Tanger reported a solid first quarter of 2020, with net operating income down about 3.7% and 94.3% of its properties occupied. But by the time management announced earnings in mid-May, they had a lot more -- and a lot worse -- information on how things were going.
The company allowed most of its tenants to defer April and May rents to 2021, and the vast majority took it up on that offer, with only 12% of April rents collected. The outlook for May isn't likely much better, and it's unclear just how much the picture will improve heading into the summer months. The company also cashed out its available credit, adding almost $600 million in cash to the balance sheet while pushing total debt above $2 billion.
As a result of all this uncertainty, Tanger's board elected to suspend the company's dividend, breaking a streak of paying dividends every quarter for the last 27 years.
That's the bad news. The good news is that Tanger management says that between the cash on the balance sheet and steps already taken to lower expenses, the company could go for two years without earning any rental income (though its debt covenants might argue otherwise).
There's more good news in the form of more of its tenants opening back up for business. On the earnings call on May 13, CEO Steven Tanger said 18% of stores were open, and that number is increasing as more areas Tanger operates in lift restrictions. As these restrictions are lifted and more Tanger tenants open up for business, the company should see cash from rents start to trickle back in and steadily increase.