Greetings, and welcome to the Urban Edge Properties First Quarter 2024 Earnings Call. It is now my pleasure to introduce your host, Areeba Ahmed, Investor Relations Associate. Thank you, Areeba. You may begin.

Good morning, and welcome to Urban Edge Properties First Quarter 2024 Earnings Conference Call. Joining me today are Jeff Olson, Chairman and Chief Executive Officer; Jeff Mooallem, Chief Operating Officer; Mark Langer, Chief Financial Officer; Rob Milton, 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, including reference to our 2025 FFO as adjusted target. Reconciliations of these measures to GAAP results are available in our earnings release, supplemental disclosure package, and our April 2023 investor presentation in the Investors section of our website. At this time, it is my pleasure to introduce our Chairman and Chief Executive Officer, Jeff Olson.

Thank you, Areeba, and good morning, everyone. We are off to a great start in 2024, and we are excited to build on our momentum, executing the growth strategy we outlined at our 2023 Investor Day. The first quarter FFO as adjusted was $0.33 per share, reflecting a 4.4% increase compared to the previous year. This growth was driven by higher NOI, which rose by 3.7% for our same-property pool. We acquired two shopping centers in our core New Jersey markets, Heritage Square and Ledgewood Commons, for $117 million at an approximate cap rate of 8%. We financed these acquisitions with about $77 million of fixed-rate mortgage debt at 6.1%, $38 million from asset sales at a 5% cap rate, and $18 million of equity issued under our ATM. These transactions demonstrate our continued momentum from the accretive deals we announced last year, including Shoppers World and Gateway Center in Boston, which Jeff will elaborate on shortly. Since October 2023, we have acquired four high-quality retail properties for $426 million at a weighted average cap rate of 7.2%, while disposing of non-core properties totaling $356 million at a weighted average cap rate of 5.2%. Due to our better-than-expected results, solid retail fundamentals, and our recent acquisitions and disposals, we have raised our 2024 FFO as adjusted guidance by $0.03 per share at the midpoint to $1.30 per share, indicating 4% growth for this year. We anticipate that 2025 FFO as adjusted will be at the high end of the $1.31 to $1.39 range, suggesting 5% to 6% earnings growth. Leasing activity remains robust, with same-property occupancy increasing by 140 basis points compared to last year, showcasing cash leasing spreads of 23% on new leases and overall leasing spreads of 10% when accounting for renewals and options. Our signed but not yet opened pipeline consists of $27 million or 10% of net operating income. Our redevelopment pipeline, totaling $166 million, is projected to generate a 15% return, with over 90% of the GLA in this investment already preleased. Our balance sheet is strong, and our interest expense has become more predictable following nearly $500 million of fixed-rate refinancings in the past year, leaving only 11% of our total debt maturing through 2026. Our unencumbered asset pool has grown by $400 million to $1.5 billion in the last year. Our secured debt strategy mitigates risk at the corporate level, and the debt is easily assumable. This is an opportune moment to invest in the shopping center sector, particularly Urban Edge. Given the leverage retail landlords have today, combined with our capacity for meaningful growth—illustrated by how even $117 million of acquisitions at an 8% cap rate makes a significant impact—our high-quality portfolio is positioned in the most densely populated, supply-constrained markets in the country. The caliber of our real estate, paired with the limited availability of new supply and strong demand, should provide a favorable backdrop moving forward. I will now turn it over to our Chief Operating Officer, Jeff Mooallem.

