Todd Thomas: Okay, thank you.
Operator: Our next question is from the line of Craig Mailman with Citi. Please proceed with your question.
Craig Mailman: Hey, good morning. Just a follow-up on the investment question. Steve, I appreciate you don’t want to give guidance here, but maybe some color on the mix of what you’re underwriting, whether it’s more outlet versus additional lifestyle centers? And then also, have you guys identified any outparcel or redevelopment within the portfolio and have sort of an earmarked spend for that? I noticed you took another $30 million on the ATM, it looked like in December. So maybe just talk about what that cash is used for, if that’s going to be sort of near term or whether that’s just opportunistic?
Stephen Yalof: Thanks for the question, Craig. Look, I’ll take the front half and then I’ll turn it over to Michael to talk to you about the ATM activity. But and I appreciate you understanding why we’re not going to sort of divulge the things that we’re looking at. There’s a competitive marketplace out there. And we think we might see value where others don’t, which might give us a little bit of advantage in certain markets that we’re looking at. Obviously, we’re an outlet company. We feel that open-air lifestyle is immediately adjacent to outlet for a number of the reasons I shared in my prior answer just talking about a lot of the synergies of retailers in food and beverage and entertainment and the things that we’ve been doing in our centers now for the last three years.
That said, we do think that there’s a tremendous amount of opportunity for us in our outparcel. We have a lot of excess unmonetized land that we own outright. And we’ve got a team that’s focused 100% on just monetizing that. We brought a couple of things to light last year, Dave & Buster’s in Savannah and a couple of other outparcels that we were able to open up new facilities on. This year, we’ve just did a little bit of possession in Arizona to Texas Roadhouse, they’re under construction currently. And again, adding food and beverage to a very, very highly productive shopping center we’ll only get more customers to come, stay longer. And as we like to say, spend more when they’re there. So it definitely feeds into the narrative of what we’re doing across our portfolio.
We do have a lot of other land to monetize. Those deals are actually very good deals for us, require very little capital on our end. We are debt leasers, we are not sellers, so we like to enjoy the rent that comes with that opportunity and fully monetized, we think there’s a lot of headroom for us out there. As far as ATM, I’ll ask Michael to sort of take that piece.
Michael Bilerman: Thanks, Steve, and thanks, Craig, for the question. The ATM activity, we announced $57.5 million when we announced Huntsville, we did about $30 million post that, which was really just to position our balance sheet effectively back to where it was at the start of last year at 5.2 to 5.3 times. We feel that, that leverage level is towards the low end of our range even before EBITDA growth and free cash flow to allow us the optionality to be able to fund our internal and external growth activity and that equity was raised at a commensurate yield to where we invested in assets. And so we thought it was an appropriate amount, it was prudent, and it allowed us to come to this year with full availability now on our line of credit, which we feel provides us access to capital.
Craig Mailman: Great. And then just a second question, more guidance related. I know you guys put in other income kind of expense of $0 million to $2 million, which seems like the drop would just be less interest income given that you’ve exhausted the cash balances. But just wondering if you have any color on kind of management leasing and other services and other revenues, which contributed about almost $26 million in ’23 what you expect from a run rate perspective there in ’24 to be meaningfully different? Or any color you could give on that would be great.
Doug McDonald: Sure, Craig. This is Doug. That number, we continue to grow through the activities that we’re providing. We talked about last quarter, taking on additional management of the strip center adjacent to our Palm Beach outlets. But otherwise, there shouldn’t be any substantial growth in the line item. It can be lumpy at times due to leasing fees. But the Tanger Place next door to Tanger Palm Beach was the only midyear addition last year that would be full year run rate impact in ’24. Otherwise, we’ll continue to earn a variety of fees through the assets owned in joint ventures and then the Palm Beach property.
Craig Mailman: Okay. So it should be ascribed slightly higher.
Doug McDonald: Sorry, what was that, Craig?
