Tanger Factory Outlet Centers Inc

NYSE:SKT

Earnings Call Transcript 2020-Q3

[Cyndi Holt, Vice President, Investor Relations]

Good morning. This is Cyndi Holt, Vice President of Investor Relations, and I would like to welcome you to the Tanger Factory Outlet Centers Third Quarter 2020 Conference Call.

Yesterday evening, we issued our earnings release, as well as our supplemental information package and investor presentation. This information is available on our Investor Relations website, investors.tangeroutlets.com.

Please note, that during this conference call, some of management’s comments will be forward-looking statements that are subject to numerous risks and uncertainties and actual results could differ materially from those projected. We direct you to our filings with the Securities and Exchange Commission for a detailed discussion of these risks and uncertainties.

During the call, we will also discuss non-GAAP financial measures as defined by SEC Regulation G, including funds from operations or FFO, core FFO, same-center net operating income, and adjusted EBITDA. Reconciliations of these non-GAAP measures to the most directly comparable GAAP financial measures are included in our earnings release and in our supplemental information.

This call is being recorded for rebroadcast for a period of time in the future. As such, it is important to note that management’s comments include time-sensitive information that may only be accurate as of today’s date, November 6, 2020.

At this time, all participants are in listen-only mode. Following management’s prepared comments, the call will be opened for your questions. We request that everyone 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 for you to re-queue for additional questions.

On the call today will be, Steven Tanger, Chief Executive Officer; Stephen Yaloff, President and Chief Operating Officer; and Jim Williams, Executive Vice President and Chief Financial Officer.

I will now turn the call over to Steven Tanger. Please go ahead, Steve.

[Steven Tanger, Chief Executive Officer]

Good morning, and thank you for joining us. I will provide a review of our third quarter performance and an update on each of our key priorities. Steve Yaloff will provide additional details on our strategic initiatives and Jim Williams will discuss our financial results and balance sheet.

During the third quarter, we made meaningful improvements across each of our areas of focus, including liquidity, rent collections, driving traffic to our centers, leasing, and shopper engagement. Our centers offer a compelling option for retailers with an attractive, relatively low cost of occupancy.

For shoppers, our open air outdoor centers offer an inviting way to find the brands and value they seek as evidenced by the rebound in traffic that we experienced as the third quarter progressed. We believe, we are well-positioned to capture pent-up demand going into this holiday shopping season and beyond.

In the third quarter of 2020, same-center NOI was $66.6 million, a decline of $10.9 million, compared to the prior year, driven in large part by the impact of COVID-19 on rent collections. We are pleased that the year-over-year change is significantly better than it was in the second quarter.

Furthermore, since the start of the third quarter, we have generated positive cash flow each month resulting in $640 million of available liquidity at the end of October. We have made significant progress in terms of rent collections, which were markedly improved compared to the second quarter.

For the third quarter, we expect to collect approximately 92% of rents billed including 89% that we have already collected.

We only have approximately 3% of third quarter billed rent that are being deferred or still under negotiation and 5%, which we do not anticipate collecting due to one-time concessions or bankruptcies or because, we other deemed them uncollectible because of tenant financial weaknesses. In the select cases, where we have granted one-time concessions.

We have done so in exchange for landlord favorable lease modifications such as, co-tenancy waivers, term extensions, and early option exercises in an exchange of value-for-value with the ultimate goal of preserving our ongoing income stream, while offering desirable brand variety and product choice to our shoppers.

This year’s third quarter was negatively impacted by reduced back-to-school shopping caused by some districts requiring schools to be virtual. Uncertainty was prevalent including shoppers’ comfort in going to stores, retailer’s ability to open and staff their stores, and the full availability of inventory. Given that changing backdrop, we are pleased with our performance.

For the quarter, traffic rebounded to 86.5% of prior year even as stores opened to accommodate retailer needs, our open air centers operated at 30% fewer hours per week since reopening. In addition, many local mandates require only 50% of capacity at one-time in retail stores.

