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Tanger Factory Outlet Centers Inc. (NYSE:SKT)

Q1 2009 Earnings Call

April 24, 2009 10:00 am ET

Executives

Stanley K. Tanger – Chairman

Steven Tanger – President and Chief Executive Officer

James F. Williams, Senior Vice President, Controller

Analysts

Jay Habermann – Goldman Sachs

Quentin Velleley - Citi

David Fick – Stifel Nicolaus & Company

Frederick H. Taylor - MJX Asset Management

[Gregory Holstrom - Good Samaritan]

Michael Mueller – JP Morgan

Rich Moore – RBC Capital Markets

[Harvey Shore – East West Investments]

Ben Yang – Green Street Advisors

Operator

Welcome to the Tanger Factory Outlet Center's first quarter 2009 conference call. Please note that during this conference call some of management's comments will be forward-looking statements regarding the company's property operations, leasing, tenant sales trends, development, acquisition, expansion and disposition activities, as well as their comments regarding the company's funds from operations, funds available for distribution and dividends.

These forward-looking statements are subject to numerous risks and uncertainties and actual results could differ materially from those projected due to factors including, but not limited to, changes in economic and real estate conditions, the availability and cost of capital, the company's ongoing ability to lease, develop and acquire properties, as well as potential tenant bankruptcies and competition.

We direct you to the company's filings with the Securities and Exchange Commission for a detailed discussion of the risks and the uncertainties. We also direct you to the company's prospectus as filed with the Securities and Exchange Commission on form S-4 for the complete details of the company's exchange offer relating to our 3.75% exchangeable notes.

Report tenant comparable sales numbers discussed today are for the company's wholly-owned portfolio and exclude the centers in Foley, Alabama and on Highway 501 in Myrtle Beach, South Carolina, both of which underwent major renovations during the last year.

This call is being record for re-broadcast for a period of time in the future, as such it is important to note that the management's comments include time-sensitive information that may be accurate only as of today's date, April 24, 2009.

(Operator Instructions) On the call today will be Stanley Tanger, Chairman of the Board, Steven Tanger, President and Chief Executive Officer and James Williams, Senior Vice President and Controller. I will now turn the call over to Steven Tanger.

Steven Tanger

There is currently a lively debate within the REIT industry with regard to many REIT's shifts in their dividend policies. We were pleased to announce on April 9 that our board of directors had approved an increase in our annual cash dividend rate from $1.52 to $1.53 per share.

We are proud of the fact that we have raised our dividend each of the 16 years that we have been a public company. Our budget for 2009 currently anticipates the year-end funds from operations available, funds available for distribution, or FAD, in the mid 60% range.

That means our existing cash dividend is 150% covered from operating cash flow. We do not use our lines of credit to fund our dividend. One of the reasons investors buy REIT stocks in Tanger is the expectation of a total return, including a cash dividend.

Frank Marchisello, our Executive Vice President and Chief Financial Officer who normally participates in our earnings call is a little under the weather today. So I'm pleased to have Jim Williams with me on the call.

I'm going to turn the call over to Jim now, who will take you through our financial results for the quarter, and then I will follow with the summary of our operating performance and our current expectations for 2009. Jim?

James Williams

Let me take you through our financial results quickly, and then I will take a few minutes to discuss the outstanding exchange offer relating to our 3.75% exchangeable notes. Our current year and prior year comparative results have been adjusted to include the impact of a number of new accounting pronouncements, the most material of which is FASB APB 14-1 accounting for convertible debt instruments that may be settled in cash upon conversion, including partial cash settlement.

Net income available to common shareholders for the first quarter of 2009 was $0.92 per share, compared to $0.16 per share in the prior year. Funds from operations for the first quarter of 2009 increased approximately 12% to $0.66 per share, compared to $0.59 per share the previous year.

The increase in FFO was driven by our ability to increase rental rates on renewals and re-leased space as well as incremental FFO from our new center in Washington, Pennsylvania, which opened during the second half of 2008.