Craig Mailman: I was going to say the amount should be kind of flattish year-over-year to slightly higher. So you have $26 million, $27 million range. Is there a fair way to think about it?
Doug McDonald: Yes. So you’re talking about all of the ancillary revenues, including the sustainability initiatives, EV charging, the marketing partnerships, all of those pieces. I thought the question was on the management and leasing fees. But you’re right, the rest of that business, we see Continued opportunities. The $0 million to $2 million on the interest and other income, that line item is primarily interest income, along with some of the TRS activity and some small miscellaneous piece. But the other revenue line item, we will continue to see progress on our marketing partnerships initiative. The team there is doing a great job. Our sustainability initiatives continue to drive revenue. Some of that came online last year. So you’ll see some full year impact from that in ’24. We think that’s a line item that is high priority strategically for us, and we’ll continue to see growth in those various revenue line items.
Craig Mailman: Okay. All right. So net-net, those are kind of going higher a little bit. Okay. Perfect. Thank you.
Doug McDonald: Thanks, Craig.
Operator: Our next question is from the line of Caitlin Burrows with Goldman Sachs. Please proceed with your questions.
Caitlin Burrows: Hi, everyone. Congrats on the strong year. Maybe starting with occupancy. Could you guys just confirm whether the tenants remain at 10% now, but then more importantly, permanent tenancy increased during ’23. So what’s your outlook for increases in permanent occupancy in ’24? And maybe what are some of the pieces to consider why it may or may not increase in the near to medium term?
Michael Bilerman: Thanks, Caitlin. So temp continues to be about 10% of our portfolio. Occupancy in aggregate was 97.3%, which includes the acquisitions of Huntsville and Asheville, which were below average occupancy to our portfolio. On a same-center basis, it was relatively flat at 98%, which was up about 100 basis points over last year, and all of that growth came from increasing permanent occupancy. So a lot of things that we’ve been talking about on the calls has been we’re going to continue to drive our overall occupancy to a point where then we can start to reduce the amount of temp. And I love when Steve always says, as long as there’s one vacant square foot, we’re going to try to get a tenant in that space overall. As we think about what’s going to happen in 2024, we’ve talked a lot about this remerchandising and re-tenanting, which is swapping out perm for perm.
So our expectation over the course of the year embedded within our guidance is some range where we’ll continue to increase our permanent overall, but the most important thing is the replacement of lower productive users and replacing them with higher productive users, which we will drive our sales growth, drive our rents and ultimately drive NOI.
Caitlin Burrows: Got it. Okay. And then maybe just a follow-up to a question from earlier on the uncollectible rents. You mentioned how when something is in the news, that’s normally not news to you, which is good. But I’m guessing that maybe something that could come up in August or November ’24, say, maybe it’s been quite fully appreciated now in February. So to what extent is the roughly say 50 basis points of rent reserve bad debt assumption include maybe like a buffer for unknown events coming up?
Michael Bilerman: So within our range, every one of these items has got a high and a low and an average. And so there’s a lot of different variables. We feel that over time, we’ve been able to handle difficulty in the retailer environment. And we’re in a unique spot where we do get monthly sales from our tenants. And so we’re always understanding and we’re in constant communication with our tenants to try to work out if they have some problems to get them to the other side. It’s been fortunate that we haven’t had companies go completely away in Chapter 7. And so that’s — we’re mindful of the environment and we feel that embedded in our current 2% to 4% is a reasonable amount of protection around that.
Caitlin Burrows: Okay. Thank you.
Operator: Our next question is from the line of Greg McGinniss with Scotiabank. Please proceed with your questions.
Viktor Fediv: Hello. This is Viktor Fediv on with Greg McGinniss. As a quick follow-up on these temp tenants. When you look to backfill one of those month-to-month leases, how quickly you can get a new tenant in the space and paying rent?
