Q3 2024 Urban Edge Properties Earnings Call
Speaker Change: Ladies and gentlemen, good morning and welcome to the Urban Edge Property Stutt Quartet when the 24-Honing School.
Speaker Change: At this time, all participants are in a listen-only mode.
Speaker Change: A brief question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star and zero on the telephone keypad.
Speaker Change: As a reminder, this conference is being recorded.
Speaker Change: It is now my pleasure to introduce your host, Ariba Ahmed, Investor Relations Associate. Please go ahead.
Ariba Ahmed: Good morning and welcome to Urban Edge Properties 3rd 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 Oster, EVP and Head of Leasing, and Andrea Drazen, Chief Accounting Officer.
Ariba Ahmed: 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 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.
Ariba Ahmed: In our discussion today, we will refer to certain non-GAAP financial measures, including reference to our 2025 FFO as adjusted target.
Speaker Change: 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.
Speaker Change: Our growth was driven by a 5.1% increase in same property net operating income and accretion from our capital recycling activity.
Speaker Change: Over the past year, we have acquired $552 million of high-quality shopping centers at a 7% cap rate, mostly funded through $425 million of dispositions of non-core and single-tenant assets at a 5% cap rate.
Ariba Ahmed: and Ariba Ahmed.
Ariba Ahmed: Yesterday, we acquired the village at Wa Chapel.
Ariba Ahmed: a 382,000 square foot grocery anchored shopping center located in Anne Arundel County, Maryland for $126 million at a cap rate of 6.6% in an off-market transaction.
Ariba Ahmed: The acquisition included the assumption of a $60 million mortgage with a significantly below market rate of 3.76%
Ariba Ahmed: with approximately seven years of term remaining, resulting in an expected first-year leverage return of 9%.
Ariba Ahmed: We expect NOI should grow by approximately 3% a year over the next 10 years.
Ariba Ahmed: The property is anchored by Safeway, Marshalls, Home Goods, TJ Maxx, and a good mix of shop uses including Chick-fil-A, Chipotle, and Sephora.
Ariba Ahmed: The center attracts 6 million visitors a year, ranking in the 96th percentile of all shopping centers in Maryland.
Ariba Ahmed: The acquisition was funded in part with proceeds from selling a freestanding Home Depot in Union, New Jersey for $71 million at a cap rate of 5.35%, which also closed yesterday.
Ariba Ahmed: Home Depot's rent is flat for the next 14 years and contains another 50 years of term through options with minimal growth.
Ariba Ahmed: We are underwriting several assets in the D.C. to Boston corridor that would likely be funded, in part, through the disposition of lower-growth, single-tenant assets like the Home Depot property we just sold.
Ariba Ahmed: Even though the acquisition market is more competitive, cap rates have also compressed on single-tenant assets. So we still expect to make a meaningful spread through future capital recycling.
Ariba Ahmed: Leasing activity remains strong. We matched last quarter's record volume with the execution of 23 new leases at a same space cash spread of 15%.
Ariba Ahmed: Shop occupancy increased by 500 basis points compared to the third quarter of 2023, and by 60 basis points sequentially to 90.4%.
Ariba Ahmed: Our signed-but-not-open pipeline amounts to $24 million, or 9% of net operating income.
Ariba Ahmed: Notably, in the third quarter, we commence $6 million of annualized gross rent, a leading indicator for same property NOI growth over the next several quarters.
Ariba Ahmed: New rent commencements included Ralph's Supermarket at Monteheadra, Bath and Body and Crumble Cookies at Bergentown Center, CityMD and Starbucks at Bruckner, and Starbucks at Heritage Square.
Ariba Ahmed: based on our better-than-expected results.
Ariba Ahmed: Strong Retail Fundamentals.
Ariba Ahmed: to $1.32 to $1.35 per share, up $0.03 per share at the midpoint, reflecting 7% expected FFO growth for the year.
Ariba Ahmed: We continue to believe that we will reach the high end of our 2025 FFO target of $1.31 to $1.39 per share.
Speaker Change: Our achievements to date are truly a testament to the quality of our real estate and the dedication and commitment of the Urban Edge team. We are excited about the growth opportunities we see ahead. I will now turn it over to our Chief Operating Officer, Jeff Mooallem.
Jeff Mooallem: Thanks, Jeff, and good morning everyone. It was another strong quarter at Urban Edge as we continued to execute on all three growth drivers of our business leasing, redevelopment, and acquisitions.
