Urban Edge Properties (UE) Q2 FY26 earnings call: guidance and Q&A

Asked for clarification on how the $0.03 of one-time benefits (lease termination income, accelerated amortization, tax refund) reconciled with the $0.02 FFO guidance increase, implying a net negative impact from other factors.

Mark Langer explained that some of the termination income was already baked into the plan as rent, and some Q2 benefits (percentage rent timing) would have occurred later in the year, thus not being purely incremental to the full-year guidance raise.

“Yes, Michael, the $0.03 one-timers that I highlight versus the $0.02 increase in guide, part of that, as you said, was termination income. So on a full year basis, some of that income was already baked into our plan in the form of rent. And likewise, some of the beat this quarter I highlight from the timing of percentage rent elevated the second quarter, but would have normally come in later in the year. So that kind of reconciles the $0.03 onetimer versus the $0.02 bump.”

asked by Michael Goldsmith · answered by Mark Langer

Inquired about current cap rates for acquisitions and dispositions, and the accretion from capital recycling given market conditions.

Jeff Olson stated cap rates are generally 5% to 7% for acquisitions, with unleveraged IRRs of 7% to 9%. The strategy is to sell lower-growth (1%-2%) assets at low cap rates and redeploy into higher-growth (3%-4%) assets at comparable cap rates, implying accretion through growth profile improvement.

“But generally, cap rates are in the 5% to 7% range. The key is what is the NOI growth and how much capital. They're pricing to unleveraged IRRs in the 7% to 9% range. As far as our own capital recycling, I mean, generally, what we're doing is we're looking to sell our lower growth assets, but those assets that have high credit that can sell at pretty low cap rates and redeploy that capital into higher growth assets.”

asked by Michael Goldsmith · answered by Jeffrey Olson

Asked about the implied new lease spread for the second half of the year given Q2's 13% vs. H1's 30%, and if tenants are opening faster to boost shop occupancy.

Jeff Mooallem clarified that quarterly spreads fluctuate, but they are confident in exceeding 20% for the full year. He noted efforts to accelerate tenant openings by leveraging increased tenant flexibility due to high demand and limited supply, but permitting remains a challenge.

“We're very confident we'll be over 20% for the year. We actually -- if you look at our pipeline right now, should exceed that pretty comfortably... As far as getting people open faster, that is rallying cry #1 around here. We're doing everything in our power. I would tell you, it's gotten a lot better because tenants have become a lot more flexible with this increased demand and limited supply for space.”

asked by Michael Griffin · answered by Jeffrey Mooallem

Inquired if Urban Edge would consider expanding beyond the Northeast corridor into markets like Florida or North Carolina due to increased competition.

Jeff Olson confirmed that the Southeast is a natural extension and they are actively looking in that market, acknowledging it is super competitive but hoping to enter it at some point.

“I mean I do think the most natural extension for us is to go south. So yes, I think the Southeast is a market that we've been actively looking in. It is super competitive for sure. But we are hoping at some point that we'll be able to go into that market.”

asked by Michael Griffin · answered by Jeffrey Olson

Asked if there's been compression in cap rate spreads between large community/power centers and grocery-anchored centers.

Jeff Mooallem confirmed that everything has compressed, and more buyers are looking at assets they previously wouldn't have, increasing competition across all retail asset types. This drives them to seek off-market deals.

“I mean, the short answer is yes. Everything has compressed... a power center asset where there might have been 5 to 10 names on the bid sheet now might have north of 10 and institutional names that previously might have turned their nose up at power. We're seeing more competition on pretty much everything, which is making us double down on our efforts to look for things off market.”

asked by Daniel Purpura · answered by Jeffrey Mooallem

Asked about the natural or target level for total portfolio and shop occupancy going forward.

Jeff Mooallem reiterated a target of 93% to 94% for shop occupancy by year-end, supported by the active pipeline. For blended occupancy, the goal is 97% by year-end, expecting to re-lease the Wren Kitchens spaces.

“So we've messaged, Caroline, 93% to 94% shop occupancy. And despite a little bit of a dip in 2Q, we're still on point with that message... A lot of our shop vacancy is not the shop vacancy that is ever going to get to 99% or 100%. I think we'd be very happy to hit 93.5%, 94% this year, and we have a road map to get there on the shop side. On the anchor side... we should be back to around 97%, 98% and a blended 97% occupancy by the end of the year is our goal.”

asked by Caroline Long · answered by Jeffrey Mooallem