Steven Tanger, CEO of Tanger Factory Outlet Centers, Talks Succeeding Through a Recession

Steven Tanger joined Tanger Factory Outlet Centers (SKT 0.73%), founded by his father in 1981, as its fourth employee. The company had grown to 13 outlet centers by 1992, and the following year became the first outlet center developer to be listed on the NYSE as a publicly traded REIT. Tanger has been president and CEO since 2009, and the company's portfolio, growing steadily, now includes more than 40 outlet centers across the U.S. and in Canada.

In this interview, Motley Fool co-founder and CEO Tom Gardner sits down with Steve Tanger to discuss Tanger Outlets' history and success, even through the recession; its business model and approach to location, employees, growth, and the consumer; and its status as a REIT and what that means to the company and its investors.

A full transcript follows the video.

Tom Gardner: Tom Gardner, co-founder and CEO of The Motley Fool, here with Steve Tanger, the CEO at Tanger Factory Outlet Centers, which has been a public company since 1993 -- which is the same year that we started The Motley Fool -- and it's been an incredible stock since 1993. The stock is up about 20% a year, all distributions included as a REIT, which is a 40-bagger, going back to 1993. We're really excited to get a chance to talk to you, Steve, and talk a little bit about the business.

Steve Tanger: Thanks, Tom. I'm looking forward to it.

Gardner: What can you tell us, first, about your dad, and about the decision to move from a shirt-making business to the factory outlet mall business? What sort of man was he, and why did he make that decision? I guess he was in his mid-50s when he started the business.

Tanger: My dad was a visionary and an entrepreneur. He started this business when he was 56 years old. It's very difficult to find a job when you're a 56-year-old retired shirt company executive, so he did what most people do when they can't find a job -- he went into real estate.

He started this business in 1981. His vision, his little twist, was to cluster factory outlet centers together in a strip shopping center.

Previous to that, all the way back to 1920, my grandfather opened up one of the first employees' stores in Wallingford, Conn., which was the predecessor to an outlet store. We owned and operated -- when we manufactured Creighton Shirts -- all the way from 1919, through when we sold it back to our employees in 1979, December 31.

Gardner: Leading to your dad's retirement.

Tanger: Leading to his retirement. We had five outlet stores, basically in North Carolina. He called, in 1981, a couple of his friends. We had seven stores; a small strip shopping center we built in Burlington, N.C.

There's never a good time, there's never a bad time. It's just the time to start a business. You're a finance expert. Try running models today, when interest rates are 18% and inflation is 15%, and see if you can get the numbers to work.

Gardner: I know that your father borrowed money to start the business. He had to go out and raise some capital.

Tanger: He did. We used to, what my father would affectionately call, "dial for dollars." Our first site was in Burlington, N.C., and he literally would get the Yellow Pages -- which at that time were hard-copy books -- and turn to the bank section, and whichever bank had the largest ad was the one he called, because he figured that was the biggest bank in the community. He would start with the president of the bank.

Gardner: What was the interest rate on that first loan? I don't know that you can recall.

Tanger: I wish I could remember, but I don't.

But I'll tell you an interesting story. The executive who was the person that made the decision in Burlington -- it was the BB&T bank, Branch Banking & Trust -- local office in Burlington, N.C. Stephenson was his last name; I forgot his first name.

He was the bank officer in 1981, and gave my father the first challenge. He said, "I understand your business plan, but if you can bring us some signed leases for these Fortune 500 companies, I'll lend you 50% of the value of the leases so you can build the shopping center." My father was able to do that. He got the leases signed, built the shopping center, and lo and behold -- I think it was 2011 -- when we opened our shopping center in Mebane, N.C., the mayor of Mebane was the same man who gave us our first loan.

Gardner: That is outstanding!

Tanger: It's interesting how the world turns.

Gardner: Now Tanger has more than 40 outlet malls, spread out in more than 20 states around the country, its market cap $3 billion. Can you talk a little bit about the dynamics of how the business works? You've given us a little lay of the land, but what brings the brands together? What brings the properties together? What are the competitive advantages of the business?

