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Tanger Factory Outlet (SKT) is the only publicly-traded REIT specializing solely in the development, leasing, marketing and operations of outlet centers in the United States and Canada, notes Brad Thomas, editor of Forbes Real Estate Investor.
Since pioneering the dynamic outlet industry in 1981, Tanger remains an industry leader that strives to provide superior experience to consumers, retail partners and shareholders.
Tanger is not a traditional mall REIT; instead, the North Carolina-based company owns 44 outlet centers in the U.S. (22 states) and Canada.
Uncommon to malls that are costly to build (upwards of $100 million), and with significantly higher operating costs, Tanger set out to create a differentiated retail model that could provide both scale and low-price brand recognition aimed to meet the demands of the bargain-hunting consumer.
Tanger is the only pure-play outlet center REIT, and as you can see below, there are no department stores in the portfolio
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The key to successfully buying a stock at a discount is accurately estimating the future cash flows you expect that business to generate. Accordingly, we take a fundamental approach to valuation analysis and consider the REIT’s funds from operations (FFO).
While I cannot predict the future of retail, I am confident that Tanger’s business model is sound and that the outlet center model is misunderstood by Mr. Market, and therefore, shares now trade at prices that are at a wide discount, or margin of safety.
As Sir John Templeton explained, “To buy when others are despondently selling and sell when others are greedily buying requires the greatest fortitude and pays the greatest ultimate rewards.”
I am maintaining Tanger Factory Outlet as a Strong Buy recommendation and my #1 Buy conviction of 2018.
Disclosure: I am long Tanger Factory Outlet.
Brad Thomas is editor of Forbes Real Estate Investor.
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