UE Urban Edge Properties

Urban Edge Properties (NYSE: UE) (the "Company") today announced its results for the quarter ended June 30, 2024 and raised the low end of its FFO as Adjusted guidance for the full-year.

"Our second quarter results reflect continued momentum from strong operating fundamentals and the benefits of our recent capital recycling activity," said Jeff Olson, Chairman and CEO. "We are especially pleased with our leasing progress, as shop occupancy grew to 89.8% in the quarter, up 520 bps compared to the second quarter of 2023. In addition, we continue to pursue exciting external growth opportunities, with a focus on acquiring attractive shopping centers that further expand our presence in our core markets between Washington, D.C. and Boston. We remain focused on executing our strategic plan to grow earnings and cash flow while continuing to simplify our business."

Financial Results(1)(2)

(in thousands, except per share amounts)

 

 

2Q24

 

2Q23

 

YTD 2024

YTD 2023

Net income (loss) attributable to common shareholders

 

$

30,759

$

10,262

 

$

33,362

$

(8,856

)

Net income (loss) per diluted share

 

 

0.26

 

0.09

 

 

0.28

 

(0.08

)

Funds from Operations ("FFO")

 

 

58,397

 

35,918

 

 

97,447

 

74,520

 

FFO per diluted share

 

 

0.47

 

0.29

 

 

0.79

 

0.61

 

FFO as Adjusted

 

 

40,156

 

37,180

 

 

80,974

 

76,153

 

FFO as Adjusted per diluted share

 

 

0.32

 

0.30

 

 

0.66

 

0.62

 

Net income for the three months ended June 30, 2024 included a $21.7 million, or $0.18 per diluted share, gain on extinguishment of debt related to the foreclosure settlement of Kingswood Center and a $13.4 million, or $0.11 per diluted share, gain on sale of real estate, primarily related to the disposition of our industrial property in Lodi, NJ. FFO as Adjusted for the three months ended June 30, 2024 increased by 7% as compared to the prior year period and benefited from rent commencements on new leases and growth from acquisitions.

Same-Property Operating Results Compared to the Prior Year Period(3)

 

 

2Q24

 

YTD 2024

Same-property Net Operating Income ("NOI") growth

 

3.6

%

 

2.9

%

Same-property NOI growth, including properties in redevelopment

 

4.0

%

 

3.9

%

Increases in same-property NOI metrics for the three and six months ended June 30, 2024 were primarily driven by rent commencements on new leases from our signed but not open pipeline.

Operating Results(1)

• Achieved same-property portfolio leased occupancy of 96.5%, an increase of 150 basis points compared to June 30, 2023, and 30 basis points compared to March 31, 2024.
• Reported consolidated portfolio leased occupancy, excluding Sunrise Mall, of 96.4%, an increase of 160 basis points compared to June 30, 2023, and 30 basis points compared to March 31, 2024.
• Increased retail shop leased occupancy to 89.8%, up 520 basis points compared to June 30, 2023, and 140 basis points compared to March 31, 2024.
• Executed 47 new leases, renewals and options totaling 506,000 sf during the quarter. New leases totaled 166,000 sf, of which 38,000 sf was on a same-space basis and generated an average cash spread of 18.7%. New leases, renewals and options totaled 378,000 sf on a same-space basis and generated an average cash spread of 12.3%.
• Published the Company's 2023 Corporate Responsibility Report on June 26, 2024.

Acquisition and Disposition Activity

On April 5, 2024, the Company closed on the $83 million acquisition of Ledgewood Commons, a 448,000 sf grocery anchored shopping center located in Roxbury Township, NJ. The initial capitalization rate on the transaction was 7.9% with an expected first-year cash yield in excess of 10%.

On April 26, 2024, the Company closed on the sale of its 127,000 sf industrial property located in Lodi, NJ for a price of $29.2 million, representing a 5.4% capitalization rate. This transaction was structured as part of a Section 1031 exchange, allowing for the deferral of capital gains resulting from the sale for income tax purposes. As a result of this transaction, the Company recognized a $13.1 million gain on sale of real estate.

The Company is in advanced negotiations to acquire several shopping centers in our core markets between Washington, D.C. and Boston.

Financing Activity

On April 3, 2024, the Company borrowed $60 million on its unsecured $800 million line of credit to partially finance the acquisition of Ledgewood Commons discussed above. During the quarter, the Company repaid $63 million of the outstanding balance on its line of credit using proceeds from the sale of its property in Lodi, NJ and proceeds from a $50 million, 5-year mortgage on Ledgewood Commons bearing interest at a fixed rate of 6.03%, reducing the balance outstanding as of June 30, 2024 to $150 million. Subsequent to the quarter, the Company repaid an additional $45 million on the outstanding balance primarily from proceeds generated from equity issuances under its ATM program.

On June 27, 2024, the property foreclosure process was completed for Kingswood Center, located in Brooklyn, NY. In connection with the foreclosure settlement, the lender took possession of the property and the Company recognized a $21.7 million gain on debt extinguishment, eliminating a $68.6 million mortgage liability that was due to mature in February 2028.

During the quarter ended June 30, 2024, the Company issued 1,607,353 common shares at a weighted average price of $18.21 per share under its ATM Program, generating net cash proceeds of $28.9 million. Subsequent to the quarter, the Company issued an additional 891,643 common shares at a weighted average price of $18.23 per share, generating net cash proceeds of $16.0 million.

The Company has limited debt maturities coming due through December 31, 2026 of $188.3 million in the aggregate, which represents approximately 11% of outstanding debt.

