Tanger Inc. (SKT) Earnings Call Transcript & Summary

Hi. Good morning. My name is Todd Thomas. I'm the senior equity research analyst at KeyBanc Capital Markets, responsible for covering retail, net lease and self-storage REITs. I'm pleased to be here today with Steve Yalof, the CEO of Tanger Factory Outlets. Tanger Factory Outlets is an owner of or has ownership interest in 38 open-air outlet centers across United States, comprising more than 12 million square feet. The company, which was founded in 1981, is the only pure-play outlet center REIT. With that, let me turn over the time to Steve to provide an update on Tanger's business and portfolio. I'll kick off with a number of questions, and then we're happy to take questions from those joining us today. So please submit your questions. And Mr. Yalof, I might add, just took over as CEO of Tanger on January 1. So this is the first public forum or presentation as CEO of Tanger for Steve. Excited to be here with you today. And with that, let me turn over the time to Steve.

Good morning, and thanks for hosting, Todd. Very much appreciate it. I hope you had a happy and healthy family time over the past couple of weeks. So Tanger Outlets, as you shared, is an open-air, pure-play outlet center REIT, 38 shopping centers primarily in the United States, with few partnership centers up in Canada. And very pleased with our business, particularly as it relates to customer traffic that we enjoyed over the last quarter. Coming out of December, sales and traffic have both been good; traffic, over 90%. And our retailers are sharing anecdotally, at least, that their sales are outpacing their expectations.

All right. Great. Steve, maybe we can begin with sort of a 2-part question for you, and maybe we can back up a little bit first. First, what differentiates Tanger from other types of retail real estate? And then having just joined the company, what was it about Tanger that was of interest to you? You've been in the retail real estate business for a long time, but what attracted you to the opportunity at Tanger?

So let me take that one first. So I've been in the outlet business since the early '90s. I started with New Plan Realty Trust leasing outlet shopping centers. And my career has taken me through 2 retailers, both Gap and Ralph Lauren, both of which are big players in the outlet world. My role at Ralph Lauren was an international one. And following my 12 years at Ralph Lauren, I joined Simon Premium Outlets and ran that division. So I have a lot of experience in outlets. In fact, I think I'm probably one of few people that have been to almost every outlet center in the world. I know the products. I know the property. I'm a customer. I believe in the brand proposition. I believe in the value proposition that outlet centers offer. And obviously been following Tanger and had been friends with Mr. Tanger for over 30 years. And when the opportunity to take over as CEO of this company, as Mr. Tanger stepped into the role of Executive Chair and they presented me with the opportunity, it seemed like one that was I've essentially been preparing my whole career for.

All right. And how about -- what do you think differentiates Tanger from other types of retail real estate?

Well, we said earlier that Tanger's a pure-play outlet center. And our customers -- and there are several types of customers, but one of our customers, that core outlet shopper loves the outlet shopping experience, and they all say that it's not something that you can even replicate online. It's the thrill of the hunt. It's the thrill of the shop and the ability to find great value product and the brands they love, everyday value in our portfolio, and that's what we're about. I said earlier, I'm an outlet customer as well. And it's just -- it's thrilling to be out in our open-air shopping centers and have the opportunity to shop by brand, by category and have the whole lifestyle breadth of assortment and product that's offered by each of those particular brands.

Okay. And when -- the organization has a solid platform within the outlet space, of which you're very familiar. It's a brand name people know, retail partners know. Coming in now, though, is there an opportunity for you, with sort of a fresh set of eyes and some ideas and past experiences, is there -- how do you take Tanger's platform to the next level?