Of note, traffic picked up tremendously from the beginning of the quarter to the end. By mid-June, non-essential shopping mandates were lifted at all of our centers and store openings accelerated as the third quarter progressed.

At the start of the quarter, approximately 88% of total occupied stores in the portfolio had reopened. At the close of the quarter, that increased to more than 99%. We have increasingly moved from a defensive and reactive approach that was necessary as we learned how to adapt and operate within the protocols of the pandemic towards a proactive strategy of safely getting customers back in shopping.

As of today, we have increased hours and access. As we maintain our priorities of shoppers’ safety, retailer ability to staff the stores and the desire to offer as much access as possible to our customers. Blended average rental rates for all leases that commenced in the quarter were off 6% on a straight-line basis and 11% on a cash basis.

At quarter end, occupancy for our consolidated portfolio was 92.9%, down 90 basis points from the end of the second quarter, due in large part to Ascena closing 29 stores, totaling 137,000 square feet.

While a number of tenant bankruptcies and brand-wide restructurings remain fluid at this time, we expect approximately 80 stores, comprising 400,000 square feet to close between the fourth quarter of 2020 and the second quarter of 2021.

We also expect there will be an impact on rental rates, as mid-lease modifications are implemented in select cases and as some tenant leases are renewed at reduced spreads. These tenant situations have accelerated as the pandemic further impacted their businesses.

That is one element of our business that we cannot control and while there will likely be additional fallout as we sit today, our tenant watch list is smaller than it was going into the pandemic.

Our confidence in our platform is steadfast and while the current level of vacancy does create near-term pressure on our NOI, it also creates opportunity as we curate our centers, and target new tenants that will increase the shopping options available to our centers.

Importantly, we have maintained our strong liquidity position. With an improving outlook, we’ve fully repaid the outstanding balances on our $600 million unsecured lines of credit. With the increase in rent collections, we have achieved positive cash flow each month since the start of the third quarter. As of the end of October, we had a cash balance of approximately $40 million.

Balance sheet strength has long been a core tenant of Tanger and this discipline is serving us well. We believe, a fortified balance sheet remains crucial to navigate challenging times and to emerge with the strength necessary to pursue potential opportunities.

Our priorities remain consistent, maintain a strong balance sheet; provide a compelling value proposition for our retailers and consumers; and maintain a high quality portfolio with desirable brand name tenants.

While we are encouraged by sequential improvements and our long-term outlook, we do recognize the continued challenges we face, largely due to the impact to COVID-19. Leasing remains a top priority, as does continuing to build on our positive traffic momentum, particularly as we enter the holiday shopping period.

As we evolve from the defensive stats, we needed to take at the outset of the pandemic, we are taking a fresh look at our center operations with a view towards achieving additional NOI and sustained long-term growth.

Finally, I want to express my ongoing best wishes for everyone’s good health and well-being. We remain committed to supporting our employees, customers, and communities through this difficult time.

I will now turn the call over to Steve Yaloff.

[Stephen Yaloff, President, Chief Operating Officer]

Thank you. We made significant progress in terms of stores reopening and rent collection since last quarter’s call. These continue to be priorities for our entire team, and we are highly focused on returning to long-term sustained growth. Our immediate emphasis is on leasing available space, driving traffic to our open air outlet centers, and building shopper engagement through the important holiday shopping period.

We are effectively executing on our initiatives aimed at, operating more efficiently to optimize cost; maximizing revenue; and driving NOI growth. In terms of leasing, we continue to get in front of our great brands and generate tenant interest, many of which are already Tanger customers that are looking to expand their footprint with us such as, Calvin Klein, West Elm, Pottery Barn in Erie. These brands have opened new locations during the pandemic including marquee stores in center of court locations.

We are also strategically and successfully utilizing pop-up stores. Pop-ups allow us to fill vacancies and to introduce new brand and new categories to Tanger such as, in the home category, top food and beverage concepts, well-known local brands and digitally-native brands.

