Tanger Factory Outlet Centers, Inc. (NYSE:SKT) Citi’s 2022 Global Property CEO Conference March 7, 2022 5:00 PM ET
Company Participants
Stephen Yalof – Director, President and Chief Executive Officer
James Williams – Executive Vice President, Chief Financial Officer and Treasurer
Conference Call Participants
Katy McConnell – Citigroup
Operator
Good afternoon, everyone and welcome to the 5 PM session at Citi’s Global Property CEO Conference. I’m Katy McConnell with City research and we’re pleased to have with us Tanger Outlets. Before we get started, this session is for Citi investing clients only. So if media or other individuals are on the line, please disconnect. For those joining in person, feel free to ask questions up at the microphones in the center aisle or you can type them into the webcast question box. And now Steve, I will turn it over to you to introduce the company and team and provide some opening remarks.
Stephen Yalof
Thank you, Katy. Good afternoon, everybody. I’m Steve Yalof. I’m the President and CEO of Tanger Outlets. Joining me today Cindi Holt, who’s our SVP of Investor Relations. And Jim Williams, who is our EVP and Chief Financial Officer. Tanger Outlet is the only publicly traded REIT specializing solely in the development, leasing, marketing and operations of upscale open air outlet centers in the United States and Canada. The fourth quarter of 2021 punctuated a year of continued improvement, as customers demonstrated their desire to shop our brand. And retailers recognize the benefits of being in our open air shopping centers. We’re excited about the growth for our business in 2022. Value has historically outperformed other market segments and inflationary times. And we’re building the team and the technology to execute organic growth strategies focused on three core elements of our business, accelerating our leasing, reshaping our business operations and commercializing our marketing strategy.
This year, we have a unique opportunity to increase rents with 19% of our space coming up for renewal against a backdrop of strong sales productivity, and low occupancy cost for our tenants. In fact, in January our blended 12-month spreads turned positive and in place rents represented an occupancy cost ratio of approximately 8%. This is meaningfully lower than any other retail distribution channels despite Tough comps due to January winter weather. Our rolling 12-month tenant sales sustain the record high level achieved in December. Leasing activity is accelerating as demand is growing for space in our open air portfolio. And we did not recapture any space during the fourth quarter due to early terminations and are now seeing open to buys from retailers and alternative uses like home, food and beverage and other experiential brands.
Our non-store revenue initiatives are one important way that we’ve reshaped our operations discipline. Non-store revenues remain a strong contributor of our earnings growth, as evidenced by our other revenues line item increasing more than over 70% during ‘21 compared to ‘20 and almost 40% compared to 2019. Our high traffic open air shopping centers provide an opportunity for our retailers and other national brands to connect with our shoppers through marketing partnerships, and on center sponsorships through events, amenities, and product sampling and digital and static media. In 2021, we hosted activations for such brands as Heineken, Tesla, Unilever, Geico, and Hilton just to name a few. Currently, in its infancy, non-store revenues represented about 3% of our total revenues, a level that we believe can increase significantly over time as we grow this revenue generating platform. We continue to invest in our people and our systems in order to scale our business.
Last year, we promoted our EVP of Operations Leslie Swanson to Chief Operating Officer. And additionally, we added a Chief Commercial Officer which is a new position in Tanger, and gentlemen named Andrew Wingrove to our management team. The creation of this new role demonstrates our commitment to commercializing our marketing strategy through digital transformation, modernizing our loyalty programs, and creating an experience with all touch points that engage our customers. Andrew has extensive experience in achieving marketing programs, loyalty strategies, and customer centricity at companies that included Macy’s and Delta Airlines. Additionally, we’re pursuing a number of value enhancing investments including solar, electrical vehicle charging stations, and other projects to reduce our energy and water usage. And it underscores our commitment to sustainability. Our peripheral land team is aggressively pursuing opportunities to monetize our outparcel portfolio, unlock new opportunities to enhance our offering and generate new revenue streams and create long-term portfolio value.