Well, first of all, I think Tanger's in great shape. From a shopping center location point of view, from a management point of view, and our physical plant, we look great, best-in-class. And some of the assets that Tanger has such as our TangerClub program, our VIPs, over 1.5 million loyal customers that shop frequently with us as well as the Tanger Insider program, which is over 10 million shoppers that interact regularly with our website, and some of the enhancements that we've learned over the COVID period is that customer really wants to be communicated to. And I think as we grow our business into the future, our ability to grow our digital platform, our ability to talk to our consumer and some of the enhancements that we've made most recently that we're going to build on into the future, things like sharing particular product that retailers have. It's been written that 90% of all in-store shopping journeys start online. Our ability through our Tanger web and Tanger app to show the customer what products they could actually find when they come and shop in our shopping centers makes that shopping trip a little bit more purposeful. And that's going to be something that we're going to build on. We recently added to our team a head of our digital transformation. This is a gentleman that spent the last 10 years working at Delta on building that Delta app. And we're hopeful he'll take some of the best practices and some of the learnings from that experience to help us build on our Tanger app and our Tanger web as we lean very heavily into digital transformation going into the future.

Okay. All right. It's helpful. Maybe we can dig in on that and touch on that in a short bit. But I wanted to switch over to sort of operations, and the company provided an operational update this morning. You touched on traffic in your opening remarks. Can you just provide a little bit of an update and touch on some of the key points from that release this morning?

Sure. Well, first of all, I think what's pretty compelling is we've been able to collect over 90% of our rents. But not only that, we -- when the stay-at-home mandates were first implemented and nonessential retail stores shut, our strategy was to offer all of our retailers, going back to March, the opportunity to defer their rents for April and May, allowing them to get focused on the pandemic, getting prepared to get their stores opened, to make sure that their stores were appropriately sanitized, that they were able to offer their customers the appropriate PP&E that we, as an organization, had our shopping centers prepared and ready to receive our -- both our retailers and our customers. So we wanted to relieve that stress point from our retailer partners. As a result, we deferred a large sum of money from our '20 rents. I'm happy to report, and we reported this morning that prior to the end of 2020, we had already collected 40% of that deferred rent.

Okay. How do you feel about the repayment of the remaining deferred rent obligations, that January and February repayment that was scheduled for this year? How do you feel about those repayments at this time?

Well, when we offered the deferral in March, it was when nobody knew how long the stay-at-home mandates would last and nobody knew how long nonessential retail would need to be closed. And our stores opened relatively quickly. In fact, some of our shopping centers, particularly in the south and in South Carolina, opened up as early as April. And then as you go north, the openings staggered. But I think that it was the unknown at the beginning time that was the relief to be able to add that or offer that deferral program to most. But I think as traffic has started to rebound and as sales have started to rebound, I think our expectations are high that we'll collect that deferred rent.

Okay. Yes. Can you talk a little bit more about traffic at your centers? I don't know if you have any information or detail around sales that you can share around the holiday season, but can you provide a little bit of an update around that sort of November, December time frame?

Sure. First of all, on the traffic front, and we track our traffic and we do versus the prior year. So what we found, particularly in late summer and as we started to build through fourth quarter, our traffic had returned to over 90% of last year's levels. I mean, first of all, it speaks to the open air of our shopping centers, right? Because when the stadiums were closed, concert venues were closed, places where people could go to gather weren't available to them, the open-air shopping centers were a place that people could actually get together and do things together. And so we were thrilled to have our shopping centers be part of that entertainment that allowed people to get outdoors and do things as a family, to do things in small groups together. So I think our traffic rebounding had a lot to do with that. Sales, what I can report is anecdotally, our retailer partners are sharing with us is that sales at outlet have -- are outpacing their expectations. Obviously, they've re-forecasted their sales for fourth quarter, but they're -- for the most part, outpacing their re-forecast going into the fourth quarter. But additionally, I think that they're selling through. The stores are stocked and staffed, and they're doing so with fewer hours. In fact, our Q4 selling hours were about 20% of what -- or I'm sorry, were reduced by 20% from what our usual run rate of hours are. And then the other piece is the amount of folks that are allowed to be throughput through a store at any given time. So where the occupancy levels have been reduced locally by state, some of those stores have been -- you've seen lines building outside of stores. And obviously, the customers waiting on line, that's a purposeful shopping visit. And we know that customer is going to go when they walk into the store, they're not there to window shop. They're there to buy, and they're there to build a big basket, and they're there to spend some money.