While the rent per square foot on these pop-up leases is lower than the portfolio average, they fill a number of objectives including, keep the space occupied with desirable retailers, and setting us up for additional future growth with many of these tenants.

Two such examples are Tory Burch and Vineyard Vines, both of which initiated their relationship with us as pop-ups and have since expanded to have multiple, long-term leases. While leasing velocity remains moderate in this environment, we believe the open air outlet distribution channel continues to be critically important for many retailers providing a low relative cost of occupancy making it a compelling option for retailers new to the channel, particularly strong local brands.

Through our leasing efforts, we limited our occupancy decline for the quarter to 90 basis points, as new leases offset almost half of the vacancies created by the recaptured space. We have been focused on evolving our marketing strategy to drive customers to our centers, while also increasing customer engagements, enhancing our digital strategy and marketing efforts has been an objective for some time, and the current environment has only accelerated this initiative.

During the quarter, we launched some exciting enhancements to the Tanger digital capabilities, where shoppers can access exclusive deals and earn rewards. As of the end of the third quarter, Tanger App downloads were up 26% year-to-date. Similarly, we have continued to utilize the Tanger Virtual Shopper Program, which allows shoppers to seamlessly access products from across our platform.

This program is having the intended results of engaging shoppers and allowing them to shop in a way it fits their needs. As we lead up to the holiday shopping season, we are planning for one that looks different than it has years past. Instead of the difficult focus on the day and weeks following Thanksgiving, we are starting early and encouraging people to shop early, shop now, shop Tanger.

We are working closely with our retailers to provide exclusive promotions at our centers and to provide a safety conscious and fun environment for shoppers. At this time, tenants are communicating that they are in good shape with regards to holiday inventory, having effectively worked through inventory that they’ve built up during the shutdown.

Additionally, we believe we have a compelling opportunity from an operational perspective with some enhancements to our field management team. To drive this, we have added a seasoned executive to our team.

Leslie Swanson has joined Tanger as Executive Vice President of Operations and is responsible for overseeing the planning and execution of operational strategies and expense management initiatives; growing center occupancy; and developing new revenue opportunities.

The underlying elements of this approach is to ensure we have an empowered field-driven organization laser-focused on increasing NOI. There are some opportunities, particularly on the expense side that we can unlock in the near-term and others that will take longer to realize, but I am confident that we can drive incremental revenue and profit over time.

Finally, I would like to highlight some of our ESG activities with regard to the social elements, supporting local communities is embedded in our culture. Tanger continues to support important social services throughout the pandemic by making our centers available to blood drives and food collection distribution sites.

As part of our efforts to foster civic engagement, Tanger partnered with two non-Partisan organizations, HeadCount and Power the Polls to encourage voter registration and offered our full-time employees, paid time-off to volunteered polling stations. We are dedicated to engaging with our stakeholders on ESG matters at all levels.

To further this engagement, Tanger will complete a comprehensive materiality assessment early next year to help guide our ongoing ESG strategy goals and objectives. We are committed to ongoing improvement and transparency and we look forward to reporting on our efforts and progress.

The entire team is excited by the future prospects for Tanger, although the near-term environment remains uncertain and it will take some time to return to sustained growth as we continue to work through the impact of the pandemic and recent tenant reorganizations, I believe we have an unparalleled platform and brand from which to achieve growth and create value.

With that, I would now like to turn the call over to Jim to take you through our financial results, balance sheet and liquidity recap.

[James Williams]

Thank you, Steve. Third quarter results showed a strong improvement from our second quarter performance, but reflect the ongoing impact of uncollected rent and reserves related to the pandemic and tenant bankruptcies.

Please refer to the earnings release we issued last night for additional detail provided to quantify the impact to rental revenues.

For the third quarter, net income available to common shareholders was $0.14 per share, compared to net income of $0.25 per share in the prior year. Third quarter core FFO available to common shareholders was $0.44 per share, compared to $0.58 per share in the third quarter of 2019.