Tenant interest in our Nashville project has been strong, and we are on track to break ground in the first half of this year with grand openings scheduled for fall of 2023. We enter ‘22 with a well-positioned balance sheet, which we proactively strengthened in 2021 in anticipation of higher interest rates, and inflation, low leverage, limited floating rate debt and ample liquidity combined with a clear path to sustain the center NOI growth and long-term growth initiatives create a compelling opportunity to grow our cash flow and increase the value of our real estate.
Question-and-Answer Session
Operator
[Operator Instructions]
Katy McConnell
Great, thank you. So to start off each session, we’re asking the same opening question, which is, what are the top three reasons why investors should buy your stock today over other property rates?
Stephen Yalof
Well, first of all, I think we’re undervalued. A second of all, I mean with 8% OCR, I think there’s tremendous amount of upside for us to push rents. I think we’ve got a best-in-class leadership team and management team right now to execute not only the commercial strategies, the operational strategies, and our leasing initiatives. And lastly, I think we’ve got a great balance sheet that’s going to position ourselves to take advantage of opportunities that will present themselves.
Katy McConnell
So since the stocks relative valuation, you mentioned is still lagging. What do you think the market is penalizing your stock for the most today? And how do you plan to address that?
Stephen Yalof
Well, first of all, I think we took back a million square feet during the pandemic. And for a portfolio our size, that was a very big impact. We quickly stood up our management teams in each one of our shopping centers to become leasing agents, we understand leasing, leasing, leasing is the name of the game, thinking to get as much of that local traffic into our shopping centers as possible, and try and take advantage of a lot of the other shopping centers that we’re also seeing similar attrition in their formats. So by doing a lot of this temporary leasing, I think we’ve got more temporary leasing in our shopping center that we’ve had before. I think a lot of people are looking at that as though it’s a negative, we look at it as a positive. We like to keep the lights on, we’d like to keep the shopping centers commercially interesting, and especially like to keep them cash flowing. And I’ve said it before, I’ll say it again, I think that a lot of our shoppers don’t know the difference between a short term tenant and a permanent tenant. But they definitely know the difference between a closed door and an open store. And we like to keep as much commercial vibrancy in our centers as we can.
Katy McConnell
So your sales metrics reached a high last quarter, as we think about momentum going forward. Do you think the consumer spending environment will continue to be as strong last year?
Stephen Yalof
Yes, we anticipate that. I think as we made our plan for 2022, we made it our point to reach out to a lot of our retailer partners and see what their plans were looking like, I spent 20 years of my career in the retail space working for brands like Gap and Ralph Lauren, both on the real estate side, but understand the value of the plan and how they were pushing their retails. So through some of those contacts and connections, a lot of the retailers that we do business with, we reached out and said, how are you guys thinking about your business? Variable rents a big part of our business where there are partner in a lot of these cases, so we thought we should have some knowledge base relative to how they’re going to grow their business. And I think there’s a lot of optimism out there, especially in the outlet channel, where I think that value is, I think an inflationary times values of my channel would be.
Katy McConnell
And how have tenant or customer conversion rates evolved coming out of the pandemic? And what about average time at your centers?
Stephen Yalof
Well, dwell time is a metric that we’re starting to study a little bit more closely now, we do have an average dwell time for each of our centers, I think we’ve set a pretty good baseline over the last couple of months. So we’ll start to watch as that number grows or falls and pull the appropriate levers accordingly. But as far as conversion rates are concerned, I think one need only look at the traffic pattern. So our traffic growth, which is now at least outpaced the 2019 levels, but not growing as quickly as our sales per square foot is growing, which would indicate that the retailers are converting at a far more rapid rate, and squeezing a lot more sales out of each of the individual customers to shopper center.
Katy McConnell
And we have a question on that online here. So the traffic that you’re seeing in your centers, why do you think those figures are fine even with increases we’re seeing in ecommerce?
Stephen Yalof
Why do you think? Say it again.
Katy McConnell
The question is why you think the traffic in your outlets I guess the outlook for traffic is fine despite the increase we’re seeing in ecommerce for outlets.
