The Motley Fool was founded in 1993 by brothers Tom and David Gardner. Through our website, podcasts, books, newspaper columns, radio programs and advanced investment services, we help millions of people achieve financial freedom.
Have a good day, and welcome to the second quarter conference call of Tanger Factory Outlet Center. [Operator Instructions]. After today’s speech, there will be an opportunity to ask questions. [Operator Instructions].
I now want to hand over the meeting to Cyndi Holt, Vice President of Investor Relations. please continue.
Good morning. I’m Cyndi Holt, Vice President of Investor Relations, and I would like to welcome you to the Tangier Factory Outlet Center’s second quarter 2020 conference call. Last night, we released the earnings release and supplementary information package and investor introduction. This information is available on our investor relations website investors.tangeroutlets.com.
Please note that during this conference call, some of the management’s comments will be forward-looking statements, subject to many risks and uncertainties, actual results may differ materially from expected results. We will refer you to the filing of the US Securities and Exchange Commission to discuss these risks and uncertainties in detail.
During the conference call, we will also discuss the non-GAAP financial indicators defined by SEC Rule G, including funds from operations or FFO, core FFO, and net operating income from the same center. The reconciliation of these non-GAAP measures with the most directly comparable GAAP financial measures is included in our earnings release and supplementary information.
The call is being recorded for replay in the future. Therefore, it is important to note that management’s comments include time-sensitive information, which may only be accurate on August 6, 2020. Currently, all participants are in listen-only mode. After the management is ready for comments, it will open the phone to ask your questions.
We ask everyone to ask only one question and one follow-up to allow as many of you as possible to ask questions. If time permits, we are happy to ask you other questions. Today’s call will be CEO Steven Tanger; President and Chief Operating Officer Stephen Yalof; Executive Vice President and Chief Financial Officer Jim Williams.
Good morning, thank you for joining us. Since the announcement of the COVID-19 pandemic, and the related home authorization and closure instructions, Tanger has focused on several key priorities. These include the health and safety of our employees, tenants and customers, maintaining a stable balance sheet and liquidity position, working with our tenants to promote efficient store reopening, collecting rent and protecting our rights under lease, and Shoppers are encouraged to return to our center.
I will review the performance of the second quarter and then update each of our key priorities. Steve Yalof will provide more details, and Jim Williams will discuss our financial performance and balance sheet. In the second quarter of 2020, the NOI of the same center was reduced by $39 million compared to the previous year. This is largely due to the impact of COVID-19 on the rent collection that Jim will discuss.
At the end of the quarter, our combined portfolio had an occupancy rate of 93.8%. Leasing is our top priority because we will continue to work with quality retailers to manage our center to provide the best customer experience. As of June 30, our executed or in-process lease renewals accounted for 68% of the space in the consolidated portfolio scheduled to expire in the 2020 calendar year, compared to 73% in the same period last year. We expect that the renewal rate of this year’s expiring space will be lower than the historical level, which averages 80%. Part of the reason is the impact of the expiration of the leases of tenants who have declared bankruptcy.
In the 296 total leases of 1.4 million square feet of leases that began in the past 12 months ending June 30, 2020, our mixed average rent plummeted by 1.1% and cash was down by 6.5%. Obviously there are many factors outside our control that are having a profound impact on the world and Tangier. However, within our control, we have also actively responded to many challenges to meet these challenges.
The first is our balance sheet and capital position. In the second quarter, we reduced our cash outflows by approximately $11 million by reducing G&A and property operating expenses. During this year, we will also postpone certain planned capital expenditures, including our potential development in Nashville. These efforts, coupled with the continuous improvement in rental income, enabled us to resume positive cash flow in July. Given the stabilization of the liquidity outlook, we are happy to repay most of the outstanding amount of credit instruments drawn at the beginning of the closure.
As of July 31, our total liquidity exceeded US$560 million. Balance sheet strength has long been Tanger’s core tenants, and this discipline is good for us. We believe that a solid balance sheet is essential to survive the challenging times and to chase the potential opportunities that may arise. As disclosed last quarter, our board of directors has decided to temporarily suspend dividend distribution to provide more flexibility and liquidity during this crisis.
We intend to continue to comply with the REIT taxable income distribution requirements for the 2020 tax year, and the board of directors will continue to evaluate future dividend distributions on a quarterly basis. Although our center has never closed, during the peak period of home ordering in April, almost all stores were closed. With the increase in home orders, the store has opened in the center of South Carolina from the end of April.