Leasing, Development and Redevelopment

During the quarter, the Company executed 166,000 sf of new leases, including leases with BJ's Wholesale Club, Chipotle, Bank of America, and First Watch.

In June, the Company executed a new 112,000 sf lease with BJ's Wholesale Club at Bruckner Commons to take over a portion of the former Kmart space and entered into a lease termination agreement with Target at the same property. The Target termination agreement releases Target from its obligations under the previously-executed 10-year, 139,000 sf lease, providing the Company the opportunity to enter into the new 20-year lease with BJ's at a comparable project yield.

The Company commenced two redevelopment projects with estimated aggregate costs of $5.1 million during the quarter and now has $170.1 million of active redevelopment projects underway, with estimated remaining costs to complete of $109.2 million. The active redevelopment projects are expected to generate an approximate 15% yield. The Company also stabilized one project aggregating $13.3 million with the rent commencement of Prime Urgent Care in June 2024, completing the second phase of its Huntington Commons center redevelopment.

As of June 30, 2024, the Company had signed leases that have not yet rent commenced that are expected to generate an additional $28.6 million of future annual gross rent, representing approximately 11% of current annualized NOI. Approximately $2.8 million of this amount is expected to be recognized in the remainder of 2024.

Balance Sheet and Liquidity(1)(4)

Balance sheet highlights as of June 30, 2024 include:

• Total liquidity of approximately $721 million, consisting of $101 million of cash on hand and $620 million available under the Company's $800 million revolving credit agreement, including undrawn letters of credit.
• Mortgages payable of $1.5 billion, with a weighted average term to maturity of 4.8 years, all of which is fixed rate or hedged.
• $150 million drawn on our $800 million revolving credit agreement that matures on February 9, 2027, with two six-month extension options. Subsequent to the quarter, the Company repaid $45 million of the credit facility, reducing the outstanding balance to $105 million.
• Total market capitalization of approximately $4.0 billion, comprised of 127.2 million fully-diluted common shares valued at $2.3 billion and $1.7 billion of debt.
• Net debt to total market capitalization of 39%.

2024 Outlook

The Company has updated its 2024 full-year guidance ranges for net income and FFO based on recent results and transactions and the expected ongoing strength in business fundamentals, and is increasing the low end of the guidance range for FFO as Adjusted, estimating net income of $0.28 to $0.31 per diluted share, FFO of $1.42 to $1.45 per diluted share, and FFO as Adjusted of $1.29 to $1.32 per diluted share. A reconciliation of the range of estimated earnings, FFO and FFO as Adjusted, as well as the assumptions used in our guidance can be found on page 4 of this release.

Earnings Conference Call Information

The Company will host an earnings conference call and audio webcast on July 31, 2024 at 8:30am ET. All interested parties can access the earnings call by dialing 1-877-407-9716 (Toll Free) or 1-201-493-6779 (Toll/International) using conference ID 13747085. The call will also be webcast and available in listen-only mode on the investors page of our website: www.uedge.com. A replay will be available at the webcast link on the investors page for one year following the conclusion of the call. A telephonic replay of the call will also be available starting July 31, 2024 at 11:30am ET through August 14, 2024 at 11:59pm ET by dialing 1-844-512-2921 (Toll Free) or 1-412-317-6671 (Toll/International) using conference ID 13747085.

(1)

Refer to "Non-GAAP Financial Measures" and "Operating Metrics" for definitions and additional detail.

(2)

Refer to page 11 for a reconciliation of net income to FFO and FFO as Adjusted for the quarter ended June 30, 2024.

(3)

Refer to page 12 for a reconciliation of net income to NOI and Same-Property NOI for the quarter ended June 30, 2024.

(4)

Net debt as of June 30, 2024 is calculated as total consolidated debt of $1.7 billion less total cash and cash equivalents, including restricted cash, of $101 million.

2024 Earnings Guidance

The Company has updated its 2024 full-year guidance ranges for net income and FFO based on recent results and transactions and the expected ongoing strength in business fundamentals, and is increasing the low end of the guidance range for FFO as Adjusted, estimating net income of $0.28 to $0.31 per diluted share, FFO of $1.42 to $1.45 per diluted share, and FFO as Adjusted of $1.29 to $1.32 per diluted share. Below is a summary of the Company's 2024 outlook, assumptions used in our forecasting, and a reconciliation of the range of estimated earnings, FFO, and FFO as Adjusted per diluted share.

 

 

Previous Guidance

 

Revised Guidance

Net income per diluted share

 

$0.12 - $0.17

 

$0.28 - $0.31

Net income attributable to common shareholders per diluted share

 

$0.11 - $0.16

 

$0.27 - $0.30

FFO per diluted share

 

$1.22 - $1.27

 

$1.42 - $1.45

FFO as Adjusted per diluted share

 

$1.27 - $1.32

 

$1.29 - $1.32

The Company's 2024 full year FFO outlook is based on the following assumptions:

• Same-property NOI growth, including properties in redevelopment, of 4.5% to 6.0%, reflecting an increase from our previous assumption of 4.0% to 6.0%.
• Acquisitions of $117 million and dispositions of $37 million, both reflecting activity completed year-to-date.
• Recurring G&A expenses ranging from $35.5 million to $37.0 million, a decrease from our previous assumption of $35.5 million to $37.5 million.
• Interest and debt expense ranging from $83.0 million to $86.0 million, a decrease from our previous assumption of $86.0 million to $88.5 million, reflecting the recent foreclosure of Kingswood Center.
• Excludes items that impact FFO comparability, including gains and/or losses on extinguishment of debt, transaction, severance, litigation, or any one-time items outside of the ordinary course of business.

