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Rating Action:

Moody's upgrades Tanger to Baa1

Global Credit Research - 23 May 2013

Approximately $550 million of securities affected.

New York, May 23, 2013 -- Moody's Investors Service upgraded the ratings of Tanger Properties Limited Partnership (senior unsecured at Baa1) and Tanger Factory Outlet Centers, Inc. (preferred shelf at (P) Baa2). The rating outlook is stable.

RATINGS RATIONALE

The upgrade reflects Tanger's success in integrating the five assets it acquired in 2011 totaling 1.5 million square feet and over $450 million while maintaining strong credit profile and pursuing successful new developments and joint ventures. Tanger's portfolio has maintained its exceptionally strong occupancy of over 95% since 1993, and its tenants' occupancy cost has remained lower than at traditional malls (most recently at 8.4% for 2012), which is a key attraction of the outlet concept for retailers. The outlet center business has proven to be resilient throughout all economic cycles and Tanger has and continues to be a leader in this segment. The REIT's same store net operating income growth has remained positive through all cycles.

Tanger has also successfully expanded its platform both geographically in Texas and Arizona, as well as strategically: with a greater proportion of joint ventures including Simon Property Group in the US, RioCan in Canada, as well as with a number of regional firms. Moody's notes that joint ventures often add complexity and require significant senior management attention; to date, Tanger has largely been able to manage its JV activities smoothly and efficiently.

Positively, Tanger's credit profile remained strong with 5.2x net debt/EBITDA, 4.0x fixed charge coverage and 4.7% secured debt for the first quarter of 2013.

Tanger's liquidity is also strong with availability of almost $345 million on its $520 million credit facilities due 2015 and limited near-term maturities and development commitments.

The stable rating outlook reflects Moody's expectation that Tanger will continue its profitable growth strategy based largely on moderate development including via joint ventures. Moody's further expects the REIT to continue to reduce its leverage and grow its fixed charge coverage, as well as temper its variable rate debt exposure. In addition, Moody's stable outlook contemplates that Tanger's joint venture exposure remains at current levels.

Positive rating movements will be unlikely in the near to medium term and will require material increase in Tanger's platform as well as further strengthening in its credit profile. At a minimum, net debt/EBITDA of less than 3.5x and effective leverage of less than 30% would be needed, as well as maintaining fixed charge coverage at or over 4.5x and secured debt below 5%.

Negative rating pressure would occur from any deterioration in Tanger's credit profile such that its fixed charge coverage declines to below 3.5x or its net debt/EBITDA increases to over 5x, on a consistent basis. A rise in secured debt to over 10% of gross assets would also be a credit concern, as would a significant increase in joint venture exposure.

The following ratings were upgraded with a stable outlook:

Tanger Properties Limited Partnership -- senior unsecured debt at Baa1; senior unsecured shelf at (P) Baa1, senior subordinate shelf at (P) Baa2

Tanger Factory Outlet Centers, Inc. -- preferred shelf at (P) Baa2

Moody's last rating action with respect to Tanger was on June 8, 2012, when Moody's affirmed the ratings of Tanger Properties Limited Partnership (senior unsecured debt at Baa2) and Tanger Factory Outlet Centers, Inc. and revised the rating outlook to positive from stable.

Tanger Factory Outlet Centers, Inc. (NYSE: SKT), a REIT headquartered in Greensboro, North Carolina, USA, focuses on developing, acquiring, owning, operating and managing factory outlet shopping centers in the US. As of March 31, 2013, Tanger's assets totaled $1.7 billion and its common equity was $511 million, both at book value.

The principal methodology used in this rating was the Global Rating Methodology for REITs and Other Commercial Property Firms published in July 2010. Please see the Credit Policy page on www.moodys.com for a copy of this methodology.

REGULATORY DISCLOSURES

For ratings issued on a program, series or category/class of debt, this announcement provides certain regulatory disclosures in relation to each rating of a subsequently issued bond or note of the same series or category/class of debt or pursuant to a program for which the ratings are derived exclusively from existing ratings in accordance with Moody's rating practices. For ratings issued on a support provider, this announcement provides certain regulatory disclosures in relation to the rating action on the support provider and in relation to each particular rating action for securities that derive their credit ratings from the support provider's credit rating. For provisional ratings, this announcement provides certain regulatory disclosures in relation to the provisional rating assigned, and in relation to a definitive rating that may be assigned subsequent to the final issuance of the debt, in each case where the transaction structure and terms have not changed prior to the assignment of the definitive rating in a manner that would have affected the rating. For further information please see the ratings tab on the issuer/entity page for the respective issuer on www.moodys.com.

For any affected securities or rated entities receiving direct credit support from the primary entity(ies) of this rating action, and whose ratings may change as a result of this rating action, the associated regulatory disclosures will be those of the guarantor entity. Exceptions to this approach exist for the following disclosures, if applicable to jurisdiction: Ancillary Services, Disclosure to rated entity, Disclosure from rated entity.

Please see www.moodys.com for any updates on changes to the lead rating analyst and to the Moody's legal entity that has issued the rating.

Please see the ratings tab on the issuer/entity page on www.moodys.com for additional regulatory disclosures for each credit rating.

Maria K Maslovsky
Asst Vice President - Analyst
Commercial Real Estate Finance
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

Nicholas Levidy
MD - Structured Finance
Commercial Real Estate Finance
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

Releasing Office:
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

Moody's upgrades Tanger to Baa1
No Related Data.

 

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