UBRAN EDGE PROPERTIES 2026 Q3 Earnings Call

Good morning and welcome to Urban Edge Properties third quarter 2026 earnings conference call. Joining me today are Jeff Olson, Chairman and Chief Executive Officer, Jeff Mooallem, Chief Operating Officer, Mark Langer, Chief Financial Officer, Heather Ohlberg, General Counsel, Scott Auster, EVP 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 in which the company does not undertake to update. Our actual results, financial condition, and business may differ. 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 our supplemental disclosure package.

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

Thank you, Areeba, and good morning. We delivered another strong quarter. FFO, as adjusted, was $0.38 per share, up 6% from last year's third quarter and 6% year to date. Same property NOI, including redevelopment, grew 4.6% for the quarter and 3.6% year to date. We raised FFO as adjusted guidance by a penny per share at the midpoint to $1.52-$1.54, which implies 7% growth over 2025. We continue to improve the quality and long-term growth rates of the portfolio through capital recycling. In September, we sold Briarcliff Commons, a Kohl's-anchored center in Morris Plains, New Jersey, for $60.5 million. That sale moves Kohl's from our third-largest tenant by ABR to our seventh. We structured it as an accretive reverse 1031 exchange paired with our acquisition of the Village at Bridgewater Commons.

Earlier this month, we closed on the $90.3 million acquisition of Regency Court in Boca Raton, marking our entry into Florida. As we've stated in the past, moving south is a natural extension of our footprint. Several of us on the leadership team spent years owning, living in, and operating shopping centers in South Florida. We know these communities well. We expect to keep growing in this market, mostly through selling some of our more stabilized, high-credit power centers in New Jersey. Regency Court is a 140,000 square foot center anchored by Publix and Walgreens in an irreplaceable, highly affluent trade area. Average household income is $194,000 within 3 miles and more than $280,000 within 1 mile. The center sits at the entrance to Woodfield Country Club, surrounded by other high-end club communities, and there is no other grocery-anchored center within 2 miles.

It draws 3.3 million visitors a year, with traffic still increasing. We underwrote this acquisition on growth embedded in the rent roll, not on the going-in yield, which was approximately 4%. Both anchors pay a fraction of market, and both leases expire, including all options in 6 years. Beyond the anchors, we see opportunities to add value through upgrading the tenant mix, improving access and parking, and potentially adding GLA. We expect to earn an 8%-9% unlevered IRR. With Regency Court, The Shops at West Falls Church in Virginia, and The Village at Bridgewater Commons in New Jersey, we've acquired $185 million of high-quality centers this year, further diversifying our geographic footprint and increasing our long-term growth rate. We are encouraged by the strength and depth of the leasing environment. Nationally, retail vacancy is 4.3%, near record lows.

Big box tenants are competing for well-located space and scarcity is pushing rents higher. Our same space new lease cash spreads are 28% year to date, and our signed but not open pipeline is $21 million, representing 7% of annualized net operating income, one of the largest pipelines in the sector. We're very well positioned for continued steady growth. With that, I'll turn it over to our Chief Operating Officer, Jeff Mooallem.

Thank you, Jeff. In the third quarter, we signed 37 leases totaling 463,000 square feet. That included 26 renewals totaling 406,000 square feet at a 12% spread, and 11 new leases totaling 58,000 square feet at a 27% same-space spread. The new leases were with a good mix of retailers new to our portfolio, as well as names we've worked with before. Examples include Veterinary Emergency Group, Foot Locker, First Watch, McDonald's, Honeygrow, and 7 Brew Coffee. Same-property leased occupancy is now 96.6%, up 20 basis points from last quarter, and shop occupancy is 91.7%, unchanged. With every new lease, we try to achieve three things: enhanced quality and credit, higher starting rent and increases, and a lower level of landlord investment. In that regard, the fourth quarter is shaping up to be one of our best.

We are in active negotiations with over 30 tenants, a mix of both anchor and shop leases, with a noticeable uptick in quality over the leases we were negotiating just a couple of years ago. Replacing outdated or lower-credit concepts with stronger operators will keep adding value to these centers for years. Rent spreads are stronger, too. With about two months left in the year, we are targeting rent spreads around 50% for the fourth quarter and over 30% for the year. Notably, those spreads are coming as much from anchors as shops, as the scarcity of box space in our markets creates additional leverage in our favor. Finally, while we don't discuss it on these calls as much as we discuss rents, the reduction in leasing costs over the last few years is as impactful to our business as the increase in rents.

The average shop deal leasing cost, defined as landlord work, tenant allowance, and commissions paid, has declined about 15% from 2024 compared to the first three quarters of 2026. For anchors, it is even more meaningful, a little over a 30% decline in average leasing costs. Many of our anchor deals now are as-is, reducing both overall cost and time to rent commencement. Tenants who previously insisted on their exact construction specs have had to adjust to a new reality. Two projects stabilized in the third quarter at a total investment of $9 million and an average yield of 18%. Nordstrom Rack and Fidelity at Manalapan Commons and a new Adidas store at Bergen Town Center. In both cases, we brought in better quality tenants than what was previously there at solid returns. Over the last 12 months, we've completed $40 million of these projects at a blended 23% yield.

In this quarter, we started another, a $7 million multi-tenant pad development at Ledgewood Commons for Veterinary Emergency Group and two additional tenants. Our active redevelopment pipeline now stands at $152 million, with $57 million left to fund and an expected yield of about 12%. Most of that work is in assets we've owned for several years, but our three 2026 acquisitions will add to it, since each has some mix of vacancy, dated tenancy, and below-market leases that provide an opportunity to create even more value. With that, I'll turn it over to our CFO, Mark Langer.

Thank you, Jeff, and good morning. We delivered another strong quarter. FFO as adjusted was $0.38 per share, up 6% from the third quarter of last year, and same-property NOI, including redevelopment, grew 4.6%. The growth came from higher rental revenue from rent commencements and contractual rent increases, along with the benefit of our earlier capital recycling. Results this quarter were slightly ahead of our expectations. NOI growth came in stronger because uncollectible revenue was better than budgeted at 45 basis points of gross rental income. That reflects the health of our tenant base. Our bankruptcy watch list is smaller than at this time in prior years, consistent with the broader market.

In October, we modified and extended our existing $70 million mortgage secured by The Outlets at Montehiedra, adding $17 million of additional proceeds through an interest-only B note at a fixed rate of 6.95%, reflecting the growth in NOI and favorable outlook for the property. Given income taxes paid in Puerto Rico, the tax-effective interest rate of this B note debt is 3.9%. The modification extended the term on the entire mortgage to seven years, which now has a current weighted average interest rate of 5.4%. We ended the quarter with $75 million drawn on our credit facility. After the quarter, we drew another $63 million for Regency Court. With that activity included, our liquidity remains very strong at over $875 million. That consists of $86 million in cash, $138 million drawn on the credit facility, and nothing drawn on either our five-year or seven-year delayed draw term loans.

Net debt to EBITDA was 5.7 times for the third quarter. Looking ahead, we are raising our 2026 FFO as adjusted guidance by a penny per share at the midpoint.