Stephen Yalof
Well, first of all, I think people like shopping live, I think that’s an important part of the omnichannel experience of shopping. I think that people are spending a lot of time online looking at product window shopping. And when they actually come to the shopping center, they know exactly what they’re going to buy. I think it is incumbent on us as developers of shopping centers to make sure that they spend more time at the center when they’re there. But also shop more stores. So that’s a big push for us. How do we get the shopper we can get them to our shopping center, but how do we get them to spend more time to get into more stores. And we’re doing that through amenities, we’re doing that through more experience, and giving that customer who may have other places to transact more reasons to come and spend time in our centers.
Katy McConnell
And another one from online with logistics and supply chain challenges. Do retailers have enough merchandise to sell through outlet channels?
Stephen Yalof
For Q4, we really didn’t see a material reduction in product during Q4. In fact, I think just the opposite. I think whoever came up with the strategy if you see it buy it was brilliant. We saw that as early as October where holiday shopping started really early. We started our holiday shopping season November 1, we started to decorate our shopping centers, which was pretty early compared to years past, but the customer responded, and they shopped early, November sales were strong, December sales were even stronger. And the products I think the product held evidenced by our sales per square foot growth during that same period of time.
Katy McConnell
And has Omicron had any impact on those trends or rent collection levels so far in the first quarter?
Stephen Yalof
Rent collection, we haven’t talked about rent collection in a year. Thankfully, I think the one great statistic about rent collection that I’d love to share with this group is when the pandemic first hit in March of 2020, we immediately and proactively reached out to every one of our customers and said we are going to defer your rent for the month of April and May of ‘20 and pay us back in January of ‘21. This was at a time that nobody knew how long stores were going to be closed. Nobody knew how long stayed home mandates were going to be instituted. Yet we made that offer to our retailers. I know on a number of earnings calls, I was asked by analysts and investor meetings we were asked, Is that just an elegant way to delay abatement? And the answer was, and I’m proud to report 99% of that rent was paid. So I think it was a smart strategy, I think, in addition to looking out for our retailers to make sure that they took care of what was important first and that was their people. I think we were rewarded and continue to be rewarded with strong open to buys and getting a big share of the customers’ new stores.
Katy McConnell
You talked about how shoppers prefer value in an inflationary environment. To what extent are you already starting to see that impact on your tenants’ performance?
Stephen Yalof
Well, I would say that February was probably a month that was impacted with rising gas prices and other inflationary pressure. And we’re pretty happy with how our sales trend performed and our traffic trends have performed in the month of February.
Katy McConnell
So it feels like the tenant environment is fairly healthy today and we’re seeing continued positive leasing momentum. What do you see as the biggest risk to your tenant base over the next 12 to 24 months?
Stephen Yalof
It [Indiscernible] me, it’s like this [Indiscernible] been calling because it’s like gimme shelter is playing. So that’s his signature ringtone on my phone. The biggest risk to tenants right now I think there’s a lot of unknown in the economy right now, particularly with what’s going on in Europe. So but I, from what I’m hearing from tenants, I think people are looking at ‘22, late ‘22 and ‘23 open to buys, they’re not making decisions, they’re making decisions for ‘23 right now. So as they sort of take a look at the macroeconomics, we’re still very pleased with the amount of new deals that are in our pipeline, and very optimistic that we’ll close on most of those new deals that we’re currently working on.
Katy McConnell
Maybe you can provide some more detail on the recent retail leasing environment just in terms of what tenants are looking for space that might be new to outlets or any other notable changes that you’ve seen.
