Q2 2025 Urban Edge Properties Earnings Call

Areeba Ahmed: Greetings and welcome to the Urban Edge Properties second quarter 2025 earnings call. At this time, all participants are in a listen-only mode. A brief question and answer session will follow the formal presentation. Should anyone require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Areeba Ahmed, investor relations associate. Thank you. You may begin.

Greetings and welcome to the Urban Edge Properties Q2 2025 earnings call. At this time, all participants are in a listen-only mode.

A brief question and answer session will follow the formal presentation. Should anyone require operator assistance? During the conference? Please press star zero on your telephone keypad,

Areeba Ahmed: Good morning and welcome to Urban Edge Properties second quarter 2025 earnings conference call. Joining me today are Jeff Olson, Chairman and Chief Executive Officer; Jeff Mooallem, Chief Operating Officer; Mark Langer, Chief Financial Officer; Heather Oberg, General Counsel; Scott Oster, EVP and Head of Leasing; and Andrea Drazen, 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 uncertainty 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. Reconciliations of these measures to GAAP results are available in our earnings release and our supplemental disclosure package.

Good morning and welcome to Urban Edge properties. Second quarter 2025 earnings conference call. Joining me today are Jeff Olsen chairman and Chief Executive Officer, Jeff malam Chief Operating Officer, Mark Langer, Chief Financial Officer, Heather oelberg general, counsel Scott, auster, EVP and head of Leasing and Andrea Draven 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 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.

Areeba Ahmed: At this time, it is my pleasure to introduce our Chairman and Chief Executive Officer, Jeff Olson.

In our discussion today, we will refer to certain non-GAAP financial measures and reconciliations of these measures to GAAP. Results are available in our earnings release and our supplemental disclosure package.

Jeff Olson: Great. Thank you, Areeba, and good morning, everyone. We delivered great second quarter results, increasing FFO as adjusted by 12% over last year and 8% year to date. Same property net operating income increased by 7.4% for the quarter and 5.6% year to date. The demand for space in our shopping centers remains strong. There are few high-quality vacancies remaining in our markets, often leading to multiple bids on available space, which is driving upward pressure on rents and lease terms. Our same property occupancy increased to 96.7%, up 10 basis points from the prior quarter, and our shop occupancy rate increased to a record high of 92.5%, up 270 basis points over the prior year. Given that we are now nearly 97% leased and our properties have undergone significant improvements, including new anchors, parking lots, facades, and roofs, we anticipate a substantial decrease in future capital expenditures.

At this time, it is my pleasure to introduce our Chairman and Chief Executive Officer, Jeffrey Olson.

Great. Thank you. Our reeba and good morning. Everyone.

We delivered great second quarter results, increasing FFO as adjusted by 12% over last year and 8% year to date.

Same property net operating income increased by 7.4% for the quarter and 5.6% year-to-date.

The demand for space in our shopping centers, remains strong.

There are few high-quality vacancies remaining in our markets often leading to multiple bids on available space, which is driving upward pressure on rents and Lease terms.

Entire quarter and our shop occupancy rate increased to a record high of 92.5% up 270 basis points over the prior year.

Jeff Olson: The investment sales market for retail assets is thriving, driven by both public and private buyers. One of our board members recently described the current shopping center landscape as the revenge of the nerds, highlighting that retail is back in demand, driven by solid operating fundamentals, increased debt availability, and increased capital flows. Year to date, we have sold $66 million of assets at a blended cap rate of 4.9%. This includes the sale of two high-value, lower-growth properties, Kennedy Commons and McDade Commons, for $41 million, and the previously announced sale of a 44,000 square foot building across from Bergen Town Center for $25 million. Looking ahead, based on the strong results we have achieved to date, we increased our 2025 FFO as adjusted guidance by $0.02 per share to a new range of $1.40 to $1.44 per share, reflecting growth of 5% over 2024 at the midpoint.

Given that we are now nearly 7 97% leased and our properties of undergone significant improvements including new anchors parking, lots facades and roofs. We anticipate a substantial decrease in future Capital expenditures.

The investment sales market for retail assets is thriving.

Driven by both public and private buyers.

1 of our board members recently described the current shopping center landscape as the Revenge of the Nerds.

Highlighting that retail is back in demand, driven by solid operating fundamentals, increased debt availability, and increased capital flows.

year to date, we have sold 66 million dollars of assets at a blended cap rate of 4.9%

This this includes the sale of 2 high-value lower Growth Properties. Kennedy, Commons and MacDade Commons for 41 million. And the previously announced sale of a 44,000 square foot building across from Bergen Town Center for 25 million.

Jeff Olson: We remain confident in our strategy, which is anchored by five key strengths: one, a portfolio concentrated in the densely populated, supply-constrained DC to Boston corridor; two, highly visible future net operating income growth supported by our $24 million signed but not opened pipeline, representing 8% of current NOI; three, a $142 million redevelopment pipeline expected to yield a 15% return; four, strategic capital recycling. Since October 2023, we have acquired 552 million of high-quality shopping centers at a 7.2% cap rate and sold $493 million of non-core low-growth assets at a 5.2% cap rate. And five, a resilient balance sheet with $1.5 billion in non-recourse mortgages and 42 unencumbered properties valued at nearly $2 billion. We only have $139 million, or 9% of our total debt maturing through 2026. Our continued momentum and success are driven by our dedicated team.

Looking ahead based on the strong results, we have achieved to date. We increased our 2025 ffo, as adjusted guidance by 2 cents per share to a new range of 140 to 144 per share, reflecting growth of 5%. Over 2024 at the midpoint

we remain confident in our strategy, which is anchored by 5 key strengths.

