Tanger’s Saks Re-Tenanting Timeline, CapEx Outlook Clash With Growth Strategy Shifts

Date of Call: Aug 5, 2026

Financials Results

• EPS: Core FFO of $0.64 per share, up 10.3% from $0.58 per share in the prior year period
• Operating Margin: Same Center NOI increased 3.5% for the quarter

Guidance:

• Core FFO per share expected to be $2.45 to $2.52 for full year 2026, up from previous guidance of $2.42 to $2.50.
• Same Center NOI growth guidance low end raised to 2.75% from 2.25% previously; high end unchanged at 4.25%.
• Guidance does not assume any additional acquisitions, dispositions, or financing activity.

Business Commentary:

Strong Financial Performance and Leasing Success:

• Tanger, Inc. reported Core FFO of $0.64 per share, an increase of 10.3% compared to the prior year period.
• The growth was driven by strong internal growth and accretive external growth initiatives, as well as a high occupancy rate of 96.6%.

Increased Guidance and Disciplined Growth Strategy:

• The company raised its full-year 2026 guidance for Core FFO per share to $2.45 to $2.52 and for same center NOI growth to 2.75% from 2.25%.
• This adjustment reflects strong leasing performance, the acquisition of Levis-Commonstown Center, and confidence in continued growth.

Marketing and Customer Engagement Initiatives:

• Tanger's marketing platform is noted as a key differentiator, driving higher subscriber and engagement activity, with a focus on personalized digital marketing.
• The company's AI-powered communications and customer service tools are enhancing marketing efforts and operational efficiency.

Strategic Focus on Diverse Tenant Roster and Non-Apparel GLA:

• The company's top 25 tenants now represent approximately 50% of rent, down from over 60% five years ago, reflecting a diversification strategy.
• Tanger has expanded its portfolio to over 800 brands, up from approximately 500, with a focus on attracting a younger demographic and offering a mix of retail, food, and entertainment options.

Sentiment Analysis:

Overall Tone: Positive

• Management reported another 'strong quarter' and raised full-year guidance. They highlighted 'continued strength and durability' of their platforms, 'proactive recapture' of underperforming space, and the benefit of increased tourism. Leasing results were strong with 18th consecutive quarter of positive rent spreads. The tone was confident, citing 'robust customer traffic' and 'real opportunity' for growth.

Q&A:

• Question from Michael Griffin (Evercore): Can you comment on the health of the consumer you're seeing in your portfolio given elevated gas prices, and any shift in customer behavior?
  Response: Management sees the consumer as resilient, with higher gas prices driving domestic travel and increased traffic. They noted a younger customer demographic and successful marketing/leasing to attract them, along with strong movie business driving extended center visits.

• Question from Michael Griffin (Evercore): What does the competition set look like for outlet and lifestyle center transactions, and how is Tanger positioned for future external growth?
  Response: The market is competitive with more capital chasing retail, but Tanger is well-positioned due to its balance sheet capacity and ability to apply its platforms in mid-tier markets with less competition. They emphasize creating long-term stakeholder returns.

• Question from Greg McInnis (Scotiabank): How far below market were SACS leases, what type of large-format customers are additive, and what are the CapEx needs?
  Response: SACS rents were similar to temporary rents in the portfolio, offering a 2-4x multiplier opportunity on new rents. Some spaces will be single-user or multi-tenant replacements. CapEx depends on the use and whether boxes are split, but overall economics are seen as providing significant return.

• Question from Greg McInnis (Scotiabank): For centers with high occupancy, is there excess land for ground-up development or are acquisitions more sense from a risk and cost perspective?
  Response: Both options are viable. Tanger has peripheral land that can be monetized as populations move into mid-tier markets. Many centers were built with expansion opportunities, and they are currently under construction on some to create more upside and modern space.

• Question from Akhil Guntupalli (JP Morgan): Can you give an update on the Legends acquisition in Kansas City?
  Response: Performance has been good. They've had traction on leasing, found operating efficiencies, and see continued value creation opportunities.

