Urban Edge Properties — FY2022 Form 10-K
Business context and period. This combined annual report covers Urban Edge Properties (UE) and its operating partnership, Urban Edge Properties LP, for the year ended December 31, 2022. UE is a REIT focused on retail real estate, primarily in the Washington, D.C.–Boston corridor. At year-end, the portfolio included 69 shopping centers, five malls and two industrial parks, totaling approximately 17.2 million square feet; reported consolidated occupancy was 90.3%.
Key financial and operating metrics
| Metric | FY2022 | FY2021 |
|---|---|---|
| Total revenue | $397.9 million | $425.1 million |
| Net income | $47.3 million | $107.8 million |
| Diluted EPS | $0.39 | $0.88 |
| FFO attributable to diluted common shareholders | $145.2 million | $180.3 million |
| NOI | $240.9 million | $223.8 million |
| Same-property NOI | $210.1 million | $201.8 million |
| Net cash provided by operating activities | $139.6 million | $135.3 million |
Same-property NOI rose 4.1% year over year; including properties in redevelopment, it increased 2.9%. NOI, same-property NOI and FFO are non-GAAP measures and should not be treated as substitutes for GAAP earnings or operating cash flow. The filing does not provide a single consolidated operating-margin figure.
- Cash and liquidity: Cash and cash equivalents plus restricted cash were $128.8 million at year-end, down from $219.8 million. The $800 million revolving credit facility had no borrowings outstanding and matures February 9, 2027, with two six-month extension options.
- Debt: Mortgage debt was $1.699 billion gross ($1.692 billion net of issuance costs); approximately 91% was fixed-rate. Variable-rate debt was $159.2 million, with a 6.11% weighted-average rate. The filing identifies approximately $329 million of mortgage debt maturing within the next 12 months; the debt schedule lists $351.5 million of 2023 principal repayments. Management was exploring refinancing options. All debt covenants were met at year-end.
- Cash investment and distributions: Capital expenditures were $116.0 million, including $77.4 million for development and redevelopment. UE declared $0.64 per share in 2022, versus $0.60 in 2021.
- Portfolio leasing: Retail occupancy was 94.3%, excluding Sunrise Mall; industrial occupancy was 100%. The company signed a record 69 new leases. Same-space new leases had average rent spreads of 45.1% GAAP and 22.2% cash; renewals/extensions had spreads of 9.2% GAAP and 6.0% cash.
Material changes versus FY2021
- Revenue declined $27.1 million, primarily because 2021 included $45.9 million of accelerated amortization of below-market lease liabilities following lease terminations. This was partly offset by acquisitions, improved collections, lease commencements and rent increases.
- Net income fell $60.5 million and FFO declined $35.1 million. The comparison also reflects a $18.6 million property-sale gain in 2021 versus $0.4 million in 2022; the 2021 result included the unusual non-cash lease-accounting benefit.
- Operating cash flow increased $4.3 million. Investing cash outflow narrowed to $151.9 million from $311.2 million, mainly reflecting lower acquisition spending, while financing cash outflow rose to $78.8 million from $23.5 million.
- Property operating expenses increased $5.8 million and G&A rose $3.9 million; G&A included $2.5 million of executive transition costs, including accelerated equity-award amortization.
- The company acquired two assets for $37.6 million, completed ten projects totaling $105.2 million and activated 14 projects totaling $98.6 million. It expanded its revolver by $200 million to $800 million and extended its maturity.
Outlook, risks and unusual items
Management’s 2023 outlook is qualitative, not a quantified earnings or FFO forecast. Priorities include leasing vacant space, commencing signed leases, adding essential and healthcare tenants, pursuing redevelopment and anchor repositioning, maintaining balance-sheet flexibility and making selective acquisitions. At year-end, 25 active projects had estimated total costs of $216 million, with $159.7 million remaining to fund; management estimated an approximately 12% unleveraged yield. Costs, timing and leasing outcomes remain uncertain.
- Refinancing and interest-rate exposure: Near-term mortgage maturities, higher borrowing rates and the transition away from LIBOR may raise financing costs. Management estimated that a 100-basis-point rate increase would add about $1.6 million of annual interest expense on variable-rate debt, before considering hedges.
- Tenant and leasing risk: Leases representing approximately 28% of annualized base rent were scheduled to expire within three years. Party City filed for Chapter 11 in January 2023; three leases represented $1.1 million of annual rent, with one franchise lease unaffected. Bed Bath & Beyond and related store concepts represented seven leases and $4.6 million of annual rent; the filing said no material effects had yet occurred.
- Geographic and asset concentration: New York metropolitan properties generated approximately 73% of annualized base rent; the two Puerto Rico malls contributed approximately 7% of 2022 NOI and face economic and natural-disaster risks.
- Development, inflation and operations: Construction inflation, delays, tenant demand, e-commerce, tenant credit and reletting costs could affect project returns and cash flow. Retail physical vacancy was approximately 14.9% under the risk-factor disclosure, excluding signed-but-not-commenced leases.
- Other contingencies: Environmental remediation accruals were $1.6 million. The company reported litigation seeking insurance recovery for COVID-related losses; management did not expect ordinary-course legal matters to have a material adverse effect. No material impairment losses were recorded in 2022. Deloitte issued unqualified opinions on the financial statements and internal controls.
Important facts for investors to verify
- Refinancing plans, final terms and liquidity impact for the near-term mortgage maturities; reconcile the $329 million maturity disclosure with the $351.5 million 2023 principal schedule.
- Whether rent commencements, occupancy and collections support management’s leasing and redevelopment plans, including the projected yield on the $216 million project pipeline.
- Exposure to Party City and Bed Bath & Beyond-related tenants, lease expirations, and the status of any bankruptcy-related rejections or vacancies.
- How much the 2021 non-cash lease-accounting benefit and property-sale gain distort year-over-year comparisons; assess recurring results using reconciliations of GAAP earnings, NOI and FFO.
- Puerto Rico property performance, the Las Catalinas Mall loan’s terms and repayment options, and the remaining $8.0 million Montehiedra guarantee exposure.