A portfolio concentrated in the densely populated, supply-constrained DC to Boston corridor.

2, highly visible future net. Operating income growth supported by our 24 million signed, but not open pipeline representing 8% of current noi.

3, a 142 million Redevelopment pipeline expected to yield a 15% return.

4 strategic Capital recycling.

Since October 2023, we have acquired 552 million of high-quality shopping centers at a 7.2% cap rate and sold 493 million of 9 cor low growth assets at a 5.2% cap rate

And we have a resilient balance sheet with $1.5 billion in non-recourse mortgages and 42 unencumbered properties valued at nearly $2 billion.

We only have 139 million or 9% of our total debt, maturing through 2026.

Jeff Olson: I'm grateful for their passion and commitment to execute our strategic plan while working in such a collaborative manner to achieve outstanding results. I will now turn it over to our Chief Operating Officer, Jeff Mooallem.

Our continued momentum and success are driven by our dedicated team.

I'm grateful for their passion and commitment to execute, our strategic plan while working in such a collaborative manner to achieve outstanding results.

Jeff Mooallem: Thanks, Jeff, and good morning, everyone. It was another strong quarter for leasing and development as we continue to hit on our goals of increasing occupancy, generating double-digit leasing spreads, completing development projects at or ahead of budgeted timelines, and adding new developments at double-digit returns. Let's get into it. We executed 42 deals totaling 482,000 square feet in the second quarter. This included 27 renewals totaling 394,000 square feet at a 12% spread and 15 new leases totaling 88,000 square feet at a 19% spread. New leasing activity included two boot barns, Fidelity Investments, Just Salad, and Wonder. With these executions, over 95% of our S&O pipeline is now comprised of national and regional tenants, providing further assurance that our NOI growth is derived from a stronger credit platform than what we used to see in years past.

I will now turn it over to our Chief Operating Officer. Jeff muela.

Thanks, Jeff and good morning, everyone.

It was another strong quarter for Leasing and development. As we continue to hit on our goals of increasing occupancy, generating double-digit leasing spreads completing development projects at or ahead of budgeted timelines and adding new developments at double-digit returns. Let's get into it.

We executed, 42 deals, totaling 482,000 square feet in the second quarter. This included 27 renewals totaling 394,000. Square feet at a 12% spread and 15 new leases toting. 88,000 square feet at a 19% spread.

New leasing activity, included 2 boot Barnes Fidelity Investments, just salad and wonder.

Jeff Mooallem: Our same property lease rate is now 96.7%, reflecting an increase of 10 basis points from last quarter. Leading the way in occupancy again was shop leasing, which reached a new record high of 92.5%, a 10 basis point increase from last quarter, and a 270 basis point increase from the same period last year. We have an excellent pipeline for the second half of the year as we close in on our goal of exceeding 93% shop occupancy in 2025. Anchor occupancy remains steady, moving from 97.2% to 97.4% despite the bankruptcies of Big Lots and Party City earlier this year. Just as we were expecting those two bankruptcies, we were not surprised when At Home filed last month. We have two At Home stores, both paying single-digit rents, and we expect to get one location back this year.

With these executions, over 95% of our Sno pipeline is now comprised of national and Regional tenants providing further assurance that our noi growth is derived from a stronger credit platform than what we used to see in years past.

Our same property, lease rate is now 96.7% reflecting an increase of 10 basis points from last quarter.

basis point increase from last quarter and a 270 basis point increase from the same period last year,

We have an excellent pipeline for the second half of the year as we close in on our goal of exceeding 93% shock shop occupancy in 2025.

Anchor occupancy remains steady moving from 97.2% to 97.4% despite the bankruptcies of Big Lots and Party City earlier this year.

Just as we were expecting those 2 bankruptcies, we were not surprised when at home filed last month.

Jeff Mooallem: As we've said before, tenant bankruptcies are a reality of this business, and in times like this, we can embrace that reality as an opportunity. Removing dated stores that generate minimal traffic from our centers and replacing them with higher credit and better concept operators has consistently had a positive ripple effect on the rest of the property. On the development front, we continue to progress on multiple projects, delivering spaces and getting stores open. During the quarter, we completed five redevelopment projects enabling new tenant openings at Montehedra, Marlton, Brick, Walnut Creek, and Huntington. Adding national tenants like Burlington, Kava, First Watch, Starbucks, and Sweetgreen to these properties has strengthened credit and increased traffic. We also activated new projects at Bergen Town Center, where we continue to improve the food options at one of the busiest assets in our portfolio.

We have 2 at home stores, both paying single-digit rents and we expect to get 1 location back this year.

As we've said before, tenant bankruptcies are a reality of this business, and in times like this, we can Embrace that reality as an opportunity.

Removing dated stores, that generate minimal traffic from our centers and replacing them, with higher credit and better concept. Operators has consistently had a positive ripple effect on the rest of the property.

On the development front, we continue to progress on multiple projects delivering spaces and getting stores open.

During the quarter, we completed 5 Redevelopment projects, enabling new tenant openings at Monte hidra, Marlton brick, Walnut Creek and Huntington.

Adding National tenants like Burlington cabba. First, Watch Starbucks, and sweet green to these properties, as strength, and credit, and increased traffic.

Jeff Mooallem: Tate Bakery, Capon's Burgers, and Tommy's Tavern will complement four other new food concepts we previously announced, giving this newly renovated property one of the best dining lineups in all of Bergen County. With the five projects that came off our development pipeline and the two new projects added, active redevelopment now totals $142 million and maintains a strong expected return of 15%. With that, I'll hand it over to our CFO, Mark Langer.

