Urban Edge Properties (UE) 2026 Q3 法說會逐字稿

Greetings, and welcome to the Urban Edge Properties Third Quarter 2026 Earnings Call.

At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation.

(Operator Instructions)

I will now turn the conference over to Areeba Ahmed, Investor Relations Associate.

Thank you, Areeba. You may begin.

Good morning, and welcome to Urban Edge Properties' third quarter 2026 earnings conference call.

Joining me today are Jeff Olson, Chairman and Chief Executive Officer; Jeff Mooallem, Chief Operating Officer; Mark Langer, Chief Financial Officer; Heather Ohlberg, General Counsel; Scott Auster, EVP and Head of Leasing; and Andrea Drazin, Chief Accounting Officer.

Please note today's discussion may contain forward-looking statements about the company's views of future events and financial performance, which are subject to numerous assumptions, risks, and uncertainties, and which the company does not undertake to update. Our actual results, financial condition, and business may differ.

Please refer to our filings with the SEC, which are also available on our website, for more information about the company.

In our discussion today, we will refer to certain non-GAAP financial measures. Reconciliations of these measures to GAAP results are available in our earnings release and supplemental disclosure package.

At this time, it is my pleasure to introduce our Chairman and Chief Executive Officer, Jeff Olson.

Thank you, Areeba, and good morning.

We delivered another strong quarter. FFO, as adjusted, was $0.38 per share, up 6% from last year's third quarter and 6% year-to-date. Same-property NOI, including redevelopment, grew 4.6% for the quarter and 3.6% year-to-date. We raised FFO, as adjusted, guidance by a penny per share at the midpoint to $1.52 to $1.54, which implies 7% growth over 2025.

We continue to improve the quality and long-term growth rates of the portfolio through capital recycling. In September, we sold Briarcliff Commons, a Kohl's-anchored center in Morris Plains, New Jersey, for $60.5 million. That sale moves Kohl's from our third-largest tenant by ABR to our seventh.

We structured it as an accretive reverse 1031 exchange paired with our acquisition of The Village at Bridgewater Commons.

Earlier this month, we closed on the $90.3 million acquisition of Regency Court in Boca Raton, marking our entry into Florida.

As we've stated in the past, moving south is a natural extension of our footprint. Several of us on the leadership team spent years owning, living in, and operating shopping centers in South Florida, so we know these communities well. We expect to keep growing in this market, mostly through selling some of our more stabilized, high-credit-power centers in New Jersey.

Regency Court is a 140,000-square-foot center anchored by Publix and Walgreens in an irreplaceable, highly affluent trade area. Average household income is $194,000 within three miles and more than $280,000 within one mile. The center sits at the entrance to Woodfield Country Club, surrounded by other high-end club communities, and there is no other grocery-anchored center within two miles. It draws 3.3 million visitors a year, with traffic still increasing.

We underwrote this acquisition on growth embedded in the rent roll, not on the going-in yield, which was approximately 4%. Both anchors pay a fraction of market rent, and both leases expire, including all options, in six years. Beyond the anchors, we see opportunities to add value through upgrading the tenant mix, improving access and parking, and potentially adding GLA. We expect to earn an 8% to 9% unlevered IRR.

With Regency Court, the Shops at West Falls Church in Virginia, and the Village at Bridgewater Commons in New Jersey, we've acquired $185 million of high-quality centers this year, further diversifying our geographic footprint and increasing our long-term growth rate.

We are encouraged by the strength and depth of the leasing environment. Nationally, retail vacancy is 4.3%, near record lows.

We're seeing big-box tenants competing for well-located space, and scarcity is pushing rents higher. Our same-space new lease cash spreads are 28% year-to-date, and our signed-but-not-open pipeline is $21 million, representing 7% of annualized net operating income, one of the largest pipelines in the sector.

We're very well positioned for continued steady growth.

With that, I'll turn it over to our Chief Operating Officer, Jeff Mooallem.

Thank you, Jeff.

In the third quarter, we signed 37 leases totaling 463,000 square feet. That included 26 renewals totaling 406,000 square feet at a 12% spread and 11 new leases totaling 58,000 square feet at a 27% same-space spread.