Tanger: Actually, we have 43 shopping centers in 26 states and Canada, and we're opening our 44th tomorrow, in our 27th state. I leave from here, I go to Washington, D.C., and we open tomorrow in National Harbor, which is in Prince George's County, Md.

Gardner: Which is about five minutes from our corporate headquarters.

Tanger: Is that right?

Gardner: Yes, so there will be some Motley Fool Tanger shoppers.

Tanger: Please, wear the Fool hats and come say hi! That will be our 44th, and we're very excited about that.

The business model that we started is simple and elegant. It's brand names, selling directly to the consumer. You cut out the middleman. By cutting out the middleman's profit, inherently you save a lot of money. The manufacturers and the designers, by cutting out the middleman and selling direct to you as the consumer, are able to offer you 30% to 50% off, every day.

That business model has worked, all these many years, in the face of the growth of Internet sales, in the face of the growth of Wal-Mart (WMT -0.08%) and other discounters. We are distinct, in that it's brand names and designer names, selling directly to you.

Gardner: When you bring those brand names together, for example, who's bearing the marketing costs to bring the customers in? Is that Tanger, who's out there, getting out and getting word spread out about the different brands that are in each location, or are the brands themselves helping to allay some of those costs?

Tanger: We have a very active, well-seasoned marketing group, led by our chief marketing officer, named Carrie Geldner, who is wonderful and has been with us about 20 years. We actually market a retail destination without mentioning the names of the tenants that are there, so we have to build a mystique about the value and the fun of shopping and buying in an outlet store.

The tenants put money into a marketing fund, and then we use that marketing fund, paid by the tenants, to market the site. Now, in some centers around the country, we may supplement to be able to get a bigger market share.

This year, we'll have somewhere between 180 and 190 million shopping visits to Tanger outlets around the country.

Gardner: In those outlets, all the stores are staffed by the individual brands. I look at your company -- as I said, a $3 billion market capitalization -- with less than 300 full-time employees.

Tanger: That's right. We are very happy and proud of our tenant partners. We are an American business that created jobs for Americans. We're very proud of that. Every day, about 45,000 people work in Tanger centers across the country and in Canada, so we've created a lot of jobs.

The site we're opening tomorrow in National Harbor will employ about 900 people; full- and part-time jobs, created without government subsidies.

Gardner: People's association with shopping malls today is, "The occupancy rates have got to be dwindling. Who's heading out to these places, when they can just point and click and buy?"

But the occupancy rates at Tanger malls are pretty remarkable. I know there's a waiting list as well, to get into the mall. Why is that? What stands out as unique? Maybe you've just already explained it, but do you agree that shopping malls are becoming less relevant, but it's not actually affecting your business?

Tanger: I don't agree that shopping malls are becoming less relevant. I think they're changing. Some of the stores are more lifestyle-type stores; spinning, local makeup type stores for the local community, that will vest in the mall and have it as a sense of place.

They're very smart people that run the big mall companies, and we've been through many cycles since the first mall was opened in the '50s -- almost 60 years ago -- so it constantly evolves, and will continue to evolve.

Macy's, run by Terry Lundgren, is a fantastically operated department store chain, and they reported third-quarter profits are up, and their sales are up, and I think they're optimistic about the fourth quarter, as we are.

The outlets are a different channel of distribution. We are a distinct distribution channel, just like the department stores are a distinct distribution channel. As I like to say, "In good times, people like a bargain, and in tough times like these, they need a bargain," so our business model has sustained for all these 33 years.

We have the distinction of being the only national real estate company, in any property sector -- any -- that, for 33 consecutive years, has never ended the year less than 95% occupied; and that's over many cycles, stock market crashes, terrorist events, all kinds of macro events that might disturb that. But our tenants find outlet stores, and their outlet division, extremely profitable.

Gardner: What sort of tenants? Some of the big brands -- obviously, Nike, Michael Kors -- what are some of the names that people... most people have been to a Tanger mall, so I'd just like to hear a couple of the anchor tenant, long-standing partners that are there.

Tanger: We really don't have any anchors. Anchors are heavyweights that drag you down and keep you stationary. We have magnet tenants; people that are so popular that our customers will drive anywhere from 25 to 50 miles to go shop.