We also activated new projects at Bergen Town Center where we continue to improve the food options at 1 of the busiest Assets in our portfolio.

Tate Bakery, Cape bonds, burgers and Tommy's Tavern, will complement 4 other new food Concepts. We previously announced giving this newly renovated property 1 of the best dining lineups in all of Bergen County.

With the 5 projects that came off our development Pipeline and the 2, new projects added active Redevelopment now, totals 142 million and maintains a strong expected return of 15%.

Mark Langer: Thank you, Jeff, and good morning. We were pleased to deliver another strong quarter marked by solid earnings performance and continued leasing momentum. FFO as adjusted came in at $0.36 per share, and our same property NOI, including redevelopment, increased 7.4% compared to the second quarter of 2024. The outperformance was driven in part by higher rental revenue from tenant rent commencements, higher net recoveries, and year-end CAM reconciliation billings, of which approximately a penny per share is non-recurring. Same property NOI growth would have been 5.6%, excluding the $1.2 million of non-recurring tenant billings. Still, a very strong result reflecting growth from our S&O pipeline. FFO as adjusted also benefited from lower recurring G&A expenses. I will comment on our favorable trend on G&A in a moment when I provide an update on guidance.

With that, I'll hand it over to our CFO Mark Langer.

Thank you, Jeff, and good morning.

We were pleased to deliver another strong quarter, marked by solid earnings performance and continued leasing momentum.

Ffo has adjusted came in at 36 cents per share and our same property noi, including Redevelopment increased 7.4% compared to the second quarter of 2024.

The outperformance was driven in part by higher rental revenue from tenant rent, commencements higher net, recoveries and year-end cam. Reconciliation Billings of which approximately a penny per share is non-recurring.

Same property. Noi growth would have been 5.6%. Excluding the 1.2 million of non-recurring tenant Billings

Still a very strong result reflecting growth from our Sno pipeline.

Ffo as a adjusted also benefited from lower recurring GNA expenses.

Mark Langer: On the financing front, at the end of June, we paid off our $50 million mortgage loan on the Plaza at Woodbridge, which had an effective interest rate of 6.4% and was due to mature in June 2027. Payment was made in part using our line of credit, which has a current interest rate of approximately 5.4%. Our $800 million line now has $90 million drawn. Our balance sheet remains in excellent shape, with total liquidity of approximately $800 million, including $118 million in cash. As Jeff highlighted, we have just 9% of our outstanding debt coming due through 2026. Our cash flow has improved steadily as we have added high-quality anchors and strong regional shop tenants to our portfolio. We have carefully managed our debt during our growth cycle the past few years.

I will comment on our favorable trend on GNA in a moment when I provide an update on guidance,

On the financing front, at the end of June, we paid off our $50 million mortgage loan on the plaza at Woodbridge, which had an effective interest rate of 6.4% and was due to mature in June 2027.

Payment was made in part using our line of credit which has a current interest rate of approximately 5.4%.

Our 800 million line now has 90 million drawn.

Our balance sheet remains in excellent shape.

With total liquidity of approximately million dollars, including 118 million in cash.

As Jeff highlighted we have just 9% of our outstanding debt coming due through 2026.

Our cash flow has improved steadily as we have added, high-quality anchors, and strong Regional shop, tenants to our portfolio.

Mark Langer: Our adjusted EBITDA to interest expense has increased to 3.7 times, up nearly 30% from 2.9 times a year ago. Our net debt to annualized EBITDA was 5.5 times in the second quarter, positioning us well to capitalize on future growth opportunities. Looking ahead to the remainder of 2025, we are increasing our FFO as adjusted guidance by $0.02 per share to a new range of $1.40 to $1.44 and projecting same property NOI growth, including redevelopment, to be in the range of 4.25% to 5%. Our assumptions for uncollectible revenue remain unchanged at 75 to 100 basis points of gross rent and incorporate the expected impact of At Home.

We have carefully managed, our debt during our growth cycle, the past few years.

Our adjusted EBIT to interest expense has increased to 3.7 times, nearly 30% from 2.9 times a year ago.

Our net debt to annualize, EBA was 5 and a half times in the second quarter.

Positioning us well to capitalize on future growth opportunities.

Looking ahead to the remainder of 2025, we are increasing our ffo as adjusted guidance by 2 cents per share to a new range of 1.40 to 1.44.

Property in oi growth, including Redevelopment to be in the range of 4 and a quarter percent to 5%.

Mark Langer: Our $24 million S&O pipeline continues to be a key growth driver, with $3.9 million in annualized gross rent already commenced in the second quarter, and we expect to recognize another $1.7 million in new commencements in the remainder of the year, which will predominantly come online in Q4. Based on results year to date and our future expectations, we have lowered our recurring G&A forecast for 2025 by $500,000, bringing the midpoint to $35 million, which implies a reduction of 3% from 2024. This is due to a combination of factors, including lower headcount and the expected timing to backfill open positions, in addition to other cost-saving measures. In closing, we remain focused on executing our strategic plan, driving leasing and occupancy, delivering new tenant spaces on schedule, and carefully managing expenses. We're confident in our ability to continue delivering sector-leading growth.

Our assumptions for uncollectible Revenue. Remain unchanged at 75 to 100 basis points of gross rent and incorporate the expected impact of at home.

Our 24 million Sno pipeline continues to be a key growth driver with 3.9 million in annualized Gross. Rent already commended in the second quarter. And we expect to recognize another 1.7 million in new commencements and the remainder of the year, which will predominantly come online in Q4.

