Urban Edge Properties — Q1 2024 Form 10-Q
Reporting period: Three months ended March 31, 2024; filing dated May 7, 2024. Urban Edge Properties is a retail-focused REIT operating primarily in the Washington, D.C.–Boston corridor. Its portfolio comprised 71 shopping centers, two outlet centers, two malls and one industrial building, totaling approximately 17.1 million square feet. The filing combines the REIT’s and its operating partnership’s reports.
Financial and operating performance
| Metric | Q1 2024 | Q1 2023 |
|---|---|---|
| Total revenue | $109.6 million | $99.4 million |
| Net income (loss) | $2.4 million | $(20.1) million |
| Net income (loss) attributable to common shareholders | $2.6 million; $0.02 per diluted share | $(19.1) million; $(0.16) per diluted share |
| Net cash from operating activities | $22.9 million | $29.4 million |
| Net cash used in investing activities | $(44.3) million | $(22.8) million |
| Net cash used in financing activities | $(57.8) million | $(24.2) million |
| Cash and restricted cash, quarter-end | $95.1 million | $111.2 million |
Management-reported non-GAAP measures: NOI was $66.7 million versus $61.1 million; same-property NOI was $54.7 million versus $53.5 million, up 2.2%. Same-property NOI including redevelopment properties rose 3.7% to $60.5 million. FFO applicable to diluted common shareholders was $39.1 million versus $38.6 million. These measures are not substitutes for GAAP net income or operating cash flow. The filing does not provide a conventional operating margin measure.
Rental revenue increased $10.2 million, primarily from acquisitions net of dispositions, rent commencements and contractual increases, and a recovery of amounts previously deemed uncollectible. Depreciation and amortization increased $13.5 million, including from acquired properties and redevelopment projects placed in service. Interest and debt expense rose $5.3 million to $20.6 million, reflecting new debt and refinancings and line-of-credit borrowing, partly offset by loan repayments. Q1 2023 included a $34.1 million impairment charge; Q1 2024 did not.
Debt, liquidity and capital allocation
At March 31, 2024, debt principal was approximately $1.69 billion: $1.486 billion fixed-rate debt and $205 million variable-rate debt. Approximately 88% of debt was fixed rate. The weighted-average rates disclosed were 4.95% on fixed-rate debt and 6.21% on variable-rate debt. The company had $153 million drawn on its $800 million revolving credit facility, with $616.9 million available, including the effect of undrawn letters of credit. Cash and restricted cash totaled $95.1 million. The filing states approximately $47 million of mortgage debt matures within the next 12 months; the debt maturity schedule separately lists $58.0 million for the remainder of 2024.
During the quarter, the company acquired Heritage Square in New Jersey for $33.8 million, funded with cash on hand, and sold a Hazlet, New Jersey property for $8.7 million, recognizing a $1.5 million gain. It repaid three variable-rate mortgages totaling $75.7 million and refinanced Yonkers Gateway Center with a five-year, $50 million loan at 6.30%. ATM share issuance generated $18.5 million of net cash proceeds; 1.08 million shares were issued at a weighted-average price of $17.31. The quarterly dividend was $0.17 per share/unit, or a stated annual rate of $0.68.
Outlook, risks and unusual items
- The filing gives no specific earnings, NOI or FFO guidance. Management says available cash, operating cash flow, the revolver, refinancing capacity and capital-market access are expected to fund short- and long-term needs.
- There were 22 active development, redevelopment or anchor-repositioning projects with estimated total costs of $166.4 million; $99.7 million remained to be funded at quarter-end. Timing and costs may be affected by economic conditions, tenants, vendors and supply chains.
- The Kingswood Center mortgage remained in default and foreclosure proceedings as of March 31, 2024. The property’s cash flows were insufficient to cover debt service, and $3.3 million of default interest had been accrued. The property had been impaired by $34.1 million in Q1 2023.
- Other disclosed exposures include tenant bankruptcies and lease rejections, higher insurance costs and potential uninsured losses, environmental remediation accruals of $1.4 million, interest-rate and refinancing risk, and possible tenant or redevelopment disruption. A $5.6 million limited guarantee remained on the Outlets at Montehiedra loan.
- After quarter-end, the company sold its Lodi property on April 26, 2024, as part of a Section 1031 exchange, and acquired Ledgewood Commons on April 5 for $83.2 million. On May 3 it obtained a five-year, $50 million mortgage on Ledgewood Commons at 6.03%.
- Management reported disclosure controls were effective and no material change in internal control over financial reporting. It reported no material change to the risk factors in its 2023 Form 10-K.
Important facts for investors to verify
- How the Kingswood Center foreclosure and default interest develop, and whether there are further effects on results or liquidity.
- The timing and funding plan for the $99.7 million of remaining project costs, alongside acquisitions and scheduled debt maturities.
- Reconciliation of the filing’s approximately $47 million next-12-month mortgage maturity statement with its $58.0 million remainder-of-2024 debt schedule.
- Whether same-property NOI growth and rental collections persist, given the quarter’s lower operating cash flow and the role of nonrecurring or portfolio changes in reported results.
- Future borrowing costs, refinancing terms, insurance availability and costs, and the company’s capacity to maintain distributions while funding investment needs.