Thanks, Jeff, and good morning, everyone. 2024 has started in much the same way that 2023 finished with all 3 of our operating components, leasing, development, and investment activity, firing on all cylinders. Let's get into some of the details. First, on the acquisitions and dispositions front. Jeff highlighted the significant volumes we've closed since October 2023, with $426 million of purchases and $356 million of dispositions. With all of these transactions, we've acquired stronger assets for our business in markets we know well at yields that are 200 basis points higher than what we sold. But beyond the math and accretion of these deals, the assets we acquired this quarter, like the Boston assets we acquired last year, continue our theme, a simple business plan grounded in strong tenancy, first-ring locations, and large controllable land parcels acquired below land and building replacement cost. We believe these assets will continue to provide the best opportunity for Urban Edge, given the attractive going-in cap rates, a limited buyer pool, strong tenant credit profile, and our ability to extract value. Our newest acquisition, Ledgewood Commons in Ledgewood, New Jersey is a perfect example. It sits on over 50 acres at the best intersection in the trade area, and it's anchored by Walmart Supercenter, Marshalls, and Burlington and includes shop tenants like Starbucks, Chipotle, Ulta, and J.Crew. Like the Heritage Square property we acquired in February, we own all the outparcels at Ledgewood Commons, including 2 currently vacant pads that we will develop. With a going-in cap rate of 7.9%, embedded growth from shop leasing and outparcel development and the great financing that we procured will generate double-digit levered returns on this property, exceptional for a Walmart-anchored asset in any economic cycle. We'd love to find more assets like Ledgewood, and our team is busy evaluating anything that could be a fit. The current interest rate volatility greatly benefits buyers like us who are both well-capitalized and highly trusted by sellers, brokers, and lenders. I believe we are at the top of that list in our markets. On the leasing side, we've executed 44 deals for a total of 805,000 square feet, a very strong first quarter pace. Of those 44 deals, 17 were new leases with an average spread of 23%, a result we believe of the strong leasing fundamentals we've been talking about now for several quarters. Our same-property lease occupancy rate increased by 30 basis points from the prior quarter and now sits at 96.2% with anchor lease occupancy at nearly 98% and shop occupancy up 70 basis points since last quarter to 88.4%. As we mentioned at the beginning of the year, we are laser-focused on increasing our shop occupancy back to and above our historical high watermark of 91%. We are on track to achieve this goal in 2024, perhaps even by the end of the third quarter based on shop leases currently in negotiations. These deals are coming from all industries, including food and beverage, medical, health and beauty, and apparel. They are a byproduct of both market conditions and the heavy lifting we've done with anchor repositioning in the past several years. And while our anchor occupancy of 98% is already healthy, we have good visibility to improving not only this percentage but the quality of some of our anchors by the end of 2024. And finally, on the development side, we continue to execute on a very simple and low-risk business plan of building out space for committed leases, delivering 1 anchor space this past quarter at our Yonkers Gateway asset. Our $166 million development pipeline is 90% comprised from signed leases and will generate an expected 15% unlevered yield on cost. So that's the what and the how of the quarter. As to why our business is so strong right now, I think there are a couple of reasons. First, we've talked for several quarters now about shopping center fundamentals. Vacancy remains at historic lows. Store openings continue to outpace store closures and new retail construction is virtually nonexistent in our markets. These market conditions put upward pressure on market rents and allow us to extract better terms in our leases. But the second reason we're so optimistic about our business plan is one of the key points of differentiation about Urban Edge. Our portfolio has an average property size of almost 20 acres and 215,000 square feet. Based on our current stock price, that is a value of approximately $2 million per acre or $215 per built square foot, numbers that are significantly below current land values and current building replacement costs. As we continue to build a portfolio of assets with similar attributes, like Shoppers World and Gateway Center in Boston and now with our acquisition of Ledgewood Commons, we believe we are positioning this company extremely well for the long term. A low building basis and intrinsic land value in highly supply-constrained markets will allow us to push rents and accretively redevelop and expand our assets. We are seeing some of the fruits of that labor in 2024 and 2025 and the opportunities for growth in a portfolio like this should extend well into the future. I will now turn it over to our Chief Financial Officer, Mark Langer.