• Question from Akhil Guntupalli (JP Morgan): How are you thinking about bad debt levels and tenant lease expirations for next year?
  Response: Management will approach conservatively, evaluating on an ongoing basis. The tenant watch list remains at low levels, with positive overall demand.

• Question from Juan Sanabria (BMO Capital Markets): Can you size the long-term opportunity for ancillary income from marketing, events, loyalty, and what's driving near-term growth?
  Response: Ancillary income is significant, averaging nearly half a million dollars per center. Growth opportunities come from enhancing marketing (like signage), adding services (EV charging, solar), and expanding loyalty programs, especially within acquisitions.

• Question from Juan Sanabria (BMO Capital Markets): How should we think about occupancy trends and any incremental drag from SACS to Q3?
  Response: Occupancy is a metric; focus is on NOI and EBITDA per square foot. SACS impacted Q2 sequential NOI by ~$45k. Occupancy is expected to build seasonally through the balance of the year. They will continue re-merchandising to higher-productivity tenants.

• Question from Richard Hightower (Barclays): Is there an upper limit on lifestyle center exposure in the portfolio, and how do you view the risk/return profile of lifestyle vs. traditional outlet?
  Response: No theoretical target mix; they acquire the best centers regardless of type. The asset classes are synergistic with similar tenant bases and operating intensity. Lifestyle centers benefit from Tanger's digital marketing expertise. Risk is underwritten appropriately.

• Question from Andrew Reel (Bank of America): What are early indications on back-to-school performance and retailer outlooks for the balance of the year?
  Response: Back-to-school is the second biggest shopping holiday; traffic and sales are up. Consumers are voting with dollars for value and experiences. Gen Alpha is a key cohort. The strong trend is expected to continue into Q3.

• Question from Andrew Reel (Bank of America): What is the target mix for non-apparel tenants in GLA, and how have they impacted productivity and traffic?
  Response: There is no single target; mix is tailored per center to market demand. Diversity of uses drives traffic. They plan to keep adding new brands, uses, and amenities to create the best mix for each community.

• Question from Todd Thomas (KeyBank Capital Markets): For SACS boxes with temporary tenants, are they at economics that equate to the 2-4x multiplier once permanently tenanted, and when might you recapture them?
  Response: Temporary tenants effectively replace most of the SACS rent, leaving strong permanent re-tenanting opportunity. The timeline varies; some permanent rent may come in 2027, with bigger impact in 2028, as they make the right merchandising fit decisions.

• Question from Todd Thomas (KeyBank Capital Markets): How does the acquisition pipeline look today, and what are cap rate trends?
  Response: The pipeline is very active, with more assets on the market. Cap rates have compressed, requiring discipline. They focus on deals that create both financial and strategic value, leveraging their platform.

• Question from Naishal Shah (Green Street): How does retailer demand from new brands in the outlet channel today compare to prior years?
  Response: There is tremendous demand from new brands not historically in the outlet channel. They are educating tenants on the evolved outlet model, adding lifestyle and food/entertainment offerings to keep consumers on campus longer.

• Question from Naishal Shah (Green Street): When sitting down with new retailers, is there a target price point or consumer demographic?
  Response: They aim for a younger demographic but use data analytics to understand community wants. Leasing decisions are data-led and geared toward what the local consumer desires.

• Question from Tayo Okusanya (Deutsche Bank): How do you think about ROI or return hurdles for marketing and technology investments?
  Response: Digital marketing offers clear ROI through personalization and attribution (e.g., coupons, QR codes). They can tie sales back to specific marketing efforts, enabling measurement of return on investment.

• Question from Caitlin Burrows (Goldman Sachs): Can you comment on TI spend in the quarter and timing/broad mix shifts?
  Response: Q2 TI was elevated due to leasing-related openings. Full-year guidance is $65-$75M, mid-teens % of NOI. Strong renewal spreads and non-comp leasing (3.3M sq ft) drive value. Second half should moderate.