They're the finest brand-name and designer names in the world today: Polo Ralph Lauren, Nike, Under Armour -- pick any name you want -- Michael Kors, Coach, Kate Spade, Phillips-Van Heusen, the Gap, Old Navy, Banana Republic, J.Crew. I don't want to get in trouble, because I'm leaving out a lot...

Gardner: Can you name your favorite employees, too, at the company?

Tanger: Every one is my favorite employee!

Gardner: Every tenant, and every employee.

Tanger: And every one of our shopping centers is my favorite. I love all my children!

Gardner: Have you closed any, over time? Do you sell them off, acquire other ones -- either locations, or the actual mall?

Tanger: Sure. As in any portfolio -- and I'm sure you, in your investment advice, tell your subscribers to diversify, and to constantly review your portfolio to see which positions are no longer core positions and to dispose of those non-core positions and invest in more growth companies. Well, we do the same in our portfolio.

From 2000 to 2010, we sold 11 shopping centers, basically to entrepreneurs in the local community. These were non-core assets, and we reinvested the funds at a higher rate of return in some of our newer properties. So, from time to time we do sell assets; not often, but we do. That's just part of the process.

Gardner: The emphasis on location means that you have your particular model of what you look for when trying to identify a great location for your next outlet mall. I just want to go through a few of the factors, and have you explain why that's relevant. Why is it relevant to have a million people within 30-40 miles, with an average income level of $65,000 per household?

Tanger: We are a regional shopping destination. We like to put our shopping centers on an interstate or a major highway system, at the interchange, so that our customers can get on and off the interstate easily, and it's great visibility.

Unlike other neighborhood shopping centers, or a regional mall, that look at population and density and family household and incomes within a one-, three-, and five-mile radius, we look at five-, 10-, and 20-mile radiuses, because we draw from that amount of distance.

We have found, based on our experience in developing probably 40-45 of these already, that we have kind of a matrix of success, and that's what we look for, as a minimum. Household income and base population.

Gardner: And 5 million tourist visits a year.

Tanger: We have basically two types of different centers. One is a tourist location; let's say Riverhead, N.Y., which is at the east end of Long Island. You have the tourists going to the wine country, Splish Splash, all the attractions in the Hamptons, the North Shore and the South Shore of Long Island. That's a tourist location.

Or Branson, Mo.; or Myrtle Beach, S.C.; or Sevierville, Tenn.; or Foley, Ala. These are tourist locations.

Then we have mid-market or in-market centers, like National Harbor, which is both. National Harbor will attract the 35 million tourists a year to Washington, D.C., but also the permanent population in Virginia, Maryland, and the District.

So, we have two different types of studies and profiles.

Gardner: Were these profiles evident in 1984, and you've just tweaked them over time, or did you have major discoveries in finding these factors?

We have so many business owners that are part of our Motley Fool membership base, and they're always interested in the journey that somebody takes toward discovering the new factors that matter most. Has this been set and tweaked -- and almost a strategic model that could be put semi on autopilot -- or has it been a process of discovery and a lot of change over the last, let's say, 20 years?

Tanger: It's been a process of discovery that changes every day, because if you don't change it, you lose it. The first center we opened, of about 35,000 feet in Burlington, N.C. -- a little strip center -- would not really be successful today. We constantly tweak the format.

It evolved from Burlington to small, out-of-the-way tourist areas like North Conway, N.H.; Kittery, Maine; Martinsburg, W.V.; places you've probably never heard of or never went to. But we went where our tenants wanted to go, because in the early '80s, the very fine tenants looked at this as a clearance store and they didn't want to compete against the department stores. But they wanted their brand out there, and they needed to clear excess inventory and to turn it into cash.

Then, we came a little bit closer in and we built, effectively, very nice buildings surrounding a parking lot; a classic strip-center type of location -- if you look at it, almost a "C" -- it's up, across, and down.

Then, probably 10 years ago, that evolved to what we call a racetrack design, which, if you look at a regional mall and take the roof off, is what we do. You have a center of the donut, then you have a loop around, and then outside, so you have concentric circles. You walk around the racetrack, and you can look to your left and to your right, and you have a store on either side. It's a very efficient model, and the parking lot surrounds the buildings, as opposed to buildings surround the parking lot.

