Urban Edge Properties Q4 FY2025 earnings call

Key Points - 2025 was a strong year with FFO growth, new leasing records, and same property NOI growth. - Signed but not open pipeline was a key growth driver, with over $16 million of new annualized gross rent commenced in 2025 and remaining pipeline to generate $22 million more. - Development and construction teams completed 14 projects totaling $55 million with 19% unlevered yields and have $166 million of redevelopment projects underway with 14% unlevered return. - Over the past three years, FFO as adjusted grew at an average annual rate of 6%, exceeding the 2023 Investor Day target. - Fourth quarter leasing: signed 47 new leases totaling over 200,000 square feet, 14 new leases at 11% same space spread, 33 renewals at 17% spread. Year-end same property lease occupancy was 96.7%, anchor occupancy 97.5%, shop occupancy 92.6%. - Development in fourth quarter: stabilized three projects totaling $12 million, activated four new projects totaling $28 million. - Capital recycling: executed an agreement to acquire a property in New Jersey for approximately $54 million.

In 2025, Urban Edge Properties generated FFO as adjusted of $1.43 per share, representing 6% growth, driven by the continued execution on the signed but not open pipeline and 5% same property NOI growth. During the year, 58 new leases were executed at a record same space cash rent spread of 32% and achieved record shop occupancy of 92.6%. The remaining signed but not open pipeline is expected to generate an additional $22 million of annual gross rent, representing 8% of current NOI. For the fourth quarter, FFO as adjusted was $0.36 per share, and same property NOI, including redevelopment, increased 2.9% for the quarter and 5% for the full year.

2026 Goals - Expect FFO as adjusted growth of at least 4.5%, same property NOI growth above 3%, and returning leased occupancy toward historical high of ~98%. - Acquisition guidance: $54 million shopping center under contract. - 2026 FFO as adjusted per share guidance range: $1.47 to $1.52 per share, reflecting 4.5% growth at midpoint. - Same property NOI, including redevelopment growth, guidance: 2.75% to 3.75%. - Recurring G&A expected: $34.5 million to $36.5 million in 2026. - Capital spending: $70 million to $80 million in 2026 on redevelopment projects and $20 million in maintenance CapEx. - Dividend: Board approved an 11% increase to an annualized rate of $0.84 per share. - 2027 and beyond: expect to increase FFO by at least 4% annually, with significant growth from six anchor repositioning projects.

Risks - SACS OFF 5TH store closures: East Hanover location closed in January, Bergen Town Center store is one of few remaining. - Weather impacts: snow removal expenses had a 110 basis point negative impact on same property NOI growth in the quarter. - Acquisition market competition: finding properties at attractive valuations is hard, cap rates are competitive. - Tenant credit risk: bad debt guidance adjusted based on assessment of tenant environment.

Q: Just hoping you could give some comments on sort of what your expectations going forward in terms of how much more upside is there in shop occupancy?

A: Jeffrey Mooallem said they think they can get to a steady state somewhere in the 94% range, 93, 94 is probably a good safe bet for 2026.

Q: Maybe talk a little bit more about sort of the acquisition pipeline and some of the cap rates. And then on the disposition side, sort of what are you sort of willing to put on the table this year?

A: Jeffrey Olson said the acquisition market is competitive, cap rates are coming down, found a property in Bridgewater at over 7.5% cap rate, plans to use proceeds for 1031 exchange and reduce Kohl's exposure.

Q: Can you walk us through the same property NOI growth path over the next couple of years?

A: Mark Langer said deceleration in 2026 is due to tenant fallout and one-timers in 2025, reacceleration in 2027 is from signed but not open pipeline visibility.

Q: If I could just go back to the same store for a second, you mentioned the tenant fallout. You also mentioned snow removal costs in the fourth quarter, I'm just wondering what you might have baked into the 2026 guidance for the winter storms that have already gone through the Northeast that might be having an impact there?

A: Mark Langer said their guidance range this year accounts for estimate of what was incurred in January, and they feel appropriately provisioned for snow in guidance.

Q: My question to you is just on the leasing on the quarter for new lease spreads came in at about 11%. I know that these things can be choppy quarter over quarter, and it seems like you're projecting 20% new lease spreads for the year ahead. But I mean any kind of puts and takes or things just on the quarterly number that maybe it came in a little bit lighter? Can you give us some context around that?

A: Jeffrey Mooallem said it was just a low number overall, only on 37,000 square feet of space, and to look at it more on a four-quarter rolling basis.

Q: Getting maybe a little bit more into the capital recycling which you guys have done incredibly well over the last couple of years, mind you. But as cap rates have compressed in your core markets, maybe talk about the, you know, the cap rates added and, you know, the spread that you've historically achieved. How is that? It looks like it's shrinking if I look at what you did the assets you sold last year and the asset you bought in Massachusetts. There's a 50 basis point spread there. It's still positive. But you used to be able to get significantly higher spreads on your capital recycling. How do you see that transpiring going forward? Maybe if you can talk a little bit about that and what you think is happening to cap rates?

A: Jeffrey Olson said spreads have narrowed, but there may be a two to 300 basis point spread in growth on an annual basis when using capital recycling to accelerate internal growth.

Q: I'm definitely not a Michael G. So thanks, guys, for taking my question. So getting maybe a little bit more into the capital recycling which you guys have done incredibly well over the last couple of years, mind you. But as cap rates have compressed in your core markets, maybe talk about the, you know, the cap rates added and, you know, the spread that you've historically achieved. How is that? It looks like it's shrinking if I look at what you did the assets you sold last year and the asset you bought in Massachusetts. There's a 50 basis point spread there. It's still positive. But you used to be able to get significantly higher spreads on your capital recycling. How do you see that transpiring going forward? Maybe if you can talk a little bit about that and what you think is happening to cap rates?

A: Jeffrey Mooallem talked about Gateway and Bruckner projects, saying Gateway has long-term leases and needs to get space back to retenant, Bruckner is a successful redevelopment example with significant growth expected.