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Stock Strategist

Outlet Sale at Tanger

Given its solid growth prospects, we think the firm remains among the best-positioned REITs we cover.

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 Tanger Factory Outlet Centers Inc (SKT) announced it has sold five of its noncore outlet centers for $150.7 million. We are maintaining our $41 fair value estimate and narrow moat rating for the real estate investment trust.

The consideration received for these five centers seems low, considering that they represent 14% of Tanger's presale 37-asset consolidated center portfolio. Four of the five centers were sold for an aggregate $44 million, or an average of $11 million each, far below what we think Tanger's average center is worth. We think this low average price reflects relatively higher near-term capital expenditure requirements and lower growth prospects as well as smaller size (roughly 110,000 square feet per center versus more than 300,000 square feet for the rest of Tanger's consolidated portfolio), lower productivity ($252 in tenant sales per square foot versus roughly $400), and small aggregate net operating income (less than 2% of total portfolio net operating income).

Todd Lukasik does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.