Based on results year to date and our future expectations. We have lowered, our recurring GNA forecast for 2025 by $500,000. Bringing the midpoint to 35 million, which implies a reduction of 3% from 2024

This is due to a combination of factors including lower head, count, and the expected timing to backfill open positions. In addition to other cost-saving measures

In closing, we remain focused on executing our strategic plan driving Leasing and occupancy, delivering new tenant spaces on schedule, and carefully managing expenses.

Mark Langer: With that, I'll turn the call over to the operator for questions.

We're confident in our ability to continue delivering sector-leading growth.

With that, I'll turn the call over to the operator for questions.

Areeba Ahmed: Thank you. We will now be conducting a question and answer session. If you would like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star two if you would like to remove your question from the queue. For those using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment, please, while we pull for questions. The first question is from Ronald Camden from Morgan Stanley. Please go ahead.

Thank you. We will now be conducting a question and answer session. If you would like to ask a question, please press *1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press *2 if you would like to remove your question from the queue. For those using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment, please, while we pull for questions.

Ronald Kamdem: Hey, just two quick ones, I guess, starting with the record occupancy and lines of base. Maybe can you talk a little bit about, you know, how much more upside you think is that number, that occupancy number? And number two, how is that translating into either better lease contracts or pricing power for you guys in the business? Thanks.

The first question is from ra. Ronald Camden from Morgan Stanley. Please go ahead.

Jeff Olson: Jeff, go ahead.

Hey uh, just 2 quick ones. I guess, starting with uh the record occupancy and the inline space maybe, can you talk a little bit about, you know, what, how much more upside you think is, is that number that occupancy number? And and number 2 has that translating into either better lease contracts or pricing power for you guys uh in the business. Thanks.

Jeff Mooallem: Yeah. Hey, Ron, good morning. Yeah, listen, we're really happy with where we are on the shop space. I'll take that first. But as I said in my prepared comments, we think we can get to between 93 and 94,000 square feet, 93 and 94% shop occupancy, which requires us to get another 50, 60, 70,000 square feet and also account for some vacates, you know, as the year goes on, although we don't expect much of that. The nice thing about the shop occupancy right now is that we do have, as you said, real pricing power. And of course, pricing power today is not just charging a higher rent or asking for better interest rates, but it's on things like exclusive use provisions, radius restrictions, opening dates, landlord contributions, tying things to permitting.

Jeff, go ahead.

Jeff Mooallem: We've been able to extract much better terms on all of the shop leasing we've been doing. So there's a little bit of run rate there in terms of occupancy growth and certainly better economic and other terms in the leases. On the anchor side, you know, we have a name circled next to pretty much every anchor vacancy in the portfolio. Some of those deals should happen in the next, you know, few weeks to a couple of months, and we'll announce them in 3Q. And some of them might take longer, but there's certainly more activity on all of our spaces than we've seen in years past, and we're not really too worried about having a lot of space that's going to be sort of static, inherent, long-term anchor vacancy. So that's pretty good news as well.

Yeah. Hey Ron, good morning. Um, yeah, listen, we're we're really happy with where we are on the shop space. I'll take that first, but as I said, in my in my, uh, prepared comments, we think we can get to, between 93 and 94,000, square feet, 93, and 94 percent shop occupancy, which requires us to get another 50, 60 70,000 square feet, and also account for some vacates, uh, you know, as the year goes on, although we don't expect much of that. Um, the nice thing about the shop occupancy, right now, is that we do have, as you said, real pricing power and of course, pricing power. Today is not just charging a higher rent, or asking for better interest rates, but it's on things like exclusive use, provisions radius, restrictions opening dates, uh, landlord contributions, uh, tying things to permitting, uh, we've been able to extract much better terms on all of the shop leasing. We've been doing. So there's there's a little bit of run right there in terms of occupancy growth and certainly better economic and other terms in the leases on the anchor side. Um, you know, we have a name sir

Ronald Kamdem: Great. And then my second one, a little bit of a two-parter, but just you guys have had a lot of success on sort of the capital recycling front. Maybe just talk a little bit about what you're seeing sort of in terms of cap rates and opportunities going forward. And then the second part is that the At Home update was helpful, but any sort of update on Kohl's as well. Thanks.

Circle next to pretty much every anchor vacancy in the portfolio. Um, some of those deals should happen in the next, you know, few weeks to to a couple of months and we'll announce them in 3 Q. Uh, and some of them might take longer but they're certainly more activity on all of our spaces than we've seen in years past. And we're not really too worried about having a lot of space that's going to be sort of static inherent long term. Uh, anchor vacancy, so that's uh pretty good news as well.

Great. And then my second 1, a little bit of a 2-part, but just you guys have had a lot of success on sort of the capital recycling front. Uh, maybe just talk a little bit about what you're seeing.

Jeff Olson: Yeah. Hi, Ron, it's Jeff. Let me start with the acquisition market, which, you know, has been heating up even over the last, you know, several months. And I think what's happened sort of in this post-COVID environment, investors have realized that in the shopping center space, the cash flows are durable and there's actually a fair amount of growth coming going forward. In addition, the lenders have really stepped up, in particular the banks. So we're starting to see them become much more active in the market. And as you know, the banks are, you know, much more flexible than CMBS lenders, and the pricing is very competitive. In fact, we're negotiating a bank loan right now where the equivalent spread is 135 basis points over treasuries. That would be a record low for us. And remember, this is non-recourse debt.

Um, sort of, in terms of cap rates and opportunities going forward. And then the the second part is that the at home update was helpful, but any sort of update on coals as well, thanks.

