1 Real Estate Stock That Looks Like a Steal Right Now

In the worst of the COVID-19 pandemic, Tangier Factory Outlet Center (NYSE: SKT) showed how resilient his business was and how the company could stay profitable even in difficult times. Now that all properties are open to business, recent data shows that the outlets will stay here. In this Fool Live video clip recorded on August 17th, Millionacres real estate analyst Matt Frankel, CFP, and editor Deidre Woollard discuss why Tangier stock might be a bargain right now.

Deidre Woollard: Let’s talk about one of your favorites, Tanger Outlets. I was there this weekend. Wow it was full, back to school in full effect. But the stock has been down a bit lately, up about 9% over the past five days. I feel like some of this is just that Delta twist that doesn’t seem really deserved when Tangier is kicking the ass right now.

Matthäus Frankel: I noticed a big difference between now and last year. Now the medical experts say the Delta variant could be the final wave. I think dr Gottlieb, who was really a voice of reason in many things. He was one of those who said we would wear masks for over a year. We get locked up, things like that. Now he says this could be the last wave. I think there is a different attitude towards the Delta Wave than others in the medical community because it is called the unvaccinated pandemic. I don’t want to go too far into the weed on the vaccine issue. But after saying that, you mentioned Tangier, there are plenty of Tangier outlets in South Carolina. The southeast is their bread and butter, so to speak. You cannot currently park at a Tanger Outlet in Myrtle Beach. It wasn’t nearly as crowded before the pandemic and their numbers show that. I don’t know if I was smart about buying it when I did because I could really have done if a vaccine hadn’t been developed and the outlets would have gone away. It could just as easily have been different. It was cheap for a reason. But I was convinced all along that science would find out. I am a scientist at heart, my degree is in science that doesn’t invest, believe it or not. Tangier said traffic to their properties was higher than in a comparable quarter in 2019. That sounds very surprising on paper if you’ve been to one of their properties. It probably isn’t. That’s surprising. What surprised me is that their rental revenues are higher than in 2019, 7% higher on a square meter basis compared to 2019. That’s really impressive to me. It just feels like their business is about to turn around in general. For the first time in several quarters, the occupancy rate rose. Tangier’s occupancy rate has been over 96% over its 25-year history. During the financial crisis, it didn’t even drop below 96%. At the end of the first quarter we saw below 92%. So it finally starts to turn a corner. They do a great job of getting non-retail space there. As an example, a microbrewery recently opened on one of their Michigan properties. They do an excellent job at larger retailers who can occupy lots of free square feet. The first Dick’s sporting goods (NYSE: DKS) Electrical outlet within the Tangier property. WeWork CEO is destroying his board of directors and you and I could probably talk about WeWork for a long time. The new CEO, who recently took office on January 1st, this year I think, is doing a fantastic job and I think Tangier is still a bargain.

Wool hair: I absolutely find it a bargain. If you think about some of the Tangier tenants, you have had really good results this season. Think things like Sketcher, things like Nike (NYSE: OF), many retail companies. Many of them have resolved some of their supply chain problems that they had. I was just starting to think about the difference between physical retail, e-commerce, and how the two work together. Because I feel a bit like pre-pandemic, retail hasn’t fully understood how to work together. But one of the things that I find really interesting about retail trends is that people buy certain things that they didn’t buy during the pandemic. We think people were buying at home, but they weren’t buying the exact same things. Women’s clothing is one of them, shoes are one of them. One stock I talked about with the team on the Five Show yesterday was Dillard‘S (NYSE: DDS). Dillard had a great second quarter. Now Dillard’s won’t have any good quarters, I don’t think, because it’s a department store and there are some problems there. But retail in general, the power of brands, is still very much alive in my opinion. I think one of the other things Tangier starts with is some of those targeted consumer brands too.

Frankel: Yes. They’re doing a great job with it. We’ll talk about that in a moment. Simon (NYSE: SPG), has done a fantastic job over the years and I feel like Tangier is a little late for the party, but better late than never I would say. I think they are doing a great job now visualizing the future. It’s like your recent phone call, that’s the tone I got from your CEO, it’s like, “Okay, we’ve turned the corner. Now what?” If you remember the Tangier CEO, they stole him from Simon.

Frankel: Previously, he was CEO of Premium Outlets, by far the largest outlet chain. They are three or four times the size of Tangier. The outlet industry is still quite small overall. Tangier has a lot of money to grow. I think you also saw that they recently raised $ 400 million of fresh capital through a bond offering, they have issued shares a few times recently. They are really building up their liquidity and seeing opportunities here. You are in the early stages of developing a property in Nashville, a very fast growing area. There are many. When you look at their map I mentioned that they really focus on the east coast. Especially in the southeastern states, not Florida. They don’t have a very large presence in Florida, which I think is a great opportunity for them. They really aren’t very present west of the Mississippi. I think there are great opportunities in many of these markets that are not well served by the outlets. These are properties that you really need to physically go to. The things they have from you in Tanger’s Outlets and the things they have in Myrtle Beach in my outlet are probably two completely different things. It’s a real treasure hunt aspect. There is a lot of potential in this business and trading for less than ten times the FFO which is a bargain in my opinion.

This article represents the opinion of the author who may disagree with the “official” referral position of a premium advisory service from the Motley Fool. We are colorful! Questioning an investment thesis – even one of our own – helps us all think critically about investing and make decisions that will help us get smarter, happier, and richer.