 

Guidance 2024E

 

Per Diluted Share(1)

(in thousands, except per share amounts)

Low

 

High

 

Low

 

High

Net income

$

35,200

 

 

$

39,000

 

 

$

0.28

 

 

$

0.31

 

Less net (income) loss attributable to noncontrolling interests in:

 

 

 

 

 

 

 

Operating partnership

 

(2,100

)

 

 

(2,100

)

 

 

(0.02

)

 

 

(0.02

)

Consolidated subsidiaries

 

1,100

 

 

 

1,100

 

 

 

0.01

 

 

 

0.01

 

Net income attributable to common shareholders

 

34,200

 

 

 

38,000

 

 

 

0.27

 

 

 

0.30

 

Adjustments:

 

 

 

 

 

 

 

Rental property depreciation and amortization

 

155,800

 

 

 

155,800

 

 

 

1.25

 

 

 

1.25

 

Gain on sale of real estate

 

(15,300

)

 

 

(15,300

)

 

 

(0.12

)

 

 

(0.12

)

Limited partnership interests in operating partnership

 

2,100

 

 

 

2,100

 

 

 

0.02

 

 

 

0.02

 

FFO Applicable to diluted common shareholders

 

176,800

 

 

 

180,600

 

 

 

1.42

 

 

 

1.45

 

Adjustments to FFO:

 

 

 

 

 

 

 

Impact of property in foreclosure

 

2,300

 

 

 

2,300

 

 

 

0.02

 

 

 

0.02

 

Non-cash adjustments

 

2,300

 

 

 

2,300

 

 

 

0.02

 

 

 

0.02

 

Transaction, severance, litigation and other expenses

 

600

 

 

 

600

 

 

 

—

 

 

 

—

 

Gain on extinguishment of debt, net

 

(21,400

)

 

 

(21,400

)

 

 

(0.17

)

 

 

(0.17

)

FFO as Adjusted applicable to diluted common shareholders

$

160,600

 

 

$

164,400

 

 

$

1.29

 

 

$

1.32

 

(1)

Amounts may not foot due to rounding.

The following table is a reconciliation bridging our 2023 FFO per diluted share to the Company's estimated 2024 FFO per diluted share:

 

Per Diluted Share(1)

 

Low

 

High

2023 FFO applicable to diluted common shareholders

$

1.51

 

 

$

1.51

 

2023 Items impacting FFO comparability(2)

 

(0.26

)

 

 

(0.26

)

2024 Items impacting FFO comparability(2)

 

0.15

 

 

 

0.15

 

2024 impact of property in foreclosure

 

(0.02

)

 

 

(0.02

)

Same-property NOI growth, including redevelopment

 

0.08

 

 

 

0.10

 

Acquisitions net of dispositions NOI growth

 

0.07

 

 

 

0.07

 

Interest and debt expense(3)

 

(0.10

)

 

 

(0.09

)

Recurring general and administrative

 

(0.01

)

 

 

(0.01

)

2024 FFO applicable to diluted common shareholders

$

1.42

 

 

$

1.45

 

(1)

Amounts may not foot due to rounding.

(2)

Includes adjustments to FFO for fiscal year 2023 and expected adjustments for fiscal year 2024 which impact comparability. See "Reconciliation of net income to FFO and FFO as Adjusted" on page 11 for actual adjustments year-to-date and our fourth quarter 2023 Supplemental Disclosure Package for 2023 adjustments.

(3)

Excludes the impact of Kingswood Center which was foreclosed on in June 2024.

The Company is providing a projection of anticipated net income solely to satisfy the disclosure requirements of the Securities and Exchange Commission ("SEC"). The Company's projections are based on management’s current beliefs and assumptions about the Company's business, and the industry and the markets in which it operates; there are known and unknown risks and uncertainties associated with these projections. There can be no assurance that our actual results will not differ from the guidance set forth above. The Company assumes no obligation to update publicly any forward-looking statements, including its 2024 earnings guidance, whether as a result of new information, future events or otherwise. Please refer to the “Forward-Looking Statements” disclosures on page 8 of this document and “Risk Factors” disclosed in the Company's annual and quarterly reports filed with the SEC for more information.

Non-GAAP Financial Measures

The Company uses certain non-GAAP performance measures, in addition to the primary GAAP presentations, as we believe these measures improve the understanding of the Company's operational results. We continually evaluate the usefulness, relevance, limitations, and calculation of our reported non-GAAP performance measures to determine how best to provide relevant information to the investing public, and thus such reported measures are subject to change. The Company's non-GAAP performance measures have limitations as they do not include all items of income and expense that affect operations, and accordingly, should always be considered as supplemental financial results. Additionally, the Company's computation of non-GAAP metrics may not be comparable to similarly titled non-GAAP metrics reported by other real estate investment trusts ("REITs") or real estate companies that define these metrics differently and, as a result, it is important to understand the manner in which the Company defines and calculates each of its non-GAAP metrics. The following non-GAAP measures are commonly used by the Company and investing public to understand and evaluate our operating results and performance:

