Business Context and Reporting Period
Urban Edge Properties (the "Company") and its operating partnership, Urban Edge Properties LP, filed a Form 8-K on April 7, 2017, reporting the entry into a Material Definitive Agreement. The filing details a proposed acquisition of seven retail assets totaling 1.5 million square feet of gross leasable area, primarily located in the New York City metropolitan area. The transaction is expected to close in the second quarter of 2017, subject to customary conditions.
Key Financial Metrics and Transaction Details
The total agreed contribution value for the acquisition is $325 million. The funding structure for the transaction is as follows:
- Operating Partnership Units: Approximately $127 million (valued at $27.02 per unit, representing approximately 4.7 million units).
- Non-Recourse Secured Debt: Approximately $117 million.
- Cash: Approximately $48 million.
- Assumed Debt: Approximately $33 million of existing debt.
The acquired portfolio has a weighted average occupancy rate of 83%. Key tenants include Burlington, Best Buy, DSW, PetSmart, Raymour & Flanigan, and Trader Joe's.
Acquired Property Portfolio
| Property | Location | GLA (SF) | Occupancy |
|---|---|---|---|
| Yonkers Gateway Center | Yonkers, NY | 436,770 | 88% |
| The Plaza at Woodbridge | Woodbridge, NJ | 413,013 | 81% |
| The Plaza at Cherry Hill | Cherry Hill, NJ | 412,969 | 74% |
| Manchester Plaza | Manchester, MO | 130,934 | 89% |
| Millburn Gateway Center | Millburn, NJ | 102,725 | 97% |
| 21 E Broad St/One Lincoln Plaza | Westfield, NJ | 21,908 | 100% |
| Total | - | 1,518,319 | 83% |
Material Changes and Agreements
This filing represents a material expansion of the Company's asset base. A Tax Protection Agreement will be entered into, requiring the Company and Operating Partnership to indemnify contributors for federal income taxes incurred due to the sale of contributed properties or failure to maintain specified nonrecourse debt levels for 15 years post-closing. Contributors have the option to elect up to an additional $20 million in operating partnership units in lieu of cash prior to closing.
Guidance, Risks, and Unusual Items
The filing does not provide updated financial guidance or outlook beyond the transaction details. The transaction is contingent upon the satisfaction of customary closing conditions and is subject to extension rights. The operating partnership units issued are unregistered securities relying on Section 4(a)(2) of the Securities Act of 1933 and are redeemable for cash or common shares one year after issuance.
Investor Verification Checklist
- Verify the final closing date and confirmation that all customary conditions have been met.
- Confirm the final mix of cash versus equity consideration, noting the Contributors' right to elect up to $20 million in additional units.
- Review the specific terms of the $117 million non-recourse secured debt and the $33 million assumed debt.
- Assess the impact of the 15-year Tax Protection Agreement on future cash flows and liabilities.
- Monitor the occupancy rates and lease expirations of the acquired properties, particularly The Plaza at Cherry Hill (74% occupancy).