With the cancellation of regulations in other states, stores reopened steadily throughout the second quarter. With the opening of the Northeast region in mid-June, our number of stores reopened to 72% of the total number of stores. This number has been growing. As of July 31, 95% of the leased stores in our combined portfolio have reopened, accounting for 95% of leased square feet and annualized base rent. The business hours of all Tanger centers have been reduced. Due to tenants’ security agreements related to potential COVID exposure, we do expect some temporary store closures in the short term.
We recognize that the speed of rent collection depends largely on opening stores quickly. Although most of our tenants are not essential, we do not have a lot of exposure to categories that rely more on social interaction and face more challenges in the current environment.
We believe that these categories may be attractive to us in the future, but today we do not have many centers and we will benefit from them. We have been helping retailers to reopen, implement health and safety protocols, create a warm environment for our tenants and shoppers, and encourage shoppers to return. We are actively taking measures to delay rents to promote these reopenings, and we have been persistently seeking solutions to any outstanding collections to make our prospects more certain.
We have appropriately cooperated with tenants and provided relief mainly in the form of deferred when necessary. In all cases, if we agree to a one-time offer, we do that in exchange for a corresponding lease adjustment, thereby providing Tanger with long-term value. In addition, we have the responsibility to seriously become good corporate citizens. In this regard, throughout the pandemic, Tangier Outlet Center has been used for Red Cross blood transportation, food collection sites, roadside food collection, and assembly areas for law enforcement and emergency medical services.
In the short term, we are facing the challenge of closing doors, rent collection and cautious consumer behavior. As we look forward, our priorities remain consistent. Maintain a strong balance sheet, provide a compelling value proposition for our retailers and consumers, and maintain a high-quality product portfolio with ideal brand names and designer name tenants. For our tenants, compared with other distribution channels, we provide an attractive location with low occupancy costs.
For our shoppers, we will continue to provide the brands they are looking for at the prices they want. In our center, shopping is a form of entertainment, and we believe that over time, we have the opportunity to expand this concept and create added value for tenants, shoppers and shareholders. Given the nature of our investment portfolio, which includes a value-oriented outdoor center, we believe we are in a good position to recover. I also welcome Steve Yalof to the Tanger board of directors. The board of directors has expanded to eight members and we look forward to Steve’s contribution.
Finally, I would like to express my best wishes for the health and well-being of all. In this difficult period, we are always committed to providing support to employees, customers and the community.
Thank you, Steve. In the last call, I discussed three priorities, which have been our focus in the second quarter and today. The first is to maximize rental income. The second is to provide support to our retail partners to help them manage the reopening of stores, while ensuring that the shopping experience is a safe, organized and entertaining experience for many of our loyal shoppers. The third is to accelerate our leasing efforts to combine new permanent, short-term and pop-up stores to fill vacant stores.
Regarding the rent collected when the store was initially requested to close, we immediately implemented the rent deferral strategy, aiming to promote the reopening of the store in the fastest and most effective way. To this end, in late March, we provided all tenants in the combined investment portfolio with the option to postpone the rent for April and May by 100%, while retaining all rights under the lease agreement.
Now, with the removal of the tasks of all our centers and the reopening of stores, our top priority is to collect contractual rent receivables and develop solutions while positioning retailers in our portfolio for long-term growth. In this regard, we have adopted a variety of strategies to achieve this goal, including our rent deferral initiative and, in some cases, one-off discounts. In the case of providing a one-time rent reduction, we do this in exchange for the landlord’s favorable lease modifications, such as co-tenancy exemptions, term extensions and early option transactions in exchange for value. The ultimate goal is to maintain our continuous income stream, and Maintain our occupancy rate.
In the second quarter, we expect to collect 43% of the paid rent and defer by 26%, and we will continue to seek a solution of only 6%. We do not expect to charge 25% of the rent in the second quarter. These include 11% related to tenant bankruptcy filings and accounts that may not be recovered. The remaining 14% includes the one-time discount I discussed earlier. Our rent in July was much better than the rent in the second quarter. As of July 31, we have collected 72% of the settled rent in July and 79% of the net rent confirmed before deduction of reserves and straight-line rent adjustments.