Yes, that's interesting. What have you seen in that regard, right, in terms of basket size and customer dwell times? How has customer shopper behavior changed over the last several months now that your centers have reopened? What are you seeing there?

Well, there's been a customer evolution. At first, when stay-at-home mandates were lifted and the nonessential stores started to open, the traffic started to build, and it builds -- and it started to build slowly. And I think that people who are in constant communication with Tanger web, Tanger app knew what stores were open, knew when their favorite brands were open. And one of the things that we did very early on, we offered curbside so that the customer could actually contact their retailer and make a purchase and have that purchase at one of our designated curbside locations in our shopping centers. But we built on that curbside, and we created a program called the Virtual Shopper. And essentially, using our customer service representatives that are on-site in each one of our shopping centers, we were able to stand up a program where our customers could go online and actually virtually shop stores with that customer service representative, whether they did it online or if they did it with their phones by using FaceTime. This program actually, since its inception in early June, we've had over 350,000 interactions with the program. Obviously, our transaction could not keep up with the pace of people that showed interest in the program. But what we were able to do is allow the customer to build the basket. So if they transacted through our Virtual Shopper, that person can shop multiple stores. They could build the basket. We would either have that product waiting for them curbside. We would then -- or we could provide shipping and ship the product directly to them. And then there's customers that just want to window-shop, see what's available, and that converted into a shopping visit.

Okay. What about -- this morning, you also discussed the occupancy. Obviously, it's been a challenging year for a number of retailers in certain categories. So occupancy decreased relative to where it was in the third quarter. What are your expectations around sort of a bottoming in occupancy? Do you start to claw back some occupancy in 2021? Or is 2021 still a little bit of a transitional year of sorts? What do you think happens there? And maybe we can talk about some of the leasing activity that you're seeing on the other side.

Sure. Well, first of all, I think that there's going to be pressure on occupancy, but I mean -- and just like we're seeing right now. There was -- we had our list of retailers that were on our watch list, a number of which have filed bankruptcy during 2020. Fortunately, a lot of those bankruptcy filings were restructuring and not necessarily liquidations. So when there's a restructuring, obviously, we're able to maintain the occupancy but put some of the pressure on the rents. But in some instances, where that occurred, we would agree to short-term leases. And obviously, as the market comes back, we'll reprice our real estate accordingly. But we've also been leasing, and there's been some great leasing activity. We use top-up leasing as a strategy, particularly in the outlet space. Obviously, outlet's a place for fashion retailers, traditionally dispose of excess inventory or get rid of product that hadn't sold in stores. So a lot of retailers that are not yet in the outlet space would like to test it before they see -- before they dive in head first and start rolling out stores. And we've had great success with retailers who popped up with us first, and then ultimately ran -- rolled out a number of stores. I think of Lululemon and Tory Burch is -- and Vineyard Vines is great examples of brands that started out as pop-up stores but ultimately rolled up. And in the fourth quarter, we were able to add a number of new platform or new to outlet retail brands in that same sort of pop-up style, guys like J. McLaughlin, Robert Graham, a company called Psycho Bunny that opened up in our shopping center Riverhead to great fanfare. In fact, in addition to being available to the customers, and we like to flow newness constantly into our shopping centers so our shoppers are always finding new products when they visit one of our shopping centers. But this Psycho Bunny store actually had the effect of drawing customer, particularly from the Hamptons, that we hadn't seen before shopping our center. And that's a great strategy for us as well, find the brands that customers love, not necessarily our core customer, but if we can find the brands that will speak to a different customer, then we get the benefit of bringing in new customer into our shopping centers as well. A big part of our strategy on a going-forward basis and something that we're leaning very heavily into going into '21.

