Tanger CEO explains the upside in replacing tenants and how outlets appeal to luxury brands

Tanger CEO Stephen Yalof told CNBC’s Jim Cramer on Wednesday why it can be more valuable to replace tenants instead of renewing leases.

“We’ve traditionally, at least over the last couple of years, renewed existing tenants at a rate of about 95%,” Yalof said. “Now, what we’re saying is, there’s more upside in replacing a tenant that may be oversized, that maybe hasn’t invested in their store, whose sales maybe have started to decline.”

Yalof said it’s important to find tenants that will bring in new customers. He added that not renewing a tenant’s lease doesn’t mean Tanger is getting rid of them completely. Instead, that tenant could move elsewhere in the shopping center and have a chance at a new location, a new concept and a better size — all of which could increase productivity.

Tanger is driving traffic by using its “peripheral land” and other vacancies to expand offerings, including furniture retailers, Yalof said. A wider variety of brands can encourage customers to come more frequently, stay for longer and ultimately spend more, he said.

Yalof also explained how Tanger appeals to luxury brands. Because “the customer is aspirational,” he said outlets draw in new clientele that may not have considered these high-end brands otherwise.

“You might have an opportunity to get a whole new customer that you don’t get anywhere else, who might not want to shop you on Madison Avenue,” Yalof said. “But here you can. You see a new customer, you can trade them up through your ecosystem … you can make them a customer of yours for life.”