 back-up date when I schedule an initial appointment just to be safe. Based on the forecast and our availability, this can often be back-to-back days. If you arrive to your portrait session and it begins to rain or the skies are overcast, if I feel we could capture better portraits during another session we may capture what portraits we can using various lighting techniques and then reschedule our photos for a quick follow-up session. I often reschedule sessions when the threat of rain is greater than 40% as it’s not only the precipitation but added cloud cover blocking the light from beaming down during our portraits. I want my clients to love their portraits and if that requires waiting for the sun to smile down us on another day then sometimes we reschedule our session.Mall REITs are starting to fall, but Tanger is still holding strong. Does that make it worth buying today?
The mall real estate investment trust (REIT) niche is going through a shakeout. Tanger Factory Outlet Centers (NYSE:SKT) and its peers are facing massive headwinds with no easy fixes. With Tanger's stock off by roughly 55% this year alone, is it worth buying? Here are some things to think about before making a final call.
CBL & Associates and Pennsylvania REIT both declared bankruptcy just before the U.S. elections. The economic closures used to slow the spread of COVID-19 were what pushed these mall REITs over the edge, but problems were present well before 2020. Indeed, the "retail apocalypse" story has been around for years as consumers have increasingly taken advantage of online shopping options. In fact, the global pandemic really just sped up a process that was already underway.
But it's important to step back and understand the bigger issue here. Yes, consumers are shopping online more, but the real problem facing retailers is a mixture of too much leverage and an inability to keep up with changing consumer trends (including, but not limited to, e-commerce). The stores going dark aren't executing well overall, but the ones that are keeping up with consumers continue to do quite well. In fact, while it may sound like stores are closing left and right, some retailers are actually still opening new locations. So there are very real headwinds for malls like Tanger to deal with, but online shopping isn't likely to fully replace the mall anytime soon.
That said, Tanger is particularly well positioned to deal with the COVID-19 headwind when you look at the 39 factory outlet centers that make up its portfolio. These are typically outdoor structures, which increases the ability to socially distance and provides ample airflow. These factors are likely to make customers feel more comfortable visiting while the pandemic remains an issue. To put a number on that, in a mid-September news release, the company noted that foot traffic at its centers was 89% of year-ago levels. That's pretty good given the circumstances.
That said, malls are not easy assets to run. Although Tanger benefits from low operating costs because its properties are largely open-air and standardized structures, it still has to curate the tenants in each property. That's complicated by relatively long leases, which means that Tanger may not be able to jettison a struggling and out-of-style tenant as soon as it would like. Finding a new tenant, meanwhile, can take a while. Resetting a property can be a multiyear process.
The retail bankruptcies that are occurring today are speeding up that process, which is good in some ways, because weak tenants are going away on their own. The problem is that a large number of tenants are hitting the skids all at once. In that September update, Tanger also noted that occupancy was 93.7%, and that's historically low for the REIT. Making matters worse, it's only been able to collect 85% of the rents it is owed. So the retail fallout is helping along what had been a slow-moving process, but the speed is creating financial problems for mall owners like Tanger.
The fly in the ointment is that the fix here -- finding new tenants -- still isn't something that happens quickly. So it will take time for Tanger to reposition its properties, and perhaps even more time than usual given the large number of retailers that are facing problems today.
So the question for investors willing to take the needed long-term view here is whether or not Tanger has the financial strength to survive while it works through all of these problems. The answer is likely yes. For starters, Tanger has a fairly conservative corporate culture. When tough times hit, it made sure it had the liquidity it needed in case cash got tight, and it deferred rent for all of its tenants so it could be a good partner and ensure its occupancy remained strong. It also suspended its dividend. As of mid-September, the company had repaid a revolving credit facility in full. Thus, it has $600 million available to it if it needs extra cash. It has $6.6 million in cash on hand.
Meanwhile, the company's properties are largely unencumbered by mortgages (only 6% of its square footage is occupied by businesses with mortgages, and those are largely joint venture properties). It still has an investment grade credit rating as well, suggesting it can access the bond markets if it needs to. And as of the second quarter, the REIT remained in compliance with key debt covenants. Assuming that its business continues to improve, it looks like Tanger is past the worst of the COVID-19-related hit.
The big picture here is that Tanger is facing very real problems but appears to be financially strong enough to weather the hit, with the added benefit of having largely outdoor assets. But that doesn't change the fact that it will probably take Tanger several years to rework its tenant lists so it is again offering malls filled with the types of stores consumers want.
In other words, Tanger is something of a turnaround play today. That's not where most conservative long-term investors should be looking. However, if you can take the long view and don't mind a little uncertainty, it might be worth considering this deeply out-of-favor REIT today.You can make a better decision choosing your cabinet cooling product by understanding the total cost of your investment and the operating cost associated with each style. Today we will compare EXAIR Cabinet Cooler systems and a refrigerant based enclosure air conditioning system.
How will EXAIR’s Cabinet Cooler system benefit you? I will help you understand your investment, installation, maintenance and operating costs for both EXAIR Cabinet Coolers verses a refrigerant based conditioner. The importance of understanding these costs will not only help you realize the return on your investment but will also give you the confidence knowing you made the best decision for you and your company. We will compare EXAIR’s model 4325 (NEMA 12) with a 1700 BTU capacity to a similar coolant based air conditioning unit.
The initial investment for the EXAIR model 4325, 1700 Btu/hr. Cabinet Cooler system at 2021 list pricing is $809 and will have an estimated life of 20 years ($40.45/yr). The initial cost for a refrigerant based A/C with similar Btu/hr is $3777 and an estimated life of 5 years ($751.58/yr). EXAIR’s Cabinet Cooler runs on compressed air and has no moving parts which provides a long product life. It is built for industrial, dirty, extreme temperature, heavy duty and remote locations.
Installation of the EXAIR Cabinet Cooler when installed according to manufacturers recommendation will take approximately 1 hour (estimating $65/hr) while the enclosure a/c will take up to 3 hours or more. There is no worrying about what position it was on the shipping truck, no time to allow the oil to drain back into the refrigerant compressor and no huge window to cut out of your enclosure to mount within. Again the edge goes to EXAIR Cabinet Coolers with less hassle and downtime. If we use that same operating lifetime the Cabinet Cooler system will require $3.25/yr and the refrigerant unit will require $39/yr for installation.
As mentioned earlier that EXAIR Cabinet Coolers do not have moving parts thus reducing or practically eliminating any maintenance or downtime. The refrigerant cooler will average 4 hours of downtime for cleaning and checking for refrigerant leaks. You will also experience downtime to replace filters and refill refrigerants when required. There will be drain lines to maintain for the condensate that will accumulate. EXAIR wins again having no downtime or costs for replacement parts. A refrigerant unit can require 4 hours per year of maintenance to provide its full five years of usefulness. Again using $65/hr there are zero dollars per year in Cabinet Cooler system maintenance compared to $260/yr for the refrigerant unit.
If we assume that the systems run an average of 5 hours per day, 5 days per week and 9 months per year we can calculate the cost of operating each style of cooling device. We know that it costs $0.025/1000 cu. ft of air. When put into our equation it shows that the EXAIR Cabinet Cooler system has an annual operating cost of $338. The coolant based a/c unit operated on electric at a rate of $0.0955/KWH for an annual operating cost of $56.38 giving the edge to this unit.
The total cost of your investment, installation, maintenance and operating costs for the EXAIR Cabinet Cooler is $382 per year while the coolant based a/c is $1106.96 per year giving a fast return on investment for the EXAIR 4325 Cabinet Cool