Same-center NOI for the consolidated portfolio decreased $10.9 million for the quarter, including a $6.6 million charge to write-off uncollectible revenues or reserve programs that were deferred or under negotiation at quarter end and may not be collectable.

In addition, we recognized a write-off of approximately $2.4 million in straight-line rents, associated with the bankruptcies and uncollectible accounts. The outcome of the bankruptcies is still not fully known at this time and the rents in uncollectible are largely pre-petition rents. Tenants who are currently on a cash basis of accounting comprise less than 3% of our monthly rents.

We also continue to collect rents billed for prior periods and as of October 31, our second quarter collections improved to 43% of rents billed, as expected payments were received, previously under negotiation were resolved and a portion of rents written-off in the second quarter were paid.

With regard to rent deferrals, we recognized revenue from these leases in our net income, FFO and same-center NOI, and recorded a lease receivable on our balance sheet. In the third quarter, approximately $2.2 million of rental income billed represent deferred rents or those that are under negotiation. This is a market decline from the $28 million deferred or under negotiation for it’s billed in the second quarter.

Substantially, all of the deferred rents are due in 2021, the majority of which are due in January and February. That said, we have taken a prudent approach towards collectability. In total for both quarters, we have taken a reserve against revenues for potentially uncollectible accounts totaling $11.8 million, which represents 6% of rent billed and 39% of rents deferred or still under negotiation.

As we have previously discussed, we have always prioritized maintaining a strong financial position, and particularly through the pandemic, this discipline has proven to be critical. With these improvements in rent collections, the ongoing focus on cost controls and a prudent approach to capital allocation, we currently have $640 million of available liquidity, including $40 million of cash, and $600 million of unused capacity on our lines of credit.

At the start of the pandemic, out of caution, we drew down our entire line of credit. With the impeding environment, during the quarter, we fully paid down the balance. We have no significant debt maturities until December of 2023.

In terms of capital allocation, we will continue our disciplined and conservative approach, our priority uses of capital include investments to deliver NOI growth, such as retenanting vacancies, reducing levers that has increased in the current environment, as well as evaluating selective accretive opportunities over the long-term.

With regard to dividends, the Board will continue to evaluate future dividend distributions on a quarterly basis. But we remain committed to paying our dividend as required to maintain REIT status. Due to the ongoing uncertainty around the current environment, we are not reinstating guidance at this time.

We anticipate the remainder of this year and into next year to be pressure as we see potential store closures and rent modifications from these recent announcements. Nevertheless, we believe our balance sheet is well-positioned from a liquidity perspective and are continuing to make the appropriate steps to navigate the current environment.

I’d now like to open it up for questions. Operator, can we take our first question?

[Operator]

[Operator Instructions] And our first question today comes from Katy McConnell from Citi. Please go ahead with your question.

[Katy McConnell, Citigroup]

Great. Thank you and good morning everyone. Could you provide a little more color on what the pipeline of actual leasing demand looks like today? And based on the progress you’ve made adjusting 2020 expression, can you talk about how spreads are trending for the leases you are actually signing today as opposed to the prior twelve months?

[Stephen Yaloff, President, Chief Operating Officer]

Good morning. This is Steve Yaloff. I am going to let Jim talk about the spread, but as far as leasing is concerned, the first thing I want to say is that everybody in our company is a leasing representative. Steve is leasing, I am leasing, or center managers are leasing and our retailers, although they are taking a cautious approach, we are talking about future open to buy.

Our leasing strategy is a sound one and we are talking to a lot of the national retailers that are currently in our footprint about expanding. Some of the recent bankruptcies that created opportunity where we had space available in some shopping centers that are typically high occupancy and have given us the opportunity to get in front of a number of new retailers and creating opportunities that hadn’t been there in the past.

We are also employing our pop-up strategy as I said in my remarks and we think pop-up is a strategy as great opportunity to turn some of that vacant space into net income. And obviously, short-term leases give us the opportunity to reprice our real estate ultimately as we come to the end of this pandemic.