Okay. And what about bringing in some new categories? You've historically been more heavily weighted towards apparel and accessories, things of that nature, a little less of a focus on food, for example. Is there an opportunity to sort of rethink the tenant mix from that standpoint? I mean, how do you envision the merchandising of your centers over the next several years as a result of what we've seen this year?

Well, there -- we're attacking that on a number of different fronts. First of all, you spoke about dwell time before, and that's critical. Once you get people to come to one of your shopping centers, you want them to spend time. The longer they spend there, the more stores they'll visit. The more stores they visit, obviously, the more they're going to shop. Food is critical. And we're working on a program that we're going to roll out in '21 that will help the customer get the food choices that they want at the shopping center so that we can keep that customer satisfied and keep that customer on site longer. Also, entertainment uses are important, and local brands. And when we talk about local brands and entertainment, I give you a great example of one that ticks both boxes. We've got a very successful center in Sevierville, Tennessee. One of the things people do when they're touring in Sevierville is go to one of the many moonshine stores that are in that particular geography. People like to go and do a moonshine tasting. It's just something that you just -- when you go to Napa, you go wine tasting. When you go to Sevierville, you go moonshine tasting. And we were able to bring into one of our spaces that was a chronic vacancy in that particular center a moonshine store, a local business that now allows the customer who knows that they have that on their list as an activity that they're going to engage when they're traveling in that market, they can do that at the shopping center as well. So it gives them the opportunity and an added level of entertainment. The store is doing extremely well. It's actually drawing traffic to the shopping center, which is of a great benefit to us.

Okay. And what does -- going back to -- there's obviously a lot of tenant movement, a lot of ins and outs, right? So you're talking about pricing or repricing some of the real estate. What does that portend for rental rates? And how are you establishing rental rates, right, given the lack of visibility around sales forecasting that some of your tenants may be having as well?

Well, we, obviously, still -- we still rely fairly heavily on retailer occupancy costs, and you know our retailer occupancy cost is the best in the business. And that's one of the things that people value about the outlet center business is that great sales, great traffic and that the retailers can actually operate at a cost structure that allows them to be extremely profitable. From a pricing point of view, we still have shopping centers with extremely high occupancy. And in fact, some of the brand-wide restructurings that have seen some stores closed in some of our top properties have created opportunities for us to replace or expand some of the more successful retailers that we have in those properties. So that's something that we're finding. To the extent that there are retailers that -- we're fighting the battle on 2 lines. We're fighting the occupancy battle and the rent battle. In the case of occupancy, we're watching sales rebound. And as they do, we know that retailers will be keenly interested in renewing leases with us. So if we had short-term rent concessions that we made to retailers, we'll ultimately have the opportunity to reprice that real estate as our business and as our markets rebound.

Okay. What's -- curious, in terms of sort of the shopper and customer behavior that you're different than what you're seeing today, right? I mean, we've heard about coming out of this and a recovery. We've heard about revenge shopping and all different things. I mean, how do you think about sort of a post-pandemic environment? I guess what's your view? What's the Tanger view on '21, '22, plus?

Well, without giving any guidance to the future, let's just say, strategically, we learned a tremendous amount coming out of COVID. We learned that our customer wants to shop where they are, and they want to be met where they are, that communicating to the customer is extremely important. The history of outlet centers, it used to be, in the outlet center business -- and like I shared with you at the beginning, I've been doing it for over 30 years. But in the outlet center business, it used to be billboards on the highway that said next exit, 45 designer brands. But now what's happening is retailers are allowing you to use their name in the marketing, so that we're able to communicate better with the customer and not only tell them what brands are actually in the shopping center, but the brands are now sharing product with us to share online. So that at least the customer can see online what product they can actually buy if they go -- if they come to the shopping center, making that triple more purposeful trip. And as I shared with you earlier, as we're trying to build that digital part of our business, I think it's crucial to be able to give your customer an opportunity to do that window shopping trip online. So that's one of the things that we've learned during COVID that the customer demanded. Well, we think that, that customer is going to demand that long into the future. But also as -- if I can paraphrase my core customers who constantly say it's hard to replicate the outlet experience online because not only is it great brands at great value, it's the opportunity to shop a store, shop the lifestyle experience that store has to offer and just buying great finds that you can't find anywhere else.