That is the evolution of our base model. We are testing one now -- I don't know if we'll find another site after this -- but in Foxwoods, Conn., we are building a bridge connecting the Grand Pequot Hotel and the MGM Grand Hotel casino floors. It will be about a 325,000-square-foot shopping center, but on a bridge. It will just be like one aisle way and you turn to your left or turn to your right, there's a store on either side.

That's an interesting format; very expensive engineering task to build, but we're under construction now.

Gardner: Out of curiosity, what is your area of greatest enjoyment in all of this? For example, are you involved in the design? Are you reviewing the design? Or are you more interested in the location choices and the financial profile of the overall business? I'm sure you're excited and enthusiastic about every area, but do you have a particular area, right now in the work that you're doing, that you find most interesting?

Tanger: Tom, I joined the company as the fourth employee. It was my father and I, and a secretary, and a bookkeeper so, out of necessity, each of us did everything. We did the marketing, we did the leasing, we did the land development, we did the finance, the operations... so I'm trained in all aspects of it, as most entrepreneurs are when they start a small business. You have to get your hands dirty, and you love what you do. And I still love what I do.

It took us from 1981 to 1990 to hire our 10th employee, so we grew the business slowly, very conservatively financed. Today, we have about 150 employees in our office in North Carolina, and probably a total of 500, if you include all the Tanger people on site in our 43 shopping centers.

But I oversee the very talented people that we've hired. My mantra is "Hire very smart, very talented people, and get out of their way and let them do their job." I'm not...

Gardner: Mr. Micromanager.

Tanger: No. I think the hardest thing for an entrepreneur to learn is to give up control. Because entrepreneurs are used to hands-on, micromanaging everything, and thinking -- and sometimes rightfully so, and sometimes not -- they can do everything better than everybody else.

But we've hired extremely talented people. We have a robust succession planning program, starting with myself. We review it twice a year. Every employee is put into a nine-box grid, and we track them, we educate, we self-promote.

It's important, I think, for the shareholders to know that no one person is bigger than the enterprise. Our enterprise value now, including debt, is probably $4.7-$4.8 billion -- and that's starting from a dream, with nothing.

We want to be sure that our stakeholders, who have shown confidence in our management team by investing with us, and making us stewards of their hard-earned money, we want to be sure that the enterprise survives.

I'm asked from time to time, what happens if I get hit by a bus? My answer is, "Well, I no longer cross the street!" But if something were to happen to me, the company would survive and prosper.

Gardner: What are the changing dynamics of the tenants, and just the experience you will get, going to a Tanger mall, over the next 10 years or five years? What do you think some of the new features might be? Events? Experiences? You were talking about the lifestyle-type businesses that are showing up in neighborhood malls or shopping malls now. Movie theaters? More food? More experiences? Or something else?

Tanger: We spend a lot of time focusing on how to enhance the consumer's experience and give them joy when they come to our center to shop. We were the first national shopping center developer to put free Wi-Fi on every one of our properties -- not because we thought it was cool but because, candidly, I wanted to entertain the non-shopping spouse.

Gardner: NFL Sunday Ticket!

Tanger: Really, it's not gender-specific and it's not age-specific. You go into our centers now -- in our food courts, or by our fountains, or under our beautiful landscaping, sitting on a bench -- and you'll see people and children on their devices, happily entertained. That gives the shopper more time in the store, without being pulled out.

Gardner: Would you say that your general thought about your customer base is that it's a family that's coming?

Tanger: We love to entertain families. Particularly at resort locations, we are usually the second most popular thing to do on vacation. Now, if you go to the beach, it's the beach. If you go skiing, it's skiing. But usually one or two days, the weather doesn't cooperate and you go shopping, and we hope you'll come shopping at a Tanger outlet -- and usually families go shopping together.

In our pass-by locations, or more middle-market locations, people will make multiple day trips during the month or during the year, and go as a group. A group of friends will go in a car; three or four in a car, and come shop for three or four hours, and have lunch, and then go home. We want to be sure that they're entertained.

