NEW YORK–(BUSINESS WIRE)–Urban Edge Properties (NYSE: UE) today announced its results for the quarter ended September 30, 2024 and updated its outlook for full-year 2024.
“Our third quarter results reflect continued momentum in executing our strategic plan,” said Jeff Olson, Chairman and CEO. “We are pleased to announce the $126 million acquisition of The Village at Waugh Chapel in Anne Arundel County, Maryland and the sale of a single-tenant Home Depot in Union, New Jersey for $71 million. Over the last year, we have acquired $552 million of high-quality retail assets in our core markets at a 7% capitalization rate and have sold over $425 million of non-core and single-tenant assets at a 5% capitalization rate. Based on our strong results to date coupled with our recent investment activity, we increased our 2024 FFO as Adjusted guidance by $0.03 per share at the midpoint, reflecting 7% growth for the year, and we continue to believe that we will reach the high end of our 2025 FFO target outlined at our April 2023 Investor Day.”
Financial Results(1)(2)
|
(in thousands, except per share amounts) |
|
3Q24 |
3Q23 |
|
YTD 2024 |
YTD 2023 |
||||||
|
Net income attributable to common shareholders |
|
$ |
9,080 |
$ |
36,118 |
|
$ |
42,442 |
$ |
27,262 |
||
|
Net income per diluted share |
|
|
0.07 |
|
0.31 |
|
|
0.35 |
|
0.23 |
||
|
Funds from Operations (“FFO”) |
|
|
43,935 |
|
64,242 |
|
|
141,382 |
|
138,762 |
||
|
FFO per diluted share |
|
|
0.34 |
|
0.53 |
|
|
1.13 |
|
1.13 |
||
|
FFO as Adjusted |
|
|
44,685 |
|
38,981 |
|
|
125,659 |
|
115,134 |
||
|
FFO as Adjusted per diluted share |
|
|
0.35 |
|
0.32 |
|
|
1.01 |
|
0.94 |
||
Net income and FFO for the three months ended September 30, 2024 decreased as compared to the prior year period driven by the $26.7 million, or $0.22 per diluted share, gain on extinguishment of debt, net of tax, recognized in August 2023 related to the Shops at Caguas financing. FFO as Adjusted for the three months ended September 30, 2024 increased by $0.03, or 9%, per diluted share 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)
|
|
|
3Q24 |
|
YTD 2024 |
||
|
Same-property Net Operating Income (“NOI”) growth |
|
4.8 |
% |
|
3.6 |
% |
|
Same-property NOI growth, including properties in redevelopment |
|
5.1 |
% |
|
4.4 |
% |
Increases in same-property NOI metrics for the three and nine months ended September 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 96.3%, an increase of 200 basis points compared to September 30, 2023, and a decrease of 10 basis points compared to June 30, 2024.
- Reported consolidated portfolio leased occupancy of 96.3%, an increase of 190 basis points compared to September 30, 2023, and a decrease of 10 basis points compared to June 30, 2024.
- Increased retail shop leased occupancy to 90.4%, up 500 basis points compared to September 30, 2023, and 60 basis points compared to June 30, 2024.
- Executed 45 new leases, renewals and options totaling 683,000 sf during the quarter. New leases totaled 126,000 sf, of which 117,000 sf was on a same-space basis and generated an average cash spread of 14.8%. New leases, renewals and options totaled 674,000 sf on a same-space basis and generated an average cash spread of 9.0%.
Acquisition and Disposition Activity
On October 29, 2024, the Company closed on the acquisition of The Village at Waugh Chapel for a gross purchase price of $126 million, representing a capitalization rate of 6.6%. The grocery-anchored center is located in Gambrills, MD, a highly educated and affluent trade area that sits within 20 miles of Washington, D.C., Baltimore and Annapolis. The shopping center aggregates 382,000 sf with national tenants including Safeway, Marshalls, HomeGoods, and T.J. Maxx, as well as several high-quality outparcels highlighted by Chick-fil-A, LA Fitness and Chipotle. Shop spaces account for approximately 150,000 sf of leasable area and offer strong growth opportunities through in-place contractual rent increases and the re-leasing of below-market spaces.
The acquisition was partially funded through the assumption of a $60 million interest-only mortgage with a below-market rate of 3.76% and a remaining term of approximately 7 years. The Company expects to earn a first-year levered return of approximately 9%. This transaction increases the Company’s presence in the Washington, D.C. to Boston corridor and is expected to provide immediate accretion to its portfolio.