Jeff Olson: So overall, as financing becomes more attractive in the space, there certainly are more buyers now willing to pay higher prices. I think the sellers overall generally recognize what's happening, so they are putting more product into the market, and they're also asking a whole lot of money for that product too. So pricing expectations are awfully high. At the moment, we're evaluating lots of deals, and we do hope to find some opportunities for more capital recycling. I think we're going to test the market this fall for more dispositions, and again, we're sort of hoping to place that disposition capital into higher yielding acquisitions that have higher long-term growth rates as well.

They've become much more active in the market. Um, and as you know, the banks are much more flexible than CMBS lenders, and the pricing is very competitive. In fact, we're negotiating a bank loan right now where the equivalent spread is 135 basis points over Treasuries; that would be a record low for us. And remember, this is non-recourse debt. So, overall, as financing becomes more attractive in the space, there are more buyers now willing to pay higher prices.

Um, I think the sellers overall generally recognize what's happening. So they are putting more product into the market, and they're also asking a whole lot of money for that product too. So pricing expectations are awfully high.

Jeff Olson: But in the meantime, we've got plenty of growth to mine from our existing assets, including from our S&O pipeline, which is, as we said, 8% of total NOI, which I think may be the highest in the space, and also from redevelopment. In terms of pricing, Ron, I think what you're seeing for higher quality assets today are cap rates sort of in that 5.5% to 6% range. If the Kaggers are able to, the NOI Kaggers are able to get 3% growth, that would imply unleveraged IRRs in the 8% to 9% range and leveraged IRRs in the 10% to 12% range.

At the moment, we're evaluating lots of deals and we do hope to find some opportunities for more Capital recycling. I think we're going to test the market this fall for more dispositions and um, and again, we're sort of hoping to place that disposition Capital into higher yielding Acquisitions that have higher long-term, growth rates as well.

But in the meantime, we've got plenty of growth to mine from our existing assets, including from our Sno pipeline, which is, as we said, 8% of total NOI. I think that may be the highest in the space, and also from redevelopment.

Um in terms of pricing Ron, I think what you're seeing for higher quality assets today are cap rates sort of in that 5 1/2 to 6% range. If the kurz are are, are are able the noi kurz are able to get 3% growth,

Jeff Olson: As I sort of reflect on those numbers, Ron, and look at our stock at 20 bucks, which is implying a cap rate that starts with a 7, and then when I overlay that on top of our expected NOI growth, which we think will be probably at least 4% over the next several years, which is driven largely by this S&O pipeline, it seems to us that our stock is relatively inexpensive.

That would imply unleveraged irrs in the 8 to 9% range and leveraged irrs in the 10 to 12% range.

Um, as I sort of reflect on those numbers, Ron and look at our stock at 20 bucks, which is implying a cap rate. Uh, that starts with a 7. And then when I overlay that on top of our expected, noi growth, which we think will be probably, at least 4% over the next several years, which is driven largely by this Sno pipeline. It's

seems to us that are stock is relatively inexpensive.

Ronald Kamdem: Great. And then the update on Kohl's?

Jeff Olson: Jeff, why don't you take that one?

It's great. And then the update on calls.

Jeff Mooallem: Yeah, I mean, Ron, you know, obviously Kohl's is on our radar screen. They're on everyone's radar screen. But at this point in the process, and we've, you know, met with everybody there, Mark and his team have done a very good job of, you know, understanding both their current maturity debt profile and where the stock is trading and interest in the company. You saw it was a meme stock last week and had a really nice spike for a little while. We're really still playing offense when it comes to Kohl's, meaning we are talking to them about locations where they have term that we'd like to get back. And we've approached them about two of those locations already and having some conversation, but we're not seeing a great sense of urgency from them to close stores.

Uh, Jeff, why don't you take that one?

Jeff Mooallem: They've told us that they are, you know, four-wall profitable in almost all of their stores. Obviously, they're keeping an eye on a declining sales environment, as are we, but right now they don't seem to be too concerned that they can't be a profitable ongoing business. And most of their stores in the Northeast, which is where our stores with them are located, are generally amongst their best performers in the portfolio. So what I would say is while we're tracking Kohl's, we don't think of it as a 2025 or even really a 2026 decision we're going to have to make. If we can get some stores back and play offense and re-tenant them, we will. But in the meantime, we're just kind of, you know, keeping an eye on it and we don't think it's imminent.

Yeah, I mean Ron uh, you know, obviously Cole's is on our radar screen, they're on everyone's radar screen but at this point in the process and we've, you know, met with everybody there. Uh, Mark, and his team have done a very good job of, you know, understanding both their current maturities, uh, debt profile. And, and where the stock is trading, and, and interest in the company, you saw, it was a, it was a meme stock last week, and had a really nice Spike for a little while. Um, we're really still playing offense, when it comes to Cole's, meaning we are talking to them about locations where they have term that we'd like to get back. And, uh, We've approached them about 2 of those locations already and having some conversation, but we're not seeing a great sense of urgency from them to close doors. Uh, they've told us that they are, you know, 4 wall profitable in almost all of their stores. Obviously, they're they're keeping an eye on the declining sales environment as are we? But right now, they don't seem to be too concerned that they can't be a profitable ongoing business, and most of their stores in the Northeast.

Which is where our stores with them are located are generally amongst their best performers in the portfolio. So I what I would say is while we're tracking calls we don't think of it as a 2025 or even really a a 2026 decision. We're going to have to make if if we can get some stores back and play offense and reten at them, we will. Um but uh, in the meantime we're just kind of

Jeff Olson: Super helpful. Thanks so much.