We were the first mall real estate investment trust to have an app. We have the Tanger app, which is hooked up to GPS and Yahoo! If you go on our site and you're on the Tanger app, it will ping you. For instance, if you go in front of a J.Crew store, and J.Crew is running a 20% off, it will ping you and you can literally go into the store, show them your phone with the Tanger app and the barcode...

Gardner: You mean a J.Crew anywhere?

Tanger: No, in a Tanger Outlet Center.

Gardner: Will there be a Tanger Center online to buy from? Is that a possibility?

Tanger: I don't think that's a possibility. I think people love to socialize. People like to touch fabrics, they like to try things on, they like to experience the joy of going shopping. Apparel and footwear are difficult to sell online profitably, and that's why we've been able to survive. At the same time the Internet sales have grown, our sales have grown.

I think most of our tenants today have a dot-com division, but people use that for informational purposes. But when they come to the center, they buy. Unlike digitized type of products, like books or movies or music, which can easily be downloaded and purchased online, it's difficult to find the right color and the right size online.

Gardner: Last couple of questions: For investors who have never invested in a real estate investment trust, can you just give the basic dynamics -- the basic distribution of 90% of net income, the restriction on total inside ownership of the business -- just any of the factors that are true about a real estate investment trust, and then maybe one or two things that you would look for as an investor in those types of companies?

Tanger: Let me take it in reverse order.

Gardner: Yeah, great.

Tanger: One thing I look for as an investor is stability; a balance sheet that's a fortress. We just raised $250 million of unsecured 10-year money at 3 7/8 on Monday.

Gardner: Wow.

Tanger: We are the only REIT to have been upgraded by both Moody's and Standard & Poor's this year. We are one notch below an A rating, which is pretty impressive for a company our size.

I would look for a company that has provided a steady stream of income. We have, since the day we went public 20 years ago, every year raised our dividend -- consistently, every year, through the good times and bad years.

Gardner: Always a good indicator.

Tanger: There is a group, I'm told, called the Dividend Aristocrats, which is a group that's raised their dividends in each of 20 consecutive years -- and there are not many companies that have that consistency.

So, I look for a long track record of raising dividends, and paying dividends that are well-covered; a balance sheet that's a fortress, to get through good times and bad times; and a seasoned management team. Those are the three things I'd look for.

Gardner: For the fun of it, I'm going to jump in and ask, what would you look for to find Tanger in 1993, where you didn't have all of that full evidence of dividends being raised. Let's say a REIT that has just come public, or has one or two years in the public markets, and is showing the dynamics, the factors and traits, that Tanger did, back in '93.

Tanger: We went public, and our dividend yield the day we went public was 7.47%. It's a 747, that's how I remember it! Our initial public offering was 30 times oversold, because we had a long runway to grow, which we did.

The public markets embraced the growth story and the higher dividend to attract people. We went public and we raised $100 million, and paid off $100 million in debt. It's been a long ride since '93 to today, at about a $4.7 billion enterprise. People are attracted to various things, but in 1993, I think they were attracted as an initial public offering to the growth story.

Gardner: In the portfolio that I manage at The Motley Fool, I am not allowed to sell within five years, so every investment that I make has a minimum holding period of five years.

The point that I'm making there is, first of all, I think you'll get better returns. You'll in part get better returns just because it's more tax-efficient, but more importantly you'll start looking for factors that lead to sustained greatness at a business. You won't get caught up in a single economic cycle or one product launch. You'll actually have to look to find evidence that there are the ingredients of greatness, over 10-, 15-, 20-year periods.

One of the factors I look for is that the family, or the founder, is involved. Founder CEOs and founding family CEOs -- in Buffett's parlance -- they're taking care of that asset as if it's the only family asset, and I really love feeling that alignment, rather than having a CEO who might have stock options and might be gone in five years.

I presume you view that as an important factor in Tanger's history, or in your investment approach, too.

Tanger: Enthusiastically, yes. I own about 5% of the company; I think we're $33-$34 a share, which is significant -- my largest holding -- and look forward to many more years of continued growth there and adding to my ownership through stock grants that vest and other ways.