Jeff Mooallem: We signed 45 deals in the third quarter for a total of 683,000 square feet, including 23 new leases at a same space spread of 15% and 22 renewals at an 8% spread.
Jeff Mooallem: Our same property leased occupancy of 96.3% increased 200 basis points compared to the prior year, and is down 10 basis points compared to the prior quarter. The slight decrease was due to an expected lease termination at Hudson Mall, where we received a termination fee from a national tenant on a space that we are now in negotiations to backfill.
Jeff Mooallem: Anchor tenant occupancy is holding steady at a robust 97.4%. While we're constantly monitoring current or future potential bankruptcies such as big lots, as we've said in the past, often we don't even have an opportunity to get those leases back as our markets are highly coveted by other retailers in an auction process.
Jeff Mooallem: To the extent we do get anchor spaces back, we believe any short-term exposure to a reduced occupancy is offset by longer-term opportunities to improve both rent and tenant mix.
Jeff Mooallem: Our small shop lease occupancy now stands at 90.4% of 60 basis points from the prior quarter and our highest shop occupancy percentage ever.
Jeff Mooallem: Around this time last year, with small shop occupancy sitting at 85.4%, we started calling 2024 our small shop leasing year. And we set a goal to be at 91% by the end of this year.
Jeff Mooallem: Based on new leases we're currently negotiating, we remain on track to hit 91%, and the quality is matching the quantity, with retailers such as Sweetgreen, Sephora, Kava, and Mathnasium on that roster.
Jeff Mooallem: Generating this kind of improvement in shop occupancy in a relatively short period of time, just one year, is a credit to our entire team. From the leasing team sourcing and negotiating the deals, to the attorneys preparing them, to the construction and development departments getting tenants open.
Jeff Mooallem: It's also further testament to the shift in fundamentals we've been seeing for the past couple of years, namely that retailer demand has remained resilient and that our assets are among the most sought after shopping centers in our markets.
Jeff Mooallem: Thank you.
Jeff Mooallem: Like leasing, our low-risk redevelopment program remains a strong driver for our 2024 growth. This quarter, we stabilized projects at Kingswood Crossing and Birdside Commons, both in Metro New York City, and both with regional anchors on long-term leases.
Jeff Mooallem: We have a $159 million redevelopment pipeline that is expected to generate a 14% unlevered yield on cost.
Jeff Mooallem: I want to close by spending some time discussing the acquisition market and how it has evolved this year.
Jeff Mooallem: for Urban Edge and for others. There is no doubt that in our core markets and for retail assets overall, there's been a notable increase in activity and a notable decrease in cap rates.
Jeff Mooallem: The volume of retail property sales nationwide is up from $6 billion in 2023 to $10 billion year-to-date in 2024. Debt markets have also come back in a big way, with both CMBS originations and traditional lending well ahead of last year's pace.
Jeff Mooallem: What is driving this, we believe, is the recognition by institutional capital on both the private and the public side that retail's combination of stability and growth is outperforming many other asset classes.
Jeff Mooallem: rising occupancy rates, increasing market rents, stronger retailer balance sheets, and the lack of any new meaningful supply gives us very good confidence that this trend will only continue.
Jeff Mooallem: The increased demand for retail properties, of course, has a dual effect of making our existing assets more valuable and making the acquisition of targeted properties more challenging.
Jeff Mooallem: We were fortunate to get to the party early, buying over $550 million in the past year before prices rose. A significant 80% of that $550 million was in off-market deals sourced through our principal-to-principal relationships and our local market expertise.
Jeff Mooallem: Our recent acquisition of the village at Watt Chapel in Gambrills, Maryland, a highly educated and affluent trade area situated between Washington, D.C., Baltimore, and Annapolis, is a perfect example.
Jeff Mooallem: We love the small shop exposure and the low anchor and out parcel rents at this asset, and we expect it to be an accretive contributor to FFO growth for a long time to come.
Jeff Mooallem: In sum, while the acquisition market is getting more competitive, we think our advantages as a highly credible and well-capitalized buyer will allow us to find and announce more opportunities like this one soon.
Speaker Change: I will now turn it over to our Chief Financial Officer, Mark Langer.
Mark Langer: Same property NOI growth, including redevelopment, was up 5.1% compared to the third quarter of 2023. The increase in FFO was primarily due to accretive capital recycling, new rent commencements, and contractual rent bumps.
Mark Langer: We exceeded our internal forecast, in part due to the benefit of lease termination income and the acceleration of non-cash revenue related to below-market amortization, which added $0.02 per share in the quarter.
