A $1.7 Billion Bet on Old Malls Is Pushing This Firm Past Rivals

In a retail landscape where many mall operators struggle to adapt, Urban Edge Properties (NYSE: UE) is betting big on the past to secure its future. The company’s $1.7 billion strategy—focusing on revitalizing aging malls and second-generation retail spaces—has positioned it as a leader in a sector rife with skeptics. Here’s how Urban Edge is turning outdated properties into gold mines.

The Strategy: Repurpose, Recycle, and Reimagine

Urban Edge’s playbook hinges on Class B malls, which represent 28% of U.S. malls but often languish with 9% lower foot traffic than pre-pandemic levels. These underperforming assets are prime targets for adaptive reuse, where the company transforms them into mixed-use hubs blending retail, residential, healthcare, and entertainment.

Take the Bergen Town Center East in Paramus, New Jersey: A former Sears anchor is now a $25 million sale under a Section 1031 tax-deferred exchange, with proceeds reinvested into projects like The Village at Waugh Chapel. Meanwhile, the Hawthorn Mall in Illinois is being redeveloped into a luxury residential-retail hybrid, a project aligned with Urban Edge’s $156.4 million of active redevelopment pipelines, targeting a 14% yield.

The Financial Edge: High Yields, Low Risk

Urban Edge’s strategy is paying off in cold, hard numbers. In Q1 2025, the company reported:
- 96.4% leased occupancy, near all-time highs, with shop spaces surging to 92.4% occupancy (up 400 basis points year-over-year).
- $25.1 million in future rent from leases not yet commenced, including commitments from Trader Joe’s, Sephora, and Sweetgreen.
- 3.8% same-property NOI growth, driven by redeveloped assets and aggressive leasing, with FFO guidance raised to $1.37–$1.42 per share for 2025.

The company’s $791 million in liquidity and 37% net debt-to-market-cap ratio further insulate it from market volatility. CEO Jeff Olson attributes this success to a focus on “high-yield projects in supply-constrained urban markets”, where rising construction costs (up 30% post-pandemic) deter new competition.

Why This Works: A Perfect Storm of Trends

Urban Edge’s success isn’t luck—it’s alignment with three unstoppable trends:
1. Mixed-Use Demand: Shoppers now prioritize malls as community hubs, not just retail centers. Urban Edge’s projects add residential, medical, and entertainment spaces, creating 24/7 vibrancy.
2. Tenant Shifts: Apparel’s decline (now below 50% of mall space) has made way for restaurants, fitness centers, and healthcare, all of which Urban Edge’s redevelopments emphasize.
3. Capital Recycling: Selling non-core assets (e.g., $66 million in dispositions planned for 2025) fuels reinvestment in high-yield projects, while tax-efficient exchanges minimize costs.

Risks and the Path Ahead

No strategy is risk-free. Urban Edge faces headwinds like rising labor/material costs and regulatory delays. Yet its focus on limited new supply (construction costs are too high for competitors) and prime locations (urban markets from D.C. to Boston) mitigates these risks.

The company’s $1.7 billion net debt—a nod to its scale—also allows it to acquire distressed assets others can’t. As CEO Olson noted, “In a world of scarce capital, we’re the ones with the balance sheet to act.”

Conclusion: A Model for Mall Survival

Urban Edge’s $1.7 billion bet isn’t just about old malls—it’s about redefining what malls can be. By targeting Class B properties, leveraging tax-deferred sales, and prioritizing mixed-use development, the company has turned a sector many write off into a growth engine.

With 34.3% average rent spreads on new leases and a redevelopment pipeline yielding 14%, Urban Edge isn’t just surviving—it’s thriving. As peers flounder, this firm’s focus on adaptive reuse, disciplined capital allocation, and high-demand tenant mixes makes it a blueprint for retail real estate in the 2020s.

For investors, Urban Edge’s 96.4% occupancy and 3.8% NOI growth speak to a strategy that’s both profitable and future-proof. In a mall world full of ghosts, Urban Edge is still very much alive—and leading the pack.