The new leases were with a good mix of retailers new to our portfolio, as well as names we've worked with before. Examples include Veterinary Emergency Group, Foot Locker, First Watch, McDonald's, H1y Grow, and Seven Brew Coffee.

Same-property leased occupancy is now 96.6%, up 20 basis points from last quarter, and shop occupancy is 91.7%, unchanged.

With every new lease, we try to achieve three things: enhanced quality and credit, higher starting rent and increases, and a lower level of landlord investment.

In that regard, the fourth quarter is shaping up to be one of our best. We are in active negotiations with over 30 tenants, a mix of both anchor and shop leases, with a noticeable uptick in quality over the leases we were negotiating just a couple of years ago.

Replacing outdated or lower-credit concepts with stronger operators will keep adding value to these centers for years.

Rent spreads are stronger too. With about two months left in the year, we are targeting rent spreads around 50% for the fourth quarter and over 30% for the year.

Thank you, Jeff.

In the third quarter, we signed 37 leases totaling 463,000 square feet. That included 26 renewals totaling 406,000 square feet at a 12% spread and 11 new leases totaling 58,000 square feet at a 27% same-space spread.

The new leases were with a good mix of retailers new to our portfolio, as well as names we've worked with before. Examples include Veterinary Emergency Group, Foot Locker, First Watch, McDonald's, H1y Grow, and Seven Brew Coffee.

Same-property leased occupancy is now 96.6%, up 20 basis points from last quarter, and shop occupancy is 91.7%, unchanged.

With every new lease, we try to achieve three things: enhanced quality and credit, higher starting rent and increases, and a lower level of landlord investment. In that regard, the fourth quarter is shaping up to be one of our best. We are in active negotiations with over 30 tenants, a mix of both anchor and shop leases, with a noticeable uptick in quality over the leases we were negotiating just a couple of years ago.

Replacing outdated or lower-credit concepts with stronger operators will keep adding value to these centers for years. Rent spreads are stronger too. With about two months left in the year, we are targeting rent spreads around 50% for the fourth quarter and over 30% for the year.

Notably, those spreads are coming as much from anchors as shops, as the scarcity of box space in our markets creates additional leverage in our favor. And finally, while we don't discuss it on these calls as much as we discuss rents, the reduction in leasing costs over the last few years is as impactful to our business as the increase in rents.

The average shop-deal leasing cost, defined as landlord work, tenant allowance, and commissions paid, has declined about 15% from 2024 compared to the first three quarters of 2026. For anchors, it is even more meaningful, with a little over a 30% decline in average leasing costs. Many of our anchor deals now are "as is," reducing both overall cost and time to rent commencement. Tenants who previously insisted on their exact construction specifications have had to adjust to a new reality.

Two projects stabilized in the third quarter at a total investment of $9 million and an average yield of 18%: Nordstrom Rack and Fidelity at Manalapan Commons, and a new Adidas store at Bergen Town Center. In both cases, we brought in better-quality tenants than what was previously there at solid returns.

Over the last 12 months, we've completed $40 million of these projects at a blended 23% yield, and this quarter we started another $7 million multi-tenant pad development at Ledgewood Commons for Veterinary Emergency Group and two additional tenants.

Our active redevelopment pipeline now stands at $152 million, with $57 million left to fund and an expected yield of about 12%. Most of that work is in assets we've owned for several years, but our three 2026 acquisitions will add to it, since each has some mix of vacancy, dated tenancy, and below-market leases that provide an opportunity to create even more value.

With that, I'll turn it over to our CFO, Mark Langer.

Thank you, Jeff, and good morning.

We delivered another strong quarter. FFO, as adjusted, was $0.38 per share, up 6% from the third quarter of last year, and same-property NOI, including redevelopment, grew 4.6%.

The growth came from higher rental revenue from rent commencements and contractual rent increases, along with the benefit of our earlier capital recycling. Results this quarter were slightly ahead of our expectations. NOI growth came in stronger because uncollectible revenue was better than budgeted at 45 basis points of gross rental income. That reflects the health of our tenant base. Our bankruptcy watch list is smaller than at this time in prior years, consistent with the broader market.