Thanks, Jeff. Good morning. I will comment on our first quarter results, our balance sheet and liquidity, and conclude with comments on our updated guidance. Starting with our results. We reported FFO as adjusted of $0.33 per share in the first quarter. Same property NOI growth, including redevelopment, was up 3.7% compared to the first quarter of 2023. The increase was primarily attributed to new rent commencements, lower bad debt, and better-than-expected recoveries on amounts previously deemed uncollectible. We collected about $1 million on older past due receivables. NOI also benefited from our retention rate in the quarter, which was almost 100%. G&A came in lower than expected, primarily due to some timing factors, which we expect will normalize during the remainder of the year as reflected in our full year guidance. Interest expense was down $2 million from the prior quarter due to the repayment of 3 variable rate loans in early January, aggregating $76 million that were bearing interest at 7.34% as well as the elimination of Freeport's $43 million mortgage when that property was sold in December. On the financing front, we refinanced Yonkers Gateway Center with a new 5-year $50 million nonrecourse mortgage at a fixed rate of 6.3%, executed at a spread of 205 basis points. A portion of the proceeds were used to pay off the previous $23 million mortgage. After the quarter, we financed Ledgewood Commons with a new 5-year $50 million nonrecourse mortgage at a fixed rate of 6%, executed at a spread of 180 basis points. We continue to be in active discussions with a variety of debt providers and are encouraged by the interest and availability of capital focused on high-quality retail shopping centers. While the benchmark treasury rate has been volatile, we are seeing spreads compress as competition from life companies, CMBS, and select regional banks has helped offset some of the increase in treasury rates. Our net debt to annualized EBITDA is now 6.6x and should decline further as EBITDA grows as more rents from our SNO pipeline commence. We expect this level to be in the 6 to 6.5x range in the future post the full stabilization of rent commencements. In addition, leverage levels are expected to be helped in the future from a decline in future CapEx funding requirements as we complete our current anchor repositioning projects. Turning to our outlook for 2024. We increased our 2024 FFO as adjusted per share guidance by $0.03 a share to a new midpoint of $1.30 a share. The increase reflects our better-than-expected performance in the first quarter, accretion from our capital recycling transactions, including the purchase of Ledgewood, and our expectations for same property NOI growth, including redevelopment, to achieve our new midpoint of 5%, up from the prior midpoint of 4%. As previously mentioned, our NOI growth is driven by $6 million from the SNO pipeline, of which $2 million rent commenced in the first quarter and an additional $4 million is expected to be recognized in the remainder of 2024, of which 90% is weighted to the second half of this year. Additionally, this midpoint assumes a credit loss of 75 to 100 basis points of gross revenues or approximately $3.5 million and an additional $500,000 of collections on past amounts deemed uncollectible for the remainder of the year. Moving to transactions. Our guidance includes the $117 million acquisitions of Heritage Square and Ledgewood Commons and the non-core dispositions that we announced in our release today. Guidance does not assume any additional acquisitions or dispositions. We updated our guidance assumptions related to interest expense to reflect the new $50 million mortgage on Ledgewood Commons and the new $50 million mortgage on Yonkers as well as the other financing activity we announced this quarter. The only variable rate exposure we have is related to our line of credit, which currently bears interest at SOFR plus 110 basis points. As Jeff mentioned, given the success of our capital recycling, our recent acquisition of Ledgewood, and the strong fundamentals we are experiencing, we expect to achieve the higher end of the 2025 FFO as adjusted per share range of $1.31 to $1.39 per share that we outlined at our Investor Day last year. We expect to provide more details on all of the underlying assumptions in the future. And while it is too early for us to go through that now, we do believe that leasing fundamentals and a lack of available space in high-quality locations provide a good buffer against some of the volatility that may arise. We are now reaping the benefits of the portfolio transformation that has been underway since the pandemic, as we have replaced poor-performing over-leveraged weak operators with highly sought-after grocers, discounters, restaurants, health and beauty concepts, and desirable shop tenants. This has directly contributed to a more stable cash flow stream that is being helped by increasing market rents, which we have seen reflected in strong leasing spreads. Fundamentals are also being helped by omnichannel strategies being used by retailers as nearly 42% of e-commerce orders last year involved stores, up from 27% in 2015 according to a recent article. Retailers are on track to open more stores than they close in 2024 for the third consecutive year, a testament to the strength and lower cost of distribution that high-quality brick-and-mortar locations offer. In summary, we are pleased with our continued momentum and look forward to further executing the business plan we outlined at Investor Day. I will now turn the call over to the operator for questions.

