Fort Worth

With more than four decades of experience as an owner and operator of open-air outlet and retail destinations, Tanger Inc.’s (NYSE: SKT) recent purchase of an open-air lifestyle center—its first move into that particular segment of the market—underscores how the REIT continues to look for ways to innovate the retail experience for its shoppers.

At the start of 2024, the REIT’s portfolio consisted of 38 outlet centers in addition to the recently purchased open-air lifestyle center, comprising more than 15 million square feet positioned across tourist destinations and vibrant markets in 20 U.S. states and Canada.

The guiding principle of Tanger over the years, which officially became its vision statement in 2023, is that “we use our customer insights in order to form the future of shopping,” says President and CEO Stephen Yalof.

“What that means is we follow the customers’ lead,” he adds. “If we’re going to go after the younger customer, it’s not just about marketing to that younger customer, but bringing the brands that they want into our centers.”

With more than 3,000 stores operated by more than 700 different brand-name companies, Tanger today is well prepared to meet the changing needs of its consumers, in whatever form that might take.

A Company is Born

Tanger, previously known as Tanger Outlets before rebranding last year, was founded in 1981 by Stanley Tanger, who was in the manufacturing business, originally providing uniforms for police and fire departments and evolving to include men’s shirts. Out of its headquarters in Greensboro, North Carolina, he (and later his son Steven) led the company, hosting outlet sales once a month for the irregular and excess items that needed to be moved to clear the way for new designs.

Not long after, Tanger joined with a number of other brands (such as Hanes and Liz Claiborne) to open an outlet center in Burlington, North Carolina—the first of its kind in the U.S. In 1993, Tanger went public, becoming the first outlet developer to be listed on the New York Stock Exchange as a publicly traded REIT.

“They did this to raise capital for expansion,” says Yalof, who became involved in the industry in 1990, leasing shopping centers for one of Tanger’s competitors at the time. “They continued to grow and evolve the business.”

Yalof joined Tanger in April 2020 and replaced Steven Tanger, becoming the third CEO in the company’s 43-year history.

Property Composition

This past year was an active one for Tanger. In November 2023, the company opened the 290,000-square-foot Tanger Outlets Nashville, located in the foothills of the Smokey Mountains. This was the first outlet center to break ground and deliver to the market since 2019, and opened at 96.5% leased.

“Our unprecedented leasing success is a testament to the resilience of physical retail and the market’s demand for our brand of shopping, that can offer a truly differentiated experience to guests and retailers alike,” Yalof says. “This is right out of our strategic playbook of an outlet format shopping center in a great tourist-driven location.”

In November 2023, the company opened Tanger Outlets Nashville, located in the foothills of the Smokey Mountains. Photo courtesy of Tanger.

Another new property in the portfolio is the 70-store, 382,000-square-foot Asheville Outlets, an open-air shopping center located in the popular tourist market of Asheville, North Carolina.

Whether Tanger builds a new center or acquires it, the company looks for a trade area with a growing population base, and one with lots of tourism.

Asheville fit that description to a tee. It was named the number one food destination in the U.S. by Travel + Leisure magazine and last year, the Asheville Regional Airport commenced a $400-million-dollar expansion of its passenger terminal that will increase capacity by 150%, to better accommodate the rapidly growing city’s more than 12 million annual visitors.

“Being a Southeast company, the majority of our properties are in the south, and as far west as Texas,” Yalof says. “We also have a property in Arizona, and we do have a number of properties from New Jersey to New Hampshire to Michigan that are equally important to the mix, and two large properties in Long Island.” He adds that as Tanger seeks to acquire new assets, “we like the south region because the shopping season is significantly extended when you have no weather issues to deal with.”

Another notable Tennessee property is a legacy outlet in Sevierville, near Dollywood, that has remained a big traffic draw for decades.

Meanwhile in 2022, Tanger entered into a strategic partnership with investment manager Clarion Partners to manage and operate the 450,000-square-foot Palm Beach Outlets in West Palm Beach, Florida, which was rebranded Tanger Outlets Palm Beach. The partnership provides Tanger with the potential opportunity to acquire equity ownership over time. This is one of six joint venture partnerships Tanger currently has.

A New Focus

In December 2023, Tanger acquired the 825,000-square-foot Bridge Street Town Centre, an upscale outdoor shopping district located in Cummings Research Park in Huntsville, Alabama, for $193.5 million.

This open-air lifestyle center is a new direction for the company, and Yalof notes that the segment will be a focus for the future.

