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 CMBS loan maturing in November 2027, underscores Tanger's commitment to external growth in high-traffic, affluent marketsTanger Acquires Legends Outlets in Kansas City, Kansas^[1]. With an expected 8% return in the first yearTanger (SKT) Expands Portfolio with $130M Acquisition of Legends^[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 Nike, Coach, and Sephora, as well as entertainment venues like AMC Theatres and Dave & Buster'sTanger Kansas City at Legends - Shopping mall in Kansas^[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 trafficLegends Outlets in Kansas City, Kansas sold for $130M^[4]. Tanger's acquisition of the property, now rebranded as Tanger Kansas City at Legends, reflects a focus on “mixed-use” assets that blend retail, dining, and entertainment to drive foot traffic and tenant salesTanger Reports Second Quarter 2025 Results and Raises Full-Year …^[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 Pinecrest in Cleveland ($167 million), with similar 8% return projectionsTanger Reports Fourth Quarter and Full Year 2024 Results and …^[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 FitchFitch Affirms Tanger at 'BBB'; Outlook Stable^[7]. The company's available credit capacity of $481 million as of March 2025 further supports its ability to manage debt while funding future growthTanger Hikes Dividend 6.4% Amid Elevated Payout Ratios and …^[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 2027Tanger Reports First Quarter 2025 Results - Business Wire^[9] could strain liquidity if interest rates remain elevated. While the company has hedged against rate hikes, its debt-to-equity ratio of 1.93Tanger Reports Fourth Quarter and Full Year 2024 Results and …^[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 managementRetail Sector Management Effectiveness Information and Trends^[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 profileU.S. Real Estate Market Outlook 2025 - Retail^[12].

Key risks include:
1. Capital Expenditures: At 18 years old, Legends Outlets may require significant upgrades to maintain tenant satisfaction and competitivenessLegends Outlets Kansas City - Wikipedia^[13].
2. Market Saturation: New retail or entertainment developments in the Village West district could erode Legends Outlets' market shareTanger Acquires Legends Outlets in Kansas City, Kansas^[14].
3. Consumer Shifts: While outlet malls remain resilient, e-commerce and shifting consumer preferences for experiential retail could impact long-term performanceUnited States Retail Market Dynamics Q2 2025^[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 2025Tanger Reports Second Quarter 2025 Results and Raises Full-Year …^[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.