Mark Langer: Our 5.1% NOI growth this quarter was driven by a 5% increase in minimum rent year-over-year.
Speaker Change: As a reminder, we do not include lease termination income in NOI.
Speaker Change: While uncollectible rental revenue was almost twice as high as the unusually low level we recorded in the third quarter of last year, it was 25 basis points lower than we had expected when measured as a percentage of rental revenues.
Speaker Change: Both mortgages were executed at a spread of 180 basis points.
Speaker Change: We continue to see debt capital widely available from all primary sources, including life companies, CMBS, and select regional and national banks.
Speaker Change: We are currently under contract to refinance our maturing loan at Brick Commons in the fourth quarter with a new seven-year, $50 million mortgage at a fixed rate of 5.2 percent, locked at a spread of 155 basis points.
Speaker Change: That spread reflects the very high quality of Brick Commons, with a grocer that is doing over $1,300 in sales per square foot.
Speaker Change: After the BRIC mortgage financing is completed, we have no other debt maturities until December 2025, where we only have one $24 million mortgage that is maturing, which is easily refinanceable.
Speaker Change: Given our recent acquisition activity, we issued about 4.4 million shares of common stock under our ATM, raising approximately $84 million of net proceeds during the quarter.
Speaker Change: We had $150 million drawn on our line of credit at the end of the second quarter, bearing interest at about 6.5 percent, and fully repaid the balance in the third quarter using proceeds from the ATM along with those from the aforementioned mortgage financings.
Speaker Change: We continue to make progress reducing our overall leverage levels.
Speaker Change: with net debt to EBITDA of 5.8 times using third quarter annualized income excluding lease termination income.
Speaker Change: This level will fluctuate with new acquisitions and mortgage activity, but should remain in the low 6X range, which is below the 6.5X target we outlined at our April 2023 Investor Day.
Speaker Change: Turning to our outlook for 2024, we increased our FFO's adjusted guidance by three cents per share, implying a fourth quarter FFO rate of 33 cents per share at the midpoint.
Speaker Change: This guidance increase is related to the two cents of benefit from lease termination and lease amortization income I previously described, and one penny is due to favorable trends on the bad debt side and other expense improvements, including G&A.
Speaker Change: Our updated guidance incorporates the acquisition and disposition activity we have announced today, but does not assume any other transactional activity in 2024.
Speaker Change: implying 8.6% growth in the fourth quarter.
Speaker Change: As Jeff mentioned, $6 million of annualized gross rents commenced in the third quarter from leases previously executed.
Speaker Change: which will help drive our NOI growth over the next several quarters.
Speaker Change: In terms of the S&O pipeline for 2025, we have disclosed in our supplement that we expect about $10 million of additional gross revenue to come online.
Speaker Change: We expect one-third of that will be realized in the first half of the year, with two-thirds coming in the second half of the year.
Speaker Change: In closing, we are very pleased to see the execution our team has achieved on the growth drivers we outlined at our Investor Day last year.
Speaker Change: Fundamentals in our business remain favorable as there's limited space available, strong demand from our current core tenant base, a lack of new supply, strong mark-to-market rent spreads, and favorable levels of attractively priced capital.
Speaker Change: We are seeing the benefits of our simplified portfolio while focusing on prudent capital allocation, both from accretive acquisitions and from the sale of high-value, low-growth assets.
Speaker Change: The strength of our cash flow has been enhanced by the anchor repositioning efforts we have completed and we expect further improvement as new tenants open and shop leasing follows.
Speaker Change: Our balance sheet is in excellent shape with limited maturities, abundant liquidity, and growing free cash flow.
Speaker Change: We look forward to continuing our track record of generating strong earnings growth.
Speaker Change: I will now turn the call over to the operator for questions.
Speaker Change: and others. Thank you. Thank you.
Speaker Change: Thank you.
Speaker Change: Ladies and gentlemen, we will now be conducting a question and answer session. If you would like to ask a question, please press star and 1 on your telephone keypad.
Speaker Change: A confirmation tone will indicate your line is in the question queue.
Speaker Change: You may press star and 2 if you would like to remove your question from the queue.
Speaker Change: For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys.
Speaker Change: Ladies and gentlemen, we will wait for a moment while we poll for questions.
Speaker Change: The first question comes from the line of Floris Van Dijkum from Compass Point. Please go ahead.
Speaker Change: Hey, morning guys. Thanks for taking my question.
