sequential basis. And you talked about traffic trends improving in 12 of the last 13 weeks of the quarter, can you comment on sort of the cadence of sales and how they trended throughout the quarter?

Sure. There was the shift in the Easter this year from historically April to March. So those sales were pretty much in the first quarter. The cadence increased every month from April, May to June. I just want to remind you that we have very little luxury tenants that were soft in the past couple of years, but now appeared to be doing much better. We are focused totally on outlet centers in the United States and the international market where some of our peers appear to be doing well. So we're focused on our market. We're focused on reducing our G&A as sales continue to trend slightly up. And I just want to remind you that there's -- we are a dynamic business and we're very happy to have produced results that beat FFO consensus in this quarter.

Your next question comes from the line of Samir Khanal from Evercore.

Steve, I'm sorry, but did you say the 105,000 square feet you got back, that number included toys?

Yes. We disclosed and highlighted that number 90 days ago.

Okay. So first quarter -- if I work through the maths -- math, 37,000 square feet first quarter, second quarter was 68. So how much of the 68 was kind of broken down between, I guess, Nine West and Toys? If you have that [indiscernible]

You have that number, Jim?

Yes, I don't have [indiscernible] most of it. I'd say about 2/3 of that was Nine West and a 1/3 of it was Toys.

Okay. And then you've got another additional sort of 15 for Rockport gets you to around 120. So you still have a cushion about 50,000 square feet per guidance, right?

Actually, 30 to 50.

30 to 50 okay. And then, I guess, my second question is when you look at some of the other, your mall peers, I mean, they started a -- you start to see a bit of rebound in sales, the sort of the 3-ish percent and you guys are kind of sort of this of 1% range. I guess, why didn't we see the same sort of result from you guys last night? And if sales doesn't pick up here and with occupancy costs sort of at 10%, I guess, where do you go from here from a pricing power perspective? If sales doesn't pick up, then it feels like it's going to be tough to get pricing power back. So how do we think about that sort of going forward?

Well, we're seeing some encouraging signs in our conversations with our tenants. We do continue to fill vacant space created by the bankruptcies. We are encouraged, as Tom mentioned in his remarks, that leases executed in the second quarter, 70% were positive cash spreads compared to less than 50% in Q1. And also, I just want to caution you that this is -- the second quarter results are a pretty small sample size and it's way too early to call a trend or a bottom, but we are encouraged. I don't think that you'll see pricing power shift until we -- still we fill more of the vacant space and hopefully there will be no new supplier vacant space by overleveraged private equity bought out companies going bankrupt. It's going to take several more quarters to have that pricing power. That's candidly what we're seeing.

Your next question comes from the line of Caitlin Burrows from Goldman Sachs.

I was just wondering if maybe you guys could talk about when your signing leases, who those new users are? Are they relocating from nearby outlet or full price stores and/or expanding footprints?

Good morning, Caitlin. They are coming from all over. As we mentioned, we signed a -- and are about to open a Carolina Pottery, 52,000-foot store in Myrtle Beach, South Carolina, which will fill significant amount of vacant space in that center. We have signed the first and only American Girl outlet. We're continuing to work with people like T.J. Maxx, Marshals, HomeGoods. There are several other local tenants that we're dealing with. Actually, we've had the pleasure of working with T.J. Maxx for about 8 years now in our centers. So we have -- obviously, there's a lot of people we're talking to. We're very profitable distribution channel, and as I said before, it's going to take a couple more quarters, several more quarters for things to continue to stabilize before they move back up.

Okay. And then on the idea of essentially looking out to 2019, I know some of the other companies have talked about on the impact, they think, changes to the internal leasing costs will have on G&A and/or FFO in 2019. So I was wondering if you have anything to tell us on that front.

Yes, Caitlin. It's Jim. We're still working through that, we're not quite finished -- put the finishing touches on that. But what we can give you is kind of a point of reference. Last year what we capitalized in internal leasing, legal cost was about $6 million. What we've capitalized so far through the first 6 months this year is about $2.8 million. A big portion of that will be expense, but we'll also continue to capitalize some of that. So that's where we are, and as we finish that up, we can give you a little more color. I think you can just -- even if you looked at it from a perspective that all of that would be expense and it won't be because we will continue to capitalize some of that, and of course with that standard, I think, it's 92% or less of our FFO.

Our next question comes from the line of George Hoglund from Jefferies.

I just have one question on the overall tenant retention rates going forward. Just -- and so we've seen kind of broadly the pace of store closure is slow, how do you view sort of tenant retention if customer -- if tenants are still trying to trim back their store portfolios?

