Urban Edge Properties(US:UE)2021-08-08 14:55Financial Data and Key Metrics Changes - The company reported FFO as adjusted of $0.28 per share, a 56% increase compared to the prior year [7] - Same property NOI, including redevelopment, grew by 24% compared to last year [7] - The collection rate improved to 97%, with new reserves for uncollectible amounts dropping to $3.1 million [33] Business Line Data and Key Metrics Changes - Same-property leased occupancy increased to 92%, a 90 basis point increase compared to Q1 2021 [8][20] - The leasing pipeline is the largest ever, with over one million square feet of space under negotiation [8] - The company has visibility to increase NOI by 13%, aiming to return to pre-COVID NOI levels by late 2022 [10] Market Data and Key Metrics Changes - The retail sector is experiencing strong demand, particularly from grocers, discounters, and quick-service restaurants [8][24] - The stock prices of the top 15 retailers have increased by 55% since the pre-COVID peak [9] - The company is seeing significant interest from traditional mall retailers seeking off-mall locations [26] Company Strategy and Development Direction - The company plans to increase grocery-anchored assets from 60% to 70% of asset value through ongoing redevelopments [11] - The strategy includes upgrading the merchandise mix and intensifying properties with non-retail users [15] - The company aims to diversify about 30% of its assets into industrial and residential over the next five years [100] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the retail sector, noting that COVID accelerated the decline of weaker retailers, creating opportunities for stronger concepts [23][69] - The company anticipates higher NOI growth from Puerto Rico assets over the next 18 to 24 months [46] - Management is bullish on retail, citing a reduced percentage of at-risk tenants compared to pre-COVID levels [69] Other Important Information - The company has approximately $1 billion of liquidity, including $400 million in cash and a $600 million undrawn line of credit [16] - The company issued its first ESG report, outlining efforts to reduce environmental impact and improve employee wellness [40][41] - New senior hires were made to strengthen the team, including executives with extensive experience in retail and development [17] Q&A Session Summary Question: Thoughts on industrial transaction and strategic acquisition - Management views the acquisition as a tax deferral and a strategic bolt-on to solidify their position as the largest owner of industrial properties in the market [45] Question: Broader thoughts on Puerto Rico assets and potential exit - Management is not gearing up for an exit and believes the assets are well-positioned for growth, with plans to fill vacancies [46] Question: Discussions with mall-based retailers for off-mall locations - There is significant interest from mall-based retailers seeking to lower operating costs and enhance their presence in open-air centers [49][52] Question: Update on targeted exposure to retail components and expected returns - Management aims to diversify 30% of assets into industrial and residential over five years, focusing on creating value through entitlements [100][101] Question: Update on disposition or acquisition plans - Management expects to sell about $50 million of non-core assets annually and is looking for value-add opportunities in the New York Metro area [102][104] Question: Impact of tenant fallout and small shop demand - The primary driver of tenant fallout was the bankruptcy of Century 21, but there is an uptick in small shop demand with over 170 active negotiations [112][119]