• FFO: The Company believes FFO is a useful, supplemental measure of its operating performance that is a recognized metric used extensively by the real estate industry and, in particular REITs. FFO, as defined by the National Association of Real Estate Investment Trusts ("Nareit") and the Company, is net income (computed in accordance with GAAP), excluding gains (or losses) from sales of depreciable real estate and land when connected to the main business of a REIT, impairments on depreciable real estate or land related to a REIT's main business, earnings from consolidated partially owned entities and rental property depreciation and amortization expense. The Company believes that financial analysts, investors and shareholders are better served by the presentation of comparable period operating results generated from FFO primarily because it excludes the assumption that the value of real estate assets diminishes predictably. FFO does not represent cash flows from operating activities in accordance with GAAP, should not be considered an alternative to net income as an indication of our performance, and is not indicative of cash flow as a measure of liquidity or our ability to make cash distributions.
• FFO as Adjusted: The Company provides disclosure of FFO as Adjusted because it believes it is a useful supplemental measure of its core operating performance that facilitates comparability of historical financial periods. FFO as Adjusted is calculated by making certain adjustments to FFO to account for items the Company does not believe are representative of ongoing core operating results, including non-comparable revenues and expenses. The Company's method of calculating FFO as Adjusted may be different from methods used by other REITs and, accordingly, may not be comparable to such other REITs.
• NOI: The Company uses NOI internally to make investment and capital allocation decisions and to compare the unlevered performance of our properties to our peers. The Company believes NOI is useful to investors as a performance measure because, when compared across periods, NOI reflects the impact on operations from trends in occupancy rates, rental rates, operating costs and acquisition and disposition activity on an unleveraged basis, providing perspective not immediately apparent from net income. The Company calculates NOI using net income as defined by GAAP reflecting only those income and expense items that are incurred at the property level, adjusted for non-cash rental income and expense, impairments on depreciable real estate or land, and income or expenses that we do not believe are representative of ongoing operating results, if any. In addition, the Company uses NOI margin, calculated as NOI divided by total property revenue, which the Company believes is useful to investors for similar reasons.
• Same-property NOI: The Company provides disclosure of NOI on a same-property basis, which includes the results of properties that were owned and operated for the entirety of the reporting periods being compared, which total 66 properties for the three and six months ended June 30, 2024 and 2023. Information provided on a same-property basis excludes properties under development, redevelopment or that involve anchor repositioning where a substantial portion of the gross leasable area ("GLA") is taken out of service and also excludes properties acquired, sold, or that are in the foreclosure process during the periods being compared. As such, same-property NOI assists in eliminating disparities in net income due to the development, redevelopment, acquisition, disposition, or foreclosure of properties during the periods presented, and thus provides a more consistent performance measure for the comparison of the operating performance of the Company's properties. While there is judgment surrounding changes in designations, a property is removed from the same-property pool when it is designated as a redevelopment property because it is undergoing significant renovation or retenanting pursuant to a formal plan that is expected to have a significant impact on its operating income. A development or redevelopment property is moved back to the same-property pool once a substantial portion of the NOI growth expected from the development or redevelopment is reflected in both the current and comparable prior year period, generally one year after at least 80% of the expected NOI from the project is realized on a cash basis. Acquisitions are moved into the same-property pool once we have owned the property for the entirety of the comparable periods and the property is not under significant development or redevelopment. The Company has also provided disclosure of NOI on a same-property basis adjusted to include redevelopment properties. Same-property NOI may include other adjustments as detailed in the Reconciliation of Net Income to NOI and same-property NOI included in the tables accompanying this press release. We also present this metric excluding the collection of amounts previously deemed uncollectible.
• EBITDAre and Adjusted EBITDAre: EBITDAre and Adjusted EBITDAre are supplemental, non-GAAP measures utilized by us in various financial ratios. The White Paper on EBITDAre, approved by Nareit's Board of Governors in September 2017, defines EBITDAre as net income (computed in accordance with GAAP), adjusted for interest expense, income tax (benefit) expense, depreciation and amortization, losses and gains on the disposition of depreciated property, impairment write-downs of depreciated property and investments in unconsolidated joint ventures, and adjustments to reflect the entity's share of EBITDAre of unconsolidated joint ventures. EBITDAre and Adjusted EBITDAre are presented to assist investors in the evaluation of REITs, as a measure of the Company's operational performance as they exclude various items that do not relate to or are not indicative of our operating performance and because they approximate key performance measures in our debt covenants. Accordingly, the Company believes that the use of EBITDAre and Adjusted EBITDAre, as opposed to income before income taxes, in various ratios provides meaningful performance measures related to the Company's ability to meet various coverage tests for the stated periods. Adjusted EBITDAre may include other adjustments not indicative of operating results as detailed in the Reconciliation of Net Income to EBITDAre and Adjusted EBITDAre included in the tables accompanying this press release. The Company also presents the ratio of net debt (net of cash) to annualized Adjusted EBITDAre as of June 30, 2024, and net debt (net of cash) to total market capitalization, which it believes is useful to investors as a supplemental measure in evaluating the Company's balance sheet leverage. The presentation of EBITDAre and Adjusted EBITDAre is consistent with EBITDA and Adjusted EBITDA as presented in prior periods.

The Company believes net income is the most directly comparable GAAP financial measure to the non-GAAP performance measures outlined above. Reconciliations of these measures to net income have been provided in the tables accompanying this press release.

Operating Metrics

The Company presents certain operating metrics related to our properties, including occupancy, leasing activity and rental rates. Operating metrics are used by the Company and are useful to investors in facilitating an understanding of the operational performance for our properties.

