Good morning. This is Cyndi Holt, Vice President of Investor Relations and I would like to welcome you to the Tanger Factory Outlet Centers Fourth Quarter and Year End Conference Call. Yesterday, we issued our earnings release as well as our supplemental information package in 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, February 14, 2019. 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 your 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 Steven Tanger. Please go ahead, Steve.

Thank you, Cindy. Good morning and Happy Valentine’s Day. Today I will give you a summary of 2018 and highlights of the fourth quarter, along with our perspective on 2019, Tom will then provide you with additional operational color and Jim will provide financial detail and our outlook for this year. Looking back at 2019, Tanger continued to demonstrate our leading position in the outlet industry. This was exhibited by a number of notable items. We had an active leasing year with more than 1,800,000 square feet of leases signed that commenced in 2018, representing a 9% increase over the prior year. Average tenant sales continued to grow. We maintained a high occupancy level of 96.8% at year end. Occupancy costs for our tenants remains stable at less than 10%, providing them with an ongoing compelling and profitable and value propositions to keep their stores open in our properties and we increased membership in our exclusive Tanger Royalty Club by 13% to 1.4 million members. These represent our most active customers who on average visit our centers about 50% more frequently and spend over 10% more per trip than non-members. Additionally, as one of our key principles, we maintained a fortress balance sheet that supported our efforts during the year. During 2018, we completed several financing transactions, which had a combined effect of increasing our total borrowing capacity, reducing our exposure to floating rate debt and extending the average term to maturity. With the net debt to EBITDA ratio of 5.9x at year end, our balance sheet is well-positioned providing us with the financial flexibility to pursue growth opportunities as they arise and prudently return capital to shareholders as appropriate. Specifically, given our strong cash flow, we are able to allocate capital towards investing in our centers to keep them…

Thanks. As Steve mentioned, our fourth quarter came in better than anticipated through the strong execution by our team. Maintaining well merchandised, vibrant centers is the key to our success. In that regard, we remain highly focused on our leasing and marketing activity to keep our centers filled with high-quality productive tenants. During the trailing 12 months ended December 31, we had 373 new and renewal leases commenced comprising 1.8 million square feet of GLA. That represents a 9% increase compared to the square footage, which commenced in the prior year. This leasing volume was offset by 126,000 square feet of space that was recaptured during the year due to bankruptcies and brand wide restructurings by retailers. Through aggressive leasing, we achieved 40 basis point sequential gain in occupancy during the quarter bringing our year end consolidated portfolio of occupancy to 96.8%. While seasonal tenants contributed to the gain, this improved occupancy demonstrates the ongoing successful execution of our proven strategy of maintaining well-merchandised centers while optimizing revenue and tenancy over time. For all leases that commenced in 2018, rents increased by 5.3% on a straight line basis and declined by 140 basis points on a cash basis compared to the prior year period. Comparable traffic for our portfolio was up 40 basis points in the quarter compared to the prior year. For the year, average tenant sales for the consolidated portfolio were $385 per square foot, a $5 increase from the prior year. On an NOI weighted basis, they were a healthy $413 compared to $406 per square foot in the prior year. Same center tenant sales performance increased 1.9% in 2018 compared to 2017. During the fourth quarter, we saw favorable results from our marketing efforts. In particular, in October, we ran in our annual peak style promotion,…

Thank you, Tom. Fourth quarter AFFO available to the common shareholders was $0.64 per share compared to $0.66 per share in the fourth quarter of 2017. Incremental income from our new developments and expansions completed in 2017 was partially offset by same-store NOI decrease of 70 basis points compared to the prior year quarter, driven primarily by the 2017 and 2018 store closures and lease modifications. These results have anticipated primarily due to the solid tenant sales, performance in the fourth quarter, which resulted in a better-than-expected percentage rent. Strong results from our seasonal tenant program and other income programs and lower-than-expected expenses, some of which is due to the mild winter season. For the year, FFO per share increased to $2.48 from $2.46, an increase of 1%. We recognized of $112,000 in termination fees and a consolidate portfolio to the fourth quarter of 2018 and $837,000 during the fourth quarter of 2017, which are not included in same-center and portfolio NOI. We were proactively in 2018 in enhancing of our fortress balance sheet, including two financing transactions in the fourth quarter, which continues our strategy of extended maturities and reducing our exposure to variable interest rates in both our consolidated and unconsolidated portfolios. First, in October, we amended and restated of our bank term loan, increasing the outstanding balance to $350 million from $325 million, extending the maturity to April 2024 from April 2021, and reducing the interest rates spread to 90 basis points, down from to 90 basis point, down from 95 basis point over LIBOR. The additional $25 million of proceeds was used to pay down the balance of outstanding under our security lines of credit. Second, in December, our National Harbor located near Washington, D.C. closed from $95 million mortgage loan with a fixed rate of…

