Urban Edge Properties(US:UE)2023-05-13 12:04Financial Data and Key Metrics Changes - FFO as adjusted was $0.32 per share for Q1 2023, up 13% compared to the previous year [4] - Same property NOI increased by 6.3% year-over-year, attributed to new rent commitments and lower operating expenses [4][20] - Total liquidity at the end of the quarter was approximately $911 million, including $800 million undrawn line of credit and $111 million in cash [21] Business Line Data and Key Metrics Changes - The signed but not open pipeline grew to $31 million, representing 13% of NOI, up from $29 million in Q4 2022 [6] - 42 leases were executed for a total of 430,000 square feet, with same space leases generating an average cash rent spread of 7.5% [12] - New leases included 14 new leases for 111,000 square feet with an average cash rent spread of 18% [13] Market Data and Key Metrics Changes - Same property lease occupancy increased by 240 basis points year-over-year, reaching 94.6% [13] - Total portfolio shop occupancy increased to 85%, up 50 basis points compared to Q4 2022 [13] Company Strategy and Development Direction - The company aims to grow NOI by more than 20% over the next three years, with 80% of this growth coming from signed but not open leases and contractual rent bumps [6][9] - A focus on redevelopment projects with $218 million in active projects expected to generate a 12% unleveraged return [7][9] - The company is evaluating options for a site plan approval for 456 multi-family units, considering both sale and joint venture opportunities [6][36] Management's Comments on Operating Environment and Future Outlook - The supply and demand balance in the retail industry is the best seen in the last 15 years, with strong demand from retailers despite economic uncertainties [11] - Management expressed confidence in the ability to backfill spaces vacated by Bed Bath & Beyond with new tenants at significantly higher rents [7][18] - The company anticipates reaching overall occupancy of 97% to 98% through its leasing pipeline [14] Other Important Information - A non-cash impairment charge of approximately $34 million was recognized for Kingswood Center, which is expected to impact future earnings positively [22][23] - The company has minimal debt maturities through 2025, with only 15% of debt maturing in that timeframe [8][21] Q&A Session Summary Question: What drives the low end of the same store guidance? - Management indicated that prior peer collections and at-risk tenants contribute to the low end of the range [26][27] Question: What is the NOI drag from Kingswood? - The projected NOI is $1.4 million, compared to $3.4 million in interest expense, resulting in a $2 million cash drag [28] Question: Will expense recovery ratios continue to improve? - Management expects recovery ratios to increase, potentially reaching the high 80s by 2024 and 2025 [29] Question: What is the status of the Kingswood impairment? - Management remains optimistic about negotiations with lenders regarding the Kingswood asset [30] Question: Are leasing costs lower due to supply and demand? - Management confirmed that they are seeing benefits in lower tenant improvement costs and higher fixed rent bumps due to favorable market conditions [31][32] Question: What are the plans for the approved apartment project? - The company is evaluating whether to sell or enter a joint venture based on pricing and terms from bidders [36]