Our first question comes from the line of Steve Sakwa with Evercore ISI.

I guess, Jeff or Jeff Mooallem, could you maybe just talk a little bit about the pricing dynamic? And I guess, how aggressive or how much upside do you think you have on both, I'd say, the anchor spreads and over time, your blended spreads, given the tightness of the market, I'm just wondering how much upside you think there is in spreads moving forward?

On leasing spreads, Steve? Yes. I mean, look, it continues to be strong and moving in our favor. We've executed a few renewals, and you can see from our first quarter numbers, we had a pretty high level of renewals from a square footage standpoint. So, there were a couple of anchor deals in there. One of them was contractual, there wasn't much we could do about it. But the other one we were able to negotiate a pretty good renewal. You're still getting the pushback from anchors on anything that goes beyond the standard 10% every 5 years. That's still the opening line out of the gate, but we've had some success in pushing that up higher. And it's not surprising. The other place where we're seeing better traction with anchor renewals, not necessarily on spreads, but terms are coming a little bit more into our favor, and we're able to sort of get more control rights over outparcels. We're able to sort of maybe limit certain things that the anchors want to do. The conversations are very productive. I would not describe them as landlord controls the terms like it might have been way back when you and I started, but it's no longer tenants controlling the terms the way it has been for the last 15 years. It's a pretty even playing field right now.

Okay. Great. And my second question, maybe just on the transaction front. Could you just maybe talk a little bit about where you're sourcing some of these deals from? Obviously, they're very attractive going-in yields with seemingly good upside. So, I'm just curious who the sellers are in this environment given the positive trends we're seeing in retail. I guess I'm a little surprised that cap rates are as good as they are. But maybe just talk about where you're sourcing these from and how big is that pool?

Yes. I mean, look, timing is everything. First and foremost, we stay around the hoop on all the deals that are out there. We're constantly talking to the brokers. They may tell us price guidance when they're bringing something out, and we may say that's not for us at that price, but interest rates move and all of a sudden, they're not getting that price, and they're calling us back. That's sort of what happened in the case of the asset we bought in New Jersey, Ledgewood Commons. In that particular case, the seller was a fund, and that was the last asset in the fund. And they were motivated to get it sold. We were competitive on our price. There were 2 or 3 others around the same price, but they believed we had the highest certainty to close, and that's why they awarded the deal to us. So I would say some of it being timing, but other of it, I'll pat ourselves on the back a little bit. We kind of look through some of the noise on assets where if there is a tenant that's struggling in a specific property, we do a lot of market intel with other tenants in the market, and we quickly try to find out before we put an offer how replaceable that risk might be. So we try to underwrite the risks maybe a little bit more aggressively than others and talk to a lot of the brokers. We also talk directly to a lot of sellers and we sometimes get deals thrown to us from lenders, but it's mainly having an extensive brokerage network, primarily from D.C. to Boston, that's helped us generate a lot of our deals.

And Steve, what I'd add to that is because we've closed on $426 million of acquisitions since October, I mean, we have been the most active buyer in our markets. So we're also the most preferred buyer too because potential sellers know that we are going to close.

Okay, and just last question. Can you just remind us, I guess, what's left on the disposition bucket list, either from non-core or maybe retail assets that are in kind of the bottom part of the portfolio, like how much is there left to sell?