I’ll turn it over to Jim to sort of share with you little bit more about the leasing spreads.

[James Williams]

Yes. Hi, Katy. This is Jim. Good morning. We are not going to be able to give you much guidance as into 2021. We do and as we’ve said, we expect to see a little bit continued pressure on the spread as we are working with our tenants through this environment and the challenges that that faces to maintain high occupancy.

[Katy McConnell, Citigroup]

Okay. Thanks. And then, seeing as we made great progress on the rent collections this quarter, I am curious when we’d expect to get back to a more normalized level of collections? And based on that progress in 2Q can you touch on any cap categories that seems to be a pretty modest improvement or that are still lagging?

[James Williams]

So, Katy, I think, we are delighted to see that our collection rates get to 89% and really, if we look at what we expect to get, we think that will get up to 92%. And there is a piece that’s still – that’s deferred or under negotiation which is 3%, which is pretty small, and I think pretty incredible when you think we pretty much had to work with almost every tenant in the portfolio.

And we are down to that pretty small percentage. So we are working through that and I think we’ll continue to make progress there. We’ve also seen the rents for second quarter and third quarter to be impacted by the bankruptcies and lot of that are write-offs coming from the bankruptcies or pre-petition rents. And so, now we are in the post-petition periods.

So, we don’t expect to see unless there is further bankruptcy filings, we don’t expect to see 2% of the rents written off for the bankruptcies. We do see as looking ahead, to see some more store closures and some rent coming in as we work through the bankruptcy tenants.

[Katy McConnell, Citigroup]

Okay. Great. Thanks.

[Operator]

Our next question comes from Greg McGinniss from Scotiabank. Please go ahead with your question.

[Greg McGinniss, Scotiabank]

Hey, good morning. Just following on Katy’s question a little bit. So, based on that, pretty impressive 89% collections number and you’ve clearly been hard at work receiving that rents owed. Could you just provide the final collections number by month in Q3? And then, kind of where you expect collections to turn by year-end? Is that 92% number the bogie here?

[Stephen Yaloff, President, Chief Operating Officer]

Well, Greg, I think, again, it’s going to be literally like then to give you guidance for fourth quarter. But yes, I mean, the collection rates for the month, that was very similar to particularly the latter remarks, to where I average had turned out to be of 89% and so far, what we are seeing in October is very similar to that range.

[Greg McGinniss, Scotiabank]

Sorry. And then, the July, August collections numbers? Don’t mind?

[Stephen Yaloff, President, Chief Operating Officer]

We are obviously, July was lower, but we prefer not to give the monthly break down. I think the important piece I think is that, where we are trending is towards the end of the quarter and looking into fourth quarter is more like the rates what we are seeing in the table.

[Greg McGinniss, Scotiabank]

Okay. I guess, then, Jim, as noted in the earnings release, there were some rents written off in Q2 that are repaid in Q3. Do you mind outlining the impact of adjustments built into Q3 results that really actually apply to last quarter’s reserves and write-offs?

[James Williams]

Yes. There is quite a bit of movements in the various buckets. I mean, part of this analysis and there is a big chunk of when it’s in deferred that won’t be paid until 2021. So, as we went through the year, we will have to continue to go through what’s still on the books, what’s still unpaid and do the collectability assessment.

In some cases, we’ve increased the reserves what had and in some cases we had some positive results for folks either paid or we think they were going to pay it, or we get some termination fees what we were previously written off. But net-net, I think the impact of truing up those items in second quarter that rolled into third quarter was pretty much a wash.

[Greg McGinniss, Scotiabank]

Okay. I guess, just one more from me. On the Terrell outlet sale, just curious what the drivers were behind the disposition. Whether we should expect to see further non-core sales in the future? And then, the – what the NOI contribution was from that asset? Obviously it’s smaller.