On October 29, 2024, the Company sold a single-tenant, Home Depot anchored property located in Union, NJ for a price of $71 million, reflecting a 5.4% capitalization rate. The outstanding $44.6 million mortgage encumbering the property was assumed by the buyer at closing. This transaction was structured as part of a Section 1031 exchange with the acquisition of The Village at Waugh Chapel, allowing for the deferral of capital gains resulting from the sale.
Financing Activity
On August 29, 2024, the Company obtained a 5-year, $31 million mortgage loan secured by its property Greenbrook Commons, located in Watchung, NJ. The loan bears interest at a fixed rate of 6.03%.
On September 13, 2024, the Company obtained a 10-year, $30 million mortgage loan secured by its property Briarcliff Commons, located in Morris Plains, NJ. The loan bears interest at a fixed rate of 5.47%.
During the quarter ended September 30, 2024, the Company issued approximately 4.4 million common shares at a weighted average gross price of $19.24 per share under its at-the-market equity offering program (the “ATM Program”), generating net cash proceeds of $83.7 million used to fund acquisitions and reduce outstanding borrowings on its line of credit. The Company does not expect to issue additional equity unless significant future acquisition opportunities arise.
The Company paid off the $150 million outstanding balance on its line of credit during the quarter using proceeds generated from equity issuances under the ATM Program and proceeds received from the new mortgage loans discussed above. Subsequent to the quarter, the Company utilized its line of credit to partially finance the acquisition of The Village at Waugh Chapel, increasing the outstanding balance to $65 million.
As of September 30, 2024, the Company has limited debt maturities coming due through December 31, 2026 of $187 million in the aggregate, which represents approximately 12% of outstanding debt.
Leasing, Development and Redevelopment
The Company stabilized two redevelopment and anchor repositioning projects during the quarter with the rent commencements of Bingo Wholesale at Burnside Commons and Visiting Nurse Services at Kingswood Crossing. The two projects had estimated aggregate costs of $10.0 million.
The Company activated one project during the quarter with an estimated cost of $1.4 million and now has $159.2 million of active redevelopment projects underway, with estimated remaining costs to complete of $95.2 million. The active redevelopment projects are expected to generate an approximate 14% yield.
As of September 30, 2024, the Company had signed leases that have not yet rent commenced that are expected to generate an additional $23.8 million of future annual gross rent, representing approximately 9% of current annualized NOI.
Balance Sheet and Liquidity(1)(4)
Balance sheet highlights as of September 30, 2024 include:
- Total liquidity of approximately $860 million, consisting of $90 million of cash on hand and $770 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 4.7 years, all of which is fixed rate or hedged.
- No amounts 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 borrowed $65 million under its line of credit to partially finance the acquisition of The Village at Waugh Chapel.
- Total market capitalization of approximately $4.3 billion, comprised of 131.8 million fully-diluted common shares valued at $2.8 billion and $1.5 billion of debt.
- Net debt to total market capitalization of 33%.
2024 Outlook and 2025 Targets
The Company has updated its 2024 full-year guidance ranges for net income, FFO and FFO as Adjusted, estimating net income of $0.35 to $0.38 per diluted share, FFO of $1.44 to $1.47 per diluted share, and FFO as Adjusted of $1.32 to $1.35 per diluted share, up from its previous guidance ranges of 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.
The Company is also reiterating its expectation to achieve the high end of its 2025 FFO as Adjusted target outlined at its April 2023 Investor Day.
Earnings Conference Call Information
The Company will host an earnings conference call and audio webcast on October 30, 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 13748725. 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 October 30, 2024 at 11:30am ET through November 13, 2024 at 11:59pm ET by dialing 1-844-512-2921 (Toll Free) or 1-412-317-6671 (Toll/International) using conference ID 13748725.
|
(1) |
Refer to “Non-GAAP Financial Measures” and “Operating Metrics” for definitions and additional detail. Reported consolidated occupancy excludes the impact of Sunrise Mall. Including Sunrise Mall, consolidated portfolio leased occupancy is 91.2% at September 30, 2024. |
|
(2) |
Refer to page 11 for a reconciliation of net income to FFO and FFO as Adjusted for the quarter ended September 30, 2024. |
|
(3) |
Refer to page 12 for a reconciliation of net income to NOI and Same-Property NOI for the quarter ended September 30, 2024. |
|
(4) |
Net debt as of September 30, 2024 is calculated as total consolidated debt of $1.5 billion less total cash and cash equivalents, including restricted cash, of $90 million. |
2024 Earnings Guidance
The Company has updated its 2024 full-year guidance ranges for net income, FFO and FFO as Adjusted based on strong results year-to-date, estimating net income of $0.35 to $0.38 per diluted share, FFO of $1.44 to $1.47 per diluted share, and FFO as Adjusted of $1.32 to $1.35 per diluted share. Below is a summary of the Company’s 2024 outlook, assumptions used in its 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 |
|
$0.28 – $0.31 |
|
$0.35 – $0.38 |
|
Net income attributable to common shareholders per diluted share |
|
$0.27 – $0.30 |
|
$0.34 – $0.37 |
|
FFO per diluted share |
|
$1.42 – $1.45 |
|
$1.44 – $1.47 |
|
FFO as Adjusted per diluted share |
|
$1.29 – $1.32 |
|
$1.32 – $1.35 |
The Company’s 2024 full-year FFO outlook is based on the following assumptions:
- Same-property NOI growth, including properties in redevelopment, of 4.75% to 6.00%, reflecting an increase on the low end from our previous assumption of 4.50% to 6.00%.
