Urban Edge Properties Q2 Earnings Call Highlights

Key Points

• Urban Edge raised its 2026 outlook, increasing adjusted FFO guidance to $1.50–$1.54 per share and lifting same-property NOI growth guidance to 3.25%–3.75%, supported by stronger leasing, percentage rents and recoveries.
• Leasing momentum remained strong, with new leases generating a 13% same-space cash spread and year-to-date spreads near 30%. Shop occupancy declined to 91.7%, but management sees an approximately 20% mark-to-market opportunity as it backfills space.
• The REIT is recycling capital into higher-growth assets, including a $50.5 million acquisition, while pursuing a $60.5 million property sale. Its $155 million redevelopment pipeline has an expected yield of about 12%, and liquidity stood at approximately $960 million.

Urban Edge Properties NYSE: UE reported second-quarter results that exceeded its internal expectations, driven by higher leasing spreads, same-property net operating income growth and contributions from redevelopment activity. The retail real estate investment trust raised its full-year funds from operations guidance while outlining continued capital recycling and leasing initiatives across its Northeast-focused portfolio.

Chairman and Chief Executive Officer Jeff Olson said the company generated record FFO as adjusted of $0.40 per share, up 10% from the second quarter of 2025 and 7% year to date. Same-property NOI, including redevelopment, rose 3.2% in the quarter and 3% through the first half.

Olson said traffic at the company’s centers increased 3% from a year earlier, with particularly noticeable gains at Bergen, Woodbridge, Hudson Mall and Totowa, where Urban Edge has upgraded its tenant mix. He attributed demand to limited availability of quality retail vacancies in its trade areas and the company’s value- and necessity-oriented merchandise mix.

Guidance Raised as NOI Growth Outpaces Expectations

Urban Edge raised its 2026 FFO as adjusted guidance by $0.02 per share at the midpoint to a range of $1.50 to $1.54 per share. The updated outlook implies 6% growth over 2025, according to Olson. The company also increased the low end of its same-property NOI growth outlook, including redevelopment, by 25 basis points to a range of 3.25% to 3.75%.

Chief Financial Officer Mark Langer said second-quarter NOI growth exceeded the company’s expectations, supported by higher percentage rents, greater net recovery revenue, collections on prior-period reserves and lower real estate taxes.

Results also included several items that Langer characterized as one-time benefits. Urban Edge received approximately $0.02 per share of lease termination income from Wren Kitchens, as well as about $0.01 per share from accelerated amortization of non-cash revenue and a multi-year real estate tax refund. Langer said some of the income had already been anticipated in the company’s full-year plan or reflected revenue that otherwise would have been recognized later in the year.

Bad debt was about 40 basis points of gross rents in the quarter, better than expected, aided by collections from accounts reserved in the first quarter. Langer said a multi-location franchise operator in Puerto Rico that had contributed to earlier uncollected rents paid all current second-quarter rent and was current on payment-plan obligations for past-due amounts. For the third and fourth quarters, the company expects credit losses of 60 to 75 basis points of gross rent.

Leasing Spreads and Occupancy

Chief Operating Officer Jeff Mooallem said Urban Edge executed 26 leases totaling 199,000 square feet during the quarter, evenly divided between 13 new leases and 13 renewals. New leases produced a same-space cash spread of 13%, while renewals and option exercises generated a 10% cash spread.

While the quarterly new-lease spread was lower than the first quarter, Mooallem said results can fluctuate because of the company’s size. Year-to-date new-lease spreads were nearly 30%, and the company expects new-lease cash spreads to exceed 20% for the full year, which would mark its fifth consecutive year at that level.

Same-property leased occupancy was 96.3% at quarter-end, down 10 basis points from the prior quarter and 40 basis points from the year-earlier period. The decline largely reflected the bankruptcy of Wren Kitchens, which occupied two company locations. Mooallem said Urban Edge collected a meaningful settlement related to those leases and expects the vacated space to support a stronger merchandising mix at rents above Wren’s previous rates.

Shop occupancy declined 70 basis points sequentially to 91.7%. About half of the decline resulted from deliberate recapture opportunities in which the company chose not to retain existing tenants, Mooallem said. Urban Edge expects to backfill shop space at average rents of about $45 per square foot, representing a mark-to-market opportunity of approximately 20%, and aims to restore shop occupancy above 93%.

During the question-and-answer session, Mooallem said replacement tenants under consideration include names such as CAVA, Starbucks, Mathnasium and Rally House. He also identified fitness, medical, veterinary, urgent-care and quick-service restaurant concepts as active sources of small-shop demand, while noting the company is monitoring restaurant concentration at individual properties.

Redevelopment Pipeline and Capital Recycling

Urban Edge’s signed-but-not-open pipeline represents $22 million of future annual gross rent, equal to about 7% of current NOI. Langer said the pipeline is expected to contribute $1.7 million of new rent during the remainder of 2026, primarily in the fourth quarter, and represents approximately $7.7 million of annualized rent.

At Bruckner Commons in the Bronx, BJ’s Wholesale Club, Ross, Chick-fil-A and Chipotle are under construction. Olson said rent commencements are expected to begin during 2027, with the projects collectively representing more than $8 million in annual rent.

The company stabilized a Hudson Mall redevelopment project with Burlington’s May opening in Jersey City, New Jersey. HomeGoods is under construction at the center and is expected to open later this year. Urban Edge also activated an anchor project at Ledgewood Commons and a multi-tenant outparcel at Woodmore Town Center.

Mooallem said completed projects over the past 12 months involved $33 million of investment and are generating an average yield of 25%. The active development pipeline totals $155 million, with about $67 million left to fund and an expected yield of approximately 12%.

On the acquisition front, Urban Edge bought Shops at West Falls Church, an 85,000-square-foot Safeway-anchored center in Falls Church, Virginia, for $40 million. It also acquired a ground-lease position at Shoppers World in Framingham, Massachusetts, for $10.5 million. Olson said the two purchases carried an average cap rate of 6% and are expected to generate a 9% unleveraged internal rate of return.

The company is under contract to sell Briarcliff Commons, a Kohl’s-anchored New Jersey center, for $60.5 million, with closing expected later in the month. Olson said Urban Edge seeks to sell lower-growth, high-credit assets and redeploy capital into higher-growth properties, generally targeting assets with 3% to 4% growth rather than 1% to 2% growth.

Management said acquisition competition has increased and compressed retail cap rates. Olson cited a general cap-rate range of 5% to 7%, while Mooallem said buyers have become more active across asset categories. The company remains focused primarily on its existing Washington, D.C.-to-Boston corridor, though Olson said the Southeast is the most natural potential geographic expansion.

Urban Edge ended the quarter with approximately $960 million of total liquidity, including $82 million of cash, $55 million drawn on its credit facility and no borrowings on its delayed-draw term loans. Net debt to adjusted EBITDA was 5.5 times, Langer said.

About Urban Edge Properties (NYSE:UE)

Urban Edge Properties is a publicly traded real estate investment trust (REIT) that specializes in owning, operating and developing grocery-anchored shopping centers. The company was formed in January 2017 as a spin-off from Regency Centers Corporation, establishing an independent platform focused on urban and densely populated markets. As a fully integrated REIT, Urban Edge oversees the acquisition, financing, leasing, redevelopment and management of its retail properties.

The company's portfolio comprises predominantly open-air shopping centers anchored by national and regional supermarket operators.

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