Speaker Change: encouraging results. Maybe if you could, you know, particularly I'm encouraged,
Speaker Change: and Jeff, maybe if you can touch on the shop occupancy and, you know, everybody in the sector appears to be setting new records in terms of occupancy levels.
Speaker Change: Where do you see that popping out, or do you think, I mean, is it, some of your peers are getting 95% shop occupancy, is that feasible in your portfolio, in your view?
Jeff Mooallem: Hey, good morning, Floris. Yeah, it's certainly feasible. Let's talk a little bit about we've gone now up about 500 basis points in this quarter with a goal of getting another 60 to 70 basis points by the end of the year.
Jeff Mooallem: to finish 2024 with 91% shop occupancy.
Jeff Mooallem: We certainly would like to be in that 92-93% range next year. But at this point with where we are, we start really looking not just at vacant spaces and the ability to pop that occupancy up a little bit, but we start to look at under-leased spaces and opportunities where we might have to, if not change out the occupancy, change out the tenant for a better quality and a better rent.
Jeff Mooallem: So one of the things I'm talking to the leasing team about all the time is, you know, don't just lease the space that's vacant now, lease the space that we think might be coming up vacant one day or where we think we can get it back for a higher rent.
Jeff Mooallem: I think 92 to 93% is realistic, 94% would be nice, but we're trying not to manage to the number. If we get to 93 with the quality we've been getting, I'll be very happy.
Speaker Change: Thanks. Maybe another question, and this maybe is more in Mark's wheelhouse. You issued some equity during the quarter.
Speaker Change: As you look at the market, you talked about the fact that cap rates are probably heading lower in your markets.
Speaker Change: with equity as well obviously as incremental asset sales as you've been doing over the last couple of years. Maybe if you can touch on you know your your funding sources and how you look at your equity today relative to asset sales.
Speaker Change: I think you hit it and answered it really, and that is we look at a blend. We have very good quality assets that you saw again today with the Home Depot.
Speaker Change: So asset sales, especially at the cap rates that we're commanding, is definitely one of the primary targeted sources.
Speaker Change: And, you know, the debt spreads, I've given you the price of debt, which is probably five and a half to six percent. And so then when we think about equity, you know, it would really be earmarked towards growth initiatives like acquisitions, where we can look at what our implied cap rate is.
Speaker Change: relative to what we're buying and the growth of those assets. So it's really a blend of all of that, but I'll let Jeff comment on, you know, what we might be seeing on the portfolio side. I mean, we're definitely on the hunt for more acquisitions, Floris, and there are a number of assets that we're underwriting in the D.C. to Boston corridor.
Jeff Mooallem: I think one of our main competitive advantages...
Jeff Mooallem: Jeff had mentioned during his comments that 80% of the over $500 million that we've acquired have been off-market transactions, and our pipeline contains, you know, a blend of off-market deals and then some marketed deals.
Jeff Mooallem: Generally, we'd rather go with the off-market deal. But because we've been one of the largest buyers in this area for a long time, but in particular over the last year,
Jeff Mooallem: Deals beget more deals. So sellers want to come to us. They have great comfort that we're going to end up closing and that we're relatively easy to work with.
Jeff Mooallem: And then the last point on our competitive advantage in terms of being a local sharpshooter is we move very quickly.
Jeff Mooallem: It's very easy for us just to jump in the car and see a potential acquisition and then actually come home and sleep in our bed that same night.
Jeff Mooallem: So, we're constantly looking at deals and our deal team, and there are nine of us around this conference room right now, I think every one of us saw this acquisition early on and department heads saw it early on to make sure that there weren't any surprises later throughout due diligence.
Jeff Mooallem: So I love the fact that, you know, that we're this, we have this local sharpshooter mentality. I do believe that allows us to source deals more effectively.
Speaker Change: Thanks, guys.
Speaker Change: Thank you.
Speaker Change: Thank you. The next question comes from the line of Sameer Khanal from Evercore ISI. Please go ahead.
Sameer Khanal: Good morning, everyone. Jeff or Mark?
Sameer Khanal: Can you provide a bit more color on the space you got back, I think you said, from a national tenant?
Speaker Change: Just trying to, I'm sure over time you'll be able to re-tenant that space at a much higher rent, but just how should we think about...
Speaker Change: Maybe the drag it can create or maybe even into the revenues or earnings over the next 12 to 18 months
Speaker Change: Just want to make sure I get that right. Thanks.
Speaker Change: Good morning, it's Jeff Mooallem.