“The other 38 properties are pretty much pure play outlet shopping centers,” Yalof says. “Huntsville is a slight modification to our thesis, as it was our first purchase of a lifestyle center. It’s absent of any outlet retailers.”

Tanger acquired the Bridge Street Town Centre, an upscale outdoor shopping district located in Huntsville, Alabama, in December 2023. Photo courtesy of Tanger.

As Tanger seeks to grow the company, it looks for what it calls, “adjacent to outlet” land as well as what else is on the pad with an existing outlet shopping center that it owns, so it can seamlessly acquire that.

“Whether it’s a strip center or local convenience center, we have a management team on staff that reside in the property, so it would be easy for us to lease, operate, and market that additional property as well,” Yalof says. “With lifestyle centers being open-air, we felt this was a natural extension of our business, but additionally gave us access to a whole new retailer who has yet to come into the outlet space.” For instance, Apple has a store in the Huntsville Center but not in the outlet space currently.

“The focus at Tanger has been pretty consistent from its inception through the beginning of COVID,” says Yalof. “COVID was a major shift in how we saw the business and advanced the business. It was a big inflection point in the advancement of the company.”

Since the pandemic, when a lot of retailers who were hanging on by a string left the portfolio and closed their doors forever—brands like Van Heusen, Wilsons, and Dress Barn—sizeable holes emerged in Tanger’s portfolio. In fact, it lost more than 1 million square feet of a 12-million-square-foot portfolio.

“What we were realizing post-COVID is that the customer shops completely differently than they shopped pre-COVID,” Yalof says. “They were looking for places to gather outdoors, better food and beverage options, greater amenities, and more entertainment uses. So, as we started to fill the vacancies exacerbated by COVID, we built it with these alternative uses and found our shoppers were responding.”

That meant they were spending more time at the centers when they visited, were shopping more frequently than historical numbers, and as a result sales improved.

Tanger Outlets, Daytona Beach, Florida. Photo courtesy of Tanger.

“We are in the business of generating high sales volumes for our retail partners, so it made us re-evaluate our strategy,” Yalof says. “That means national retailers you find in cities and key suburbs, they are drawing the customers beyond what we may draw for the shopping experience, and we get them to stay there and shop. It’s great synergy.”

For instance, at some centers, Tanger has added a sports bar, or a Dave & Buster’s, places for families to gather and spend time before or after shopping.

“We continue to evolve uses and retailers to include those not traditionally found in an outlet center to expand and grow the experience,” Yalof says.

Secrets to Success 

What’s unique about the outlet business, Yalof shares, is that there are truly two types of customers—the retailers and the shoppers.

Stephen Yalof

“We have the unique obligation to drive the shopper into our shopping center through our marketing initiatives; we can get in front of shoppers in an original way,” Yalof says. “One of which is our digital loyalty program. We have 38 outlet centers and can brand Tanger and drive customers through an incentive program that rewards them with additional value as they accumulate points, so we have gamified the shopping experience.”

Investors are drawn to Tanger, Yalof feels, because it is relatively inflation-proof, citing that when there are strong macroeconomic headwinds, people are far more conservative where they spend their money, and providing the brands consumers love with value pricing is a part of the solution.

Todd Thomas, managing director for equity research for KeyBanc Capital Markets Inc., has covered Tanger for more than a decade. He believes that a move to lifestyle centers is a savvy transition for the REIT and makes perfect sense, given that it’s no longer limited to purely outlet centers.

“Management had messaged that there might be a strategy shift that would include some non-outlet centers, so they made the pivot, and it now allows them to expand their buy-box and allows the company to leverage its existing platform and build on its existing tenant relationships and add new ones not currently in outlets today,” he says. “From an investment standpoint, it increases the company’s addressable market.”

Thomas points out that the Tanger organization has been through a lot of change over the last few years, including new leadership, and this “fresh set of eyes” has been appealing to investors.

“In a few short years, management has made a number of changes that appear to be positive,” Thomas says. “They decentralized leasing and asset management; they’ve discussed and followed through on adding more food and amenities to the centers; and they overhauled marketing and digital initiatives. All of that has helped build momentum.”

The Road Ahead

In addition to its added focus, Tanger views 2024 as a year full of potential growth.

“Right now, it’s more economical to buy existing assets, far more than it is to build,” Yalof says. “We have our acquisitions team on a number of properties out there where we are in discussions. Our phone is starting to ring with opportunities we have never seen before and we are anxious to pursue them.”

Yalof believes the sector is “very healthy” and with interest rates expected to ease over the next year, that’s an additional encouraging sign that bodes extremely well for Tanger and the retail sector, he adds.