Warren Buffett, you mentioned, is a great investor. I don't know if you realize this, but in 1999, in the height of the tech bubble, he called and said he now owned 5.3% of our business.

Gardner: I did not know that.

Tanger: Yes. I don't think he still owns that amount. I don't know what he still owns at all, but it was like the Good Housekeeping Seal of Approval for a company our size to have a public announcement -- and he bought it in his personal account, not through GEICO, and not through Berkshire -- so we were very pleased.

I happen to believe in a lot of his thinking with regard to investing, so we are long-term holders. Our senior management team all own stock. Actually, the stock grants that were awarded to myself and our executive VPs last year have a holding period of three years after the grant is vested, so that ensures large ownership for senior management.

We're very proud of the fact that Tanger people act as owners, not as employees. We give stock grants, even down to the property level, to some of our maintenance folks. Everybody walks around with their head high. We have a stock ticker at every one of our shopping centers, so that people can track the value of the stock.

Gardner: I don't know if this number comes readily to mind for you, but another factor that I look for, again, looking for greatness over five-plus years... Ideally, I never want to sell. I'd like to own businesses for 20 years. Look at Tanger. Look at Starbucks. Look at Whole Foods. There are so many great companies.

A factor that I look for, to the extent that I can find the data, is employee retention, tenure. I like to see that people love going to work there and want to stay there for long periods of time. I'm presuming that the few-hundred Tanger employees and leaders of the company have been there for a sustained period of time.

Tanger: Our executive leadership team, I think, averages 15 years' employment with the company, which we're very proud of. As you get closer to the property level, some of the maintenance folks, they turn over a bit, but we have great employee benefits, and our retention is superb.

Gardner: Succession, you mentioned it. I presume that the next CEO will not be a Tanger family member -- although one never knows. Let's assume that it's not, for the fun of it.

What are the chances that that person is a Duke grad? Because I've looked through your management ranks, biographies and everything. I see a lot of Chapel Hill -- my brother went to Chapel Hill; we're all Chapel Hill hoops fans in our family -- I see no Dukies, and I'm wondering if that is by design, and what would happen if the greatest potential candidate for CEO leadership at Tanger was a Coach K Duke grad?

Tanger: I would not hold that against them! Duke is an outstanding school. I have three nieces and one nephew who went to Duke.

Gardner: OK, that's great.

Tanger: They're very proud of their Duke heritage. Our succession planning is in place. I have a general counsel, a chief operating officer, and a chief financial officer that are my three senior thought partners. We run the company together. I'm very proud of them, and I rely on their advice and counsel. This is not a one-man organization. It could not be, anymore.

I wanted just to go back because I don't think I properly responded to your question with regard to REITs. The Real Estate Investment Trust Act was part of a larger legislation 50 years ago to provide regular people -- not institutions or banks -- the opportunity to co-invest with large real estate families, large real estate business, but with instant liquidity.

It is a publicly traded company. We are not allowed to retain a significant amount of capital. We must pay out 90% of our taxable income. Now, as any type of enterprise, there are certain types of investments that reduce the amount of our taxes, and we pay out 90% of the taxable income.

We are a pass-through vehicle. The dividends are taxed, but the company -- the REIT -- is not taxed at the corporate level, so it flows through to the investors.

Gardner: The investors should own that, probably, in a tax-sheltered account. I don't want to put you on the spot to give financial advice, but are those dividends from a REIT taxed at capital gains or at income?

Tanger: You're asking me? It's way above my pay grade! But my guess is, with the new tax law, they'll be taxed at regular income. The total return is what Tanger shareholders look for. We pay about a 2.5% dividend but we've averaged, as you've said, anywhere from an 18%-20% total return, which is superb, over a very long period of time.

Now we certainly can't promise that in the future, but as the company's largest single nonfinancial institution shareholder, that's my goal, is to be able to repeat that.

Gardner: How many locations do you think you can have in the U.S.? Do you state that number publicly, or do you have a mentality on that, and what do you think about Canada and international opportunities?

Tanger: We're on record as saying that we can develop one to two new centers a year, at least in the next five years, and probably one center a year in Canada, so hopefully we'll be able to develop two to three.