You know, keeping an eye on it and we don't think it's imminent.

Super helpful. Thanks so much.

Areeba Ahmed: The next question is from Floris van Dijkum from Latenburg Zelman. Please go ahead.

The next question is from Flores van Dikum from Ladenburg Thalmann. Salman, please go ahead.

Floris van Dijkum: Hey guys, good morning. Thanks for taking my questions. So, this accretive recycling has been incredibly profitable for you guys in the past. Are you running out of runway? How much more in terms of volume do you think you can sell? I note you've got some California assets, you got an asset in Missouri and New Hampshire, potentially, and obviously some other boxier assets. And would you consider, if there's pressure on cap rates in your core markets, in New York and in Boston and DC, maybe expanding your reach going forward?

Hey guys. Uh, good morning. Um thanks for taking my questions.

Um, so, uh, the secretive recycling, uh, has been incredibly profitable for you guys in the past. Um, are you running out of, uh, Runway, how much more, uh, in terms of volume? Do you think you can sell? I, I, I know you've got some California assets. You got an acid in Missouri, in New Hampshire, uh, potentially and obviously some other boxier assets and, and would you consider

Jeff Olson: Yeah, Floris, I think everything is on the table, including centers that we own in the New York metro market, provided pricing is there. There is a price for every asset at which we would be willing to transact. So I don't want to put a number on it, but we absolutely will be testing the market this fall to see, you know, what we might be able to achieve, just given the demand that's taking place in the market. We would have never anticipated, you know, a couple of years ago that we'd be able to buy and sell half a billion dollars of properties at a 200 basis point spread. It would have never said that on an earnings call. But we realized that it really has supercharged this company.

In DC, maybe expanding your your reach uh, going forward.

Yeah. Uh, Flores, I think everything is on the table and and and and including centers that we own in the uh, the New York Metro Market provided pricing is there. There is a price for every asset at which we would be willing to transact.

Jeff Olson: And given the size of our company, you know, we are highly focused on trying to make things like that happen going forward.

So um I don't want to put a number on it but we absolutely will be testing the market. This fall to see, you know what, we might be able to achieve just given the the demand that's taking place in the market, we would have never anticipated, you know, a couple years ago that we'd be able to buy and sell half a billion dollars of properties at a 200 basis point spread and would have never said that on an earnings call. But we realized that it it it, it, it, it really, it has supercharged this company and given the size of our company. You know, we are highly focused on trying to make things like that happen, going forward.

Floris van Dijkum: Thanks, Jeff. Maybe a follow-up. I mean, does the improvement in the market also make you think about your redevelopment plans on some of your existing assets? I'm thinking of assets like Hudson Mall, which, as last look, is still, you know, 75% leased or something like that, and make you more confident about deploying capital into assets like that to reposition them?

Jeff Olson: We do. I mean, that's largely driven by tenant demand, which is also, you know, much stronger than it was earlier. So, you know, there are many large big box tenants that are underrepresented throughout our markets, including names like Walmart and BJ's and Ross and TJX. All are looking for new space and all are having a hard time finding space, which is putting upward pressure on rents.

Uh, thanks. Jeff. May maybe a follow-up. I mean, does the Improvement in the markets also make you think about your uh, Redevelopment plans on some of your existing assets. I'm thinking of assets like, Hudson, uh, Hudson Mall uh which as the last look is still you know 75% leased or something like that and and and make you more confident about deploying Capital into assets like that to reposition them.

We do, I, I mean that's largely driven by tenant demand, which is also, you know, much stronger than it was earlier. So, you know, there, there are many large big box tenants that are under represented throughout our markets. Um, including names like Walmart and BJs, and Ross and TJX all are looking for new space. And all are having a hard time finding space, which is putting upward pressure on rents.

Floris van Dijkum: Thanks, Jeff.

Jeff Olson: Thank you, Floris.

Thanks Jeff.

Thank you, Flores.

Areeba Ahmed: As a reminder, to ask a question, please press star one. The next question is from Michael Griffin from Evercore ISI. Please go ahead.

As a reminder to ask a question, please press *1.

Floris van Dijkum: Great, thanks. Maybe just first hitting on the balance sheet, just some commentary around the mortgage loan payoff in the quarter says that it's maturing June of 2027, but you've got a couple more maturities before that. Just, I don't know, maybe Langer, if you could comment on that, you know, why pay off that mortgage relative to the stuff that's coming due earlier?

The next question is from Michael Griffin from evercore isi. Please go ahead.

Mark Langer: Yeah, sure, Michael. It's actually pretty easy. That was a loan that had no prepayment penalty, and we were able to, you know, use our line at 100 basis points lower than that rate. So we took advantage. We've looked at our upcoming maturities, and there was just an opportunity there where it made, you know, a lot of sense.

Great, thanks. Um, maybe just first hitting on the balance sheet, just some comments area around the mortgage loan payoff. In the quarter says that it's maturing June of 2027, but you've got a couple more maturities before that. Just, I don't know, maybe Lang or if you could comment on that. You know why pay off that mortgage relative to the stuff that's coming to you earlier.

Yeah, um, sure Michael, it's actually pretty easy that was a loan. That had no prepayment penalty and we were able to, you know, use our line at 100 basis points, lower than that rate. So, we took advantage, we've looked at our upcoming maturities and there was just an opportunity there where it made. You know, a lot of sense.