Speaker Change: Yeah, I mean, we've got some confidentiality provisions in that termination agreement with that tenant, so I can't give you a whole lot of information about who it was. What we can tell you is they had not RCD-ed yet.
Speaker Change: So there was no existing revenue coming from that box at the time we did the termination. And it is a national tenant that had been looking to get out of several leases in several locations around the country. This was not a unique situation.
Speaker Change: outlier situation.
Speaker Change: when we first started talking to them about a possible termination.
Speaker Change: You know, our leasing team felt very comfortable that we would have good demand on the space.
Speaker Change: and Announced, but it was not an RCD tenant. They had not started paying rent or opened for business yet, so it was a little bit easy to take off the list.
Speaker Change: For more information visit www.FEMA.gov
Speaker Change: Okay, got it. And I guess, Mark, on the same-story guide here, I mean...
Speaker Change: So, you know, it's late into the year now and the range is still pretty wide, that 475 to 6. I know you took it up a little bit, but help us kind of understand kind of what's driving that, you know, kind of achieve the low end or the high end of that range.
Speaker Change: Yeah Samir, happy to. It really is a function kind of the size of our portfolio relative to what risk. The downside is really tied to the potential on any tenant fallout and elevated bad debt in light of the filings from you know big lots, blink, bye-bye.
Speaker Change: and some of the lumber liquidators that you've seen. All those headlines noise for us, if all of them were to stop paying and go out, then you can hit the high end because those tenants alone are about $3 million of gross rent.
Speaker Change: And the high end is really the opposite, that if we don't have that, we get a little bit lucky on some of the, you know, RCDs.
Speaker Change: And we don't have the bad debt that we've contemplated, you get to the high end. So those are really the big drivers. At this point, you know, new leasing isn't really that, as you said, that's going to hit next year. So it's really more a function of what the tenant risk list hits.
Speaker Change: and others. Thank you. Thank you.
Speaker Change: Okay, got it. And one last one for me on, Mark, you reduced DNA.
Speaker Change: guidance, help us think through, I mean you kind of reduced GNA in the past as well, and as we think about 2025, how much more is there you can do from a modeling perspective as we think about that? Thanks.
Mark Langer: Yeah, we'll give formal guidance on that when we do our year-end reporting, but I can say I would not want to set the expectation, as you point out, that over the last two years we have really chipped away, examined every element, every line item that we could.
Mark Langer: So, I don't think that there's going to be declines. We'll have, you know, cost of living and inflationary, you know, increases on the one end for sure. So, I would not set an expectation that, you know, this would continue to decline.
Speaker Change: Okay, thank you guys.
Speaker Change: Thank you. The next question is from the line of Ronald Kamdem from Morgen Stanley. Please go ahead.
Speaker Change: Hey, two quick ones from me. Just on the acquisition and disposition front, just focusing on the disposition side, as you sort of look at the portfolio, you know, how much more opportunities is there to sort of sell out of these?
Speaker Change: Laura Caprade asks, in these 1031 fashions, just are we through that pool, is there more to come, and so forth.
Speaker Change: We're definitely focused now on these single-tenant properties. If you look at our supplement, you'll see that we own 21 Home Depot, Lowe's, Wal-Mart, and Target.
Speaker Change: Those tenants generate about $33 million a year in total rent. Not all of them are separately subdivided, but that's the pool that we're focused on to generate some of the lower cap rate sales.
Speaker Change: But yeah, I'm hoping that you'll see over the next four to five years a hundred to two hundred million dollars of dispositions pretty consistently And hopefully we'll earn a decent spread on that as we redeploy that capital into higher quality shopping centers
Speaker Change: Got it. That's helpful. And then my second question was just, you know, I would say you reiterated
Speaker Change: and the 2025 target at the high end. So kudos to the team for getting there. But what's the same start and why assumption that's baked into that, that was assumed into that? How does that compare to the 5% you did this quarter?
Speaker Change: Yeah, Ron, the NOI growth, each of the assumptions that's embedded in that, we're going to break down and guide and share the assumptions just like we did this year. But you can kind of take our S&O pipeline, roll it in, obviously on a year-over-year basis as you get through the year, there's less growth. But I think healthy numbers that we outlined in our investor deck of 5% type numbers are certainly achievable.
Speaker Change: Okay, that's it for me. Thank you.
Speaker Change: Thank you.
Speaker Change: The next question comes from the line of Paulina Rojas from Green Street. Please go ahead.
Paulina Rojas: Good morning. You mentioned in your prepared remarks that the market has become more competitive, but you have seen fabrics compressed.
