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Section 1: 8-K (8-K)

8-K


UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549

FORM 8-K

CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported):
November 4, 2015

URBAN EDGE PROPERTIES
(Exact name of Registrant as specified in its charter)
Maryland
 
No. 001-36523
 
47-6311266
(State or other jurisdiction of incorporation)
 
(Commission File Number)
 
(I.R.S. Employer Identification Number)
 
888 Seventh Avenue
 
 
New York, NY 10019
 
 
(Address of Principal Executive offices) (Zip Code)
 
Registrant’s telephone number including area code: (212) 956-2556
 
Former name or former address, if changed since last report: N/A

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instructions A.2.):
o  
Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
 
 
o  
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
 
 
o  
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
 
 
o  
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))







Item 2.02 Results of Operations and Financial Condition

On November 4, 2015, Urban Edge Properties (the "Company") announced its financial results for the three and nine months ended September 30, 2015. A copy of the Company's earnings press release is furnished as Exhibit 99.1 to this report on Form 8-K. A copy of the Company's Supplemental Disclosure Package is furnished as Exhibit 99.2 to this report on Form 8-K. The information contained in this report on Form 8-K, including Exhibits 99.1 and 99.2, shall not be deemed "filed" with the Securities and Exchange Commission nor incorporated by reference in any registration statement filed by the Company under the Securities Act of 1933, as amended.

Item 7.01 Regulation FD Disclosure

On November 4, 2015, the Company announced its financial results for the three and nine months ended September 30, 2015 and made available on its website the press release and Supplemental Disclosure Package described in Item 2.02 above. The information contained in this report on Form 8-K, including Exhibits 99.1 and 99.2, shall not be deemed "filed" with the Securities and Exchange Commission nor incorporated by reference in any registration statement filed by the Company under the Securities Act of 1933, as amended.

Item 9.01 Financial Statements and Exhibits

(d) Exhibits:
99.1 - Earnings Press Release of Urban Edge Properties dated November 4, 2015.
99.2 - Supplemental Disclosure Package of Urban Edge Properties as of September 30, 2015.






SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

 
 
URBAN EDGE PROPERTIES
 
 
(Registrant)
 
 
 
 
 
 
Date: November 4, 2015
By:
/s/ Mark Langer
 
 
Mark Langer, Executive Vice President and Chief Financial Officer







INDEX TO EXHIBITS

Exhibit Number
 
Document
 
 
 
99.1
 
Earnings Press Release of Urban Edge Properties dated November 4, 2015
99.2
 
Supplemental Disclosure Package of Urban Edge Properties as of September 30, 2015



(Back To Top)

Section 2: EX-99.1 (EXHIBIT 99.1)

Exhibit


 
Exhibit 99.1
 
 
 
 
Urban Edge Properties
For additional information:
888 Seventh Avenue
Mark Langer, EVP and
New York, NY 10019
Chief Financial Officer
212-956-2556
 
 
 
 
 
 
 
 
 
FOR IMMEDIATE RELEASE:
 
 
 
 
Urban Edge Properties Reports Third Quarter 2015 Operating Results

                                    
NEW YORK, NY, November 4, 2015 - Urban Edge Properties (NYSE:UE) announced today its financial results for the three and nine months ended September 30, 2015.

Third Quarter 2015 Highlights:
Generated Recurring Funds from Operations of $0.30 per diluted share for the quarter, and $0.90 per diluted share for the nine months ended September 30, 2015
Generated Funds from Operations ("FFO") of $0.32 per diluted share for the quarter and $0.63 per diluted share for the nine months ended September 30, 2015. FFO for the three months ended September 30, 2015 includes $0.02 per diluted share of tenant bankruptcy settlement income. FFO for the nine months ended September 30, 2015 includes $0.28 per diluted share in transaction costs and one-time equity awards associated with our spin-off from Vornado Realty Trust, offset by $0.01 per diluted share from other items
Increased same-property Net Operating Income (“NOI”) by 4.1% (3.1% including properties in redevelopment) as compared to the third quarter of 2014, and by 3.6% (3.5% including properties in redevelopment) for the nine months ended September 30, 2015 as compared to the same period in 2014
Increased same-property retail portfolio occupancy 80 basis points to 96.6% as compared to September 30, 2014 which was unchanged as compared to June 30, 2015
Consolidated retail portfolio occupancy increased 70 basis points to 96.1% as compared to September 30, 2014 and by 10 basis points compared to June 30, 2015
Executed 32 new leases, renewals, and options during the quarter totaling 506,600 square feet. Same-space leases totaled 192,700 square feet at an average rent spread of 0.8%.
Increased active development and redevelopment projects by $26.2 million to $105.7 million due to the addition of new projects at Garfield, NJ and Walnut Creek, CA
Shadow development and redevelopment pipeline consists of approximately $175.0 million of additional projects to be completed over the next several years
Ended the quarter with $197.3 million cash and cash equivalents and no amounts drawn on the $500.0 million revolving credit facility

Financial Highlights:
Recurring FFO was $31.9 million, or $0.30 per diluted share, for the third quarter of 2015. Recurring FFO was $95.2 million, or $0.90 per diluted share, for the nine months ended September 30, 2015.