[Steven Tanger, Chief Executive Officer]

Good morning. Yes. Terrell was a very small poorly productive non-core asset and it’s consistent with our longstanding policy of an aggressive and active asset management program. And I am not going to get too much into the details, because it was an insignificant transaction. But it is consistent with our long-term plan.

[Greg McGinniss, Scotiabank]

All right. Thanks, Steve.

[Operator]

Our next question comes from Todd Thomas from KeyBanc. Please go ahead with your question.

[Ravi Vaidya, KeyBanc Capital Markets]

Hey. Good morning. This is Ravi Vaidya on the line for Todd Thomas. I hope everyone is doing well. I wanted to ask you guys about what concepts your team is seeing incremental demand from? We are hearing about retailers cutting around closed mall footprints. Gap was an example. Any sense how those types of tenants are thinking about the outlets?

[Stephen Yaloff, President, Chief Operating Officer]

Good morning, Ravi. First of all, as it relates to Gap, we had a very favorable resolution with Gap, in fact looking at new concepts with Gap as we speak. But I think, as we reduced our dependency on apparel and footwear going forward, home furnishings, sporting goods, hard goods, and entertainment concepts are things that we are focused on right now.

[Ravi Vaidya, KeyBanc Capital Markets]

Okay. Great. In terms of traffic, and traffic has recovered, especially in September there, close to prior year levels. Can you offer any commentary on how that’s translating into sales? Any updates on sales metrics or performance of the Tanger Club membership, average basket size, anything like that?

[Steven Tanger, Chief Executive Officer]

Well, our centers are all open air where basically consumers feel more comfortable in today’s environment shopping. Last year, I just want to point out, we were compared to a period of time with hurricane Dorian in September, where seven of our coastal centers were closed.

So, without that impact, we still would have been about 96% of prior levels that an all transparency we wanted point that out. We do believe that we have compelling offerings to consumers and we are prepared to satisfy what our research shows is tremendous pent-up demand for people to go shop.

[Ravi Vaidya, KeyBanc Capital Markets]

Okay. Just one from me here. Given the additional space you expect to recapture, the 400,000 square feet, just wondering, you have a sense of where occupancy bottoms out and when. And then just to clarify, is that 400,000 feet only for tenants at bankruptcy or are there other closures and non-renewals in that total space you are going to recapture?

[Stephen Yaloff, President, Chief Operating Officer]

So, that number is both bankruptcy and also restructuring. And obviously, it’s a fluid situation what I would call that right now it’s hard to make a determination as to where occupancy will land. But again, I reiterate that leasing is one of the main objectives for the entire organization.

And we see that some of these spaces that we are getting back be kicking into some of our better assets creating better opportunities for us to get in front of new retailers, particularly those that haven’t been in our platform before. And we think that’s going to be a great opportunity for us to build upon as we continue to maintain a strong decent relationships with a lot of retailers.

[Ravi Vaidya, KeyBanc Capital Markets]

Thank you. Appreciate the color.

[Operator]

Our next question comes from Craig Schmidt from Bank of America. Please go ahead with your question.

[Craig Schmidt, Bank of America]

Thank you. I am wondering, do the pop-ups impact leasing spreads? The pop-up leases?

[Stephen Yaloff, President, Chief Operating Officer]

No, they don’t, Craig.

[Craig Schmidt, Bank of America]

Okay. And then, regarding, like home and hard goods categories and new retailers that are entering your properties, what kind of ABR do they pay comparable to the overall portfolio?

[Stephen Yaloff, President, Chief Operating Officer]

We don’t really break down the rents by category. But from a contribution point of view, I mean, we look at great halo retailers like, some of the deals we just did at Line Caster. We added West Elm. We added Pottery Barn. And those were retailers that were positioned in other centers in that community, but they wanted to position themselves with the traffic is and they came to our shopping centers.

And with great brand followings that they have, we see that those retailers in addition to the rents that they pay, and hopefully some overage rent that we’ll get as their sales perform, we also get a whole new category of shopper shopping in our shopping center. And I think that’s great, obviously, all set to rise.