Occupancy metrics represent the percentage of occupied gross leasable area based on executed leases (including properties in development and redevelopment) and include leases signed, but for which rent has not yet commenced. Same-property portfolio leased occupancy includes properties that have been owned and operated for the entirety of the reporting periods being compared, which total 66 properties for the three and six months ended June 30, 2024 and 2023. Occupancy metrics presented for the Company's same-property portfolio exclude properties under development, redevelopment or that involve anchor repositioning where a substantial portion of the gross leasable area is taken out of service and also excludes properties acquired within the past 12 months or properties sold, and properties that are in the foreclosure process during the periods being compared.

Executed new leases, renewals and exercised options are presented on a same-space basis. Same-space leases represent those leases signed on spaces for which there was a previous lease.

The Company occasionally provides disclosures by tenant categories which include anchors, shops and industrial/self-storage. Anchors and shops are further broken down by local, regional and national tenants. We define anchor tenants as those who have a leased area of >10,000 sf. Local tenants are defined as those with less than five locations. Regional tenants are those with five or more locations in a single region. National tenants are defined as those with five or more locations and operate in two or more regions.

ADDITIONAL INFORMATION

For a copy of the Company’s supplemental disclosure package, please access the "Investors" section of our website at www.uedge.com. Our website also includes other financial information, including our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and any amendments to those reports.

The Company uses, and intends to continue to use, the “Investors” page of its website, which can be found at www.uedge.com, as a means of disclosing material nonpublic information and of complying with its disclosure obligations under Regulation FD, including, without limitation, through the posting of investor presentations that may include material nonpublic information. Accordingly, investors should monitor the “Investors” page, in addition to following the Company's press releases, SEC filings, public conference calls, presentations and webcasts. The information contained on, or that may be accessed through, our website is not incorporated by reference into, and is not a part of, this document.

ABOUT URBAN EDGE

Urban Edge Properties is a NYSE listed real estate investment trust focused on owning, managing, acquiring, developing, and redeveloping retail real estate in urban communities, primarily in the Washington, D.C. to Boston corridor. Urban Edge owns 75 properties totaling 17.2 million square feet of gross leasable area.

FORWARD-LOOKING STATEMENTS

Certain statements contained herein constitute forward-looking statements as such term is defined in Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Forward-looking statements are not guarantees of future performance. They represent our intentions, plans, expectations and beliefs and are subject to numerous assumptions, risks and uncertainties. Our future results, financial condition, business and targeted occupancy may differ materially from those expressed in these forward-looking statements. You can identify many of these statements by words such as “approximates,” “believes,” “expects,” “anticipates,” “estimates,” “intends,” “plans,” “would,” “may” or other similar expressions in this Press Release. Many of the factors that will determine the outcome of forward-looking statements are beyond our ability to control or predict and include, among others: (i) macroeconomic conditions, including geopolitical conditions and instability, which may lead to rising inflation and disruption of, or lack of access to, the capital markets, as well as potential volatility in the Company’s share price; (ii) the economic, political and social impact of, and uncertainty relating to, epidemics and pandemics; (iii) the loss or bankruptcy of major tenants; (iv) the ability and willingness of the Company’s tenants to renew their leases with the Company upon expiration and the Company’s ability to re-lease its properties on the same or better terms, or at all, in the event of non-renewal or in the event the Company exercises its right to replace an existing tenant; (v) the impact of e-commerce on our tenants’ business; (vi) the Company’s success in implementing its business strategy and its ability to identify, underwrite, finance, consummate and integrate diversifying acquisitions and investments; (vii) changes in general economic conditions or economic conditions in the markets in which the Company competes, and their effect on the Company’s revenues, earnings and funding sources, and on those of its tenants; (viii) increases in the Company’s borrowing costs as a result of changes in interest rates, rising inflation, and other factors; (ix) the Company’s ability to pay down, refinance, hedge, restructure or extend its indebtedness as it becomes due and potential limitations on the Company’s ability to borrow funds under its existing credit facility as a result of covenants relating to the Company’s financial results; (x) potentially higher costs associated with the Company’s development, redevelopment and anchor repositioning projects, and the Company’s ability to lease the properties at projected rates; (xi) the Company’s liability for environmental matters; (xii) damage to the Company’s properties from catastrophic weather and other natural events, and the physical effects of climate change; (xiii) the Company’s ability and willingness to maintain its qualification as a REIT in light of economic, market, legal, tax and other considerations; (xiv) information technology security breaches; (xv) the loss of key executives; and (xvi) the accuracy of methodologies and estimates regarding our environmental, social and governance (“ESG”) metrics, goals and targets, tenant willingness and ability to collaborate towards reporting ESG metrics and meeting ESG goals and targets, and the impact of governmental regulation on our ESG efforts. For further discussion of factors that could materially affect the outcome of our forward-looking statements, see “Risk Factors” in Part I, Item 1A, of the Company's Annual Report on Form 10-K for the year ended December 31, 2023.

We claim the protection of the safe harbor for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995 for any forward-looking statements included in this Press Release. You are cautioned not to place undue reliance on forward-looking statements, which speak only as of the date of this Press Release. All subsequent written and oral forward-looking statements attributable to us or any person acting on our behalf are expressly qualified in their entirety by the cautionary statements contained or referred to in this section. We do not undertake any obligation to release publicly any revisions to our forward-looking statements to reflect events or circumstances occurring after the date of this Press Release.

