Urban Edge Properties(UE) - 2025 Q4 - Earnings Call Transcript

Financial Data and Key Metrics Changes - The company generated FFO as adjusted of $1.43 per share for 2025, representing a 6% growth compared to 2024, driven by a 5% same-property NOI growth [4][17] - Same-property NOI, including redevelopment, increased by 2.9% for Q4 and 5% for the full year [17] - The balance sheet remains strong with total liquidity of $849 million and no amounts drawn on the line of credit [17][18] Business Line Data and Key Metrics Changes - The company executed 58 new leases at a record same-space cash rent spread of 32% and achieved record shop occupancy of 92.6% [4][9] - In 2025, the company commenced over $16 million of new annualized gross rent from openings of various retailers, with an additional $22 million expected from the remaining signed but not open pipeline [5][6] Market Data and Key Metrics Changes - Nationally, shopping center vacancy remains near historic lows, with supply constraints particularly pronounced in the Northeast, where new construction represents only 0.2% of total supply [10][11] - The company expects new lease spreads to remain above 20% in 2026 due to strong demand and limited availability of high-quality retail spaces [4][5] Company Strategy and Development Direction - The company aims for FFO as adjusted growth of at least 4.5% and same-property NOI growth above 3% in 2026, with a focus on redevelopment and anchor repositioning projects [7][19] - The growth outlook is supported by six anchor repositioning projects expected to contribute significantly to same-property NOI growth through 2027 [8] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the ability to negotiate better lease terms due to supply constraints and strong tenant demand [11] - The company anticipates that over 80% of same-property NOI growth through 2027 will come from executed leases and contractual rent increases [8] Other Important Information - The company completed 14 projects totaling $55 million in 2025, generating unlevered yields of 19% [6] - The board approved an 11% increase in the annualized dividend to $0.84 per share, reflecting a payout ratio of about 56% [21] Q&A Session Summary Question: Expectations for shop occupancy growth - Management expects shop occupancy to stabilize around 94%-96%, with opportunities to improve leasing on occupied spaces [24][26] Question: Insights on capital recycling and acquisition pipeline - The acquisition market is competitive, with cap rates continuing to decrease, but the company remains optimistic about capital recycling opportunities [27][28] Question: Same-property NOI growth path over the next couple of years - The deceleration in 2026 is attributed to tenant fallout and one-time benefits in 2025, while growth is expected to pick up in 2027 due to visibility from the signed but not open pipeline [33][35] Question: Impact of snow removal costs on guidance - Guidance for 2026 accounts for snow removal costs incurred in January, with appropriate provisions made [43][45] Question: Opportunities for accelerating redevelopment projects - The company is focused on both small-scale and larger redevelopment projects, with a strong emphasis on enhancing existing properties [46][48] Question: Strategies for optimizing rents at specific assets - Management highlighted the challenges at Gateway due to long-term leases but expressed optimism for future retenanting opportunities [64][66]