Our FFO pay-out ratio for the first quarter was approximately 58% and our FAD pay-out ratio was 69%. We are currently budgeting to spend less than $8 million in capital projects in 2009, compared to $30.8 million that we spent in 2008. This will bring our FAD pay-out ratio down substantially, most likely in the mid 60% range by year end.

At these levels our dividend is well covered, and we will generate incremental cash flow over our dividend which we plan on using to reduce our outstanding lines of credit. On a consolidated basis our total market capitalization on March 31, 2009, was approximately $2.1 billion. And our debt to total market capitalization was approximately 40.5%.

We also maintained a strong interest coverage ratio of 3.34 times for the quarter. As of March 31, 2009, approximately 77.8% of our debt was at fixed rate. Our only floating rate debt is $188.4 million outstanding on our $325 million in unsecured lines of credit which have an interest rate ranging from 60 to 80 basis points over LIBOR.

Our wholly-owned portfolio of properties was 95% unencumbered, and we have no outstanding debt maturities until June 2011. Our balance sheet strategy has always been conservative. With that in mind, let me just take a couple of minutes to discuss the outstanding exchange offer for our 3.75% exchangeable notes.

We are proposing to deliver to holders of the bonds Tanger common shares. They will receive 27.7434 common shares for $1,000 principle amount of the note, which is based on the current conversion price of $1,000 for principle amount of the notes, which is based on the current conversion price of $36.04 per share.

They will also receive a number of shares equal to $215, based on the average of the volume weighted average prices over an eight trading day averaging period, subject to a minimum and maximum number of common shares as described in the prospectus for the offer. In total this represents a premium to [inaudible] level on the note of approximately 7% to 8%.

Because our stock price is relatively close to the exchange price of the exchangeable notes, our notes still have significant equity content. We believe that this is a very efficient way to reduce debt and raise equity, more efficient than incurring the market discount an issuance call associated with a marketed or block common share offering.

We believe that many note holders are already short a significant percentage of the shares underlying the exchangeable notes. This should reduce the selling pressure that would otherwise be caused by issuing a significant number of common shares.

This transaction allows us to match what is essentially an equity issuance with the use of proceeds targeted at the exchangeable notes. Put it another way, we are raising equity only to the extent the exchangeable notes are tendered, and thus will not raise any more or less equity than is needed to complete this transaction.

Assuming all notes are tendered and accepted at a volume weighted average price of $34.01, the closing price of our common shares as of last night, we estimate that our debt to total market capitalization ratio would decrease to 33.5% from 40.5% and our interest coverage ratio would improve to 4.21 from 3.34.

In addition we estimate that exchange of all of the outstanding notes will reduce our funds from operations available to common shareholders by approximately $0.07 per share on an annual basis. Our ultimate goal in pursuing this transaction is to proactively address the pending 2011 maturity.

Other than these exchangeable notes, all of our 2011 maturities relate to commercial banking facility, including a $235 million term loan, an amount outstanding on our unsecured lines of credit. I will now turn the call over to Steve.

Steven Tanger

I'm pleased to report that so far this year we have continued to see positive rent spreads on the renewal and re-leasing of space within our portfolio. Our average cost of occupancy for 2008 was 8.2% of average tenant sales which still provides us the opportunity to raise rental rates on the re-leasing and renewal of space.

We have already made great progress on our 2009 renewals throughout our wholly-owned portfolio. As of the end of March we have obtained executed renewals and progress for 951,000 square feet, or about 63% of the space coming up for renewal during 2009.

With an increase in average based rental rates on the executed renewals of 14.5%. This compares to 493,000 square feet representing 67% of the total square feet up for renewal at this time last year with an increase in average base rental rates on the executed renewals of 17.9%. In addition, during the first quarter we re-tenanted approximately 188,000 square feet with an average increase in base rental rates of 42.4% compared to last year at this time when we released 279,000 square feet with an increase in average base rental rates of 41.7%.