URBAN EDGE PROPERTIES

CONSOLIDATED BALANCE SHEETS

(In thousands, except share and per share amounts)

 

 

June 30,

 

December 31,

 

 

2024

 

 

 

2023

 

ASSETS

 

 

 

Real estate, at cost:

 

 

 

Land

$

666,774

 

 

$

635,905

 

Buildings and improvements

 

2,741,636

 

 

 

2,678,076

 

Construction in progress

 

232,690

 

 

 

262,275

 

Furniture, fixtures and equipment

 

10,446

 

 

 

9,923

 

Total

 

3,651,546

 

 

 

3,586,179

 

Accumulated depreciation and amortization

 

(864,210

)

 

 

(819,243

)

Real estate, net

 

2,787,336

 

 

 

2,766,936

 

Operating lease right-of-use assets

 

55,575

 

 

 

56,988

 

Cash and cash equivalents

 

78,615

 

 

 

101,123

 

Restricted cash

 

22,591

 

 

 

73,125

 

Tenant and other receivables

 

25,077

 

 

 

14,712

 

Receivable arising from the straight-lining of rents

 

60,159

 

 

 

60,775

 

Identified intangible assets, net of accumulated amortization of $58,266 and $51,399, respectively

 

114,526

 

 

 

113,897

 

Deferred leasing costs, net of accumulated amortization of $21,628 and $21,428, respectively

 

27,223

 

 

 

27,698

 

Prepaid expenses and other assets

 

64,594

 

 

 

64,555

 

Total assets

$

3,235,696

 

 

$

3,279,809

 

 

 

 

 

LIABILITIES AND EQUITY

 

 

 

Liabilities:

 

 

 

Mortgages payable, net

$

1,503,030

 

 

$

1,578,110

 

Unsecured credit facility

 

150,000

 

 

 

153,000

 

Operating lease liabilities

 

52,556

 

 

 

53,863

 

Accounts payable, accrued expenses and other liabilities

 

88,523

 

 

 

102,997

 

Identified intangible liabilities, net of accumulated amortization of $48,718 and $46,610, respectively

 

175,837

 

 

 

170,411

 

Total liabilities

 

1,969,946

 

 

 

2,058,381

 

Commitments and contingencies

 

 

 

Shareholders’ equity:

 

 

 

Common shares: $0.01 par value; 500,000,000 shares authorized and 120,444,011 and 117,652,656 shares issued and outstanding, respectively

 

1,203

 

 

 

1,175

 

Additional paid-in capital

 

1,052,199

 

 

 

1,011,942

 

Accumulated other comprehensive income

 

689

 

 

 

460

 

Accumulated earnings

 

130,033

 

 

 

137,113

 

Noncontrolling interests:

 

 

 

Operating partnership

 

66,092

 

 

 

55,355

 

Consolidated subsidiaries

 

15,534

 

 

 

15,383

 

Total equity

 

1,265,750

 

 

 

1,221,428

 

Total liabilities and equity

$

3,235,696

 

 

$

3,279,809

 

 

URBAN EDGE PROPERTIES

CONSOLIDATED STATEMENTS OF INCOME

(In thousands, except per share amounts)

 

 

Three Months Ended June 30,

 

Six Months Ended

June 30,

 

 

2024

 

 

 

2023

 

 

 

2024

 

 

 

2023

 

REVENUE

 

 

 

 

 

 

 

Rental revenue

$

106,358

 

 

$

98,773

 

 

$

215,905

 

 

$

198,127

 

Other income

 

188

 

 

 

292

 

 

 

267

 

 

 

379

 

Total revenue

 

106,546

 

 

 

99,065

 

 

 

216,172

 

 

 

198,506

 

EXPENSES

 

 

 

 

 

 

 

Depreciation and amortization

 

39,679

 

 

 

25,513

 

 

 

78,253

 

 

 

50,597

 

Real estate taxes

 

17,472

 

 

 

16,121

 

 

 

34,475

 

 

 

31,798

 

Property operating

 

18,260

 

 

 

15,708

 

 

 

38,766

 

 

 

33,134

 

General and administrative

 

9,368

 

 

 

9,907

 

 

 

18,414

 

 

 

18,965

 

Real estate impairment loss

 

—

 

 

 

—

 

 

 

—

 

 

 

34,055

 

Lease expense

 

3,115

 

 

 

3,156

 

 

 

6,243

 

 

 

6,311

 

Total expenses

 

87,894

 

 

 

70,405

 

 

 

176,151

 

 

 

174,860

 

Gain on sale of real estate

 

13,447

 

 

 

—

 

 

 

15,349

 

 

 

356

 

Interest income

 

661

 

 

 

564

 

 

 

1,349

 

 

 

1,075

 

Interest and debt expense

 

(21,896

)

 

 

(18,131

)

 

 

(42,473

)

 

 

(33,424

)

(Gain) loss on extinguishment of debt, net

 

21,699

 

 

 

(489

)

 

 

21,427

 

 

 

(489

)

Income (loss) before income taxes

 

32,563

 

 

 

10,604

 

 

 

35,673

 

 

 

(8,836

)

Income tax expense

 

(539

)

 

 

(41

)

 

 

(1,204

)

 

 

(747

)

Net income (loss)

 

32,024

 

 

 

10,563

 

 

 

34,469

 

 

 

(9,583

)

Less net (income) loss attributable to noncontrolling interests in:

 

 

 

 

 

 

 

Operating partnership

 

(1,739

)

 

 

(444

)

 

 

(1,857

)

 

 

344

 

Consolidated subsidiaries

 

474

 

 

 

143

 

 

 

750

 

 

 

383

 

Net income (loss) attributable to common shareholders

$

30,759

 

 

$

10,262

 

 

$

33,362

 

 

$

(8,856

)

 

 

 