By August 4th, our July collection rate increased to 77% of the settled rent and 84% of the confirmed net rent without deduction of reserves and straight-line rent adjustments. And we have received a promise of additional payment. Our on-site and marketing teams have been focusing on our core business, while working hard to encourage consumers to return to our center and shop. This requires the implementation of on-site health and safety procedures, such as frequent disinfection of surfaces, the use of signs to increase the distance from the society, and the brand’s adherence to occupancy rate restrictions that prompt shoppers to queue outside the store.
In addition, we also launched a welcome back promotion, sidewalk sales, and three active shopping methods; in-store, curbside pickup and our proprietary virtual shopper program. We launched the virtual shopper program at the end of June, and since we see better engagement and conversion rates than expected, early customer interest is promising.
We are very happy to see shoppers returning to our open-air center, and in the past six weeks, visits have rebounded to about 85% of the previous year’s level. Even if the center continues to reduce working hours due to COVID, it has achieved this goal. As expected, tenant sales in the second quarter were greatly affected due to the closure of most of the stores. However, retailers shared that they are encouraged by their sales speed and conversion rate because the shoppers visiting our center seem to have purchase intentions.
The current environment has had a negative impact on some retailers, especially some retailers who were already under pressure before the pandemic. So far, 14 retailers on our tenant roster have declared bankruptcy or announced the reorganization of the entire brand. Since most of them are being processed, we do not yet know the final impact of closing the store, timing, lease adjustments or possible early termination fees will be [Phonetic]. These announcements range from small tenants with only one store in our portfolio to more important announcements. I will talk about four, each of which accounts for more than 1% of our combined ABR.
Ascena Brands is our second largest tenant, with 96 stores in our combined portfolio, covering 534,000 square feet, and contributing approximately 4.7 ABR (voice) points. It filed for Chapter 11 bankruptcy protection at the end of July, and they provided a preliminary list of store closures, which included approximately one-third of the stores in our combined portfolio.
Brooks Brothers has 23 stores in our comprehensive business portfolio with an area of 135,000 square feet, contributing approximately 1.4% to ABR. J.Crew has 26 stores with an area of 140,000 square feet, contributing approximately 1.4% to our consolidated ABR. G-III Apparel announced a brand-wide reorganization, including the intention to close all its Wilson and Bass stores. Currently, there are 38 Wilson and Bass stores in our comprehensive portfolio, occupying 184,000 square feet and 1.6% of ABR.
The remaining tenants who filed for bankruptcy have a total of 46 stores in our consolidated portfolio, including 183,000 square feet of GLA, accounting for 1.9% of ABR. The remaining tenants who announced the reorganization of the brand range account for a total of 45 stores in our combined portfolio, including 134,000 square feet of GLA and 1.5% of ABR. Regarding the restructuring, we have received or expect to receive a large amount of lease termination expenses.
I want to reiterate that even though we have provided the current total contributions of these tenants to our portfolio, these situations are unstable, and we hope that the results will include some sort of early store opening, store closures, and lease expiration. combination. Store closures and possible lease adjustments. In many cases, the reoccupied space will provide us with opportunities to increase and upgrade our leases and increase NOI as we continue to develop new businesses in the industry and platform retailers we believe in The new business is essential to attract new and more shoppers to visit our center.
In addition, our central design provides space and is easy to reconfigure, requiring only limited capital investment. Although the list of retailer bankruptcies is long and this is due to the economic downturn triggered by the virus exacerbating specific brand challenges, we believe that direct sales channels are still crucial for many retailers. Unsurprisingly, as many retailers have adopted a cautious attitude to open new stores in the short term, the rate of leasing has slowed.
It takes time to fill recent and anticipated job vacancies, but leasing space is the focus of the entire Tanger team, and we are in active dialogue with existing and potential brands because we provide an attractive value proposition and relatively low cost of occupation . Arranging our tenant mix remains one of our top priorities, and we believe that Tanger will continue to be the first choice for retailers seeking [Phonetic] high-quality, strategically located open-air retail venues to control their distribution, pricing and product positioning.
What makes me happy is that even in this environment, since the beginning of the pandemic, we are still signing new permanent and pop-up store agreements with many high-end brands or the first investment brands, which makes us more convinced, It is expected that the store closure will provide us with opportunities for improvement in the future of leasing.
Therefore, I now want to transfer the call to Jim to show you our financial performance, balance sheet and liquidity review.