Paulina Rojas: Can you talk about the magnitude of the compression you have observed, what time period you have in mind when you say they have compressed, and whether you have seen this across formats?
Speaker Change: The last part, oh, the format. My guess, Paulina, is cap rates are down 50 to 75 basis points over the last six to nine months.
Speaker Change: And in terms of format, I mean, we're definitely seeing more demand from some of the larger centers than we have in the past, but there is still a spread between.
Speaker Change: than simply buying a neighborhood center that's only the grocery store. There's still a decent spread there.
Speaker Change: and those are the types of assets that we're focused on acquiring because we think we can get them at a decent spread relative to our cost of capital and also relative to some of the disposition activity that's taking place.
Jeff Mooallem: And Pauline, this is Jeff, I would just add, you know, a year ago or so...
Jeff Mooallem: Some of the institutional capital has really aggregated around retail. It's not just that interest rates have caused cap rates to compress.
Jeff Mooallem: It's also that there's more buyer demand for larger type assets because people are more comfortable now with the risk profile of retail, and certainly the growth profile has gotten a lot better. So we're seeing competition not just from our competitors and peers, but also from institutional capital that in some cases is new to the product type.
Speaker Change: For more information about this event check out our website
Speaker Change: Paulina, let me correct you. We would not sell one of these anchors in the middle of a shopping center. The one we just sold, it was a freestanding Home Depot.
Speaker Change: We do own some separately subdivided freestanding anchor tenants like for example we own a Lowe's across the street from Bergentown Center that would be a prime example of another disposition candidate. But no, we would not break up a shopping center.
Speaker Change: But would we sell a shopping center that has both a Home Depot and a Costco and maybe a couple shops at a low cap rate? Absolutely.
Speaker Change: Please see the complete disclaimer at https://sites.google.com or at https://sites.google.com
Speaker Change: Okay.
Speaker Change: Okay, so probably the ideal candidate is a Home Depot that doesn't have a lot of cross shopping with the rest of the center and that it's physically a little more isolated. Is that a good way to...
Speaker Change: Paulina, you should think of it as two separate categories. One is the single tenant asset, like the one we just sold yesterday, where it's really just that one single big box credit tenant.
Speaker Change: And then we have several shopping centers which effectively trade like a big box credit tenant would because it is one or two or in some cases three big box tenants on long term leases with very good sales and low rents.
Speaker Change: So, whether we were to sell those shopping centers or we were to sell the single-tenant assets, we think they both are, you know, sub-six-cap kind of stuff that would allow us to accretively trade into some of the shopping centers we're now targeting.
Speaker Change: Okay, perfect, understood. And if I may, the last one...
Speaker Change: So, like the typical single store with a drive-thru to capitalize on the great demand that we're seeing. So, is this something that you can do more aggressively, your portfolio? And is it something that would interest you given the economics behind it?
Speaker Change: Absolutely and we are doing it and we've got several of those kinds of deals you know in the in the pipeline right now some that are in development right now.
Speaker Change: We don't talk about them as much because, you know, the single tenant...
Speaker Change: You know, drive-thru or bank or facility doesn't move the needle a whole lot on the numbers, but I can think of off the top of my head at least five of those that we have in some of our better shopping centers, whether they're ground leases or built to suit for single tenants or in a couple of cases even small strips.
Speaker Change: and that they are accretive. I think when we talk about construction...
Speaker Change: and development being hard to add meaningful supply in the future. We're talking about, you know, the 100,000 to 300,000 square foot shopping centers where you're building around an anchor tenant and the math just doesn't seem to work with what those inline type tenants are paying.
Speaker Change: But to the extent we can get at out-parcel opportunities, whether it's ground-lease or bill-to-suit, we're all over those and we have a lot of them in the queue.
Speaker Change: Thank you.
Speaker Change: Thank you. That redevelopment pipeline is really generating that 14% return.
Speaker Change: Thank you.
Speaker Change: Ladies and gentlemen, a reminder, if you wish to ask a question, please press star and 1.
Speaker Change: Thank you. Bye-bye.
Speaker Change: Thank you.
Speaker Change: As there are no further questions, I now hand the conference over to Jeff Olson for his closing comments. Jeff?
Jeff Olson: Thank you. We look forward to seeing many of you at the upcoming NARED conference in Las Vegas, and we'll speak to you soon. Please call if you have any questions.
Speaker Change: Thank you. The Conference of Urban Edge Properties has now concluded. Thank you for your participation. You may now disconnect your lines.