[Craig Schmidt, Bank of America]

Okay. Thank you.

[Operator]

Our next question comes from Caitlin Burrows from Goldman Sachs. Please go ahead with your question.

[Caitlin Burrows, Goldman Sachs]

Hi, good morning, everyone. I just - maybe, on same-store NOI for that revenues were down in the quarter but so were expenses, so, NOI I would say was, kind of even with them. I was wondering, going forward, you did talked about expense savings.

But is it possible to continue these expense savings while revenues are lower to that kind of evens out the same-store NOI declines or do you think that the expense savings may not be able to keep up with the revenue? Thanks.

[Stephen Yaloff, President, Chief Operating Officer]

Caitlin, it’s Steve again. With regard to expense savings, so I think, lot of the Q3 expense savings had to do with the fact that we cut our hours by 30% and actually starting today, we are going to add back two hours a day for holiday shopping season. So it implicit with longer hours come increased expenses.

As I mentioned in my opening remarks, we just bought a very seasoned veteran of operating shopping centers to our team. And one of the legacy field operations of Tanger being a little bit more marketing-driven are now pivoting into more of an operational model. And we think embedded in that pivot to more operations will come more expense savings on the field line.

[Caitlin Burrows, Goldman Sachs]

Okay. Got it. And then, just on the lease termination fees, they were high this quarter. But I know that you guys had mentioned last quarter that you were expecting them to be high. So, just wondering if that expectation is now of this elevated level is over? Or do you think that, what you had been talking about last quarter as that it would be coming if there is still more to that? Or if we should return to a more normalized level?

[James Williams]

Hi, Caitlin. This is Jim. I’ll take that question. We have been getting a few termination fees. But the primary reason for those, the termination fee that we recognized is a pretty significant termination fee we’ve received from a single tenant and we recognized about half of that in the third quarter and the other half will be recognized in the fourth quarter.

[Caitlin Burrows, Goldman Sachs]

Okay. Alright. Okay, thanks.

[Operator]

Our next question comes from Vince Tibone from Green Street Advisors. Please go ahead with your question.

[Vince Tibone, Green Street Advisors]

Hi, good morning. What percentage of your square footage is currently leased to pop-up or temporary tenants? And how does that compare to where it was a year ago?

[Stephen Yaloff, President, Chief Operating Officer]

Good morning, Vince. It’s Steve. Historically, temporary tenants about 4% of our portfolio. But, right now, that’s expanded to a 5.5%. And again, short-term leases and pop-ups to us, obviously, occupancy is critical and it’s our goal right now to maintain occupancy.

Occupancy means cash flow. But in a lot of those short-term leases where we have short lease expiration periods, obviously give us the opportunity to reprice our real estate when we get to the other side of this current pandemic.

[Vince Tibone, Green Street Advisors]

Got it. Thank you. And just a follow-up on Craig’s question, just want to clarify. So, all the pop-up leasing is not included in any of the leasing metrics. So, can you break it out two different sections, all lease terms and then in terms of more than 12 months. So, none of the pop-up leasing shows up even in the all lease terms section. Is that correct?

[James Williams]

So, Vince, this is Jim. Let me just clarify. If you look at the footnote in our supplement, we tell you that let’s not inspire to some of the temporary tenant leasing in term which were pop-ups would be. What’s in short-term leases are those that’s beyond a year or more. And those which inspires.

[Vince Tibone, Green Street Advisors]

Okay. Is there any – like, so how much lower is the typical rent on the pop-ups, because I think that maybe a gap in NOI between that, it’s hard to see how much that impacts. But because it’s not showing up in spreads and I don’t know where all that would flow through in the financials, it’s revenue ultimately.

But, can you help us think about, like, okay, if your tenants are going to increase what is the rent level that they generally pay relative to the portfolio average?