Thank you, Steve. The second quarter results were mainly affected by uncollected rents and reserves related to the pandemic. Please refer to the earnings report released last night for more detailed information we provide to quantify the impact of rental income. The net loss for common shareholders in the second quarter was $0.25 per share, compared with net income of $0.15 for the same period last year.
The core FFO available to common shareholders in the second quarter was $0.10 per share, compared to $0.57 per share in the second quarter of 2019. The NOI of the same center of the combined investment portfolio decreased by $39 million in the quarter, mainly due to the temporary closure of store sales under the authorization of variable rent loss from tenants, and the write-off of $33.9 million in unrecoverable revenue.
These include $13.9 million or a one-time rent reduction in exchange for a favorable lease amendment for the landlord; $8.9 million related to recent bankruptcy; and $1.4 million in other rents that we believe are risky. In addition, we confirmed that the straight-line rents related to bankruptcy and uncollectible accounts were written off approximately $3.7 million. The outcome of the bankruptcy is currently unclear, and the rent considered unrecoverable is largely the rent before the petition.
Currently, cash-based tenants account for less than 5% of our monthly rent. Regarding rent deferral, we recognized the income from these leases as our net income, FFO and Tongzhong NOI, and recorded lease receivables on the balance sheet.
In the second quarter, we confirmed $31 million in rental income, which are deferred rents for those who are negotiating. Basically, all deferred rents should expire in 2021, and most of them should expire in January and February. In other words, we adopted a prudent recoverability approach, and revenue in the second quarter was also reduced due to reserves to offset the additional $9.7 million in revenue related to deferred and still negotiating rents.
As we discussed before, we always put maintaining a healthy financial situation in the first place, and in this day and age, this is more important than ever. Since the beginning of the pandemic and related government restrictions, we have taken many measures to increase liquidity and maintain financial flexibility.
These include reducing our credit line and implementing a $11 million G&A and property operating expense cost reduction in the second quarter. We also temporarily suspended certain capital expenditures that year, saving $9 million in planned projects and $25 million in our proposed Nashville development project. We have completed the revision of credit lines and bank term loan debt agreements. After the end of the quarter, we saw a steady improvement in rental income and positive cash flow in July.
With a positive cash flow outlook, we have resumed the pay cut measures implemented earlier this year. We also repaid the outstanding balance of US$200 million under the unsecured credit line of US$600 million. In July, we paid another US$320 million. As of July 31, total working capital was US$564 million, including cash and cash equivalents on the balance sheet and unused capacity under our line of credit. Until December 2023, we have no debt maturity.
Due to the ongoing uncertainties in the current environment, including the COVID-related challenges and the possible impact of declared bankruptcies and brand-wide restructuring, we will not resume guidance at this time. We expect the pressure for the rest of this year and next year to continue as we see that these latest announcements may lead to store closures and rent adjustments. Nevertheless, we believe that from a liquidity perspective, our balance sheet is in good condition and we are taking all necessary measures to deal with the current environment.
Thank you. Now, we will start the Q&A session. [Operator Instructions]. Our first question comes from Greg McGinniss from Scotiabank. please continue.
Hi, good morning. Steve, it is encouraging that the flow of people brings such a strong return, I just want to know if you can break down this situation by geography or more based on the center of tourism. Then, given the rise in coronavirus cases in certain states, have you had any changes in recent weeks?
Good morning, Greg. We were also encouraged by the speed and enthusiasm of the outlet shoppers returning to Tangier Center after the authorization was cancelled. Regarding geography, our center is mainly located in the northeast, southeast from the base area (voice), Texas. After the authorization was cancelled, we basically did not see the geographic difference between the centers. People left home excitedly to go shopping. There are not many other types of entertainment. It’s hard to go to the movies, hard to go-can’t go to the concerts. Therefore, people are keen to come to our center. Regarding new cases, our center is located in an area that is not necessarily hit hard, and since the latest case last month or so, we have not seen any regression.
Okay thank you. Then a quick introduction to the extension and expected reserves. Therefore, I am considering the expected loss of rent and provisions for deferred and negotiated rent. I am curious how many of these are reserved for specific tenants and general reserves. Then, among those tenants who have been paying the rent for July?
