Urban Edge Properties ((UE)) has held its Q2 earnings call. Read on for the main highlights of the call.
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Urban Edge Properties’ recent earnings call painted a positive picture of the company’s financial health and strategic direction. The call highlighted strong financial performance, with notable increases in Funds from Operations (FFO) and Net Operating Income (NOI), record occupancy rates, and successful capital recycling efforts. Despite challenges such as tenant bankruptcies and reliance on nonrecurring billings, the overall sentiment was optimistic, driven by the company’s robust achievements.
Increase in FFO and NOI
Urban Edge Properties reported a significant increase in its financial metrics, with FFO as adjusted rising by 12% over the previous year and 8% year-to-date. Additionally, the same-property net operating income saw a 7.4% increase for the quarter and a 5.6% rise year-to-date, underscoring the company’s strong financial performance.
Strong Leasing and Occupancy Rates
The company achieved impressive leasing and occupancy rates, with same-property occupancy climbing to 96.7%, a 10 basis point increase from the prior quarter. The shop occupancy rate reached a record high of 92.5%, marking a 270 basis point improvement over the previous year, reflecting Urban Edge’s successful leasing strategies.
Capital Recycling and Asset Sales
Urban Edge has been actively engaged in capital recycling, selling $66 million worth of assets year-to-date at a blended cap rate of 4.9%. The company has strategically acquired $552 million in high-quality shopping centers at a 7.2% cap rate while selling $493 million in noncore assets at a 5.2% cap rate, optimizing its asset portfolio.
Strong Balance Sheet
The company’s balance sheet remains resilient, featuring $1.5 billion in nonrecourse mortgages and 42 unencumbered properties valued at nearly $2 billion. With only 9% of total debt maturing through 2026, Urban Edge is well-positioned to navigate future financial challenges.
Tenant Bankruptcies
Despite the positive financial performance, Urban Edge faces challenges with tenant bankruptcies, including Big Lots and Party City, with At-Home recently filing. The company anticipates regaining one At-Home location this year, showcasing its proactive management approach.
Nonrecurring Tenant Billings
The company’s same-property NOI growth included $1.2 million of nonrecurring tenant billings, highlighting a reliance on these nonrecurring revenues to support its financial performance.
Mortgage Loan Payoff
Urban Edge successfully paid off a $50 million mortgage loan with a 6.4% interest rate, opting to use a line of credit with a lower rate. While this move affected liquidity, it demonstrates the company’s strategic financial management.
Guidance Increase
Urban Edge Properties has raised its 2025 FFO as adjusted guidance by $0.02 per share, setting a new range of $1.40 to $1.44 per share, indicating a 5% growth over 2024 at the midpoint. The company also emphasized its strategic initiatives, including a $24 million signed but not open pipeline and a $142 million redevelopment pipeline expected to yield a 15% return.
In conclusion, Urban Edge Properties’ earnings call reflects a positive outlook, driven by strong financial performance, strategic asset management, and a resilient balance sheet. While challenges such as tenant bankruptcies and reliance on nonrecurring billings exist, the company’s proactive strategies and guidance increase indicate a promising future.