In October, we modified and extended our existing $70 million mortgage secured by the Outlets at Montehiedra, adding $17 million of additional proceeds through an interest-only B-note at a fixed rate of 6.95%, reflecting the growth in NOI and favorable outlook for the property. Given income taxes paid in Puerto Rico, the tax-effective interest rate of this B-note debt is 3.9%.

The modification extended the term on the entire mortgage to seven years, which now has a current weighted-average interest rate of 5.4%.

We ended the quarter with $75 million drawn on our credit facility. After the quarter, we drew another $63 million for Regency Court. With that activity included, our liquidity remains very strong at over $875 million. That consists of $86 million in cash, $138 million drawn on the credit facility, and nothing drawn on either our five-year or seven-year delayed-draw term loans.

Net debt to EBITDA was 5.7 times for the third quarter.

Looking ahead, we are raising our 2026 FFO, as adjusted, guidance by a penny per share at the midpoint. That implies fourth-quarter FFO of $0.39 per share and $1.53 for the full year. We have also raised our full-year same-property NOI growth guidance, including redevelopment, to a midpoint of 4.1%, up from 3.5%.

Our $21 million signed-but-not-open pipeline continues to give us good visibility into future growth. In the third quarter, $2.6 million of annualized gross rent commenced, and we expect another $700,000 to be recognized in the fourth quarter and almost $13 million to be recognized in 2027.

In closing, we are pleased with our third-quarter results, encouraged by the strength of our leasing pipeline, and excited about our progress on the capital-recycling front.

With that, I'll turn the call over to the operator for Q&A.

Thank you. We will now be conducting a question-and-answer session. (Operator Instructions)

Michael Goldsmith, UBS.

Good morning. Thanks for taking my question.

First, let's talk a little bit about Florida. It feels like the name of the game across REITs has been size and scale. You're entering a new market, and it sounds like you want to build additional scale there.

So, can you talk a little bit about what that process looks like and how quickly you can gain scale in that market?

Also, this was acquired at a pretty compressed initial yield. Could you also touch a little on whether you would continue to buy in that market, even if it is initially dilutive, as your capital recycle?

Good morning, Michael.

It's Jeff. I'll take part of it, and then I'll let Jeff Mooallem take part of it.

Regency Court was pretty darn special. I think it may be one of the best shopping centers in Florida that has traded in the last decade. Properties like this don't come to market very often.

It actually reminds me of when we bought Westlake Shopping Center in Daly City many years ago at Kimco, and also Aventura Square at Equity One, which is near Aventura Mall.

When I look at the common denominators behind those two assets and compare them to Regency Court, one is that the location is exceptional, beyond exceptional, in a severely supply-constrained market.

Number two is that these are older properties with anchor leases that run out of term, which is hard to find.

Three is that the land values are super high, so there will be opportunities to take that land value and monetize it at some point.

And four, which is an important one, is that all of these assets had been under the same ownership for decades and decades. So we think bringing a fresh perspective is going to be unique. In our experience, these types of assets are gifts that keep on giving, almost in perpetuity.

But Jeff, why don't I turn it over to you in terms of adding scale?

Ironically, I used to live in South Florida, Mark lived in South Florida, and Jeff lived in South Florida. So, this is a market that we know very well.

Yeah, hey, good morning, Michael.

I'd echo everything Jeff said about South Florida as a market and the unique qualities of Regency Court.

In terms of what the growth strategy would be, I think the most instructive thing is to look at what we've done in the New England and Boston market over the last five years. That was a market where we had barely any presence five years ago, and it now represents roughly 10% of our company, or roughly half a billion dollars of value.

That's a byproduct of being slow and steady, targeting the right kind of assets, being visible in the market, being present in the market, and buying selectively and strategically.

It's really hard to do that when you don't already have a foot in the door. Regency Court is a very special foot in the door. It's a foundational asset that we're excited to get to work on immediately, and it will open the door to other opportunities for us in South Florida.

Thanks for that.