Stephen Yalof
Sure. We were very heavily invested in apparel and footwear and I think a lot of the outlet retail leans into those two categories. But we’ve been challenged to try and change our format a little bit just to add some more variety to the centers and be less dependent on apparel. During the pandemic when I said we lost a million square feet of space. A lot of those brands were old legacy apparel brands. So we were trying to diversify our mix a little bit more. We went out through a lot of the Home Stores, Restoration Hardware, Crate and Barrel, William-Sonoma, West Elm, Mitchell Gold, all add a great degree of newness to our shopping centers, all brands that have clearance strategy or outlet strategy. And particularly in our shopping center in Riverhead has really become quite the home destination. So we’re looking to take those types of stores and retailers on the road, also had a lot of success with sit down restaurants across our portfolio. And it’s interesting because that’s a new category, particularly for the outlet business food has always been suspect in outlet centers at best. I joke that the Wetzel’s Pretzels, the official snack food of the outlet shopper. But now what we’re finding is that people want to spend more time, people are shopping a lot more during the week. And it’s not just a weekend shopper visit. And I think a lot of the sit down restaurants are definitely benefiting from there. We added I think seven of these new sit down restaurants this year, which is about 20% of our portfolio.
Katy McConnell
What’s your appetite to increase luxury tenant offerings within your centers? And where else do you think you have gaps in terms of tenant concentration?
Stephen Yalof
Well, I think direct-to-consumer is really important. In fact, we just brought on board a director of business development to help us think about some of that direct-to-consumer brands, through a lot of the relationships that he’s had and things that he’s done in his past experience. He’s made tremendous contacts and great inroads, I think a lot of these direct-to-consumer brands started out digitally native, now are first getting into the retail business. I mean, obviously, we’ve seen a lot of retail growth from some of the bigger brands, but some of that middle of the pack that are starting to think about their first foray into the retail business, we think that outlet will ultimately become an important part of their business going forward. So we’re spending a lot of time getting in front of those brands now and setting ourselves up for future successes, thinking that they may be one of the big theaters tenants in the future.
Katy McConnell
And what are you seeing in terms of outparcel leasing demand? And I know you spoke earlier about how that presents a monetization opportunity for you in terms of land sales, but to what extent do you think about retaining that for future densification opportunity?
Stephen Yalof
Well, a lot of the properties that we have, have this collection of outparcel real estate that we’ve never actually taken advantage of going out and proactively monetizing, I think we’ve been pretty successful over time, putting a Cracker Barrel in a space or leasing a pad to a to a hotel site and some selected markets. But we think that’s a real business for us. Typically an outlet center of about 350,000 square feet takes about 30 acres. And a lot of instances we purchased over time 40, 50 in some instances more. So that gives us a real good opportunity on approved and improved land to go after retailers, and mostly restaurants, other experiential retailers entertainment uses, uses that are very complementary to what we’re doing in the outlet business. But similarly, they bring a whole new customer to our outlet format. So with a new addition of, with the addition of a new hire, who’s only thinking about outparcel leasing, we think that there’s a pretty good new business for us.
Katy McConnell
In your opening remarks, I think you mentioned 19% lease expirations this year, can you update us on your progress with renewing that space and what releasing spreads have looked like so far?
Stephen Yalof
Well, at the end of the quarter, we reported that our leasing spreads for our renewal space was positive, which is obviously a great sign. For the past four quarters, our spreads had been negative, although sequentially increasing. So to pass over into positive territory has been a great, a great award and reward for our leasing team. That 19% is a pretty high number. But I think a lot of it has to do with where in ‘20 and ’21 we, where the market was in a trough during COVID, especially when leases were rolling, we elected to not do long-term leases with a lot of these of our traditional retail partners, because we didn’t want to renew for 5, 6, 7 years at the bottom of the market where they were looking for rent reduction. Arguably, there was a lot of unknown in the marketplace. In those instances, we traded going backwards in base rent for a bigger piece of overage in the event that sales returned and as you know, from the history sales return pretty rapidly.