[Operator Instructions] Your first question comes from the line Greg McGinniss with Deutsche Bank.

Good morning, Jim. I know you just kind of mentioned it. But could you explain a bit more how the change in lease accountings creating a CAM revenue benefit this year? I just – I haven’t heard any peers mentioned a similar adjustment to 2019 earnings?

Sure. The FASB issued an optional prep to Expedia to make it easier to implement the standard. For those who not using that prep to Expedia issuers need to separate all the lease revenue into lease components and non-lease components. And this could require issuers to reset some potentially relocate revenue recognize for every single lease as a middle of ramp or expense reimbursement, which is economic component, if you thought the practical experience, which we think most of shares are doing you allow that all the revenue to drive from the lease of the single lease component. And that throws you into straight line of recognition of the entire fixed portion of the lease.

Okay, alright. Thank you. I appreciate that. And then thinking about the same-store NOI range, could you possibly kind of bucket the pieces of it in terms of what the drag from occupancy is going be and then kind of rent escalators versus the reductions that we’ve seen or expect to have for the year?

Like what I can provide, I think, if you look at the midpoint, the decline in NOI is 240 basis points, about 140 basis points have added, some of the expectations of the further bankruptcies, potential rent adjustments from 2019 activity. Add to that things would be down on around about 100 basis points, which factors in all these other things, you mentioned, the drag from the 2018 closures and so forth.

Okay thank you.

And your next comes from the line of Todd Thomas with KeyBanc Capital Markets.

Hi, thanks. Good morning, Tom. I am just trying to determine you know how your accounting for incremental store closures in the guidance, it would seem that you’re already at the midpoint, with the 87,000 for Charlotte Russe and 66,000 for Gymboree, maybe a couple of other closures. But I think Jim mentioned that you have accounted for 100,000, so what’s the delta there and can you discuss whether there is sort of another reserve or anything else embedded in guidance for potential store closures that’s capturing some of that activity already?

Well, I believe as Jim mentioned just a minute ago, 1.4% of that – of the midpoint of the Same Center NOI decreases related to what we expect to get from store closures. And as you mentioned, a chunk of that is already known, but there – we’re expecting it will be more and we don’t know exactly what those will be right now.

And Todd, this is Jim, just to add to that. I think a part of what’s known of that 140 basis points is – two of the filings already with Gymboree, Crazy 8, and Charlotte Russe we mentioned earlier. Of the 100,000 square feet that we believe we’ll close, that’s about 100%, excuse me, about half of that 140 basis points, but half of it’s unknown to – for the anticipation that there may be further bankruptcies or other.

Okay. And then in terms of the average occupancy assumptions of 94% to 94.5%, where do you see that going in the first half? Just trying to get a sense of the magnitude of the decrease that you might experience early in the year and how much that might ramp in the back half of the year? And maybe Tom, along those lines, you commented that seasonal occupancy contributed to the increase in sequential occupancy. How much of a contribution was that in the fourth quarter?

In the fourth quarter, the majority of that was seasonal. And the first question was?

Just in terms of the sort of cadence of occupancy change throughout the year, what to expect in the first half versus the second half as it pertains to that – the 94% to 94.5% range?

So, Todd, I think about 100 basis points of occupancy is – the decline is driven by this 140 basis points of Same Center NOI we’ve been talking about, that’s anticipation of the bankruptcies and the 2019 bankruptcies. So, we think of the known part that we’ve mentioned, which is about half of that we expect to come in second quarter.