And just as a follow-up, the same-store guidance moved higher, and it implies a material acceleration in the fourth quarter.

Mark, do you mind talking about the building blocks there? I think you mentioned the SNO pipeline and recognizing some revenue coming through. Maybe you can provide a little more detail on the building blocks behind that.

Hi, Michael.

The biggest building blocks are what you said. Really, it's the full stabilization of rents that commenced in Q3 that will roll over, as well as the incremental rents from the SNO pipeline in Q4 that I mentioned.

In addition, the fourth quarter is when we expect to receive our largest percentage rent and some ancillary income.

And then on the recovery side, it's hard to imagine, but a year ago we actually had $3.5 million of snow-removal expense. We were hit by some storms late in December last year. That could, of course, work to our benefit this year, as we are not modeling that same level of expense.

So there's also some benefit on the recovery side.

It's really a blend of all those factors, but the biggest driver is the new rents coming online.

Now we know why you like South Florida so much. Thanks so much.

I don't have $3.5 million of snow in South Florida, I can tell you that.

Ronald kamdem, Morgan Stanley.

Hey, great. Just staying with South Florida.

I guess it sounds like you envision this could be 10% of the company, if I'm understanding correctly, over time. Obviously, just more color around that.

Are you only buying? Would you consider developing in the market? Are there other markets being considered? Would you go beyond South Florida?

Just trying to get a sense of the scope of what checks the box and what we could see on the acquisition and potential capital deployment front.

I mean, we'd love to find more Regency Courts, candidly, but again, they don't come up very often.

I think we would extend to other portions of the state because we are very familiar with the state overall. However, it's going to be opportunistic, and it will really depend on the overall real estate opportunity.

Yeah, and Ron, I would add on the question of development.

I mean, our forte is not necessarily always ground-up development, but we are really good at repurposing older product. So, as South Florida ages as a community, as Tampa ages as a community, and as other markets like that age, there are lots and lots of shopping centers that will be in need of what we do.

It is a skill set that not a lot of people practice anymore because there hasn't been a whole lot of retail redevelopment over the last 15 years.

So, we are definitely hoping for more opportunities to undertake meaningful redevelopment as deals come forward.

Got it. That's helpful.

And then, maybe staying on the theme of same-store performance, but on expenses, just looking at the year-over-year growth, could you talk to that? Are they more elevated than they should be, or are they in line?

I'd just love to hear some comments on the expense line items this quarter and going forward.

Thanks.

Are you referring to the expense side of things, Ron?

Yes.

Okay. Yeah, I mean, when you look at the supplement, you may have noticed the decline in real estate taxes year over year. That's really just a reflection of the fact that, in this quarter, we had a few properties where we settled pending tax appeals, which required a true-up for the year-to-date number.

Because the recovery ratio for real estate taxes is so high, there was an offsetting impact on recovery revenue, so the net impact to NOI was negligible.

In terms of other expense categories, Ron, I think on a go-forward basis it's fair to assume that we've been renegotiating and looking hard at those expenses, but I think a 3% escalation in general for property OpEx is a reasonable assumption.

Great. That's perfect. Thank you so much.

Michael A. Griffin, Evercore ISI.

Great, thanks.

Not to belabor the point on Regency Court, but Jeff, I know you gave the going-in cap rate.

I'm curious if you can provide any commentary on what your expectations are for stabilized yields on that project and how quickly you can realize those below-market rents.

And then, given Walgreens' tenancy there, how do you underwrite a renewal versus a potential vacancy? Any thoughts on the tenancy at the center would be helpful.

I mean, I won't give specific numbers because it's a little bit speculative, but we know that those two leases expire in six years.

Rarely do anchor leases, by the way, go to full term, so our expectation is that there will probably be some type of deal between now and six years.

But you can sort of do the back-of-the-envelope math looking at our 8% to 9% unlevered expected yield, and that should give you enough guidance to incorporate into your model.

Great, that's super helpful.

And then, Jeff Mooallem, I appreciated your comments around more favorable capital costs and having greater leverage in a supply-constrained environment.

As you look out into the near and medium term, are capital costs as a percentage of NOI now in a different paradigm? Do you expect a more favorable environment going forward?