Yes. Hi, Greg. Thank you. We have done the work-with reserves, we have conducted a lease-by-lease analysis to try to understand who is in the pool. And we think the reserve fund we set is appropriate. Please keep in mind that most of these extensions are related to the second quarter, and we have just received some collections starting in July. Therefore, we think based on what we see here, and from the analysis of lease by lease, we believe that the reserve is appropriate.
Thank you. I want to know, given that the store you just closed is closed, by the end of the year, where do you think your portfolio share might be?
Good morning, Craig. As you know, we are not currently preparing to provide any guidance for 2020. I do think that due to the 14 bankruptcies we participated in with our tenants, our tenant bankruptcy will bring us some challenges. year. According to our history in the bankrupt state, many stores will continue to operate. But this is indeed an unstable situation. Before we can figure it out, I don’t think we are willing to give you any form of guidance on the year-end occupancy rate.
Ok. Then in terms of signing new leases, will these leases generally expire in 2021 or will some of them open this year?
of course. Thank you for your question, Craig. So, so far this year, since the COVID, we have permanently opened more than 30 new stores and therefore opened 35 pop-up stores throughout the fleet. The new store actually opened today, only to be alerted. Therefore, we have made many new developments not only this year but also next year, and a large number of leases are taking place.
Good morning. Thank you. As far as your collection status is concerned, we thank you for your disclosure. This means about $32.5 million in bill rent per month. But a subsequent press release stated that you collected $44.8 million in July. I think this includes the rent in the second quarter and the rent in July. Of the $44.8 million, how much is related to 72% of the settled rent collected in July, and how much of the previous rent receivable?
Hi, Christie. This is Jim. Yes, you are correct about how to get this $44 million. Also-we are collecting some rent from the rent issued in April, May and June. And there is some rent there, and people are already paying their August rent. As Steve said in his speech, we have received about 77% of the rent in July. The rent in July is very similar to the rent in the 7th quarter. About 9% of rents in the second quarter were related to people who were still in bankruptcy in July. Therefore, most of these rents are advance payments, and we expect that. So you can do the math and get there, we look forward to some-we have already got a promise from the extra payment for the rent in July. Therefore, we are very happy to see the rent in July, especially when you consider our portfolio, which is true for almost all non-essential tenants.
We are really happy to see an improvement in the trend of cash balances in July, and so far, what we have seen is the beginning of August, which is a bit earlier than July. Therefore, we are encouraged by these trends.
Ok. So maybe you can sort it out for me, how much of the 44.8 million USD is related to the bill rent in July? And, I’m trying to understand it in a 72% denominator exchange, and if you want to measure the collection rate of a different base, the rent in the second quarter may no longer include tenants who are bankrupt or reduced. If so, you don’t Billing is needed again.
As of July 31, the total rent we collected in July was approximately US$23.5 million, approximately 72% of the rent collected. The rest-the rest is the cash we received from the previous months’ rent and the advance payment in August.
Ok. Maybe I will follow up offline. Just a follow-up to Craig’s problem, in terms of facing the risk of bankruptcy and closing the store, Steve, the list you discussed exceeds 12% of the space, which is obviously a very difficult lease Environment, and this is a lot of space that you can reasonably reclaim. In this case, what strategy will you use and how to backfill the space and balance the rent with thinking about trying to backfill as soon as possible.
Yes, of course. As I mentioned, we still have a large number of tenant needs, especially in the furniture sector with some large-format tenants. So in February, West Elm joined us in a shopping center in Pennsylvania, and we expect Pottery Barn to open in the same shopping center for a few days. Therefore, we are discussing the space block with large clothing retailers (non-clothing retailers), and we think this will absorb some of the future demand.
However, in terms of the size of our existing retailers, we still have some huge demand, especially some better retailers, which have achieved some success in the middle part of our product portfolio and also in this regard Make a new transaction.
Hello, I would like to know if you can tell us how you consider the unrecoverable reserves in the second quarter and beyond, taking into account the bankruptcy you raised in your prepared statement.
Yes, hello, I would like to know if it is possible-if you can draw a picture of bankruptcy in the prepared words, can you provide some thoughts on your unrecoverable rent reserves in the second quarter and beyond.
Well, we have listed this for you in the table for the second quarter. For bankruptcies, in the second quarter, most of them were conducted before the petition, and we wrote off 100% of all rents that were not paid in bankruptcy. That’s it. We have prepared a general reserve for another bucket.