Same center interline growth during the quarter was 2.4% compared to 2.5% in the fourth quarter of 2008. Our overall occupancy rate for our wholly-owned stabilized properties was 93.5% at the end of the quarter compared to 95.2% last year.

Reported tenant comparable sales within our wholly-owned portfolio decreased 3.2% for the rolling 12 months ended March 2009 to $338.00 per square foot. Our portfolio does not have many luxury stores, which have been suffering the steepest decline in sales. Most moderate stores did not have the robust sales increases in 2008 so they plan more modest inventory levels in 2009.

Percentage rents, which are paid by tenants once their total sales exceeds certain levels, represents less than 3% of our expected total revenues during 2009. Approximately 93% of our total revenues are expected to be derived from contractual base rents and tenant expense reimbursements. In addition, no single tenant accounts for more than 8.4% of our gross leasable area or 5.5% of our base in percentage rents. Most of our tenants have very strong balance sheets. They are not encumbered by the excess debt layered on by most LBO's, which have caused several of the high profile bankruptcies.

On January 5, 2009, we acquired the remaining 50% interest in the joint venture which owns the Tanger Outlet Center located on Highway 17 in Myrtle Beach, South Carolina. The net purchase price of $32 million, which was funded from amounts available on our lines of credit. The property is currently subject to a $35.8 million mortgage, which matures on April 7, 2012 assuming we exercise a two-year extension option.

There is an interest rate swap on the loan that fixes the rate on $35 million of the loan at 5.99% and the remainder of the loan is at a floating rate of LIBOR plus 140 basis points. The current loan-to-value is about 36%. This is an A property which we obviously know very well. This acquisition will be immediately accretive. Gaining complete ownership of the property will allow us to capture 100% of the future upside over the long-term.

With respect to earnings guidance for 2009, based on our review of current market conditions, we believe our estimated diluted net income per share for 2009 will be between $1.35 and $1.45 per share and our FFO for 2009 will be between $2.73 and $2.83 per share.

In our earnings guidance, we are assuming that same center NOI grows by approximately 1% to 2%. The growth in NOI will be driven by continued increases in renewal and releasing spreads during 2009.

Rental rate increases, however, will be offset somewhat by what we expect will be slightly lower average occupancy rates over the next 12 months relative to last year as we continue to fill vacancies within our portfolio.

In our guidance, we also assume our tenants will be challenged to maintain sales as increased discounting and price deflation will most likely continue in 2009. We are projecting percentage rental revenues to decrease, which is a direct result of lower sales.

Our guidance range also reflects the accounting change relating to the recording of additional non-cash interest expense associated with our $149.5 million of outstanding convertible debt, which requires booking interest expense at 6.1% even though our actual rate is 3.75%. This will have a negative impact on earnings of approximately $0.07 per share. We will not adjust our guidance for the potential impact of the exchange offer relating to our 3.75 exchangeable notes until this transaction is completed.

We plan to continue to thoughtfully use our resources and to maintain a conservative financial position. These are unprecedented times, but our company is positioned to get through the headwind successfully. Our solid balance sheet with no upcoming debt maturities in the next two years puts us in a very strong position going into 2009.

Operator, we'll now take any questions that people may have.

Question-and-Answer Session

Operator

(Operator instructions) Your first question comes from Jay Habermann – Goldman Sachs

Jay Habermann – Goldman Sachs

Can you comment a bit just on the occupancy drop-off timing of which was it, in terms of impact and in terms of cash-flow, was most of the drop-off in occupancy reflected in Q1 or should we expect there to be additional impact in the second quarter? And, can you give us a little details on the space that was vacated and what sort of segments there?

Stanley K. Tanger

These are obviously unprecedented times so it's difficult to project. In the close to 30 years we've been in business, the first quarter usually drops 150 to 200 basis points from year-end. That's from seasonal temporary tenants leaving at the end of the year. And tenants that are struggling usually try to hold on until the end of the year and then in the first quarter close.