That over drent line was a pretty important component piece of our P&L, particularly in ‘21 something that we reported $25 million worth of revenue highest of all time for the Tanger portfolio, and so a lot of those leases that are rolling in 2022, which is lends itself to that high number, we are more than 30% through that. A lot of it is big portfolio deals. But I said in the opening remarks, we didn’t lose a tenant in all fourth quarter. And typically a big time, a time where a lot of retailers will fall out is the January-February timeframe. They wait to get that last Christmas bonus. And then they go ahead and they’re close some stores and they move on. But we haven’t had any fallout, thankfully, in January or February either, which I think lends itself to a probably more positive renewal opportunity for us. We also said our sales hitting all time high, and our traffic continues to improve. So when we get in front of retailers, and we make our pitch, the two big component parts are improved traffic and high sales. And we use that to drive our rents. We’re asking for more rent than we’ve ever asked for before. And we’re getting much higher rents, as we start to renew a lot of these leases. So holding out seem to probably was a pretty good strategy. But we’re anxious now to take advantage of this all-time high mark. And we’re now looking to make not only deals for ‘22, and get those completed, but also make deals for ‘23. And get those get a head start on those as well.
Katy McConnell
And as we think about the temporary leases that you signed in the peak of the pandemic, what should we expect just in terms of upcoming rent roll? And can you help quantify the potential upside from converting those from temporary rents to a higher fixed rate level?
Stephen Yalof
Sure. I mean, temporary rents come — temporary tenants come in a bunch of different formats, you’ve got temporary tenants that are pop up deals. So a great example of that is Kate Spade, Tory Burch, and [Eerg] where we were able to put them in markets that they wanted to try before they buy. And based on their sales success, they converted those short-term leases into long-term leases. Another good example of a temporary lease is take a flip-flop store, that’s a local tenant that takes the space next to Under Armour and Under Armour decides they want to expand. So through that temporary leasing, where we’re able to keep the lights on, keep the place vibrant, and also keep the space cash flowing. Now I’ve got a 30 day right to termination, I can control that space, so they’re not going to hold me up from expanding Under Armour or putting a new Tory Burch in that location. So we’re doing a pretty good job right now converting our temp leasing into permanent leasing. And we’re also taking some of those tenants that we’re displacing. And we’re putting them into some of the space that’s probably a little bit harder to lease. So where they were in some coveted spaces due to some of that restructuring and early bankruptcy, we’re now leasing that space first, and then putting our short-term tenants in other space, probably not as desirable, but if they want to be, they want to be there on a short term basis. And that’s the space that they’re always willing to take.
Katy McConnell
Are you still seeing pretty significant demand for tenants that are looking for short term deals today, and what’s your willingness level at this point to sign more of those?
Stephen Yalof
Well, we’re running 95.5% occupancy. So as long as there’s vacant space in our portfolio, we’re going to go after short term tenants to fill that space, we think it’s a good strategy, sometimes you find a great tenant that we can transfer and put in several of our centers, Byrd’s Cookies in South Carolina is a great example of that. We took them from a local strip center, and now they’re in I think four out of the five centers that we have in South Carolina, we will continue to grow business like that. We also when we empowered our field teams, the general managers to go out and do the leasing for us, they decided that they liked the leasing business, and they got rewarded for doing some great leasing. So we’re constantly looking for new brands. And we’re not looking to fill space to fill it for, just for the sake of keeping the lights on. We’re looking for great uses, complimentary a new brand that will bring a new customer to our shopping center, maybe get them to shop there more frequently. And when they do ultimately will build bigger baskets, sell more things and collect more variable rent.
Katy McConnell
So on the new lacing activity they continue to gradually improve in terms of spreads last year. And I think you said they hit positive territory in January. What’s your outlook for the rest of this year? And do you think spreads could start to trend back closer to historical levels? Or is there a longer runway to get there?
Stephen Yalof
We’re not guiding with regard to where rent spent are good to go. But, listen, we’re optimistic about sales. We’re optimistic about leasing traction. When our sales are at an all-time high we’re asking for more rents than we ever asked for before. So I think if we make deals at the levels that we’re pushing, to make deals, I think that we’re going to have positive results across the board.
Katy McConnell
Great. Maybe we can talk a little bit more about non store revenues that you’ve discussed, the recent growth and also the future opportunity that you think you have to drive that even further.