I'm just curious how we should think about this in relation to the ultimate opportunity set for growing internal cash flow, especially if you have lower capital outlays to get tenants into the properties.

Yeah, hey, good morning, Griff.

I do think we see it as a trend that shows no sign of abating and we are expecting it to continue. There's sort of two buckets of capital, right? There's the leasing costs and then there's the stuff that we have to do to maintain our shopping centers, whether that's renovation stuff the customer can see or deferred maintenance the customer can't see. And all those categories are going down. I talked about the leasing capital in my remarks and how we've just been able to negotiate better deals, more as-is deals.

A lot of it around sort of you have to take the HVAC we have or you got to put the demising wall up kind of conversations that our leasing team is doing a really good job of delivering lower capital deals. But even on the other side, in terms of what we spend on deferred maintenance and renovation, Mark has messaged consistently over the last few quarters that we spent a lot of money. I think we improved probably 70% of the portfolio or something like that over the last five to 10 years, and we don't expect that to be the run rate going forward. Looked at our 2027 budget numbers, it would bear that out. So no reason to believe that the trend of keeping capital lower on a go-forward basis will stop anytime soon.

Great. Thanks so much.

Floris Van Dijkum, Ladenburg Thalmann.

A couple of follow-ups on Regency Court. It seems to be the topic du jour.

What is the GAAP yield versus the cash yield? I presume the 4% is a cash cap rate.

Where are you marking it today, given the below-market leases, and what can you get away with?

Well, we haven't finalized the purchase price allocation fully, but I expect the GAAP yield to be in the 5s.

A couple of follow-ups on Regency Court. It seems to be the topic du jour.

Apparently, Publix was bidding on that property as well. Could you consider doing something where you sell the grocery box to Publix to lower your basis and increase the yield?

Or would you want to mark Publix's rent to market partly because of the upside potential? Or is that still an ongoing negotiation, potentially?

Ongoing, sort of its l depends on price as you would expect.

The second question I have is on Bruckner, because that's going to be a major part of your SNO pipeline, presumably.

How is that progressing? When is that going to be stabilized, and are there any other developments there? Are you seeing more momentum for that center?

Because I think that's going to be $15 million of NOI once it's stabilized, if I'm not mistaken.

Yeah, that's right, Lawrence. It's Jeff Mooallem. Good morning.

First of all, to take the stabilization question, you can see in our supplemental that we're targeting the four or five new tenants opening there, which are Chick-fil-A, Chipotle, BJ's, Ross, and DD's, all to open in the first half of 2027. Some are expected to open in Q1 and some in Q2.

Right now, we feel very good about those dates. We're hopeful that we'll beat them, on average, by 30 to 90 days, but we feel very good about where they stand for the first half of the year.

As far as more momentum goes, I need to get more space.

We're pretty much fully leased there. Scott and his team have done a very good job of increasing rents and improving tenancy. We just signed Foot Locker and tenants like that, but we really don't have a lot of vacancy at Bruckner Commons.

So, as space becomes available, these new tenants will only increase the level of demand.

Michael Gorman, U.S. Bancorp BTIG.

I was wondering if you could just talk about the three acquisitions done this year. They have a significantly higher shop component than the in-place portfolio, and I'm just curious, is that just a function of the deals that you're seeing in the marketplace right now?

Is this a specific strategy to increase the percentage of shop components in the portfolio?

Any color there would be helpful.

Look, I mean, what we're trying to do is, through capital recycling, sell more of our high-credit, sort of lower-growth properties that might generate, I don't know, 1% to 2% growth each year, that we can get pretty low cap rates for, and redeploy that into assets that are 2.5%, 3.5%, or 4.5% growth, and in Regency's case, much higher than that, actually.

So, it's less about format, and it's more about long-term NOI growth prospects over the next five to seven years.

Okay, great. That's helpful.

And then just maybe one quick one. Any updates that you can provide on the parcel sale at Sunrise? I think that's still pending.

Is that just going through normal channels, or is there anything we should keep an eye on there?

Yeah, good morning, Michael. It's Jeff.