We have experienced a slowdown, like other people, in the releasing of vacant space and I think that's part of it. The good news is that we only received back about I think 28,000 square feet in the first quarter from tenants. So, that seems to be slowing down and we're working hard to fill the vacancies.

Jay Habermann – Goldman Sachs

And then, I guess you mentioned still maintaining the guidance and I think on the last call you had mentioned sort of average occupancy of 95% and still 1% to 2% same store NOI growth. I mean, I know you've dipped below 95% I think for the first time in your history, but can you give us some comments of where you think occupancy shapes up toward year-end?

Stanley K. Tanger

The guidance, Jay, was for 95% at year-end and we have maintained year-end occupancy at or greater than 95% for the 28 years we've been in business. We have dipped below on any particular quarter, particularly the first quarter, occasionally below 95% but we have during the course of the year filled those vacancies. So our guidance is at year-end at 95% occupancy.

Jay Habermann – Goldman Sachs

And then, can you give us some sense of maybe larger stores versus smaller stores in maybe just different markets. I know if you look at some of your centers, occupancy has fallen off quite a bit. I mean, even Riverhead is now down a few hundred basis points, but some other centers are now sort of in the mid-80% range?

Steven Tanger

We don't have a lot of large stores, fortunately. The configuration of our centers is easy to re-tenant. Most of the space is 100-feet deep. We do not have any second-level retail or odd-shaped boxes. So, it's just a confluence of a lot of smaller stores through various reasons leaving and we're in the of refilling that space.

Jay Habermann – Goldman Sachs

And, lastly, I just wanted to ask a question in terms of, you mentioned, obviously, some of the levered deals and how's that impacted the retailers, but have you seen any opportunities where levered transactions might create some buying opportunities for assets?

Steven Tanger

Not yet.

Operator

Your next question comes from Quentin Velleley – Citi.

Quentin Velleley - Citi

Just on Deer Park, I noticed the cash yield looks like it's increased to about 4% annualized. I'm just wondering whether you've revised the target, as when you expect the rates to stabilization yield, which I think is about 8.5%.

Steven Tanger

Again, these are unprecedented times. Deer Park opened on October 23. We couldn't have picked a more perfect time to go right into the eye of the perfect storm. We had not executed several or many new leases since we opened.

We had anticipated, in the normal environment, the lease up would have gone more rapidly, particularly since this is a high volume center. Historically, we would have reached the stabilization within the first 12 months. I have no idea how far out that's going to go. It may be 12 months from now, which would be 18 months from opening, but that's just to guess.

Quentin Velleley - Citi

And just also on your Washington assets recently completed, I just noticed the occupancy sort of ticking down. I just was wondering if you could comment on how that asset's performing.

Steven Tanger

The asset is performing above most retailer plans. The slight drop in occupancy is a couple of small tenants that went out. It's not a significant number of square feet. The racetrack across the street, which has a pari-mutuel betting and a casino, just opened a week ago and it's a high volume facility.

So we anticipate sales throughout the summer months to grow substantially with the increased traffic provided by the casino. We are extremely optimistic. The property still maintains in the mid-80% occupancy level and we expect that to continue to grow.

Once again, that's a new property that opened over Labor Day last year, so we really have not seen a summer season, which would be more high volume yet. But, we're anticipating great results.

Operator

Your next question comes from David Fick – Stifel Nicolaus.

David Fick – Stifel Nicolaus & Company

You didn't talk a whole lot about development; I'm assuming that you have prudently decided to hold out for higher yields and are pushing back, given the Deer Park issues and the general market; is that a correct conclusion?

Steven Tanger

Yes.

David Fick – Stifel Nicolaus & Company

Any thoughts on when that might change or what you're hearing from tenants at this point?

Steven Tanger

We're in constant contact with the tenants and they will drive our decision. If we can get the returns that meet our investment criteria and we get executed leases, we will proceed. If not, we will abandon the project or put it on hold.

David Fick – Stifel Nicolaus & Company

What would be an appropriate development hurdle at this stage?

