Urban Edge Properties — FY 2023 Form 10-K
Reporting period: Year ended December 31, 2023. This is an annual filing, not a standalone fourth-quarter report; the filing provides full-year comparisons with 2022. Urban Edge Properties is a REIT focused on retail real estate, primarily along the Washington, D.C.–Boston corridor. Its portfolio comprised 71 shopping centers, two outlet centers, two malls and one industrial property, totaling approximately 17.1 million square feet, with 91.0% consolidated occupancy.
Financial and operating performance
| Metric | FY 2023 | FY 2022 | Change |
|---|---|---|---|
| Total revenue | $416.9 million | $397.9 million | +$19.0 million; 4.8% |
| Net income | $259.9 million | $47.3 million | +$212.5 million |
| Net income attributable to common shareholders | $248.5 million | $46.2 million | +$202.3 million |
| Diluted earnings per share | $2.11 | $0.39 | +$1.72 |
| FFO attributable to diluted common shareholders | $184.4 million | $145.2 million | +$39.3 million; 27.0% |
| NOI | $250.1 million | $240.9 million | +$9.2 million; 3.8% |
| Same-property NOI | $208.0 million | $205.7 million | +$2.3 million; 1.1% |
| Cash from operating activities | $163.0 million | $139.6 million | +$23.4 million |
Revenue growth reflected acquisitions net of dispositions, higher other income—including a $10 million litigation settlement—and rent commencements and contractual increases. Rental revenue deemed uncollectible increased $3.2 million. Property operating expenses and general and administrative expenses declined, while depreciation, real estate taxes and interest expense increased. Same-property retail occupancy was 95.9%, versus 94.3% in 2022, excluding specified properties from the comparison.
Cash, debt and liquidity
- Cash and cash equivalents, including restricted cash, were $174.2 million at year-end, up from $128.8 million. Investing activities used $117.7 million; financing activities provided $0.2 million.
- Year-end debt comprised $1.59 billion of mortgage principal and $153 million drawn on the revolving credit facility. The $800 million revolver matures in February 2027, with two six-month extension options; $616.9 million remained available at year-end.
- Approximately 84% of outstanding debt was fixed-rate and 16% variable-rate. A 100-basis-point increase in rates was estimated to add approximately $2.3 million to annual interest expense on variable-rate debt, excluding the effect of the Woodbridge interest-rate cap.
- The company reported approximately $70.8 million of mortgage debt maturing within 12 months as of the filing date and was exploring refinancing or repayment. Separately, it repaid $75.7 million of variable-rate loans on January 2, 2024.
- The annual dividend was $0.64 per share, unchanged from 2022. The board retains discretion over future distributions.
Material changes and notable items
- Net income rose sharply, but the comparison is heavily affected by nonrecurring items: 2023 included a $217.7 million gain on real estate sales and a $41.1 million gain on debt extinguishment, partly offset by a $34.1 million property impairment and $17.8 million of income tax expense. The Shops at Caguas refinancing drove the debt gain and a significant portion of tax expense.
- Operating results included acquisition of Shoppers World and Gateway Center in greater Boston for approximately $312.2 million, and dispositions of two properties and a parcel for approximately $318 million. The company reported a $10 million litigation settlement receipt.
- Management reported record fourth-quarter lease signings. For the year, new same-space leases achieved average cash rent spreads of 24.2%; renewals and extensions achieved 8.4% cash rent spreads.
- The company completed 11 development, redevelopment and anchor repositioning projects totaling $58.6 million and activated 12 projects totaling $60.9 million. At year-end, 23 active projects had estimated total costs of $168.1 million, with $112.2 million remaining to fund.
- Kingswood Center was impaired by $34.1 million after major office tenants announced departures or terminated leases. Its mortgage was in default, transferred to special servicing, and in foreclosure proceedings at year-end; $2.4 million of default interest had been accrued.
- Bed Bath & Beyond’s bankruptcy led to rejection of leases generating $3.0 million of annual rent; a buybuy Baby lease generating $0.6 million was assumed by a new operator. Three Harmon Face Values leases were also rejected.
Outlook, risks and contingencies
Management’s 2024 priorities are to lease vacant space, collect rent from signed leases not yet commenced, pursue redevelopment and anchor repositioning, control expenses, maintain balance-sheet flexibility and recycle capital into target markets. The filing provides no numerical 2024 earnings or FFO guidance. Management states that operating cash flow, cash on hand, the revolver, refinancing potential and capital-market access are expected to fund operations and obligations, but this depends on market conditions and execution.
Key risks include tenant credit and lease renewals, inflation and construction costs, e-commerce, higher borrowing costs and refinancing risk, development execution, and economic concentration in the New York metropolitan area, which generated approximately 67% of annualized base rent. Puerto Rico properties contributed approximately 8% of 2023 NOI and face economic and natural-disaster risks. Environmental remediation accruals were $1.4 million at year-end; actual costs could exceed estimates. Management reported no material cyber breach during 2023. Deloitte issued unqualified opinions on the financial statements and internal controls.
Investor verification priorities
- Separate recurring operating performance from the real-estate sale gain, debt-extinguishment gain, impairment and litigation settlement; review FFO and same-property NOI reconciliations.
- Track Kingswood Center’s foreclosure outcome, property cash flows and any additional impairment or debt-related exposure.
- Confirm refinancing or repayment of the remaining near-term mortgage maturities and monitor revolver usage, borrowing costs and covenant headroom.
- Assess lease-up of vacant space and commencement of signed leases, upcoming expirations, tenant credit and realized rent spreads.
- Monitor funding, completion costs and achieved yields for redevelopment projects, as well as execution of planned asset sales and acquisitions.
- Evaluate the sustainability of the $0.64 annual dividend against operating cash flow, capital spending, debt service and REIT distribution requirements.