Urban Edge Properties (UE) Q2 2024 Earnings Call Transcript

In a recent earnings call, Urban Edge Properties showcased its continued success and strategic outlook for the future. The company reported a 7% earnings growth for the second quarter of 2024, raising its FFO as adjusted guidance for the year. This growth is underpinned by strong operating fundamentals and accretive acquisitions.

Operational Highlights

Urban Edge Properties' operational performance has been noteworthy, with occupancy increasing to 96.5% and net operating income expected to continue growing at higher than historical averages. The company executed 23 new leases, a record high for the company, and recorded a 520 basis point increase in shop occupancy, reflecting the success of its anchor repositioning efforts. This shop growth is a testament to the demand for high-quality retail space and the company's ability to meet this demand.

The company's acquisition strategy has been instrumental in driving growth. Urban Edge Properties has acquired $426 million of shopping centers since October 2023, primarily funded by asset sales at a 5.2% cap rate. The company is in late-stage negotiations to acquire several high-quality shopping centers in the D.C. to Boston corridor, which will further enhance its portfolio and strengthen its market position.

Financial Highlights

The company's financial health is robust, with a balance sheet that is in great shape and a clear focus on capital allocation. Urban Edge Properties has a strong track record of simplifying its portfolio and enhancing its earnings and cash flow growth. The company's recent acquisition of Ledgewood Commons, coupled with its redevelopment pipeline, is expected to yield a 15% return, underscoring its strategic approach to value creation.

The company's guidance for 2024 reflects a confident outlook, with an expected 5% growth in FFO as adjusted and a commitment to reach the high end of its 2025 FFO target of $1.31 to $1.39 per share. This growth trajectory is underpinned by a strong leasing pipeline, a focus on accretive acquisitions, and a disciplined approach to capital allocation.

Outlook and Investor Interest

The earnings call also shed light on the broader trends in the shopping center sector, with increasing interest from large institutions like Blackstone, reflecting the sector's attractive valuations and strong fundamentals. Urban Edge Properties' strategic focus on acquiring high-quality assets in its core markets, coupled with its strong execution capabilities, positions it well to capitalize on these trends and drive long-term growth.

Conclusion

Urban Edge Properties' strong performance in Q2 2024 underscores its strategic focus on operational excellence, accretive acquisitions, and disciplined capital allocation. The company's outlook for the future is positive, with a clear path to achieving its 2025 FFO target and continuing to enhance its portfolio's value. As the company navigates the evolving retail landscape, its ability to adapt and capitalize on growth opportunities will be key to its continued success.