Steven Tanger

David, I wish I could tell you because, candidly, I'm not smart enough to figure out our cost of capital in today's market. But it certainly would be in the low double digits, but we don't know yet.

David Fick – Stifel Nicolaus & Company

Can you comment on the historical trends compared to today on the outlet business in general? Obviously, same stores are down and we do appreciate your reporting that detail. Is this a traffic issue or is it just simply discounting in price points and the volume is still strong and, then, secondly, where are you seeing strengths and weakness in terms of category, say electronics compared to kids compared to facts?

Steven Tanger

Let me take one thing at a time. Traffic levels appear to be holding down slightly. There is price deflation in apparel and footwear and athletic wear, a pretty significant price deflation. So, to even break even, the number of units going through these stores is huge, and I think that is contributing to the decline in sales. I will say that what we reported, I think, when all of the reporting is done in the next couple of weeks, our numbers, even though there down, should look pretty good.

With regard to categories, we have very little if any consumer electronics. Somewhere, about 85% of our portfolio, is footwear, apparel, various all types of apparel, and jewelry. Some of the jewelry store sales are down, but, basically, David, it's across the board, with one or two exceptions with robust sales increases. The rest of them are pretty flat to down.

David Fick – Stifel Nicolaus & Company

On the electronics, I was thinking of a Bose or Bang Olufsen. You have a fairly wide standard deviation, sort of top to bottom, within a center, with the higher end, Nikki, Polo, at one end, and Carter, Oshkosh, and some of the footwear guys are, Danskin, at the bottom end. Are you seeing more erosion at the bottom end or at the top end at this point?

Steven Tanger

It's across the board, there's no clear definition. We don't have many luxury tenants. Where, from what we understand, they've suffered the steepest declines. Our target market is the middle to upper-middle class and the price points associated with that and that's been fairly stable to down, by the percentage there, and you can see the average decline. So I can't point to one thing or one category.

David Fick – Stifel Nicolaus & Company

So it's across the board. The Saks Fifth Avenue presence, how many of those stores do you have and can you –

Steven Tanger

We have two stores, David, one in Riverhead and the other in Deer Park, both on Long Island.

Operator

Your next question comes from Fred Taylor – MJX Asset Management.

Frederick H. Taylor - MJX Asset Management

Steve, I think the exchange offer is a great idea.

Steven Tanger

Thank you, Fred.

Frederick H. Taylor - MJX Asset Management

And I wanted to, even though we're two years away, any thoughts on the bank maturity in '11 and, I guess, the mortgage maturity in '12? Might you start thinking about a refi later this year or maybe into 2010?

Steven Tanger

We are thinking about it. The first step is to successfully complete the exchange and I appreciate your positive comments. Once that is off the table, we have already met with several, if not most, of our banks that are in the facilities that you mentioned, and we're two, a little over two, years away, probably 26, 27 months away from maturity, so we're going to do the exchange first and, then we're going to go talk to the banks, probably this summer into early fall.

Operator

Your next question comes from [Gregory Holstrom – Good Samaritan].

[Gregory Holstrom - Good Samaritan]

Yes, about Deer Park, are they going to still add more tenants in the coming years or –

Steven Tanger

Our plan is to add more tenants.

[Gregory Holstrom - Good Samaritan]

Like, which ones are they talking about?

Steven Tanger

We only announce tenants once leases are signed.

[Gregory Holstrom - Good Samaritan]

Are these stores like the same ones they have at Riverhead or maybe some different ones?

Steven Tanger

Once leases are signed, we will announce them. These are two different properties, they're in, basically, two different markets. There is some overlap in tenants between the two, but there's a lot of unique tenants in each center.

[Gregory Holstrom - Good Samaritan]

Now, since Deer Park opened, I know they really had been in a really good area for it.

Steven Tanger

I'm sorry. I didn't understand your question.

[Gregory Holstrom - Good Samaritan]

When Deer Park, when they opened, it really turned out to be a really nice one.

Steven Tanger

Thank you.