Stephen Yalof
Well, first of all the non-store revenue businesses is I mean, it’s, that’s a really important business to us, we get 150 million people a year coming through our shopping centers, why not take advantage of all those eyeballs. So whether it’s standing up a Tesla test driving station, or Heineken doing one of their nonalcoholic beer installations, they see our shopping centers is great place to engage a customer in an open air environment. What’s great for us is we’ve got these national brands that have great brand cachet that if you do one, multiply that by 36 shopping centers across our portfolio, it’s very easy to scale. And so we invested in a national sales manager that can go out and actually make deals like that for us. And we’re seeing great returns. That’s just one of our non-rental revenue avenues that we’re pursuing.
Others include media, paid media, media boards when you have a shopping center, and you have Michael Kors is your tenant and Michael Kors has their sign over their front door, maybe their name is posted on our directories across the center. But if they’re pushing in a particular month, because they’ve got a product that they really want to move, they’ll buy from us additional marketing opportunities across our portfolio, whether it’s banners that we hang on light posts in the center in the common areas themselves, or backlit, what we call light walls that show some of the latest marketing and Michael Kors imagery. So we want to make sure that every single customer that shops that shopping center knows there’s a Michael Kors in that shopping center, and the investment that they make in that additional advertising definitely returns and additional customers coming through their store.
Katy McConnell
Great, so maybe just shifting to external growth now, with the balance sheet remaining in pretty good positioning, how much of a priority is external growth for the company today? And what types of opportunities whether acquisitions, additional ground up or minor redevelopment screen the most attractive to you today?
Katy McConnell
Well, that’s pretty much all we’re thinking about right now is how are we going to scale and grow this business? I think we built, you asked me at the beginning, what were our great strengths? And why should people invest in our company. And I talked about our management team. I think we’ve got a management team that’s great leaders, best-in-class leaders across their individual disciplines, we’ve got a great head of leasing, we’ve got a probably one of the best heads of operate, business operations in the industry. And we’re very, very optimistic about the new initiatives and digital transformation that our new Chief Commercial Officer is going to lead. And then I mentioned my new head of business development and the new relationships and investments that he’s going to bring to us as well being equally important. So we’re going to take those with that existing management team. And the balance sheet that we have, we think not only are we ripe for acquisition, but we’re looking forward to making bigger investments. Nashville is on the horizon, we’ve been talking, you and I about Nashville for a number of months now. It was a property that we invested in a number of years ago, we put it on hold due to COVID, we had announced publicly that will be 60% committed before we actually put a shovel in the ground. So we’re pleased to report that we will be doing so at the beginning of next quarter with a fall ‘23 grand opening.
Katy McConnell
And what types of tenants have been driving most of the leasing demand for new ground up outlet development today, including at the national project?
Stephen Yalof
Well, I think apparels really important in the outlet business. So even though we’re looking to diversify our mix, I think that apparel mix is very, very important. Accessories, jewelry, athletic footwear, athleisure products, athleisure hard goods, which I think is going to be a new category that we’re going to start to see in some of our outlet centers. So I think these are all very important. one of the big growth areas we’ve seen particularly coming out of COVID was children’s apparel, for obvious reasons kids wanted to COVID this big, they came out this big, so a lot of sales who are our children’s apparel lines. This shopping center will be about 300,000 square feet, we have a lot of demand for it. So we’re looking forward to keeping it very much individual brands, very little multi brander. And I think it’s going to be great pure outlet center with some great amenity, local food, and great services for the customers in the community and also the visitors that attract to site.
Katy McConnell
And as you think about external growth beyond Nashville potential acquisitions or additional ground up projects, how are you thinking about primary versus secondary and tertiary markets in terms of what you’re going to be focused on going forward?
Stephen Yalof
I think the tertiary market is a thing of the past for outlet centers. I think we used to put outlet centers and I’ve been in this business for quite some time. But we used to put outlet centers as far away from the human population as possible because of that retail sensitivity that a brand would have with their department store business, I think is that sensitivity starts to go away, it lends itself to bringing outlet centers closer and closer into the permanent population. And I don’t think that urban outlet is that far away. I think there’s some great markets where we could bring our brand of outlet center. And so we’re spending a lot of time thinking about that now.