Okay. And the seasonal occupancy, the majority of those tenants have already moved out in the first quarter or will move out in the first quarter?

Historically, Todd, you’re right, first quarter does show the dip, the fourth quarter usually is stronger with seasonal tenants that usually close in first quarter, right.

Right.

Okay. Thank you.

And your next question comes from the line of Caitlin Burrows with Goldman Sachs.

Hi, good morning. I guess, I was wondering if you guys could talk about – I think in the past, you had mentioned in terms of the balance between pushing rents and occupancy that the goal would be first to focus on creating demand and improving occupancy and then on the rate side. So, I was wondering, if you could just comment where you are kind of in that process and how you feel that’s going?

Good morning, Caitlin. We have a longstanding strategy of maintaining high occupancy. We have found that to be successful over past 35 years and creating an environment that the consumer wants to shop. It creates a false environment or not compelling environment if there’s a lot of dark holes. So, we have always used seasonal tenants, shorter-term pop-up stores to maintain a compelling environment for our consumers and our guests when they shop. We’ve had several pop-up stores become high volume permanent tenants, one of which is Vineyard Vines. So that project is – that strategy has been successful over many years. I don’t see any reason to change it. As I mentioned, our occupancy at the end of the year was 96.8%. We’ve guided at a lower occupancy average during the year based on what we know today with existing file bankruptcies. As everybody knows bankruptcy happens fast and refilling the space takes a little time, but we have an aggressive highly seasoned leasing group that’s been together for many, many years and has worked together very well to attempt to fill those spaces. The good thing is our average size store is only 4,000 square feet. We’re not faced with losing a large anchor box or a large department store or a large Sears that costs anywhere from $20 million to $25 million to repurpose and subdivide into other uses. The size – average size of our store, they’re all effectively 100 feet deep, are relatively easy to refill with a wider universe of tenant potentials and it’s significantly less capital expense.

I guess, just on that since you brought up the average size of the stores, have you noticed any kind of change over the past year or 2 for Tanger? And I guess going forward in the leases you’ve done, if you had a scenario where you wanted to say like combine two of those 4,000 square foot boxes into one, would that new 8,000 box, could you remind us be included in the leasing spreads?

I...

That is yes. Caitlin, I’m sorry, can you ask the question again?

Yes, I guess, two parts. In terms of average box size, have you guys noticed any shift over the past year or 2? And then based on the leases you’ve signed for going forward? And then second, to the extent, there are shifts in box size, does that or does that not get included in the leasing spreads?

Sure, I’ll take that. The second question is, yes, all those – all the box sizes get factored into our leasing spread, we don’t exclude any boxes from our spreads.

And with respect to the change in the average size, we haven’t seen a meaningful change. I mean, certain tenants are growing and looking for bigger sizes than they were before, others are making their size smaller, but on average, it’s very similar.

Okay. And then maybe just on the Nashville announcement, that’s exciting that you guys could be building a new center there. So, I was just wondering in terms of making the announcement to the community, what was your kind of threshold in terms of telling us? And then at what point do you expect to know that – when are you aiming to kind of get to that 60% pre-lease to say move forward or not?

Well, in terms of timing for the announcement, we are preparing our year – a big part of our leasing year is the ICSC Convention in May and we’re going to have our leasing folks up and running on this project before then. So, that contributes to the timing right now. With respect to when we’ll get to the 60% pre-lease, it’s very hard to tell. This is a project that will take a good bit of time because in addition to customary entitlement and pre-leasing, there’s a new interchange that needs to be built and a significant amount of grading to go on there. So, it will take a little time to get there. I would – really difficult to guess exactly when we get to that point, but we’re comfortable we’ll get there because it’s a dynamic market and –

Okay, thank you.

The next question comes from the line of Craig Schmidt with Bank of America.

Yes. I guess, sticking with Nashville, it’s mentioned that’s a near Downtown location. I just wonder, if you’re getting any pushback by tenants that aren’t comfortable with trading and proximity to traditional distribution?