[Gregory Holstrom - Good Samaritan]

Now, is Riverhead still going to have more tenants coming in, too?

Steven Tanger

That's our plan.

Operator

Your next question comes from Michael Mueller – JP Morgan.

Michael Mueller – JP Morgan

Hi, my question has been answered, thank you.

Operator

Your next question comes from Rich Moore – RBC Capital Markets.

Rich Moore – RBC Capital Markets

On ICSC that's coming up next month what is that looking like for you guys, I mean how would you characterize the interest in tenants meeting with you guys versus previous years?

Steven Tanger

We fully support ICSC and we think it's a good use of our time to bring our group out there and talk with our tenants. So far, and we're about a month away or three weeks away, the tenant meeting schedules are pretty much comparable to what they have been in previous years, so we're expecting to have a full calendar as we've always had.

Rich Moore – RBC Capital Markets

And then as you look at 2010 leasing, I mean I'm sure you guys are already well underway looking at 2010, what are you seeing as you think about leasing for 2010, and are we seeing more of the 2009 sort of caution by the retailers or is that beginning to loosen a bit?

Steven Tanger

We don't have that much focus on 2010 yet. Most of the tenants are still focusing on the balance of 2009. Most of the tenants we work with do not have their capital allocation for 2010 yet.

Rich Moore – RBC Capital Markets

And then, as you look at the leasing that you're doing, are concessions, are they prevalent, are there a lot of requests for concessions or is that abating as well?

Steven Tanger

Concessions are not prevalent and they are abating.

Rich Moore – RBC Capital Markets

And I noticed that the expense recovery ratio was down slightly from a year ago and a little bit below what we had anticipated; is there anything in particular on the expense recovery line that's occurring?

Steven Tanger

Jim, you may want to take that.

James F. Williams

Rich, I don't think there's anything in particular that stands out other than a slight decrease in the occupancy rate that has an [annotate] on that line.

Steven Tanger

Okay, I mean and there is some true ups maybe as well, Jim?

James F. Williams

We had some true ups but it wasn't…

Rich Moore – RBC Capital Markets

And then the last thing I have, as you guys talk to the lenders, even though I realize you don't have to have the deep negotiations yet, I mean how would you characterize the conversations with those guys, and I realize that you're getting done what you're getting done and if you don't have anything you're not necessarily getting anything done, but the tone is what I'm looking for versus say, six, seven months ago, how would you characterize where we are today?

Steven Tanger

My grandfather taught me you never go to a bank if you're really need money. We're going there with a pristine balance sheet and very robust cash flows and the metrics, in our business, are still extremely positive and the banks appreciate that.

We're having positive and constructive conversations with them. We have not entered into, because it's premature, definitive conversations about extending our lines of credit or extending the term loan.

Rich Moore – RBC Capital Markets

It sounds like your grandfather was a pretty wise man. Thank you very much, Steve, thanks guys.

Operator

Your next question comes from Jay Habermann – Goldman Sachs.

Jay Habermann – Goldman Sachs

Just one follow up, back to Dave Fick's question on the different segments within retail, can you comment a bit about some of the more traditional mall tenants, are you seeing the Coaches of the world. Are they still going to expand, given the low occupancy cost that obviously that the outlets offer, or are you seeing even risk of those sort of stores closing too, sort of that more traditional mall tenant?

Steven Tanger

We're talking to all tenants, including the mall tenants. Coach that you mentioned is still doing very well and they're increasing the size of their footprint in our successful malls.

Jay Habermann – Goldman Sachs

So that you are seeing more demand, as the occupancy costs is the driver?

Steven Tanger

The outlets are, for most of our tenants, the most profitable distribution channel and as such it provides most of our tenants with the highest and fastest return on their invested capital. So we're seeing a lot of interest in space from people that we had not talked to or opened stores before and that continues.

Operator

Your next question is from David Fick – Stifel Nicolaus & Company.