• Question from Caitlin Burrows (Goldman Sachs): Why were property operating expenses and tenant reimbursements high in the quarter?
  Response: High property operating expenses were due to a one-time $1.3M lease buyout fee, which does not recur. Tenant reimbursement rate was slightly elevated in Q2 but expected to come down in H2 as operating expenses are higher in the more active holiday/traffic period.

Contradiction Point 1

Timeline and Financial Impact of SACS (Saks) Re-tenanting

Contradiction on when significant rent recovery and NOI impact from SACS re-tenanting will occur.

Todd Thomas (KeyBank Capital Markets) - Todd Thomas (KeyBank Capital Markets)

2026Q2: The timeline for recapturing rent will have a bigger impact in 2028 than 2027, with some permanent rent likely coming in 2027, weighted to the back half. - [Doug](CEO)

Do the three SACS boxes with temporary tenants offer the same 2-4x multiplier potential, and when might these spaces be recaptured? - Juan Sanabria (BMO Capital Markets)

2026Q2: Saks impacted sequential occupancy by ~45 bps in Q2... 2027/2028 seeing bigger impacts as permanent tenants are brought in. - [Michael Billerman](CFO and CIO)

Contradiction Point 2

External Growth Strategy and Discipline

Shifts from a cautious, disciplined approach to an active, opportunity-focused stance.

Todd Thomas (KeyBank Capital Markets) - Todd Thomas (KeyBank Capital Markets)

2026Q2: The pipeline is very active, with more assets on the market... The company remains focused on accretive acquisitions. - [Michael Billerman](CFO)

What is the current state of the acquisition pipeline and cap rate trends? - Michael Griffin (Evercore ISI Institutional Equities)

2026Q1: The underwriting emphasizes long-term growth and attractive returns... The company has the leverage capacity and liquidity to deploy capital without needing to raise additional equity at this time. - [Michael Billerman](CFO)

Contradiction Point 3

Transaction Market Competitiveness and Capitalization Rates

Contradicts the characterization of market competition and the pressure on returns.

Todd Thomas (KeyBank Capital Markets) - Todd Thomas (KeyBank Capital Markets)

2026Q2: Tanger focuses on leveraging its platform to create value. Cap rates have compressed, requiring disciplined evaluation of deals... - [Michael Billerman](CFO)

What is the current state of the acquisition pipeline, and have cap rate trends changed? - Greg McGinniss (Scotiabank Global Banking and Markets)

2026Q1: The market is competitive but has more product available. Tanger's advantage is its owner-operated platform... - [Michael Billerman](CFO)

Contradiction Point 4

Temporary Tenancy and Portfolio Stability

Presents a more stable outlook for temporary occupancy versus a prior expectation of a significant increase.

Todd Thomas (KeyBank Capital Markets) - Todd Thomas (KeyBank Capital Markets)

2026Q2: Some will be single-user, others multi-tenant replacements. CapEx needs vary by use and whether boxes are split. Overall, the economics provide a significant return on investment. - [Doug](CEO)

Do the three SACS boxes with temporary tenants offer the same 2-4x multiplier potential, and when might these spaces be recaptured? - Naishal Shah (Green Street Advisors, LLC)

2026Q1: Temporary occupancy is about 10% currently, down from a seasonal high in Q4. It may rise temporarily due to recent bankruptcies... - [Michael Billerman](CFO)

Contradiction Point 5

CapEx Outlook for SACS (Saks Fifth Avenue) Leases

Contradiction on whether CapEx for potential SACS space recapture is embedded in guidance.

What are your key takeaways from the earnings report? - Todd Thomas (KeyBank Capital Markets)

2026Q2: The timeline for recapturing rent will have a bigger impact in 2028 than 2027, with some permanent rent likely coming in 2027... - [Doug](CEO)

Do the three SACS boxes with temporary tenants offer the same 2-4x multiplier potential, and when might these spaces be recaptured? - Andrew Reale (Bank of America)

20260225-2025 Q4: Little to no CapEx is expected this year related to potential Saks space returns, as that spend is not embedded in the 2026 guide of $65–$75 million. - [Michael Bilerman](CFO)