Urban Edge Properties [UE] Q4 2022 Earnings Conference Call February 14, 2023 8:30 AM ET

Company Participants

Jeff Olson - Chairman & CEO

Jeff Mooallem - COO

Mark Langer - CFO

Danielle De Vita - EVP, Development

Rob Milton - General Counsel

Scott Auster - SVP & Head of Leasing

Andrea Drazin - CAO

Etan Bluman - SVP, Finance & Investor Relations

Conference Call Participants

Floris Van Dijkum - Compass Point

Samir Khanal - Evercore ISI

Ronald Kamdem - Morgan Stanley

Paulina Rojas - Green Street

Operator

Greetings, and welcome to the Urban Edge Properties fourth quarter 2022 earnings conference call. [Operator Instructions] As a reminder, this conference is being recorded.

It is now my pleasure to introduce your host, Etan Bluman. Please go ahead, sir.

Etan Bluman

Good morning and welcome to Urban Edge Properties year-end earnings conference call. Joining me today are Jeff Olson, Chairman and Chief Executive Officer; Jeff Mooallem, Chief Operating Officer; Mark Langer, Chief Financial Officer; Danielle De Vita, Executive Vice President of Development; Rob Milton, General Counsel; Scott Auster, Senior Vice President and Head of Leasing; and Andrea Drazin, Chief Accounting Officer.

Please note today's discussion may contain forward-looking statements about the company's views of future events and financial performance, which are subject to numerous assumptions, risks and uncertainties, AND which the company does not undertake to update. Our actual future results, financial condition and business, may differ materially. Please refer to our filings with the SEC, which are also available on our website for more information about the company. In our discussion today, we will refer to certain non-GAAP financial measures. Reconciliations of these measures to GAAP results are available in our earnings release and supplemental disclosure package in the Investors section of our website.

At this time, it is my pleasure to introduce our Chairman and Chief Executive Officer, Jeff Olson.

Jeff Olson

Great. Thank you, Etan, and good morning, everyone. I am pleased to announce that we finished 2022 with another strong quarter. FFO as adjusted was $0.33 per share for the quarter and $1.21 for the year, a 22% increase over the fourth quarter of last year, and an 11% increase for the full year. This increase is primarily attributed to rent commencements from anchor repositioning projects completed during the year, including ShopRite at Huntington, Uncle Giuseppe's at Briarcliff Commons, Kohl's at Bergen Towne Center, and AAA Wholesale at Lodi. Our prior acquisitions of Woodmore Towne Center outside of Washington, D.C., and the shops at Riverwood in Boston, also contributed to this growth. Same-property NOI was up significantly at 6.2%, primarily due to new rent commencements, higher recoveries, and higher percentage in specialty rents. Our leasing momentum was robust during the fourth quarter, setting a company record of more than 1 million square feet of new leases for the year, including 575,000 square feet in the fourth quarter alone. Special thanks to Scott Auster and all members of our leasing, legal, and administrative teams, for generating these record results. The volume was outstanding, but it is equally noteworthy to highlight the quality of tenants being added to the portfolio. Our assets continue to attract best-in-class retailers that drive traffic to our centers and enhance the value of adjacent spaces. This quarter, we signed new leases with Target, T.J. Maxx, Golf Galaxy, Cava, Crumbl Cookies, and medical users, including Bond Vet and DaVita Dialysis. During the past year, we increased our consolidated occupancy from 92% to 95%, a notable growth rate following the pandemic. Most importantly, we have visibility to grow our net operating income by 18% or $44 million annually, two thirds of which is derived from executing Las Catalinas, Walgreens at Montehiedra, Total Wine at Cherry Hill, Nemours Children‘s Health At Broomall, and (Old Navy) at Bruckner. On a macro level, the shopping center industry has remained resilient in the face of economic uncertainty and higher inflation. Retailers have recognized the importance of brick and mortar stores, and the critical role the store plays in omnichannel fulfillment. This has led many retailers to expand their store count, driving US shopping center vacancy to its lowest level since 2007, according to Cushman & Wakefield, which bodes well for our ability to continue to increase occupancy and rents. Of course, tenant turnover is an expected part of our business. Notable at-risk tenants for us today include Bed, Bath & Beyond, Regal Cinema, and Party City. We are comfortable that we will generate strong backfill opportunities should any of them vacate as our properties are in many of the most densely populated, supply-constrained markets throughout the Northeast.