Urban Edge Properties' Q4 2024 Earnings Call: Contradictions in Bad Debt, Acquisitions, and Development Strategies
Earnings DecryptWednesday, Feb 12, 2025 6:19 pm ET
1min read
These are the key contradictions discussed in Urban Edge Properties' latest 2024Q4 earnings call, specifically including: Bad Debt Provisions and Acquisition Strategy, Disposal Spreads for Assets, Acquisition Strategy and Cap Rates, and Mixed-Use Development Strategies:
Financial Performance and Dividend Increase:
- Urban Edge Properties reported FFO as adjusted of $1.35 per share for full-year 2024, representing an 8% growth compared to the previous year.
- The company's dividend was increased by 12% to an annualized rate of $0.76 per share.
- This strong financial performance and dividend increase were driven by accretive capital recycling, record leasing volumes, and new rent commencements.
Leasing and Occupancy:
- The company executed a record 79 new leases totaling 485,000 square feet with a same-space cash rent spread of 26%.
- Same-property portfolio occupancy grew to 96.6%, with an anchor leased occupancy of 98% and small shop occupancy at 90.9%.
- Improved leasing performance was due to adding high-quality tenants and strategic capital recycling, leading to higher-quality shop tenants and improved occupancy.
Development and Redevelopment:
- Urban Edge completed $30 million of redevelopment projects with a targeted unlevered return of 16%, and ended the year with $163 million of anchor repositioning and redevelopment projects expected to generate a 15% unlevered return.
- The company's development team had a productive year, with projects generating strong returns due to strategic planning and execution.
Acquisitions and Dispositions:
- Urban Edge acquired over $550 million in assets at a 7% cap rate over the past 16 months, funding these acquisitions through $427 million of dispositions at a 5% cap rate.
- The company's acquisition strategy focuses on capital recycling to leverage competitive cap rates and enhance asset quality.
Bad Debt Provision and NOI Growth:
- Mark Langer noted that Urban Edge's 2025 guidance includes total credit losses of 75 to 100 basis points of gross rents, incorporating expected rent loss from bankrupt tenants.
- Same-property NOI growth is expected to be 7.4%, supported by rent commencements and capital recycling, despite anticipated tenant bankruptcies.
Financial Performance and Dividend Increase:
- Urban Edge Properties reported FFO as adjusted of $1.35 per share for full-year 2024, representing an 8% growth compared to the previous year.
- The company's dividend was increased by 12% to an annualized rate of $0.76 per share.
- This strong financial performance and dividend increase were driven by accretive capital recycling, record leasing volumes, and new rent commencements.
Leasing and Occupancy:
- The company executed a record 79 new leases totaling 485,000 square feet with a same-space cash rent spread of 26%.
- Same-property portfolio occupancy grew to 96.6%, with an anchor leased occupancy of 98% and small shop occupancy at 90.9%.
- Improved leasing performance was due to adding high-quality tenants and strategic capital recycling, leading to higher-quality shop tenants and improved occupancy.
Development and Redevelopment:
- Urban Edge completed $30 million of redevelopment projects with a targeted unlevered return of 16%, and ended the year with $163 million of anchor repositioning and redevelopment projects expected to generate a 15% unlevered return.
- The company's development team had a productive year, with projects generating strong returns due to strategic planning and execution.
Acquisitions and Dispositions:
- Urban Edge acquired over $550 million in assets at a 7% cap rate over the past 16 months, funding these acquisitions through $427 million of dispositions at a 5% cap rate.
- The company's acquisition strategy focuses on capital recycling to leverage competitive cap rates and enhance asset quality.
Bad Debt Provision and NOI Growth:
- Mark Langer noted that Urban Edge's 2025 guidance includes total credit losses of 75 to 100 basis points of gross rents, incorporating expected rent loss from bankrupt tenants.
- Same-property NOI growth is expected to be 7.4%, supported by rent commencements and capital recycling, despite anticipated tenant bankruptcies.
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