Okay. You talked earlier about the TangerClub and the Tanger app and some of the membership statistics around that. How are you sort of harnessing that data and taking that aspect of the business to the next level? I mean, how is that really creating value for Tanger?

We have 2 big buckets of customers that interact with Tanger web and Tanger app most regularly. There are TangerClub members, we call them our VIPs, which I said was about 1.5 million customers. Those customers are our most frequent shopper. They spend the most amount of money, and those are the ones that interact with us on the most regular basis. And obviously, one of our big pushes going into '20 and beyond is to build that VIP. But you can't build that VIP basis without giving them a great amenities, great customer service, great communication. But here's where we're going to build. As we stand up our customer relationship management system, we'll be able to communicate to that customer and explain to them exactly or talk to them the language that they understand. I don't want to be telling my Tory Burch customer and pointing them to all the Nike sales when those are happening. We want to make sure that we get a tailored experiential communication to our retail -- to our customers so that they know when they pick up that communication, there's going to be value in it for them, and there'll be something for them to come back and shop with us on. But again, through the Virtual Shopper program, we're meeting our customer where they are. So if that customer, whether that customer can get in their car and come and shop with us, that's great. But if they can't, through Virtual Shopper, we'll be able to execute those transactions with our best customers that way as well.

Okay. And I think about a trip to an outlet center. As you mentioned, you talked about sort of the dwell times, right? So you're talking about some of these other more recent initiatives, the buy online, pickup in store. You said you're offering delivery services. How do you think about the adoption of those initiatives longer-term for the portfolio?

Well, I think it's important. I see bricks-and-mortar and particularly, the outlet part of bricks-and-mortar as an extension of the omnichannel ecosystem. And it's important that we get on board with that as well. And some of the initiatives that we're doing in order to participate at a higher level, we just started up a partnership with Fillogic. Fillogic is a last-mile distribution business. So they're opening a shop with us in Deer Park, and we're partnering with them to not only do front-end distribution, they'll help service our Virtual Shopper customers. If our customers who are shopping one of our shopping centers -- and if you've shopped at one of our centers recently, the value doesn't just come in the discount for one particular item. A lot of the retailers are trying to build big baskets. And that basket build comes in a spend to get. So for example, if you go into a Nike store and the promotion that day is buy 2 pair and get the third pair free, a lot of folks that are shopping in a shopping center might not have room in their car, in their travel case to take 3 pairs of Nikes on with them. So through our partnership with Fillogic or another brand that we're working with, LugLess, who stood up their initial operation with us in National Harbor, we're providing shipping services to our customers. Our retailers are promoting that shipping service because it allows them to build a bigger basket inside the store and then provide our customers with the opportunity to ship. I see that as a big part of our business. I see it rolling out across our portfolio, and I think that will be a great opportunity for us to grow our business on a going-forward basis.

Okay. Maybe a couple of questions about the portfolio and some of the properties specifically. You have some sort of vacation destination type properties, you have some others, maybe like Deer Park and Riverhead that are more wedged within populated communities. What are you seeing in terms of the performance? And I guess, by that, I mean, leasing demand, right, interest sort of across the portfolio. How bifurcated might it be? Or would you say it's pretty broad-based? I'm thinking about sort of Lancaster, Pennsylvania and some of the Hilton Head and Myrtle Beach properties, right? I mean, you've got them all over, but some of them are attractive different times of the year seasonally and for different reasons. So what are you seeing there?