 

 

 

 

 

Earnings (loss) per common share - Basic:

$

0.26

 

 

$

0.09

 

 

$

0.28

 

 

$

(0.08

)

Earnings (loss) per common share - Diluted:

$

0.26

 

 

$

0.09

 

 

$

0.28

 

 

$

(0.08

)

Weighted average shares outstanding - Basic

 

118,859

 

 

 

117,482

 

 

 

118,466

 

 

 

117,466

 

Weighted average shares outstanding - Diluted

 

118,971

 

 

 

117,578

 

 

 

118,575

 

 

 

117,466

 

Reconciliation of Net Income to FFO and FFO as Adjusted

The following table reflects the reconciliation of net income to FFO and FFO as Adjusted for the three and six months ended June 30, 2024 and 2023. Net income is considered the most directly comparable GAAP measure. Refer to "Non-GAAP Financial Measures" on page 5 for a description of FFO and FFO as Adjusted.

 

Three Months Ended June 30,

 

Six Months Ended June 30,

(in thousands, except per share amounts)

 

2024

 

 

 

2023

 

 

 

2024

 

 

 

2023

 

Net income (loss)

$

32,024

 

 

$

10,563

 

 

$

34,469

 

 

$

(9,583

)

Less net (income) loss attributable to noncontrolling interests in:

 

 

 

 

 

 

 

Consolidated subsidiaries

 

474

 

 

 

143

 

 

 

750

 

 

 

383

 

Operating partnership

 

(1,739

)

 

 

(444

)

 

 

(1,857

)

 

 

344

 

Net income (loss) attributable to common shareholders

 

30,759

 

 

 

10,262

 

 

 

33,362

 

 

 

(8,856

)

Adjustments:

 

 

 

 

 

 

 

Rental property depreciation and amortization

 

39,346

 

 

 

25,212

 

 

 

77,577

 

 

 

50,021

 

Limited partnership interests in operating partnership

 

1,739

 

 

 

444

 

 

 

1,857

 

 

 

(344

)

Gain on sale of real estate

 

(13,447

)

 

 

—

 

 

 

(15,349

)

 

 

(356

)

Real estate impairment loss(2)

 

—

 

 

 

—

 

 

 

—

 

 

 

34,055

 

FFO Applicable to diluted common shareholders

 

58,397

 

 

 

35,918

 

 

 

97,447

 

 

 

74,520

 

FFO per diluted common share(1)

 

0.47

 

 

 

0.29

 

 

 

0.79

 

 

 

0.61

 

Adjustments to FFO:

 

 

 

 

 

 

 

Impact of property in foreclosure(3)

 

1,455

 

 

 

773

 

 

 

2,276

 

 

 

773

 

Non-cash adjustments(4)

 

1,731

 

 

 

(208

)

 

 

2,307

 

 

 

(244

)

Transaction, severance and litigation expenses

 

272

 

 

 

992

 

 

 

381

 

 

 

1,399

 

(Gain) loss on extinguishment of debt, net(5)

 

(21,699

)

 

 

489

 

 

 

(21,427

)

 

 

489

 

Tenant bankruptcy settlement income

 

—

 

 

 

(100

)

 

 

(10

)

 

 

(100

)

Income tax refund related to prior periods

 

—

 

 

 

(684

)

 

 

—

 

 

 

(684

)

FFO as Adjusted applicable to diluted common shareholders

$

40,156

 

 

$

37,180

 

 

$

80,974

 

 

$

76,153

 

FFO as Adjusted per diluted common share(1)

$

0.32

 

 

$

0.30

 

 

$

0.66

 

 

$

0.62

 

 

 

 

 

 

 

 

 

Weighted Average diluted common shares(1)

 

123,885

 

 

 

122,656

 

 

 

123,218

 

 

 

122,552

(1) 

Weighted average diluted shares used to calculate FFO per share and FFO as Adjusted per share for the three and six months ended June 30, 2024 and 2023, respectively, are higher than the GAAP weighted average diluted shares as a result of the dilutive impact of LTIP and OP units which may be redeemed for our common shares.

(2)

During the six months ended June 30, 2023, the Company recognized an impairment charge reducing the carrying value of Kingswood Center, an office and retail property located in Brooklyn, NY.

(3)

In April 2023, the Company notified the lender of its mortgage secured by Kingswood Center that the cash flows generated by the property are insufficient to cover the debt service and that the Company is unwilling to fund future shortfalls. As such, the Company defaulted on the loan and adjusted for the default interest incurred for the second quarter of 2023. The Company determined it is appropriate to exclude the operating results of Kingswood Center from FFO as Adjusted as the property was in the foreclosure process. In June of 2024, the foreclosure process was completed and the lender took possession of the property.

(4)

Includes the acceleration and write-off of lease intangibles related to tenant terminations, bankruptcies, and write-offs and reinstatements of receivables arising from the straight-lining of rents for tenants moved to and from the cash basis of accounting.

(5)

The gain on extinguishment of debt for the three and six months ended June 30, 2024 relates to the mortgage debt forgiven in the foreclosure settlement of Kingswood Center.

Reconciliation of Net Income to NOI and Same-Property NOI

The following table reflects the reconciliation of net income to NOI, same-property NOI and same-property NOI including properties in redevelopment for the three and six months ended June 30, 2024 and 2023. Net income is considered the most directly comparable GAAP measure. Refer to "Non-GAAP Financial Measures" on page 5 for a description of NOI and same-property NOI.