Well, I just want to remind you to point out the fact that, as I said before, our cash collection in July has reached 77% and promised to collect more, while 9% of the collection is beyond our control. Because of them-because they are mainly related to bankrupt tenants, and these rents are still considered rent before petitioning. So-we will write it down in July, but as you can see, I think we are really close to reclaiming most of the rent elsewhere, and it really depends on whether there is other time left in the year Bankruptcy application. Hope we have seen the worst case, but it really depends on what is happening at the moment.
But we already know that we may have written off 7% of the rent in July, and-in most cases, the rest is in good condition.
Good morning. When I look at the lease, I look at the total lease volume in the second quarter based on the past 12 months. How do you compare it to the reported volume in the first quarter? It looks like the lease volume in the second quarter. . ’20 actually increased compared to the second quarter of 19. I wonder if this sounds correct.
Well, of course. I mean, I’m looking for-does it mean renewal volume or new transaction volume? I mean, in terms of renewal volume, I mean… [voice overlap]
Caitlin, this is Cindy. It is actually about the same number of leases, and gradually increased a bit of square feet, but we can follow up [technical issues], I can point you to the detailed information on page 11 of the supplement.
Ok. Then I think there may be greater prospects in terms of leasing. I know you mentioned that the process of moving forward may be somewhat difficult. In terms of the leases you made in the second quarter, do you see any improvement as the quarter continues? Or it starts to get stronger because you might end up like February, and it will be more normal until March? Just want to know the progress of the lease in the second quarter and what you have seen so far in the third quarter.
Ok. Caitlin, when the world was forcibly closed by the government in mid-March, all of us were trying-everyone, the landlord and the retailer, was trying to figure out the scenery. There is no history and no best practices, so it took a while to return to a more common way of talking about leasing. Therefore, you can expect that in March, April and part of May, the dialogue with our tenants is a health and safety agreement to encourage them to reopen the store, which is our top priority. Then, as the center opened again, traffic flow recovered to about 85% of last year, and consumers excitedly returned to the store, resulting in a better conversion of shoppers than expected, and our tenant community was more willing to accept information about new stores and Temporary pop-up shop dialogue.
As Steve Yalof mentioned earlier, we have signed about 30 new leases and about 30 temporary transactions. Some of these temporary transactions are the designer’s name and new tenants in the retail store, as well as new tenants and expansion tenants in our existing spaces. Now, for most investment portfolios, those lease conversations are now more active in August, and we have put the discussion behind charging us rent during the COVID.
Knowing that, then, only looking at the capital expenditure for the quarter, the FAD page shows that the second-generation TI and incentives and the capital improvement in the second quarter of 20 are very similar to last year, so I want to know if this is an area that can be saved. Or whether you think this will be consistent.
Our guess is that the landlord’s capital expenditure and the reallocation of new tenants will be the same as in previous years. Unless a lease is signed, the money will only be spent, and we are ready to install a new rent-paying tenant to increase our NOI. I just want to remind the audience that our property is essentially a ground floor, and the depth of the entire property is 100 feet. In our history, because the height and depth are the same, it is easier to reconfigure the space with tenants of different sizes. As Steve Yalof said, at the end of the year, we proceed A lot of meaningful dialogue to fill the space. Several different types of retailers are very interested in expanding or joining direct sales channels.
Good morning. Can you elaborate on the lease structure amendments received in the second quarter to reduce rents?
of course. In most cases, we discussed abandoning joint leases, promoting lease termination, extending leases, and renewing the right of early option. This type of nature will protect income streams and long-term leases.
And-what do you think of the monetary value of some of these currencies? I mean, I know this is totally a negotiation and definitely a unique time, but-yes, I mean, how did you approach this problem from the neutral point of Tanger’s NPV?
I think long-term leases may provide us with some good value. I mean, ensuring the occupancy rate is indeed one of the core priorities we currently have. However, as we mentioned earlier, there are many new retailers that are studying product portfolios. We have made some very good recharges for perm rentals. As I mentioned earlier, some of our better retailers now have a deeper understanding of our product portfolio because they have succeeded at certain entry points into our product portfolio.
Furthermore, the occupancy rate will undoubtedly help our leasing work because we have introduced some better international and domestic names into our product portfolio.
Got it, thank you. I also have some questions about the Tanger virtual shopper business model. Who bears the incremental cost of these virtual shoppers, is it Tanger, the retailer, or the consumer through charging? Then, will Tanger receive any revenue or expense sharing for providing this service?