Katy McConnell
What new markets would you enter if you’re able to gain scale immediately at a fair basis?
Stephen Yalof
Well, new markets as far as where do we want to position you? I’m not going to tell you that.
Katy McConnell
Oh, come on.
Stephen Yalof
We’re being broadcast. I got to keep a couple of things under the waist. I’m happy to talk about Nashville. But I want to, I’m going to keep the rest of the pipeline until we’re ready to announce, I’ll make sure I tell you first.
Katy McConnell
At this point, are you actively exploring additional ground up opportunities?
Stephen Yalof
Well, there’s some ground up, but mostly JV partnerships.
Katy McConnell
Okay. We have a question online here about that. Just regarding growth. Do you think there’s room for more square footage of outlets or really a need for more outlets square footage in US?
Stephen Yalof
Well, I do and I think look, I think there’s definitely way too much retail in the US, but I think outlet is unique. There’s 70 million square feet outlet space, there’s 7 billion square feet of retail space for only 1%. I think people like to shop value. I mean, look at the how packed our parking lots are, look at the bags that people are carrying around with them when they’re shopping in our centers. I mean, one need only go to one of our centers to see how much need there is for an outlet center, I think we’re in a good space. I think that people love to shop value, I think there’s an aspirational customer out there that will never pay full price. They get, maybe there’s an intimidation factor about shopping in some of the high streets across the country. But if they want to engage with the brand, I think an outlet centers a great place for them to trade up. And the entry level price points are price accessible for a lot of these customers. And I think the brands think about that, too. I think they see that as a great opportunity to acquire a new customer. So you’re seeing a lot of these higher end brands put their brand in an outlet center, because they’ll never get to see that customer. And if they engage them and acquire them in an outlet format, they maybe can trade them up to a lifelong customer.
Katy McConnell
Right. So maybe shifting to the balance sheet strategy quickly. What steps are you taking to protect your balance sheet and plan for likely rising rate environment?
Stephen Yalof
I’m going to turn this over to Jim.
James Williams
Hi, thanks, Katy. Look, we last year, we got ahead of the inflation in the rising interest rate environment by putting in an ATM program, which we raised $180 million, we took opportunity to really reduce that push out some maturities and get our leverage back down, went significantly down from where it was during COVID. Our leverage climbed into the sevens on a net debt EBITDA basis and following by the time we ended the year, our net debt EBITDA was 5.5. If you include the pro rata share of our joint ventures, we have a $520 million line of credit that’s completely undrawn. We have no significant maturities. We took opportunity to push 2023 and ‘24 bonds out. So really have no near term maturities. And we have a lot of liquidity, we have $160 million in cash. So I think we’re in a very good spot from balance sheet standpoint to go to be offensive when test these opportunities that Steve has been talking about.
Katy McConnell
Great, we have one quicker one online. What are the terms on your renewal leases today, length and CPI increases?
Stephen Yalof
Well, we do get an annual increase in all of our leases, but most of the renewals are probably five years or better.
Katy McConnell
Okay. And then we’ll move on to our rapid fire questions. What is your number one ESG priority for this year?
Stephen Yalof
I think ESG is embedded in our culture. So although we don’t have a number one priority, we’re investing this year in EV charging stations, and we’re working. We’ve also made a big investment in solar.
Katy McConnell
What will same store NOI growth be for your property sector overall in 2023?
Stephen Yalof
We’re the only ones in our property sector.
Katy McConnell
Mall/ outlets.
Stephen Yalof
The malls, at 3% on the low side.
Katy McConnell
Okay. What will the 10 year Treasury yield be one year from today?
Stephen Yalof
2%.
Katy McConnell
And will your properties sector have more or fewer public companies one year from today?
Stephen Yalof
And that small sector I think fewer.
Katy McConnell
Fewer. Okay. Great. Thank you so much for your time.
Stephen Yalof
Thank you. Thanks ma’am.