Like my sense is that we're probably always going to be selling $100 million to $200 million of property each year. We'll be very opportunistic in how we do that. In many cases, we will look to 1031 those assets. I do believe we have a large pool of assets that we can sell at a meaningful spread to where current cap rates are today.

Our next question comes from the line of Floris Van Dijkum with Compass Point.

I appreciate your reference to Jim Taylor's comment about a low basis, it's quite interesting, Jeff. I agree with your thoughts on the land value. I have a couple of questions. First, can you provide an update on Bruckner? I understand the lease occupancy is still quite low there, and I believe Target is planning to move in towards the end of this year or in 2025. Also, could you share what's happening with Sunrise, specifically regarding the reimagining of that asset?

I'll address your questions in reverse order, Floris. Regarding Sunrise, we can't provide many details but we are progressing with our plans and feel optimistic about them. We anticipate being able to share more information soon. As for Bruckner, it's a property we dedicate a lot of time and effort to. There are still two unoccupied spaces, with one lease we are targeting and another that is vacant. We have announced some agreements for the other vacant space, and that is advancing. We are also continually in discussions with Target regarding that property. Lastly, I’ll just say that it's possible Jim might have borrowed that line from me, but I’ll leave it at that.

That is true. You did overlap your time, and maybe I can ask a follow-up question. The expense recovery ratio is at 83% or just under 84%. As your physical occupancy increases, that number is likely to rise. I know you mentioned that your peak occupancy in shop space is at 91%, which you might reach by the end of this year, and that would be very encouraging. There's another 200-plus basis points of upside. Can you discuss what that means for your recovery ratio as well? What has been the peak recovery ratio for your expenses in the past?

Yes. Let me peel that back in the different phases you asked for us. So, as you said, the recovery ratio, if you look at the last quarter, it was about 80%, was 83% or almost 84% this quarter. And you're right, as we look forward, I think most importantly, and look at what we think physical occupancy is going to grow. We expect physical occupancy this year for us to grow 100 to 150 basis points. So as that physical occupancy gets that would get us to about 9.5%. I think exactly to your point, what we see in our models is that the recovery ratio goes from that 83% in excess to 85%. And to your point, if you look way back when our occupancy overall was at those elevated levels, our recovery ratios got to the 88% almost to 90% level. So we are excited. Now that would mean the full SNO stabilization so when you go out to '25 and beyond. But for this year, we see physical occupancy growing, as I said, about 100 to 150 basis points.

And our next question comes from the line of Ronald Kamdem with Morgan Stanley.

I have two quick questions. First, could you elaborate on the target for record occupancy? What factors are influencing the leasing during this period? Additionally, how are you addressing some of the lower quality, less leasable assets? I'm trying to understand your approach to achieving these goals.

I'll let Jeff take it from here. However, I believe the key factor moving forward is that we have successfully re-tenanted many of our properties over the past couple of years, replacing leases with Toys 'R' Us and Kmart with much stronger tenants, such as grocers like Shoprite and discount retailers like TJX and Marshalls. As a result of these better anchors, we are now witnessing additional leasing activity, primarily occurring within the retail space.

The dispositions are not an issue because everything we've sold has been fully leased. One asset was dark but still paying, while everything else was fully operational and 100% leased. The key factor for us is the outcome of the anchor leasing. For instance, in Puerto Rico, we had vacant anchor spaces on either side of our mall. We've been month-to-month with many tenants temporarily, and now that those anchor spaces are committed and being built out, in some cases already operating, we can approach those tenants to convert them to permanent leases or inform them that we need the space for new tenants. A significant part of our strategy to increase shop occupancy revolves around this transition from temporary to permanent leases in such locations. Additionally, market conditions are contributing to this, as we are receiving more inquiries for vacant spaces. When we receive multiple calls instead of just one, we can be more selective in choosing the right tenants for our centers and increase rental rates. For example, at our Morris Plains asset, Briarcliff Commons, we opened Uncle Giuseppe's a few years ago, and there has been a noticeable increase in inquiries regarding grocery anchors. We are now considering whether we want a specific use or to wait a bit longer for a better one, as the demand is quite strong.