We continue to see our retention level in the mid-80% range which has been consistent for the past many years. So we haven't seen any change in that and that's still very positive.

[Operator Instructions]. You next question comes from the line of Omotayo Okusanya from Jefferies.

I just wanted to first of all to echo Christi's sentiments about the additional disclosure, I found that very helpful. So thank you for that. In regard -- just along George's line of questioning and the tenant retention, I mean, the process that you guys go through to decide buying a short-term lease versus let the tenant go and maybe try to re-lease the space to a stronger tenant down the line. Could you just kind of walk us through a little bit of through how you kind of make that decision and again what kind of impact that eventually -- that should have on your outlook over the next 12 to 18 months as you kind of look at the retail environment.

Thank you for the positive comments. Our discussion with regard to leasing is obviously dependent upon timing. In the past two years, we had over 300,000 square feet of space returned due to bankruptcy caused by private equity funds overleveraging great specialty retailers. That was unexpected and more than we've had in many, many previous years. We worked our way through most of that as we disclosed our occupancy at the end of Q2 was down only 50 basis points or about 65,000 square feet. So we're working our way through most of that and have worked our way through most of it. Now with no new bankruptcies hopefully on the horizon, although we could be surprised, but none that we're aware of, our terms are stiffening with the tenants. We are not as apt to make short-term deals that are less advantageous to the company because we filled a lot of the vacant space, and there's not a lot of supply overhang. So we're getting thing back to -- close to the supply-demand equilibrium. It hasn't quite shifted to more demand than supply. But right now, we're seeing stabilization, as I mentioned to you. And it's probably going to take another -- several more quarters for that stabilization to take hold. But clearly, these negotiations are like most other parts of any business based on supply and demand.

Your next question comes from the line of Michael Mueller from JPMorgan.

I know you touched on leasing quite a bit and the spreads, but I'm just curious if you take a step back and think about it, the comments about you need several more quarters to stabilize, and I'm sure you're referring to numbers as well. But how much of that comment is -- we should think of it as it's going to take several more quarters for what happened in the first half of this year as well as 2017, to actually makes its way into the numbers, because the ball is in motion, it's going to take another year or so for it to fully work its way in. Or should we think of that comment as, that's happening, but there still other stuff on the horizon that's going to produce headwinds in the back half of the year even though the environment has gotten a little bit better with the margin.

As much as I try, it's very hard for me to see over the horizon. And if somebody can do that, please let me know. We're just commenting on the facts as we see them today, Mike. We will -- we have over the years been reactive, we've been proactive, we've been active. We've been doing this for 37 years. This is not the first time we faced a market like this. As we sit here today, we can just give you our comments and our thoughts upon what we see. If, when we hang up on the call, we get a press release that someone has declared bankruptcy, we'll deal with it as we've done before. But right now, we've identified what we think are the headwinds that we know about. We have a plan to deal with them and we're -- I don't know what else I could really say. We've made big investments into our centers. We've added experiential amenities to our properties. We've added technology to our properties. We're doing the things that one might expect to make the shopping visit enjoyable. But I don't know, I can't comment on things that are unknown at this time.

Got it. So it sounds like a lot of the commentary then was more backward-looking in terms of what's happened so far and flowing into the numbers then. That sounds like what you were talking about more so then.

Your next question comes from the line of Todd Thomas from KeyBanc Capital Markets.

I just want to try to understand this a little bit, just given the comments. So on the re-leasing spreads in '19, is that comment meant to be sort of relative to the 2018 spreads or in the sense that you think spreads will moderate further in '19 relative to '18, or are you just thinking about them on an absolute basis?

We're giving you what we know today which based on 20% of the space coming for renewal in 2019, that's what we're seeing. It's about 2019.

Okay. I'm just a little unclear then just given some comments around the stabilization in leasing that you're seeing. Is this specific to -- I guess, a couple of tenants or categories or something to that extent where occupancy cost ratios are just a little out of whack? Or is it just sort of a broader comment and expectation in general?

As I said, it's based upon a small sample size of 20%. Obviously, we expect to get a lot more leases signed in the next 90 and 180 days for next year and we'll update that. Based on the 20% that are executed for 2019, we are seeing the market continue to be flat and maybe slightly down. The spreads are flat -- the spreads are flat to slightly down.

There are no further questions at this time. I will turn the call back over to the presenters.

I want to thank everybody for participating. As I mentioned earlier, we're very proud to say that we have celebrated our 25th anniversary as a public company. This concludes our 100th earnings release and conference call. So thank you for your support and thank you for participating. Goodbye now.

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