Steven Tanger joined Tanger Factory Outlet Centers (SKT 4.69%), founded by his father in 1981, as the company's fourth employee. The company had grown to 13 outlet centers by 1992, and in the following year became the first outlet center developer to be listed on the NYSE as a publicly traded REIT under ticker symbol SKT. 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 video segment, Tanger recalls the company's early days and the visionary approach that led his father to start over at the age of 56 and become a pioneer of the outlet industry. One bank manager thought his idea had merit, but issued a challenge before approving the loan.
A full transcript follows the video.
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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.