Urban Edge Properties ((UE)) has held its Q4 earnings call. Read on for the main highlights of the call.
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Urban Edge Properties Reports Strong Year Amidst Challenges
The recent earnings call of Urban Edge Properties reflects a positive sentiment overall, marked by a strong financial year with record leasing volumes, growth in Funds From Operations (FFO), and successful capital recycling strategies. However, the company is also navigating challenges such as tenant bankruptcies and a competitive acquisition market.
Record Leasing Volumes and Occupancy
Urban Edge achieved impressive leasing success, executing a record 79 new leases covering 485,000 square feet. The company reported a significant same-space cash rent spread of 26%, pushing shop occupancy to a new high of 91% and boosting same-property portfolio occupancy to 96.6%.
Growth in FFO and Dividend Increase
The company’s FFO as adjusted increased by 8% for the year, reaching $1.35 per share. Reflecting this growth and an increase in taxable income for 2025, Urban Edge announced a 12% increase in dividends, showcasing its commitment to returning value to shareholders.
Strong Redevelopment Returns
Urban Edge completed $30 million in redevelopment projects, yielding an impressive 16% unlevered return. The ongoing projects are expected to deliver a 15% unlevered return, underscoring the company’s effective redevelopment strategy.
Capital Recycling Success
The company successfully acquired $550 million in assets at a 7% cap rate, funded by $427 million from dispositions at a 5% cap rate over the past 16 months. This demonstrates Urban Edge’s ability to effectively recycle capital, enhancing its asset portfolio.
Tenant Bankruptcies Impacting Portfolio
The portfolio faced challenges from tenant bankruptcies, including Party City and Big Lots, which are expected to result in rent losses. However, Urban Edge is actively identifying replacement tenants to mitigate this impact.
Challenges in Acquisition Pipeline
The competitive market with cap rates below 6% presents challenges for Urban Edge’s acquisition pipeline, impacting the ease of executing capital recycling strategies. The company remains cautious in navigating these market conditions.
Forward-Looking Guidance
Looking ahead to 2025, Urban Edge projects a 4% or more growth in FFO as adjusted and aims for a same-property Net Operating Income (NOI) growth of at least 3.5%. The company expects its pipeline of signed but not open leases to contribute $8 million in gross rents. Urban Edge plans to increase leased occupancy to 97-98% and has announced a 12% dividend increase. With $800 million in total liquidity and plans for $75 million in capital spending, the company is optimistic about leveraging its strong balance sheet for future growth.
In summary, the earnings call of Urban Edge Properties highlighted a robust year with significant achievements in leasing, FFO growth, and capital recycling. While challenges such as tenant bankruptcies and competitive acquisition markets persist, the company remains focused on strategic growth and maintaining its financial health. Investors can look forward to continued strength in Urban Edge’s operations and financial performance.