I think the common thread of our shopping centers is that we're really in, for the most part, drive to American tourist destination locations. And the centers that you just sort of rolled off, certainly, I'll speak to that. And that's pretty much our model. I recently, over the holiday, drove from New York down to Florida and was able to visit over 1/3 of our properties on the trip. Thrilled to see the traffic, people with the shopping bags, people embracing open-air shopping, and the numbers actually speak to it. But I think that one of the things that we've learned, and particularly that's going back to COVID, is that a lot of folks are actually repositioning themselves into second homes. This work from home has given people the opportunity to work from whatever second home destination they have. And that's really our sweet spot. That's where most of our shopping centers are located. You mentioned Hilton Head, Myrtle Beach, Savannah, Georgia. These are places where when people leave big cities, that's where they go to enjoy their vacation homes. So location, which used to be a little bit more remote from the cities, we're finding that those customers are actually moving to locations. And our shopping centers have become more desirable and more proximate to where those customers are. You mentioned Deer Park and Riverhead, the same thing. Our shopping center in Riverhead is 10 minutes from Westhampton, 20 minutes from Southampton and 30 minutes from East Hampton. And as I mentioned, when I gave you the Psycho Bunny example, that just we're seeing that customer, that Hamptons customer shopping more frequently at our Riverhead center as we had before.

Okay. What about sort of a National Harbor and maybe a Glendale, right, where they're situated around sort of conference activities and other entertainment venues and things of that nature?

Yes. I mean, we're definitely seeing distress from the convention business, the football stadiums. But fortunately, in a lot of those centers, we still get to pull from huge permanent population bases. And we get to pull from the entire geography of Washington, D.C. metro area as it relates to National Harbor. And as it relates to Glendale, we're pulling from Scottsdale. We're pulling from Phoenix. I was at that center 2 weeks ago, and our shopping center was packed. It's got a great brand lineup. And like I said, it's got everyday value pricing. You don't have to wait for products to go on sale. They're on sale every day. And our customer responds to that.

Okay. [Operator Instructions] Maybe we can talk about some of those trends, some of the demographic trends or migratory trends that we've seen. How do you think, you're about allocating capital over the next several years, with some of that in mind? Do you see those trends accelerating? Do you think that, that was a short-term phenomena during the pandemic? How do you think about allocating capital in the years ahead?

Well, I'll give you a quick short-term view first. I mean, as you're aware, we still have Nashville on the books. That's a shopping center in a market that really demands our style of outlet retail. It's a project that we're committed to and one that we're actively leasing right now. Obviously, in the short-term will be -- our capital will be allocated towards our re-leasing efforts. And you mentioned earlier, some of the new retailers that we were focused on bringing into our portfolio, I think that, that's going to be very important to us. And TA is a component part of bringing particularly new retailers into our business. But with regard to the cost of actually building a store, particularly in the outlets, probably the lowest cost of any bricks-and-mortar build and the design of an outlet shopping center, we provide the storefront. So obviously, less expense to the retailers who want to come in and actually stand up a physical store in one of our shopping centers. So the value proposition for a retailer to open up in an outlet center is definitely there. We'll always be looking for new markets. We think there's still opportunity for new markets, particularly in the outlet space, where outlet retail is about 70 million of a 70 billion -- of a 7 billion square-foot total retail footprint in the United States. We think there's definitely opportunity for more outlets.

Okay. We have one question that just came in about temporary tenants in the portfolio, which you mentioned. How much square footage or occupancy today the temp tenants represent? And what are the terms of those deals look like? And what are generally the conversion rates for temp tenants to sign leases for permanent space deals?

