Urban Edge Properties

Greetings, ladies and gentlemen, and welcome to the Urban Edge Properties second quarter 2021 earnings conference call. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. Participants on the phone who would like to ask a question, please press star 1 on your telephone keypad. If anyone should require operator assistance during the conference, please press star 0 on your telephone and keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Ms. Jennifer Holmes, Chief Accounting Officer. Thank you, ma'am. Please go ahead.

Good morning, and welcome to Urban Edge Property's second quarter earnings conference call. Joining me today are Jeff Olson, Chairman and Chief Executive Officer, Mark Langer, Chief Financial Officer, Chris Wallminster, Chief Operating Officer, Danielle DeVita, EVP of Development, Herb Eilberg, Chief Investment Officer, and Rob Milton, General Counsel. 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, and which the company does not undertake to update. Our actual future results, financial condition, and business may differ materially. 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. Reconciliation of these measures to GAAP results are available in our earnings release and supplemental disclosure package in the investor section of our website. At this time, it is my pleasure to introduce our Chairman and Chief Executive Officer, Jeff Olson.

Great. Thank you, Jen, and good morning, everyone. We heard from many of our investors that they would like to hear more from us. So we plan to do these calls twice a year in addition to scheduling more investor roadshows. I am going to provide an update on our business, then turn it over to Chris Weilminster to talk about the operating environment, and Mark Langer will cover our financial results. We had a great quarter, generating FFO as adjusted of $0.28 a share, up 56% compared to prior year. Same property NOI, including redevelopment, grew by 24% compared to last year. Our results benefited from four cents a share from collections of previously reserved tenant receivables. The retail sector is strong. During the quarter, we increased same property leased occupancy to 92%, a 90 basis point increase compared to 1Q21. Our leasing pipeline is the largest it has ever been, with over 1 million square feet of space under negotiation. The most active categories include grocers, discounters, off-price retailers, home furnishings, health and beauty, quick service restaurants, and medical uses. One of my favorite data points is to look at how our top retailers are performing in the equity markets. On average, the stock prices of our top 15 retailers who are publicly traded have increased by 55% since the pre-COVID stock market peak on February 19, 2020. One of the best leading indicators of our NOI growth is the $12 million of future gross rent coming from executed leases that have not yet commenced rent up from $10 million last quarter. This amounts to approximately 5% of our current NOI. We have another $19 million of rent under negotiation that should absorb existing vacancy representing approximately 8% of NOI. Taken together, we have visibility to increase NOI by 13%, which would bring us back to pre-COVID NOI. We are now hopeful that we will reach pre-COVID NOI in late 2022. Anchored leasing is driving redevelopment activity. The bulk of our redevelopment projects are relatively straightforward anchor repositioning investments where we are taking a former Kmart or Toys R Us and converting the vacancy into a grocer like ShopRite or a discounter like TJ Maxx or Burlington. These projects are low-risk, high-return investments as each project costs only around $10 million and anchor leases are executed prior to construction. We have $134 million of active redevelopment projects underway expected to generate an 8% yield. Cap rate compression resulting from upgrading our tenant mix creates additional value. We plan to increase the percentage of our grocery anchored assets from 60% to 70% of asset value based on redevelopments underway and leases in negotiation. Our average grocer generates about $900 a foot in sales, the highest reported number in the industry. We have another $150 million of redevelopment projects that we hope to activate over the next year. The largest projects include adding four high-quality anchor retailers at Hudson Mall, to replace the Toys R Us and Interior Shop vacancies, adding four anchors at Bruckner to replace the Toys and Palace vacancies, and leasing the Century 21 vacancy at Burgantown Center. As retail demand for new stores has increased and collections have normalized, debt and equity investors have embraced open-air centers. Pricing for high-quality shopping centers is at or even above pre-COVID levels due to an abundance of low cost capital and recognition that open air retail cash flows are durable even during a pandemic. It's easy to see why investors are attracted to the sector where one can generate over an 8% cash on cash return buying an asset at a five to five and a half percent cap rate and obtaining a 3% to 3.5% 10-year mortgage leveraged at 65%. This is especially attractive for yield-starved investors considering the sub 4% cap rates we are seeing in the industrial and multifamily sectors. We are encouraged by the growing demand for assets as we look to sell selected non-core properties. We have sold or have under LOI approximately $40 million of non-core assets year to date at a cap rate of approximately 6%. We are redeploying these proceeds into two industrial properties that are located near our 1 million square foot industrial park in East Hanover, New Jersey, which we are buying at a stabilized cap rate of approximately 5%. Our strategy of upgrading our merchandise mix and densifying our properties with non-retail uses is gaining momentum. We intend to deliver our first retail to industrial conversion during 2022 in Lodi, New Jersey. Throughout many submarkets in the New York metro area, industrial rents have increased to levels that equal or even exceed big box retail rents, creating an opportunity for us to leverage our existing assets, infrastructure, and retailer relationships. Our balance sheet remains strong and is well aligned to our growth strategy. We have approximately $1 billion of liquidity, including almost $400 billion of cash and a $600 billion undrawn line of credit. Our balance sheet is positioned to fund our development and leasing program and allows us to be opportunistic on the acquisition front. I am proud of our team and believe it is one of the most talented groups in the industry. We have had a number of senior people join us this year. Danielle DeVita, Executive Vice President of Development, came from Simon where she developed over $3 billion of premium outlet centers. John Villapiano, Senior Vice President of Development, also came from Simon to lead the execution on some of our significant redevelopment projects. And Sandy Danek, Senior Vice President of Leasing, brings more than 30 years of retail experience, including at American Dream, Garden State Plaza, and Cross County Center. We are also excited to welcome our newest board member, Susan Givens. Susan brings valuable experience in real estate and has significant financial and capital markets expertise. She currently serves as the CEO of New Senior Investment Group, a New York Stock Exchange-listed senior housing REIT. Overall, we feel very good about the current state of retail and the leasing and development progress that is underway. We are entering the back half of the year in excellent shape. I will now turn it over to Chris Wildminster, our Chief Operating Officer. Chris?