Stephen Yalof: It really depends on the center. It depends on who the user is. Look, it’s — that temp tenant really encompasses a lot of different types of leasing throughout our portfolio. Sometimes we use and we call it really short-term tenancy because we try a lot of new retail. First of all, there’s a lot of barriers to entry to be in the outlet center business. It’s a lot of the retailers that want to be in the business don’t necessarily have 10 years’ worth of excess inventory and product to sell. Therefore, they want to try it before they make a long-term commitment. So we use a pop-up strategy, which is still embedded in that temp handle that we’ve created to give folks an opportunity to give it a try. One such tenant was a hook, which is a resource that you’ll see in a lot of the department stores that sell fishing gear and sporting goods stores.
Hook decided that they wanted to — they had excess — they had excess product. They wanted to get it to try. They did a pop up in one of our shopping centers in Rehoboth Beach turned out to be a success. And now they’ve got permanent stores across our portfolio, and that’s a great story. That’s part of how we use temp or short-term leasing. Other local retailers that may fill a space just to keep the space warm while we’re searching for a long-term tenant or perhaps we have it leased but the retailer isn’t ready to take delivery of possession yet. We’ve just executed five leases with a major brand. We haven’t announced who they are yet. There are short-term tenants in all of those spaces, where those retailers are ready to take delivery and possession, each one of those short-term leases comes with a 30-day right of termination on behalf of the landlord, we send them their notice, but we also offer them a different opportunity within the shopping center if such an opportunity exists.
So it’s a very fluid business, it’s one that keeps lights on. It’s one that keeps spaces cash flowing and maintains great retail vibrancy. I hate to use this old adage, we’ve been using it for years. But we feel like our customers don’t know the difference between a short-term retailer and a full-time retailer, but everybody knows the difference between a closed store and an open store. So as far as we’re concerned, if we can keep lights on, that short-term strategy is a great one for us.
Viktor Fediv: Yes, makes sense. Thank you. Then probably there’s a quick update on how does lease-up look like in Huntsville open-air lifestyle center? And probably, it is broadly trying to understand whether there is an overlap in learning for your leasing team in terms of leasing shopping centers versus outlets? Or did you need any new people to hire? Just want to understand that as well.
Justin Stein: How you doing? This is Justin Stein. So we are really excited about the opportunity at Huntsville. And you have to remember, we are account based in this organization, which means people on the leasing team lease to a certain account, whether it’s Nike or Lululemon. And so we have relationships, deep relationships with all of these retailers. And a lot of the times, the real estate directors, the head of real estate for these companies are the same people that we’ve been dealing with on the outlet channel. We also have a leasing team that has come from the tenant side of the business. So we are well equipped from a leasing, from a marketing and an operations side to handle what’s ahead of us in Huntsville. We’re really excited about it.
Viktor Fediv: Got it. Thank you.
Operator: Our next question is from the line of Mike Mueller with JPMorgan. Please proceed with your question.
Michael Mueller: Yeah, hi. I understand about being opportunistic on the investment side. But I’m just curious when it comes to development, are you actively pursuing different developments or just looking at the higher yields that you achieved on acquisitions in the fourth quarter, the near-term focus is kind of more on that sort of deployment?
Michael Bilerman: Yes. I think acquisitions. Yes, I mean, just take a look at the going in yields on the two acquisitions that we’ve made. And if you also look at the replacement cost, I mean, we purchased those assets for about 40% of which you could probably build them for today. So it looks like a pretty sound strategy. I wouldn’t consider our team to be turnaround specialists, but we’re opportunistic. And if we see there’s outsized growth opportunity in some of these shopping centers, those are the ones that we’re going to target and those are the ones that we’re going to go after.
Michael Mueller: Got it. Okay. Thank you.
Michael Bilerman: Thanks, Michael.
Operator: Thank you. Our next question is a follow-up from the line of Floris van Dijkum with Compass Point. Please proceed with your question.