Floris van Dijkum: Great, that's helpful. And then maybe just stepping back, kind of thinking about the leasing environment in the portfolio. Now, obviously, you're about 97% leased. That lease to occupied spread continues to narrow. I mean, Jeff, as you kind of talk about pricing power from a landlord perspective, is this more the ability to push space rents? Are you, you know, do you have better negotiating power when it comes to concessions? You know, I'm just trying to get a sense of kind of the landlord-tenant relationship here and how best you can utilize that position of being very highly leased to maximize revenues.

Jeff Olson: Jeff, go ahead.

Great, that's helpful. Um, and then maybe just stepping back kind of thinking about the leasing environment the portfolio. Now obviously you're about 97% lease that lease to occupied spread continues to narrow, I mean Jeff as you kind of talk about pricing power from a landlord perspective. Is this more the ability to push space rents? Are you, you know, do you have better negotiating power when it comes to concessions, you know, I'm just trying to get a sense of kind of the landlord tenant relationship here and and how best you can utilize that position of being very highly least to to maximize revenues.

Jeff Mooallem: Yeah, hey, good morning, Michael. Yeah, it's a little of everything, right? Each deal is kind of its own animal in terms of finding, you know, the soft spots to push down on. I will tell you that one of the areas that we have had much greater success in the past is on increases. The concept of, you know, 10% every five years only really happens if it's a national tenant who's absolutely dug in on it and is willing to pay a face rate and agree to, you know, capital and other things that they never would have agreed to in the past. But most often, we find that our nationals are willing to negotiate much better increases than before. The other place that it really comes in for us that's very important is in the delivery conditions.

Jeff, go ahead.

Jeff Mooallem: You know, in the past, you would always have a situation where the landlord was doing a bunch of work prior to the tenant getting to the space, and that required two permits and extended time and maybe took another three, four months to get the tenant open for business. Very often now, we're able to say you're taking it as is. Not only does that provide a better economic result for us, but it, you know, allows the tenant to get open faster because it's one permitting time. So those are two areas that our leasing team has really drilled down on in their negotiations and had really good success in. But they're really pushing on everything else. It's things like exclusives. It's things like not giving too many options. And it's things like co-tenancy requirements.

Yeah. Hey, good morning Michael. Um, yeah it's a little of everything right. Each deal is kind of its own animal, in terms of finding, you know the soft spots to to push out to push down on. Um I will tell you that 1 of the areas that we have had much greater success in the past is on increases the concept of, you know, 10% every 5 years. Uh, only really happens if it's a, a national tenant who's absolutely dug in on it and is willing to pay a face rate and agree to, you know, capital and other things that they never would have agreed to in the past. Uh, but most often we, we find that our Nationals are willing to negotiate much better increases than before the other place that it really comes in, uh, for us, that's very important, is in the delivery conditions, uh, you know, in the

Jeff Mooallem: We're trying to just negotiate better terms across the board, economic and non-economic, and we're having good success.

Uh, it's things like exclusives. It's things like not giving too many options. Um, and it's it's things like co-tenancy requirements. Uh, we're trying to just negotiate better terms across the board economic and non-economic and we're having good success.

Jeff Olson: Great. Just one more point on that issue, because I do think, you know, there's been a fair amount of discussion on CapEx. And what I'd say is that the last decade of CapEx spending is not representative of future spending. And it's in part because our portfolio is now 97% leased. It's in part because the retail market is much, much stronger, as Jeff just outlined. And it's also in part because by 2027, we will have redeveloped or repositioned about 70% of our portfolio. So we feel that's going to be a great thing going forward for CapEx.

Great. Just 1 just 1 more point on that issue because because I I, I do think, um, you know there's been a fair amount of discussion on capex. And what I'd say is that the last decade of capex spending is not representative of future spending, and it's in part because our portfolio is now, 97% least it's in part because the retail Market is much, much stronger as just just outlined and it's also in part because by 2027, we will have redeveloped or repositioned about 70% of our portfolio. So we feel that's going to be a, a, a, a, a great thing going forward for capex.

Floris van Dijkum: Thanks. That's some helpful context, Jeff. That's it for me. Appreciate the time.

Jeff Olson: Hey, you bet. Thank you.

Thanks. That's uh some helpful context, Jeff. That's it for me. Appreciate the time. Yeah. You bet. Thank you.

Areeba Ahmed: The next question is from Paulina Rojas from Green Street. Please go ahead.

The next question is from Paulina roas from Green Street. Please go ahead.

Paulina Rojas: Hi, and thank you. My question was actually about CapEx, and you touched on that at the end of the prior question. And thank you for adding that disclosure. It's very helpful. Can you maybe elaborate on the idea of CapEx declining in the future? It seems to me that in general, CapEx has been related to redevelopments, which have in turn been triggered by tenant churn. So given that we know that tenant churn is a constant in the industry, why wouldn't we expect future turnover, not just in the short term, but in the, you know, the next few years, driven by an expected tenant fallout, continue to drive CapEx at similar levels? Perhaps a little lower, but yeah, basically, I'm trying to gain confidence on the very low levels that you're forecasting at the end of that period in your chart.

Hi. Um, thank you. I am my question was actually about capex and you touched on that at the end of the prior question, and thank you for adding that disclosure. It's very helpful. Um, can you maybe elaborate on the idea of capex, uh, declining in the future?

Um, it seems to me that in general capex has been related to Redevelopment, which have in turn been triggered by tenant turn.

so,

even that we know that tenant turn is a constant in the industry. Um,

why wouldn't we expect future turnover?