FFO was $33.5 million, or $0.32 per diluted share, for the third quarter of 2015 which includes $1.8 million of tenant bankruptcy settlement income and $0.2 million of nonrecurring transaction costs. FFO was $66.3 million, or $0.63 per diluted share, for the nine months ended September 30, 2015. FFO for the nine months ended September 30, 2015 includes $29.6 million of non-recurring transaction costs and one-time equity awards primarily associated with our spin-off from Vornado Realty Trust, $1.4 million of environmental remediation costs, and $1.0 million of debt restructuring costs, partially offset by $3.1 million of tenant bankruptcy settlement income.

Net income attributable to common shareholders was $18.9 million, or $0.19 per diluted share, for the quarter ended September 30, 2015, and $23.6 million, or $0.24 per diluted share, for the nine months ended September 30, 2015.

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A reconciliation of net income attributable to common shareholders to FFO and the reconciling components of FFO to Recurring FFO are provided in the tables accompanying this press release.

Operating Highlights:
Same-property NOI increased 4.1% for the third quarter of 2015 as compared to the third quarter of 2014 due to higher occupancy, new rent commencements, contractual rent increases, higher recoveries and lower landlord expenses. Same-property NOI increased 3.6% for the nine months ended September 30, 2015 as compared to the same period of 2014. Same-property NOI including properties under redevelopment increased 3.1% for the third quarter of 2015 as compared to the third quarter in 2014. Same-property NOI including properties under redevelopment increased 3.5% for the nine months ended September 30, 2015 as compared to the same period of 2014. A reconciliation of income before income taxes to same-property NOI is provided in the tables accompanying this press release.

As of September 30, 2015, occupancy for the company’s consolidated retail portfolio was 96.1%, up 70 basis points compared to September 30, 2014, and up 10 basis points compared to June 30, 2015. On a same-property basis, retail portfolio occupancy was 96.6%, up 80 basis points compared to September 30, 2014, and unchanged as compared to June 30, 2015.

During the third quarter of 2015, the company executed 32 new leases, renewals and options totaling 506,600 square feet. The vast majority of leasing activity pertained to non same-space leases for assets in redevelopment and new pad expansions. The company executed 9 new leases on a non same-space basis during the quarter totaling 313,800 square feet at an average rental rate of $9.15 per square foot, including two warehouse leases totaling 218,400 square feet at an average rental rate of $5.15 per square foot.

On a same-space basis, 8 new leases were executed in the third quarter totaling 14,400 square feet at an average rental rate of $34.49 per square foot, representing a 16.5% decrease from prior cash rents (excluding the impact of straight-line rents). The limited number of same-space leases executed this quarter is not expected to be indicative of future activity. For the nine months ended September 30, 2015, 23 same-space leases were executed at an average rental rate of $27.63 per square foot, representing a 14.7% increase from prior cash rents.

During the third quarter of 2015, the company executed 15 lease renewals and options on a same-space basis totaling 178,400 square feet at an average rental rate of $17.62 per square foot, representing a 4.2% increase from prior cash rents. The total same-space leasing activity in the third quarter (new leases, renewals and options) aggregated 192,700 square feet at an average rental rate of $18.87 per square foot, a 0.8% increase from prior cash rents.

Development and Redevelopment Activities:
The company had approximately $105.7 million of active development and redevelopment projects underway of which $80.1 million remains to be funded as of September 30, 2015. Estimated unleveraged returns on these projects are approximately 9%. Active development and redevelopment projects increased $26.2 million during the quarter ended September 30, 2015 due to two additional projects at Garfield, NJ and Walnut Creek, CA.

The renovation of warehouses at East Hanover is ahead of schedule and the stabilization date has been moved up from 2018 to 2017. The conversion of Montehiedra Town Center, a 542,000 square-foot mall in Puerto Rico, into an outlet-focused retail mall remains on schedule for completion in late 2016. We recently executed leases with Polo and Gap.

The company continues to focus on its redevelopment pipeline, which includes approximately $175.0 million of planned expansions and renovations that the company expects to complete over the next several years.

Balance Sheet Highlights:
At September 30, 2015, the company’s total market capitalization (including debt and equity) was $3.5 billion comprised of 105.4 million shares of common shares outstanding (on a fully diluted basis) valued at approximately $2.3 billion and approximately $1.2 billion of debt. The company's ratio of net debt (net of cash) to total market capitalization was 29.8%. The company's net debt to annualized Adjusted EBITDA was 5.7x as of September 30, 2015. At September 30, 2015, the company had approximately $197.3 million of cash and cash equivalents on hand and nothing drawn on its $500.0 million revolving credit facility.