Well, the virtual shopper program was actually developed when many tasks were not cancelled in some areas of our country. Therefore, we want to provide our loyal customers (we call Tanger Insiders and Tanger VIP) an opportunity to purchase the entire product portfolio when they cannot really enter their specific store.
Therefore, in this regard, we have used many internal talents to act as virtual shoppers. We have a strong customer service plan in each shopping mall, and the customer service representatives who work in Tangier are very close to all the stores in a particular shopping mall and actually play a very good role. Ambassador of the plan.
Regarding transportation, the cost of transportation is borne by the retailer or purchaser. Therefore, from an incremental cost point of view, there is almost none.
got it. Then, do you see it as a long-term product offered as your business develops, or more short-term decisions related to COVID?
Well, this is a good question. We think this is a lasting part of our future business. I think that the way shoppers shop today has developed to a place we have never seen before. We think this is our long-term retention strategy, which is part of a series of services we provide to customers and retailers.
Thank you. Thank you maybe just the last resort of virtual shoppers. You can share information about the percentage of recent tenant sales on the platform, which can help.
What I can share is that the program itself has more than 100,000 external participants. But I am not going to talk about sales or conversions now.
Good morning. Thank you for asking my question. I think-it seems that you have always been at the forefront and proactively delayed the delivery of the house with the tenant. Do you-maybe you can talk about the direct selling industry and have this idea-do your actions prompt others to do the same? As a result, how does your competitive position in the store space evolve?
Good morning, Floris. Thank you for your compliment. I think the goodwill between us and the tenant community can be demonstrated by the speed and speed of the store reopening in our center.
At this stage, about 95% will be reopened. Please remember that most of our larger centers are located in Washington, DC and Long Island, which only opened in mid-June. We are satisfied with this. We are very pleased that many tenants have accepted the two-month extension, mainly for repayment in January and February next year, so we can all resume business. I think the success of this plan is that we seem to have returned to our normal rhythm in July and now to August. Moreover, we are discussing future growth opportunities with tenants, rather than just focusing on what they will pay and what they will do.
Therefore, the postponement fulfilled its purpose. We have more than 500 different tenants, and trying to renegotiate each lease or have all these conversations with each tenant would be pure chaos. Therefore, we decided to take a proactive approach that seemed effective.
And do you think that this has stimulated your other competitors to compete in my marketing field? I know that you think there are no more competitors in doing this, but do you pursue similar delay strategies?
We respect our competitors’ experienced senior managers very much. As far as I know, their call will be received next week, and you may want to ask for their answer. Of course I cannot represent them.
very fair. very fair. Another one-I think you have a few interesting comments before, this is the number one, you may have talked about attacking at some point. I am curious about the opportunities you think you might see, and what opportunities do you think you will find in the market?
As Steve Yalof mentioned, the benefit of restoring the store’s productive assets is that we have the opportunity to plan and improve our joint lease. I think it can be said that almost all bankruptcy productivity, its store productivity is only a small part of the average level of our shopping center. So this will provide us with some opportunities to add more tenants and create more excitement in the properties we already own, so this is one of the ways to attack.
Secondly, we do believe that there are opportunities in certain markets to provide more outlet space without outlets, or the market does not provide enough outlets. Third, we have US$564 million in available cash, which we use to look for investment opportunities that may increase the value-added investment portfolio.
of course. If possible, please allow me to follow up. You also mentioned some experienced people. It’s nice to see that you don’t have an experienced side in your center today, because obviously some of them may even suffer more than clothing, but you said you would hope that the increase may move forward . Do you see a major change in the appearance of the Tanger direct sales center in two to three years?
Floris, I don’t want to speculate on the appearance of these centers. When our shoppers come to our property, we are talking with various different types of tenants to create more excitement and new experiences, so please continue to pay attention to our development and announce our strategic plan.
There are no other questions at this time. This concludes the question and answer session. If there are any closing remarks, I want to forward the call to Steve Tanger.
Let me thank each of you for your precious time today and your attention to our company. If you wish to expand the scope of the conversation, we will continue to provide more detailed information. I look forward to all of us, Steve Yarov, Jim Williams and Cindy Holt, and Ashley Curtis, all hope we can greet you soon.
Post time: Aug-11-2020