David Fick – Stifel Nicolaus & Company

Yes, just a quick follow up; can you talk a little bit about tenant concession requests number one, and number two, what you expect out of ICSC next month, both in terms of traffic and deal volume?

Steven Tanger

We have received requests for occasional rent relief from tenants. We ask the tenants to fill out a highly detailed questionnaire and have it certified showing us exactly their cost structure, and once we request that, most of the asking for rent release stops, but when a tenant can prove to us that they do need relief, we will consider, based on the tenant and the location, a short term, usually through the end of the year, some modification to try to help both of us, help us maintain occupancy and to help the tenant, but they have to prove to us as opposed to just asking because they feel they should.

Second what we hope to get out of ICSC; there's never a down side if we can meet with a couple of hundred of our tenants face-to-face. Good things always seem to happen. It's a very efficient use of our time, in three or four days, to meet with a broad spectrum of our tenants.

David Fick – Stifel Nicolaus & Company

Why do you think so many of your peers have decided to flat up Las Vegas?

Steven Tanger

Dave, I think you'll have to ask them.

Operator

Your next question comes from [Harvey Shore – East West Investments].

[Harvey Shore – East West Investments]

Yes, I know it's a little early but do you think the fires in Myrtle Beach will have any effect on traffic going forward down there?

Steven Tanger

First of all, Harvey, I'm glad you asked, our hearts and prayers go out to the hundreds of families that have been displaced. Thank God the fires appear to be under control. They did not damage any of our properties. As far as Myrtle Beach to my knowledge hasn't really hurt near the tourist attractions, and it is early so I don't anticipate that this one event would lead to any downturn in the tourism.

[Harvey Shore – East West Investments]

That's good. Also, regarding your stock, it seems interesting that I think that your occupancy rate is remarkable in the mid-90s, but you seem to be lumped in with commercial real estate. When there's a down turn in it, they think that your properties are in commercial real estate and/or recently some of the retail malls, one specifically filed for bankruptcy and so your stock took a hit.

I think maybe if you could do a better job in delineating out your company it has been really nothing to do with those other properties or categories and the fact that you increased your dividend, when most companies are decreasing or eliminating your dividends, so I was wondering whether or not you have noticed that as your stock moves up and down with categories that you don't really fit into?

Steven Tanger

We long ago stopped trying to figure out the stock market movements. We are in a business with long term assets with a long term strategy with long term financing and, over time, the markets will reflect the shareholder value that we are creating.

This market does not, doesn't really take notice of good news too much, but we are happy for you to spread the word and thank you for your kind comments.

Operator

Your next question comes from Ben Yang – Green Street Advisors.

Ben Yang – Green Street Advisors

Steven, the overall occupancy in your portfolio is definitely healthy, but you do have a handful of centers with low occupancy levels, co-tenants be an issue for outlet centers?

Steven Tanger

We have so far not had any co-tenant issues and we don't anticipate any.

Ben Yang – Green Street Advisors

But is it written into some leases at your centers?

Steven Tanger

Occasionally there are, but they are at sufficiently low levels so that it's not an issue. Keep in mind that most of the co-tenant issues that are gaining attention of the analyst community today have to do with the large department stores and regional mall formats or in power centers or other types of formats, not ours, so even though there are co-tenant, operating co-tenant clauses in some of our leases, we are substantially way above that.

Ben Yang – Green Street Advisors

But couldn't occupancy in certain of your centers fall below a certain break point to the point where those tenancy issues become relevant? I mean you have a center at 78% occupancy and another one at 58% occupancy as of the end of last quarter, is that not an issue for those centers in particular?

Steven Tanger

The one you're talking about is a small center in Commerce, Georgia, which has been open for over twenty years, and right now that does not appear to be an issue. The other one at 78% is substantially above any co-tenant issues.

Operator

(Operator Instructions) We have no further questions at this time.

Steven Tanger

I want to thank everybody for participating and your questions today. We're always available to answer anything in more detail after the call. Thank you again and have a great day. Goodbye now.

Operator

This concludes our conference call for today. You may now disconnect your lines.

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