Not just in the short term but in the, you know, the next few years driven by an expected tenant, Fallout continue to drive, capex at similar levels and perhaps a little lower. But, um,

But yeah, and basically, I'm trying to, uh, gain confidence on the very low levels that you're forecasting. Uh,

Jeff Olson: Paulina, I think the main point is that the tenants that we replaced, we replaced tenants that were struggling for years. This is like Toys R Us and Kmart and so many others that barely made it, but they made it over an extended time period. And we put in, you know, very high-quality credit tenants to replace them, tenants like ShopRite, tenants like TJX, tenants like Ross, and many others. So we're not expecting as much dislocation going forward in part because of the high-quality retailers that we put in place, and also in part because the retail market overall is just much healthier than it was 10 years ago.

at the end of that, uh, period in in your uh chart

Jeff Mooallem: Yeah, and Paulina, I would add, in addition to the fact that when it comes to leasing CapEx, we can negotiate better terms and we have better tenants than we had in years past. The other component of CapEx, you know, fixing your roofs in your parking lots or renovating your shopping centers, that piece of it, we've mostly done all the heavy lifting on. So we have, as Jeff said in his comments, we've renovated about 70% of the portfolio already. So we don't think we're going to have that same recurring run rate of maintenance CapEx. And then when it comes to renovating shopping centers with new facades and signs and, you know, things that the customer sees, so to speak, we believe there's a yield on that. We believe that the work we do on that will pay for itself in the form of better rent.

Pauline I think I I think the main point is that the tenants that we replaced um you know we replaced tenants that were struggling for years. This is like Toys R Us and Kmart and so many others that barely made it. But they made it over an extended time period. And we put in, you know, very high quality credit tenants to replace them tenants like shop, right? Tenants like TJX tenants, like Ross and and, and many others. So we're not expecting as much dislocation going forward in part because of the high quality retailers that we put in place and also in part because the retail Market overall is just much healthier than it was 10 years ago.

Yeah. And and Paulina, I would add in addition to the fact that when it comes to leasing capex, we can we can negotiate better terms and we have better tenants than we've had in years past the other component of capex, you know, uh fixing your roofs and your parking lots or renovating your shopping centers, that piece of it, we've mostly done all the heavy lifting on so we have we have as, as Jeff said in his comments, we've renovated about 70% of the portfolio already. So we don't think we're going to have that same recurring run rate of Maintenance capex. And then when it comes to renovating shopping centers,

Jeff Mooallem: So on all elements of CapEx, whether it's the defensive deferred maintenance CapEx, the offensive renovation CapEx, or the leasing CapEx, the metrics are a lot better than they were.

Mark Langer: And I'll just end, Paulina, for you with some numbers behind that. So our maintenance CapEx, as Jeff was saying, where we've done a lot of this heavy lifting, was about $36 million in 2022. We think it's going to be $20 to $22 million this year, and then we'll gradually decline closer to $15 million as these remaining projects come online. So that shows you by order of magnitude what we're seeing.

With new facades and signs and, you know, uh, and things that the customer sees, so to speak. Uh, we believe there's a yield on that. We believe that the work we do on that will will, will pay itself pay for itself in the form of better rents. So on all on all elements of capex, whether it's the defensive deferred maintenance capex, the offensive renovation capex or the leasing capex. The metrics are a lot better than they were.

And I'll just and, uh, Paul in here for you, with some numbers behind that. Um, so our maintenance cap act as Jeff was saying where we've done a lot of this heavy lifting was about 36 million dollars in 2022. We think it's going to be 20 to 22 million this year and then we'll gradually decline closer to 15 million as these remaining projects come alive. So that shows you buy order of magnitude. What we're seeing

Paulina Rojas: Thank you very much. Great caller.

Thank you very much. Great caller.

Areeba Ahmed: Thank you, Paulina. Once again, to ask a question, please press star one. The next question is from Ken Billingsley from Compass Point. Please go ahead.

Thank you for.

The next question is from Ken Billingsley. From compass point, please go ahead.

Floris van Dijkum: Good morning. Just a numbers question here. G&A guidance and then what was in the third, second quarter here. I see you lowered, obviously, G&A expense range to 34 to 35.5 million. The line item was up year over year, was about 11.7. Can you just talk about maybe what's different in that number? And was it just increased for the second quarter and going to come down for the second half or just add a little color there?

Uh, good morning. Just just a numbers question here on GNA, uh, from guidance. And then what was in the third? Uh, second quarter here. Um, I see you lowered. Obviously GNA expense range to, uh, 34 to 35.5 million. Um, the line item was up, um, year over year was about 11.7. Um, can you just talk about maybe what's, what's different in that number? Um,

Mark Langer: Sure. I think you're looking at the gross versus what we call the net recurring items. So in the quarter, the elevation that you saw was primarily we had $2 million of severance expense and then $1 million of some non-recurring transaction costs. So when you look at it on a recurring run rate basis, which is what we guided on, that's how you get to the lower number.

And maybe it was it just increased for the second quarter and going to come down for the second half or just add a little color there.

Sure, I think you're looking at the gross versus what we call the net recurring item. So, in the quarter, the elevation that you saw was primarily we had $2 million of severance expense, and then $1 million of some non-recurring transaction costs. So when you look at it on a recurring run rate basis, which is what we got it on, that's how you get to the lower number.

Floris van Dijkum: Excellent. Thank you. Appreciate it.

Mark Langer: Yep.

Excellent, thank you. Appreciate it.

Yep.

Areeba Ahmed: There are no further questions at this time. I would like to turn the floor back over to Jeff Olson for closing comments.

Jeff Olson: Great. Thank you for your interest, and we look forward to talking to you on our next call.

There are no further questions at this time. I would like to turn the floor back over to Jeff Olson for closing comments.

Great. Thank you for uh, your interest. And we look forward to talking to you on our next call.

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

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