In general, that has lessened quite a bit overall, not just in Nashville. And I will say this is a, I think a short drive from Downtown, I wouldn’t – it’s not walking distance by any means.

Okay. And then on the 9.9% cost of occupancy, given your thought of where sales are heading and where you might be doing some restructuring of leases, do you expect that cost of occupancy to come up or go down?

Well, Craig, we’ve had probably 300,000, 325,000 square feet returned to us through unexpected bankruptcies in 2017 and 2018. We’ve maintained the occupancy during that period in the face of this large over-leverage buyouts from the private equity companies. We’ve been able to maintain during the last 2 years occupancy and working with our tenants to remain – to achieve cost of occupancy, where they still find it – find distribution in the outlets to be very profitable. I don’t – I think we would – we’re planning to have that cost of occupancy stay approximately where it is, maybe trend back to 10%, but it’s not going to jump highly with the existing co-tenants seeing the high occupancy that we anticipate.

Great. Thank you.

And your next question comes from the line of Christy McElroy with Citi.

Hi. Good morning, everyone. Just to follow up on Nashville more from a capital allocation perspective. How do you think about sort of now being the right time to explore ground-up development in the more uncertain retail environment versus putting capital towards share buybacks as you’ve done and sort of recurring CapEx needs, but also putting incremental capital into existing centers?

Good morning, Christy. Nashville is not going to happen tomorrow. It may be a year, 2 years, three years down the road. We are not allocating significant capital, very little capital right now to the Nashville future project. We are responding to some of our larger more productive tenants request to continue to grow and that’s a result of the profitability of the outlet distribution channel. So, I think one needs to look at allocation short-term, which Jim has mentioned, our priority allocations are the ones you just talked about. Over time, we intend to continue to grow. We have confidence that the outlets are – that the outlets remain popular with consumers. There is a void in this market and so I think the answer – the quick answer is, there is no capital – very little capital being allocated today.

Okay. And then can you comment on may be your appetite or desire to sell assets today? Can you may be comment on the press reports that Tanger Outlets Williamsburg is up for sale and are you marketing any others?

We really don’t comment on any acquisition or any disposition until its closed. But I would tell you we’ve had a longstanding policy of pruning our own portfolio and recycling the capital. Since December 2014, we’ve sold 9 properties and recycled $272 million in capital in doing so. So, if something does close, of course, we will provide a press release and the details.

Okay. And if I could ask just one more, you’ve talked a little bit about sort of the retailer brand-wide restructurings. Are you seeing an uptick of the – in those as we head into 2019?

Well, the brand-wide restructurings through bankruptcy are well-known and published. We – and that’s basically what we’re referring to.

Okay. Got it. So, in terms of sort of rent adjustments that you’re doing by retailer on expirations in any given year, that’s – that – are you still seeing the same pace of that?

Obviously, it’s tenant-specific, it’s shopping centers specific. We don’t see much change from the prior 2 years.

Thank you.

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

Hey, Steve. Just taking a step back and just looking at the industry as a whole and – how should we think about the long-term sales growth of your portfolio? If sales doesn’t grow much from here and you’re sort of in this 1% to 2% range and with occupancy costs just around 10%, where do you really go here from a pricing perspective? Obviously, there’s sort of a headwind over the next maybe 12 months, 24 months, but kind of in this 3-year to 5-year period, where do you see sales growing and pricing perspective as well?

My crystal ball is a bit cloudy once I go out past a year, so I’m really not comfortable talking of 3-year to 5-year period of time. We have fought as other peers in our industry a disproportionately large amount of bankruptcies caused by over-leveraged buyouts of specialty retailers by the private equity industry. That seems to be sorting itself out now. There were two that were announced in the first part of the year, but we’re hopeful that it’s getting towards the end. That’s created an overhang. And as we’ve mentioned, our strategy is to keep the lights on. That space is being refilled. I think we’ve done a terrific job of refilling the vacant space caused by those unexpected bankruptcies. We will – pricing depends on occupancy. And over time, as has been our history, this is not the first time we’ve experienced retail slowdown or an economic slowdown in the past 38 years, probably the fourth or fifth time. And we are working hard to keep the space full with vibrant tenants. If we are successful, which we have been, that will create more demand for space. The 25-year-old, 30-year-old outlet centers, some of which are being repositioned in other uses has reduced the supply of outlet space to the consumer. There’s been very little new development. So that supply/demand dynamic is working in our favor. Right now, in view of all the headlines, we are comfortable with the sales growth that we’ve had in the last 2 years. And expect if we continue to fill the space with new exciting tenants that will create more demand and that will lead to more pricing power just as it has in the past.