We have a hearing in two weeks, which is a publicly noticed hearing to move forward with the site plan approval for the parcel sale there. We've been working diligently behind the scenes to get ready for that hearing.

Once that is completed and moves through the process, and with these things it's impossible to say whether it will take one hearing, two hearings, or three, we feel very confident that we're prepared and ready for it.

Once that goes through the process, we can start targeting things like closing timelines and planning out the rest of the project.

So, in terms of new developments, I would tell you that two weeks from now, I think tomorrow is when our hearing is, and that will be the next critical step in the process.

Great. And maybe just one last quick one.

Has the Publix at Regency Court been redeveloped or refreshed as a store at any point in recent years?

It has not.

(Operator Instructions)

Paulina Rojas Schmidt, Green Street.

Good morning.

Hi, Paulina.

I'm interested in the demographics of the acquisition.

How would you define your buy box in general?

Your recent acquisition in Florida has really outstanding demographics and, per your comments, also very high barriers to entry, which I imagine would be very hard to replicate.

So, should we assume you're targeting similar demographics going forward in this market, or are you open to something slightly different?

Look, I mean, we favor densely populated markets, first-ring suburbs, highly affluent areas where supply is severely constrained and where we can do something with a shopping center that makes it unique.

So, I would expect that we would continue to deploy capital in areas where those demographic trends are all aligned. I would not expect us to move away from that strategy. And remember, we named the company Urban Edge because we're on the edge of these urban markets in these first-ring suburbs.

We love infill locations, and the tenants are paying the rents required, in many cases, for us to invest significant amounts of capital into these properties and bring them up to current standards.

And Paulina, I would just add, in the case of Regency Court and Boca, like Jeff mentioned in his comments, that there's no other grocery-anchored center within two miles.

But if you looked at our competition map and zoomed out even further, the other shopping centers that are competitive are owned by names like Regency, Edens, and Simon, which has the mall. Most notably, Publix is a major owner of these kinds of properties.

So that does a couple of things.

Number one, it makes it very difficult to ever buy in these kinds of markets, which is why we wanted to pounce on this opportunity.

And number two, you're surrounded by owners who, like us, know how to push rents and don't give space away. That generally kind of lifts all boats.

So, Regency Court is a very unique property for that reason.

Thank you for the question, Paulina.

My second question is this:

The vast majority of your portfolio is in the D.C.-Boston corridor, but you own very few assets outside of that area, including two centers in Puerto Rico, and I think there is also one in St. Louis and a couple in California.

What are your updated thoughts on those assets?

Are they short-term or medium-term holds, or are they candidates for recycling as you build in your new regions?

I think those could likely be candidates for recycling, Paulina. It's all price-dependent, and we'll weigh that against other possible sale candidates that we have.

Again, referring to some of the very high-credit, lower-growth power centers that we have in New Jersey, which trade very well, we'll evaluate those alternatives against one another.

So, we'll weigh it all off.

Can we add one more question?

Of course.

So what about the topic of scale?

Do you need a certain level of scale in South Florida to be efficient, or can you operate there for a while with one, two, or three centers?

I think we can live for a while with one, two, or three centers.

I mean, don't forget, we have a lot of operating expertise in this market. I think between the three of us, Mark, Jeff, and I, we probably have over 20 years of living and working there.

So, we know a lot of the key players. We have a good management strategy for the asset, and while we may use a local broker to help us with some of the more local leasing, the national relationships that want to be in Boca Raton are the same national relationships that want to be in Bridgewater, New Jersey, and Framingham, Massachusetts.

So, we have lots of different ways that we can reach the right tenants and manage the property effectively.

Having said that, scale is always nice. If we could add two, three, or four more centers in the area and spread out our management a little bit, we certainly are going to try to do that.

Thank you.

We have reached the end of the question-and-answer session. I would like to turn the floor back over to Jeff Olson for closing comments.

Great.

Thank you for joining us. We appreciate your interest in UE, and we look forward to seeing you guys soon.

Thank you.

This concludes today's teleconference. You may disconnect your lines at this time.

Thank you for your participation.