Temp tenants come in, in a whole bunch of different -- a whole bunch of different ways. So I talked about pop-ups earlier, and our conversion rates with pop-ups are really quite good. A pop-up, we used to describe a national retailer that hasn't been in the business or actually wants to try before they buy, so to speak. Very low-cost for them to stand a store up, particularly for the reasons I just shared. But additionally, we like to give that retailer an opportunity to come in, perhaps, in some instances, is at a percentage rent deal, so that if they prove on the sales line, we'll ultimately convert them into a long-term deal. And I gave 3 examples earlier of retailers that we've had good success, starting with pop-up and converting into multiple stores in our portfolio, Lululemon, Vineyard Vines, Tory Burch. And we have high expectations for the others, J. McLaughlin and Robert Graham and Lafayette 148 brands that we just did some pop-up deals with most recently. With regard to other temp leasing, we see temp leasing is vital to our shopping centers. We have recently done a field-first temp leasing exercise. We just brought in, as our Executive Vice President of Field Operations, a woman that I had the opportunity to work with for a number of years when I was at Simon, and she's joined our company to run our field team. One of her missions will be to create a field-driven, short-term leasing organization, where our general managers, particularly in times of COVID when a lot of the brands can't get out and actually visit shopping centers and see real estate, there's opportunity where the general managers who live in those geographies who were pretty much the mayors of their town, let alone the mayors of our shopping centers, are able to get out and identify brands that are iconic to the market. I shared the deal that we did in Sevierville, Tennessee. But that was a deal that was brought in by a general manager. So we've got our field teams and our general managers that are out there talking to retailers that we think will be accretive to our shopping center, will help us fill a vacancy whether it's a short-term or we convert that into a long-term deal on a going-forward basis, but also flow newness into the shopping center and give our customers just a little bit more variety when they shop in our particular markets.

Okay. Steve, have the more recent virus flare-ups in certain markets, has that had an impact on the portfolio at all? Are you getting any additional or incremental rent relief requests? And would you expect to see any impact in the percent of your stores that are open or rent collection levels or anything as a result?

Well, you know that there was a lockdown mandate in Canada. So we've got 3 partnership properties there that are currently closed. They closed on Boxing Day, which is the 26th, and will remain closed until the 23rd. In some instances, we do have some nonessential retail, and nonessential retail will remain open. But domestically, we -- 100% of our shopping centers are open. And 90% of our lease space is occupied and operated by tenants, and those tenants are doing well. And I shared with you earlier that these tenants are -- for all intents and purposes, outlet seems to be outperforming other bricks-and-mortar. So at least in the short run, and I guess I can knock on wood, but there hasn't been an overwhelming demand for people looking to renegotiate deals with these most recent flare-ups. And in fact, our traffic levels still continue to be good. In fact, the most recent traffic report that I got was for ended January 3, so covered the New Year's eve shopping weekend. And ex Canada, our traffic was up to just over flat from last year. So customers are coming out. The retailers are doing business. And we continue to drive the customers and keep our retailers opened, stocked and do what we can to promote their businesses.

Okay. And in terms of the balance sheet, you updated this morning the $80 million of cash on hand. What about capital recycling? The company, over the years, has called the portfolio and recycled some capital by selling centers. What are your thoughts on that going forward?

Pruning the portfolio has always been a core discipline of this company, one which we will continue. If there's a noncore asset, we would -- we'll continue to prune. And as I mentioned to you earlier, we are getting calls of some centers that folks that are either looking to partner or looking to sell property. And we take that very seriously, and we're looking at opportunity. But we need -- we're looking for opportunities that will be accretive to our business, ones that fit in with sort of that common thread that speaks to what a Tanger shopping center is all about. So we'll be opportunistic, but we'll be very disciplined about how we spend our capital going forward.

Okay. I guess, I don't see any other questions coming in right now. I guess, one last one for me, maybe. I guess, now that you're in the seat, you've been with the organization for a number of months, a little longer than that. I guess, what's the opportunity for investors in your view? I guess, what do you think are the 2 or 3 most underappreciated aspects of the business and company?