If I may add, we’ve mentioned a number of times most of our tenants tell us the outlet channel is their most profitable channel and a number have indicated they’re profitable at much higher cost of occupancy than 10%.

Okay. Thank you for the color.

And your next question comes from the line of Michael Mueller with JPMorgan.

Yes, hi. Couple of numbers questions first. I may have missed this, but did you talk about what the CapEx spend is expected to be in 2019? And then also on the rent spreads, the commentary about flat to positive so far in 2019 on what you’re pleased. Can you comment on where the cash spreads are positive as well, flat to positive?

Yes, hey, Mike, on your – in terms of your first question, that’s one of our items in the guidance section of our press please we provide for the CapEx.

Okay, got it.

We’re (Multiple Speakers) of $36 million to $40 million, which is pretty comparable to what we spent in ‘17. And the answer to your second question is yes.

It is positive, okay. And then going back to the Nashville development for a second. I mean, do you anticipate anything being different in terms of mix maybe, a different mix in terms of outlet versus non-outlet tenants or food and entertainment versus something else compared to what you’ve built over the past 5 years, 7 years?

No. We’ve sized the Nashville project at 288,000 square feet, which we think is an appropriate size for that market. This will be part of a larger multi-use development. Mike, this might be an appropriate time to say that as part of our capital allocation, we prefer other people to put their money at risk and densify the area around us as has happened many, many times in our history. Tom identified several places around the country, where we went in with an outlet and other people took the development risk and densified the area with multi-family housing, office, other types of retail, multiple restaurants. I just say that throughout entire portfolio, we have 203 restaurants within an easy walking distance of our shopping centers. We don’t have to take the risk to put our capital into supporting restaurant concepts that may or may not work we are happy to let other people take that risk.

Got it, okay. That’s what I had. Thank you.

[Operator Instructions] Your next question comes from the line of Tayo Okusanya with Jefferies.

Good morning. This is Ruben on for Tayo. What is the embedded assumptions in guidance around share buy backs? If there none currently assumed, how much do we expect in 2019?

Well, we don’t give the specific guidance regarding the share buybacks and what I can tell you is our CapEx and is particularly very comparable to the last year, as we mentioned 36% to 40%, generating over $100 million in cash flow over and above our dividend. So, it gives us plenty of room to continue our priorities, that we have the last year, I think gives us the opportunity that we can use some of those proceeds to continue to buy back shares opportunistically with make sense not continue to deleverage of our balance sheet and improved the assets in our portfolio.

Got it. Thank you. And then sorry if I missed this but on the Nashville project, what is the expected yield for the project?

We haven’t given a yield or an occupancy grand opening date, we will be happy to update as the project continues during the course of the next year or so. We are right now we’re not in a position to give the yield.

Got it. Thank you very much.

And your next question comes from the line of Steve Sakwa with Evercore ISI.

Thanks. Just one question on the share buyback, I guess you guys did not buy any stock in the fourth quarter. I didn’t know if you’re blacked out or there was a specific reason, why you guys going to take advantage of the volatility in Q4?

Steve, this is Steve. Good morning. No, we chose to pay down $50 million in our debt, and that was over capital allocation decision and made no share buyback and in the fourth quarter. Our board, as we mentioned, has increased and extended the buyback authorization to give management the optionality to buy back shares when we think the when we think it’s an appropriate time.

Okay thank you.

And there are no further audio questions. Do you have any closing remarks?

So just want to take emphasis to thank everybody for participating in our call today. We do look forward to seeing many of you at the city conference in Florida in a couple of weeks in the March 1. Once again, have a great day and thank you. Goodbye now.

Thank you. This concludes today’s conference. You may now disconnect.