Our target return for new ground of development is still cash-on-cash, day one, a 9%-11% return, which is superb. We just placed 10-year money yesterday on the public markets at 3 7/8, so that's a significant spread, over long-term money.

Gardner: Why ever do a joint venture mall? I know you've got... maybe 10 50/50 joint ventures?

Tanger: Joint ventures are a fact of life in the real estate business. As we get closer in to the metropolitan market, the land owners are much more sophisticated, and they would prefer to convert their equity in their land into long-term equity in a partnership, so they defer their taxes, if you will.

Some of them believe in the concept -- hopefully, all of our partners believe in the concept -- and it's proven to be a good investment for them.

Then, after a holding period of whatever they decide, each of our joint ventures has an exit scenario. We purchased, on August 30, our partner's interest in our Deer Park, Long Island, shopping center, and then refinanced it.

The purchase price was $325 million. We put $150 million mortgage on the asset, used the balance from our line of credit, and the mortgage of $150 million was at 150 basis points over LIBOR -- 30-day LIBOR.

We locked that a month ago, for five years. It cost us 130 basis points to lock, so we have now converted the floating rate to fixed rate at 2.8% mortgage, for five years on Deer Park, so the cash flow is significant.

But joint ventures are a fact of life. Do we need their equity? No. But in some instances, it's helpful.

Gardner: When you're moving closer to a metropolitan area, that land owner is asking for that.

Tanger: Well, in National Harbor, it's a $1 billion development, created and executed by the Peterson family -- Milton Peterson and his sons -- a great visionary. On a parcel within that development, we're partners with the Peterson family on the outlet center only, but they were very helpful in getting the appropriate permits, and as the local partner making things happen that an outside company would find more challenging to do.

It's a win/win for both.

Gardner: Last question: 2001, stock market melted down; 2008, the stock market melted down; two unbelievable events for investors to have happen within a single decade. What happened to SKT, Tanger's stock, during those two periods? I know the answer -- I went and looked back -- but it's notable.

Tanger: Well, thank you.

We are, I think, one of two -- out of 140 REITs -- that have had at least 35 consecutive quarters of comp NOI growth, even through the recession. We're one of a handful of REITs that, even through the recession, raised their dividend every year. And, even through the recession in the last 10 years, we only had one quarter where our sales went down slightly. Every other quarter, our sales went up.

The concept of factory outlets, and the love of the consumer for finding a bargain, sustains us. Also, having a balance sheet that's a fortress sustains us. Today, about 28% of our enterprise value is debt, versus the opposite for most real estate people. Most real estate people have 70% debt and 30% equity. We have the opposite.

Today, only 5% -- maybe 6% -- of our enterprise value is floating-rate debt, so we have no exposure to the fluctuations in the 10-year Treasury. And only 5% of our enterprise value is secured debt, securing our assets, so we are very safe, and have a huge cash flow.

Our cash flow, after dividends, is about $80 million a year, which pays for one of the two shopping centers we've built, or our share of two joint ventures, so we almost self-finance, which is pretty nifty.

Gardner: Unbelievable. What I look for -- Motley Fool ONE members know -- when I look for a great investment, I look for leadership that's bought in, that has a long-tenured stake in that business; I look for excellent underlying financials, a fortress of a balance sheet; I look for great growth opportunities; I look for demonstrated excellence over the period of time of that company's existence; I look for loyalty of all stakeholders.

One of the things I love, to evaluate a business along these lines; there's a marketing study that came out from a firm in the last year, that showed that consumers say 73% of the brands that they encounter could disappear, and it wouldn't actually matter to them. And, as we know, more than 70% of people who go to work say that they're indifferent or slightly negative about the company that they're working for.

I think Tanger is a great example of a company that... consumers are happy to see the mall coming. They're excited when that mall comes to their neighborhood, and you've got great tenure throughout your ranks and employees and leaders at Tanger.

So, congratulations on the last 20 years in the public markets, 30-plus years as a business overall, and we're looking forward to following along for the next 20.

Tanger: Thank you. Thank you for having me, Tom. I appreciate it.

Gardner: Thanks, Steve.

Tanger: Congratulations on the business you've built, too.

Gardner: Thank you.