[James Williams]

This is Jim. I’ll start-off and Steve Yaloff, if you want to jump in. As Steve said, I mean, the pop-ups due to their short-term nature are not going to pay the full rents and we don’t really get into up to what those rents are and how those compares. It’s a case-by-case basis or it’s a tenant-by-tenant basis. It depends on the company we are talking to and those coming in.

Obviously, the goal there is to bring in some exciting new and fresh tenants to upgrade our tenant mix and we think that’s where we need to go and take the portfolio. But we are – I think we are having a lot of success in talking to these tenants and getting them interested in coming in and opening space in our centers certainly on a pop-up basis.

[Vince Tibone, Green Street Advisors]

Okay, thank you.

[Operator]

[Operator Instructions] Our next question comes from Mike Mueller from J. P. Morgan. Please go ahead with your question.

[Mike Mueller, J. P. Morgan]

Yes. Hi. So, looking at the reserve components, that $2.3 million tied to bankruptcy primarily pre-petition and then the at risk due to financial weakness, that’s about 3.6 million together.

If we were thinking about the 400,000 square feet of space that you expect to lose over the next few quarters, what portion of that 3.6 million is tied to that 400,000? And then, what portion is tied to, I guess, other tenant situations outside of the 400,000 that you know you are going to lose?

[Stephen Yaloff, President, Chief Operating Officer]

So, Mike, I don’t have that kind of write-down in front of me that I can share with you. There is certainly a component that’s in the bankruptcy section. But I just don’t have that information. I’m sorry.

[Mike Mueller, J. P. Morgan]

Okay. Thanks.

[Operator]

And our next question is a follow-up from Vince Tibone from Green Street Advisors. Please go ahead with your follow-up.

[Vince Tibone, Green Street Advisors]

Hi. Thanks for taking more of my questions. Just, what sort of the impairment charge at Foxwoods? And then, does that mean, the property is being marketed for sale?

[James Williams]

Hi, Vince. This is Jim. The impairments related to Foxwoods is primarily the result of just that property being tied to the casino industry. It’s had some challenges with rents and occupancy. Certainly seeing that market have – the casino industry is having its own challenges. I think one of the casinos is still not open today. So, we do a quarterly analysis each quarter and based on our analysis and based on the facts and circumstances at that time, we determine that an impairment charge necessary for Foxwoods. That doesn’t necessarily mean that it’s being marketed for sale. But we have always – it doesn’t mean that’s marketed for sale.

[Vince Tibone, Green Street Advisors]

Okay. Thank you for that color and just one last one for me is, could you share some color on how much variability there is among traffic trends across your portfolio? And any notable trends by region? And specifically, how are your two important Long Island centers performing, compared to the rest of the portfolio?

[Steven Tanger, Chief Executive Officer]

Vince I’ll take that. The portfolio we have is not dependent upon visitors and tourists from other parts of the world which obviously have been impacted by this terrible virus. Our properties are a drive to American Resorts where people tend to go year-after-year together. We don’t really have – we are not a proxy for retail.

So, if I told you the southern properties were doing better than the northern properties, I don’t know if will give you a true picture. Each has different variables impacting traffic. Some of which are weather and other issues that present themselves.

Today there might be extraordinary non-recurring issues. So, I don’t think we would give you much data on geographic distribution of the sales and traffic. That would be helpful to you.

[Vince Tibone, Green Street Advisors]

Okay. Fair enough. Thank you for all the time.

[Operator]

And ladies and gentlemen, that will conclude today’s question and answer session. I’d like to turn the conference call back over to Steve Tanger for any closing remarks.

[Steven Tanger, Chief Executive Officer]

I want to thank everybody for participating in our call today. We hope to see virtually a lot of you at NAREIT a couple of weeks and eventually be able to visit with you face-to-face as we always have. Please be safe. And go shop at our open air outlet centers. Have a great holiday if we don’t see you or speak to you before.

Good bye.

[Operator]

Ladies and gentlemen, with that, we’ll conclude today’s conference call. We thank you for attending today’s presentation. You may now disconnect your lines.