Well, first of all, let's go back to our digital transformation. I think there's a great opportunity for us to create an end-to-end experience for the customer. And that TangerClub VIP that enjoys that business right now, we'll have tremendous bandwidth and be able to grow that VIP engagement. I see great opportunity to grow that engagement. And that -- those are our most valued customers. I think with the more amenities we can offer them, the more services that we can offer them, the better communication we can offer them and obviously, the more brands that we can offer them, we're going to grow that business. And I think that's going to be a big thing for us to do going into '21 and beyond. I also think there's an opportunity to elevate in a number of our shopping centers where there's -- where we can take our centers and the tenancy in those centers to the next level. We are certainly going to execute, and we're going to do so. We're working with a number of outside luxury leasing consultants to help -- and brokers that are very successful in that space to help us rethink a handful of our shopping centers that we think that the customer is there, that can support a more elevated tenant mix. And that's something that we're focused on as well. And when I say an elevated tenant mix, luxury retailers that have long had a success in the outlet business. But in addition to that, we're going to lean very heavily into digitally native brands that are looking to add bricks-and-mortar and particularly outlets to their omnichannel business. And then some other new to outlet manufacturers and retailers. So I think from a leasing point of view, from a marketing point of view and then lastly, operationally, I think we've got great foundation operationally. But now that we're putting a field team focused on running our business, where those general managers and the teams in each one of the shopping centers will literally be the CEO of those centers, managing their P&L, managing their expense and helping support leasing as we go forward, I think there's great opportunity for upside and driving NOI from that point of view as well.

Okay. All right. Great. We did actually just have one question come in that I just want to say if we can get to real quick. You talked about footfall being up slightly, so traffic levels have been holding in there and are up a little bit year-over-year. What sort of conversion rates are you seeing on the sales front from your retailer partners? How is that translating into sales?

Yes. Well, look, I can only share what I know anecdotally. And basically, what we're hearing the retailers say is, obviously, if a customer is going to come to one of our shopping centers and we've done our job from the digital point of view, they've been able to do their window shopping. They come to the shopping center because it's a purposeful-driven trip where they're looking to actually spend money. If you see a customer standing on line, and we've got lines at a lot of our stores, occupancy, lending to that principally. But if you see customers in those stores, you know that they're in there to buy. So we'll let the retailers share with you what their actual conversion rates when they report their sales. But anecdotally, at least what we're hearing is sales and conversion are outpacing retailer expectation, outpacing retail forecast and that the outlet channel is the most successful channel, particularly for holiday and beyond for these retailers coming out of 2020.

All right. I did have another one just come in about this morning's release that I just wanted to, I guess, to clarify or get a comment about. I think last quarter, you talked about recapturing about 400,000 square feet. And in the release this morning, it noted 317,000, a little under 320,000 square feet, I believe. Is the expectation or was the expectation that, that 400,000 was going to occur in the fourth quarter? Or is some of that expected to spill over into the first quarter? I guess, the question being, did you recapture less space than you anticipated?

I think we might have -- we've done a lot of leasing, so we've mitigated a lot of that exposure as well. And a lot of the fourth quarter leasing that we did or stores opening in fourth quarter mitigated a lot of that exposure. I don't want to answer the question wrong. So let's clarify that after this call. But I think if I can just sort of summarize, obviously, we've gotten some space back. As I mentioned earlier, that space is going to create opportunity, particularly in some of our top centers where we seldom get space back, give us an opportunity to drive rents there, give us an opportunity to get our most successful retailers to expand in some of those markets, and then also give us a chance to get some of the retailers that I've been talking about bringing into our platform to give them opportunities to get new stores open in some of our better centers as well.

Okay. Understood. Okay. All right. Great. Well, I think with that, I appreciate everyone's time and interest. Steve, any closing remarks?

Well, I just hope that if you're not a Tanger Outlet shopper now, you will be after you've heard our message. Come visit one of our shopping centers, join our VIP club, tell us about yourself, let us communicate to you, and let us show you over '21 and beyond what we do best and what a best-in-class outlet shopping experience is all about.

All right. Thanks, everybody.