 

Three Months Ended June 30,

 

Six Months Ended June 30,

(in thousands)

 

2024

 

 

 

2023

 

 

 

2024

 

 

 

2023

 

Net income (loss)

$

32,024

 

 

$

10,563

 

 

$

34,469

 

 

$

(9,583

)

Depreciation and amortization

 

39,679

 

 

 

25,513

 

 

 

78,253

 

 

 

50,597

 

Interest and debt expense

 

21,896

 

 

 

18,131

 

 

 

42,473

 

 

 

33,424

 

General and administrative expense

 

9,368

 

 

 

9,907

 

 

 

18,414

 

 

 

18,965

 

(Gain) loss on extinguishment of debt, net

 

(21,699

)

 

 

489

 

 

 

(21,427

)

 

 

489

 

Other expense

 

22

 

 

 

244

 

 

 

247

 

 

 

470

 

Income tax expense

 

539

 

 

 

41

 

 

 

1,204

 

 

 

747

 

Gain on sale of real estate

 

(13,447

)

 

 

—

 

 

 

(15,349

)

 

 

(356

)

Real estate impairment loss

 

—

 

 

 

—

 

 

 

—

 

 

 

34,055

 

Interest income

 

(661

)

 

 

(564

)

 

 

(1,349

)

 

 

(1,075

)

Non-cash revenue and expenses

 

(1,019

)

 

 

(2,787

)

 

 

(3,541

)

 

 

(5,050

)

NOI

 

66,702

 

 

 

61,537

 

 

 

133,394

 

 

 

122,683

 

Adjustments:

 

 

 

 

 

 

 

Sunrise Mall net operating loss

 

472

 

 

 

454

 

 

 

994

 

 

 

1,468

 

Non-same property NOI and other(1)

 

(12,817

)

 

 

(9,270

)

 

 

(25,312

)

 

 

(17,925

)

Tenant bankruptcy settlement income and lease termination income

 

—

 

 

 

(250

)

 

 

(47

)

 

 

(258

)

Same-property NOI

$

54,357

 

 

$

52,471

 

 

$

109,029

 

 

$

105,968

 

NOI related to properties being redeveloped

 

5,248

 

 

 

4,815

 

 

 

11,061

 

 

 

9,618

 

Same-property NOI including properties in redevelopment

$

59,605

 

 

$

57,286

 

 

$

120,090

 

 

$

115,586

(1)

Non-same property NOI includes NOI related to properties being redeveloped and properties acquired, disposed, or that are in the foreclosure process during the periods being compared.

Reconciliation of Net Income to EBITDAre and Adjusted EBITDAre

The following table reflects the reconciliation of net income to EBITDAre and Adjusted EBITDAre for the three and six months ended June 30, 2024 and 2023. Net income is considered the most directly comparable GAAP measure. Refer to "Non-GAAP Financial Measures" on page 5 for a description of EBITDAre and Adjusted EBITDAre.

 

Three Months Ended June 30,

 

Six Months Ended June 30,

(in thousands)

 

2024

 

 

 

2023

 

 

 

2024

 

 

 

2023

 

Net income (loss)

$

32,024

 

 

$

10,563

 

 

$

34,469

 

 

$

(9,583

)

Depreciation and amortization

 

39,679

 

 

 

25,513

 

 

 

78,253

 

 

 

50,597

 

Interest and debt expense

 

21,896

 

 

 

18,131

 

 

 

42,473

 

 

 

33,424

 

Income tax expense

 

539

 

 

 

41

 

 

 

1,204

 

 

 

747

 

Gain on sale of real estate

 

(13,447

)

 

 

—

 

 

 

(15,349

)

 

 

(356

)

Real estate impairment loss

 

—

 

 

 

—

 

 

 

—

 

 

 

34,055

 

EBITDAre

 

80,691

 

 

 

54,248

 

 

 

141,050

 

 

 

108,884

 

Adjustments for Adjusted EBITDAre:

 

 

 

 

 

 

 

Non-cash adjustments(1)

 

2,056

 

 

 

(208

)

 

 

2,754

 

 

 

(244

)

Transaction, severance and litigation expenses

 

272

 

 

 

992

 

 

 

381

 

 

 

1,399

 

Impact of property in foreclosure(2)

 

64

 

 

 

—

 

 

 

(561

)

 

 

—

 

(Gain) loss on extinguishment of debt, net

 

(21,699

)

 

 

489

 

 

 

(21,427

)

 

 

489

 

Tenant bankruptcy settlement income

 

—

 

 

 

(100

)

 

 

(10

)

 

 

(100

)

Adjusted EBITDAre

$

61,384

 

 

$

55,421

 

 

$

122,187

 

 

$

110,428

(1)

Includes the acceleration and write-off of lease intangibles related to tenant terminations, bankruptcies, and write-offs and reinstatements of receivables arising from the straight-lining of rents for tenants moved to and from the cash basis of accounting. The adjustment to EBITDAre in calculating Adjusted EBITDAre is inclusive of the portion attributable to the noncontrolling interest in Sunrise Mall.

(2)

Adjustment reflects the operating income for Kingswood Center for the three and six months ended June 30, 2024, excluding $1.4 million and $2.8 million of interest and debt expense, respectively, and $0.4 million and $0.8 million of depreciation and amortization expense, respectively, that is already adjusted for the purposes of calculating EBITDAre. See footnote 3 on page 11 for additional information.

 

View source version on businesswire.com: https://www.businesswire.com/news/home/20240731939775/en/

Mark Langer, EVP and Chief Financial Officer 212-956-2556