Tanger Acquires NJ and MD Assets

Tanger Factory Outlet Centers Inc. (SKT - Snapshot Report), a real estate investment trust (REIT), has recently acquired Phase I and Phase II of Atlantic City Outlets The Walk in Atlantic City, New Jersey, and Ocean City Factory Outlets in Ocean City, Maryland, for a combined price of $199.3 million. The purchase price included approximately $125.8 million paid in cash and the assumption of approximately $73.5 million of debt associated with the properties.

Tanger expects the properties to be accretive from the first year of its ownership. The acquisition is part of the long-term strategy of the company to strengthen its geographic presence in densely populated markets with a high-quality roster of retailers. With the inclusion of the June 2011 acquisition of an outlet center in Jeffersonville, Ohio, the company has added a total of 1.1 million square feet to its wholly-owned portfolio in the recent past.   

Spanning 491,000 square feet of leasable space, Atlantic City Outlets The Walk is built in three phases. While Phase I and Phase II are both 99% occupied, Phase III is currently 80% occupied. The outlets feature designer labels and name-brand stores of leading retailers such as Calvin Klein, Lacoste, Old Navy, Reebok, and Tommy Hilfiger.

The Ocean City Factory Outlets includes approximately 200,000 leasable square feet. The property is currently 93% occupied with approximately 40 outlet stores such as Calvin Klein, Dress Barn, and Tommy Hilfiger. The property is located in close proximity to the 568,900 square foot Tanger Outlet Center in Rehoboth Beach, Delaware – one of the high-volume centers of the company. Consequently, the acquisition is expected to provide operational synergies to benefit the company in the long-run.

Greensboro, North Carolina-based Tanger owns and operates a portfolio of 37 upscale outlet shopping centers in 25 states totaling approximately 11.4 million square feet. The properties are leased to over 2,300 retail stores that are operated by over 390 different brand name companies.

We currently have a ‘Neutral’ rating on Tanger, which presently has a Zacks #3 Rank that translates into a short-term ‘Hold’ rating, indicating that the stock is expected to perform in line with the overall U.S. equity market for the next 1–3 months. However, we have an ‘Outperform’ recommendation and a Zacks #3 Rank for General Growth Properties Inc. (GGP - Snapshot Report), a competitor of Tanger.

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