And Ron, I'll just add one data point to summarize what Jeff just said in terms of that follow-on benefit from anchors now bleeding the shops. Just from 2 years ago, our shop occupancy is up about 500 basis points. So I think that kind of demonstrates that follow-on effect.

Great. My second question is about your success in capital recycling, where you've been selling at lower cap rates and buying at higher cap rates. Can you discuss the acquisition side going forward? How is that pipeline trending, and what are the cap rates looking like?

Look, we're on the hunt every day. Cap rates have been relatively volatile just because interest rates have been pretty volatile, which, by the way, we love. We'd like to see more volatility because that can allow us to tie things up and then lock in when the rates are appropriate. So we're actively searching for a new property today, and we believe we have a cost of capital that will allow us to transact.

Our next question comes from the line of Paulina Rojas with Green Street.

You have been active on the financing side. So taking advantage of what you have learned in that process, where would you say the spread is for financing of the different shopping center formats and name community or larger power centers?

Okay. I mean the best example is Ledgewood where we locked in at 180 basis points over treasuries. At Yonkers, we were a little bit above 200 basis points. So I think that's a fair range for assets of that quality.

You mentioned that the negotiating power still seems to be in the hands of the anchors, making it challenging to push for higher rent bonds and possibly reducing options. Does this lead you to consider that when redeveloping properties and increasing your exposure to shops, it might be beneficial to align it with market rates in France?

Yes, we're always looking for the right balance between shop space and anchor space. In many instances, we assess anchor spaces and decide that there isn't enough shop space. If the layout and rental costs are favorable, we aim to increase the number of shops. However, I wouldn’t say that anchors have more control over the process at this point. An article published yesterday highlighted that retailers like Kohl's, Walmart, and Target have a significant portion of their online fulfillment taking place in stores. For example, if Kohl's or Walmart decides to close a store in the Northeast, where they typically see higher sales, they need to consider the loss not only from that store but also from fulfilling a third of their online sales. Therefore, we believe we have more leverage with anchors now than we have in a long time. When we meet with them, they’re not saying their stores are underperforming and closing, but rather asking where else they can find space. I’m confident in our distribution of anchor and shop space. While it may differ from some of our peers, based on our locations, property sizes, and anchor performance, we don’t view our assets as needing fewer anchors. In fact, we would like to add more shops since they tend to lease faster, and we are working on developing them where possible, but we don’t feel over-anchored at all.

One last question, if I may. You mentioned you expect to be at the high end of your FFO guidance provided during your Investor Day. While I understand you may not share every detail, would you say the improved outlook is primarily driven by accretive acquisitions, or is a significant portion due to same-property operations?

Look, I think there are 3 factors that contribute to our increased confidence. The first is just better retail fundamentals. The second is we have done a lot of accretive capital recycling that was not contemplated when we provided numbers at Investor Day. So again, the $426 million of acquisitions at a 7.2% cap rate, offset by $356 million of dispositions at a 5.2% cap rate, so a 200 basis point spread there. And then lastly, just interest expense is now much easier to predict because we've completed about $500 million of refinancings. We only have 11% of our debt coming due between now and 2026. Between now and 2025, we only have one $47 million mortgage coming due, and that comes to December of this year. And then the only other piece of debt is a $24 million mortgage, which matures in December 2025. So we just have greater visibility today on NOI and on interest expense.

We have reached the end of our question-and-answer session. And with that, I would like to turn the floor back over to Jeff Olson for any closing comments.

Thank you. We appreciate your attendance on this call. Please look at our new website and logo, which we posted yesterday. My favorite tab is under the career section because it showcases many of our employees and what they value about our unique culture. I'm proud of our team and the results they have produced in executing our plan. Thank you very much. Look forward to seeing everyone at the upcoming NAREIT Conference.

This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.