Tanger Inc.'s Acquisition of Legends Outlets: A Strategic Bet on Retail Real Estate Value and Risk-Adjusted Returns
Tanger Inc.'s $130 million acquisition of Legends Outlets in Kansas City, Kansas, represents a calculated move to capitalize on the resilience of retail real estate while navigating a complex macroeconomic landscape. The transaction, financed through a mix of available liquidity and a $115 million CMBSCMBS-- loan maturing in November 2027, underscores Tanger's commitment to external growth in high-traffic, affluent markets[1]. With an expected 8% return in the first year[2], the acquisition aligns with Tanger's broader strategy to diversify its portfolio and enhance risk-adjusted returns in an industry marked by constrained supply and evolving consumer behavior.
Strategic Rationale and Value Creation
Legends Outlets, a 690,000-square-foot open-air shopping center, is 93% occupied and anchored by national retailers such as NikeNKE--, Coach, and Sephora, as well as entertainment venues like AMCAMC-- Theatres and DaveDAVE-- & Buster's[3]. Its location in the Village West entertainment district—adjacent to the Kansas Speedway, Hollywood Casino, and Children's Mercy Park—positions it as a destination for both retail and leisure traffic[4]. Tanger's acquisition of the property, now rebranded as TangerSKT-- Kansas City at Legends, reflects a focus on “mixed-use” assets that blend retail, dining, and entertainment to drive foot traffic and tenant sales[5].
The acquisition also aligns with Tanger's historical emphasis on external growth. In 2024-2025, the company acquired The Promenade at Chenal in Little Rock ($73.1 million) and PinecrestPAPL-- in Cleveland ($167 million), with similar 8% return projections[6]. These deals, coupled with Legends Outlets, highlight Tanger's ability to identify undervalued assets in growing markets and reposition them for long-term value creation.
Financial Leverage and Credit Risk
Despite aggressive acquisition activity, Tanger has maintained a disciplined approach to leverage. As of March 2025, its debt-to-EBITDA ratio stood at 4.8x, down from 5.7x in 2024, and its net debt-to-EBITDA remained in the mid-4x to low-5x range, consistent with its “BBB” credit rating from Fitch[7]. The company's available credit capacity of $481 million as of March 2025 further supports its ability to manage debt while funding future growth[8].
However, the Legends Outlets acquisition introduces refinancing risks. The $115 million CMBS loan, which matures in 2027, will need to be refinanced in a potentially higher interest rate environment. Tanger's debt maturities of $356 million in 2026 and $625 million in 2027[9] could strain liquidity if interest rates remain elevated. While the company has hedged against rate hikes, its debt-to-equity ratio of 1.93[10] suggests vulnerability during economic downturns.
Risk-Adjusted Returns and Industry Benchmarks
The retail real estate sector's risk-adjusted returns in Q2 2025 were mixed. While return on assets (ROA) hit 6.8%, return on investment (ROI) dipped to 11.97%, reflecting reduced efficiency in asset management[11]. Tanger's projected 8% return on Legends Outlets, though below the sector's ROI, is competitive given the property's high occupancy and strategic location. The acquisition's Sharpe ratio—a measure of risk-adjusted returns—remains undisclosed, but its alignment with Tanger's low-leverage strategy and focus on necessity-driven retail (e.g., grocery-anchored centers) suggests a favorable risk profile[12].
Key risks include:
1. Capital Expenditures: At 18 years old, Legends Outlets may require significant upgrades to maintain tenant satisfaction and competitiveness[13].
2. Market Saturation: New retail or entertainment developments in the Village West district could erode Legends Outlets' market share[14].
3. Consumer Shifts: While outlet malls remain resilient, e-commerce and shifting consumer preferences for experiential retail could impact long-term performance[15].
Conclusion: Balancing Growth and Prudence
Tanger's acquisition of Legends Outlets exemplifies a strategic balance between growth and risk mitigation. By leveraging its strong leasing activity (96.5% portfolio occupancy as of June 2025[16]) and disciplined capital structure, the company aims to generate value from underutilized assets in high-potential markets. However, the success of this bet hinges on Tanger's ability to navigate refinancing challenges, manage capital expenditures, and adapt to evolving retail dynamics. For investors, the acquisition underscores the importance of evaluating retail real estate through a dual lens of operational resilience and macroeconomic prudence.
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