- Acquisitions of $243 million and dispositions of $109 million, both reflecting activity completed year-to-date.
- Recurring G&A expenses ranging from $35.5 million to $36.5 million, a decrease on the high end from our previous assumption of $35.5 million to $37.0 million.
- Interest and debt expense ranging from $82.0 million to $84.0 million, a decrease from our previous assumption of $83.0 million to $86.0 million, reflecting updated financing transactions.
- 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 |
$ |
44,200 |
|
|
$ |
48,000 |
|
|
$ |
0.35 |
|
|
$ |
0.38 |
|
|
Less net (income) loss attributable to noncontrolling interests in: |
|
|
|
|
|
|
|
||||||||
|
Operating partnership |
|
(2,600 |
) |
|
|
(2,600 |
) |
|
|
(0.02 |
) |
|
|
(0.02 |
) |
|
Consolidated subsidiaries |
|
1,100 |
|
|
|
1,100 |
|
|
|
0.01 |
|
|
|
0.01 |
|
|
Net income attributable to common shareholders |
|
42,700 |
|
|
|
46,500 |
|
|
|
0.34 |
|
|
|
0.37 |
|
|
Adjustments: |
|
|
|
|
|
|
|
||||||||
|
Rental property depreciation and amortization |
|
151,500 |
|
|
|
151,500 |
|
|
|
1.20 |
|
|
|
1.20 |
|
|
Gain on sale of real estate |
|
(15,300 |
) |
|
|
(15,300 |
) |
|
|
(0.12 |
) |
|
|
(0.12 |
) |
|
Limited partnership interests in operating partnership |
|
2,600 |
|
|
|
2,600 |
|
|
|
0.02 |
|
|
|
0.02 |
|
|
FFO Applicable to diluted common shareholders |
|
181,500 |
|
|
|
185,300 |
|
|
|
1.44 |
|
|
|
1.47 |
|
|
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 |
|
1,300 |
|
|
|
1,300 |
|
|
|
0.01 |
|
|
|
0.01 |
|
|
Gain on extinguishment of debt, net |
|
(21,200 |
) |
|
|
(21,200 |
) |
|
|
(0.17 |
) |
|
|
(0.17 |
) |
|
FFO as Adjusted applicable to diluted common shareholders |
$ |
166,200 |
|
|
$ |
170,000 |
|
|
$ |
1.32 |
|
|
$ |
1.35 |
|
|
(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) |
|
0.14 |
|
|
|
0.14 |
|
|
2024 impact of property in foreclosure |
|
(0.02 |
) |
|
|
(0.02 |
) |
|
Same-property NOI growth, including redevelopment |
|
0.09 |
|
|
|
0.10 |
|
|
Acquisitions net of dispositions NOI growth |
|
0.07 |
|
|
|
0.07 |
|
|
Interest and debt expense(3) |
|
(0.08 |
) |
|
|
(0.08 |
) |
|
Recurring general and administrative |
|
(0.01 |
) |
|
|
(0.01 |
) |
|
Straight-line rent and non-cash items |
|
0.01 |
|
|
|
0.01 |
|
|
2024 FFO applicable to diluted common shareholders |
$ |
1.44 |
|
|
$ |
1.47 |
|
|
(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.
Operating Metrics
The Company presents certain operating metrics related to our properties, including occupancy, leasing activity and rental rates. Operating metrics used by the Company are useful to investors in facilitating an understanding of the operational performance for our properties.
Recovery ratios represent the percentage of operating expenses recuperated through tenant reimbursements. This metric is presented on a same-property and same-property including redevelopment basis and is calculated by dividing tenant expense reimbursements (adjusted to exclude any ancillary income) by the sum of real estate taxes and property operating expenses.
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 65 properties for the three and nine months ended September 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.
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.