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Non-GAAP Financial Measures
The company believes FFO (combined with the primary GAAP presentations) is a useful, supplemental measure of its operating performance that is a recognized metric used extensively by the real estate industry and, in particular REITs. The National Association of Real Estate Investment Trusts ("NAREIT") stated in its April 2002 White Paper on FFO, "Historical cost accounting for real estate assets implicitly assumes that the value of real estate assets diminishes predictably over time. Since real estate values instead have historically risen or fallen with market conditions, many industry investors have considered presentations of operating results for real estate companies that use historical cost accounting to be insufficient by themselves." The company also believes that Recurring FFO is a useful supplemental measure of its core operating performance that facilitates comparability of historical financial periods. FFO, as defined by NAREIT and the company, is net income (computed in accordance with GAAP), excluding gains (or losses) from sales of, or impairment charges related to, depreciable operating properties, plus depreciation and amortization, and after adjustments for unconsolidated partnerships and joint ventures. The company makes certain adjustments to FFO, which it refers to as Recurring FFO, to account for items it does not believe are representative of ongoing operating results, including transaction costs associated with acquisition and disposition activity and non-recurring revenue and expenses. The company believes that financial analysts, investors and stockholders are better served by the presentation of comparable period operating results generated from its FFO and Recurring FFO measures. The company's method of calculating FFO and Recurring FFO may be different from methods used by other REITs and, accordingly, may not be comparable to such other REITs.
 
The company uses NOI, which is a non-GAAP financial measure, internally as a performance measure and believes NOI provides useful information to investors regarding the company’s financial condition and results of operations because it reflects only those income and expense items that are incurred at the property level and when compared across periods, reflects the impact on operations from trends in occupancy rates, rental rates and operating costs on an unleveraged basis, providing perspective not immediately apparent from our operating income or net income. In this release, the company has provided NOI on a same-property basis. Information provided on a same-property basis includes the results of properties that were owned and operated for the entirety of the reporting periods being compared and excludes properties that were under development/redevelopment and properties acquired, sold, or in the foreclosure process during the periods being compared. The company has also provided NOI on a same-property basis adjusted to include redevelopment properties.

Earnings before interest, tax, depreciation and amortization ("EBITDA") and Adjusted EBITDA are supplemental, non-GAAP measures utilized in various financial ratios. EBITDA and Adjusted EBITDA are presented to assist investors in the evaluation of REITs and as a measure of the company's operational performance as they exclude various items that do not relate to or are not indicative of our operating performance. Accordingly, the company's use of EBITDA and Adjusted EBITDA in various ratios provides a meaningful performance measure as it relates to our ability to meet various coverage tests for the stated period.

FFO, Recurring FFO, NOI, same-property NOI, EBITDA and Adjusted EBITDA are presented to assist investors in analyzing the company’s operating performance. Neither FFO nor Recurring FFO (i) represents cash flow from operations as defined by GAAP, (ii) is indicative of cash available to fund all cash flow needs, including the ability to make distributions, (iii) is an alternative to cash flow as a measure of liquidity, or (iv) should be considered as an alternative to net income (which is determined in accordance with GAAP) for purposes of evaluating the company’s operating performance. The company believes net income attributable to common shareholders is the most directly comparable GAAP financial measure to FFO and Recurring FFO while income before income taxes is the most directly comparable GAAP financial measure to NOI and same-property NOI and net income (loss) is the most directly comparable GAAP financial measure to EBITDA and Adjusted EBITDA. Reconciliations of these measures to their respective comparable GAAP measures have been provided in the tables accompanying this press release.

ADDITIONAL INFORMATION
For a copy of the company’s supplemental disclosure package, please access the "Investors" section of UE’s website at www.uedge.com. Our website also includes other financial information, including our Annual Report on Form 10-K, Form 10-Q, Current Reports on Form 8-K, and amendments to those reports.

ABOUT URBAN EDGE
Urban Edge Properties is a real estate investment trust that owns, operates and develops retail properties in high barrier-to-entry markets. At September 30, 2015, the portfolio comprises 79 shopping centers, three malls and a warehouse park adjacent to one of the centers, and aggregates 14,831,000 square feet.

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FORWARD-LOOKING STATEMENTS
Certain statements contained in this Press Release constitute forward-looking statements as such term is defined in Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Forward-looking statements are not guarantees of future performance. They represent our intentions, plans, expectations and beliefs and are subject to numerous assumptions, risks and uncertainties. Our future results, financial condition and business may differ materially from those expressed in these forward-looking statements. You can find many of these statements by looking for words such as “approximates,” “believes,” “expects,” “anticipates,” “estimates,” “intends,” “plans,” “would,” “may” or other similar expressions in this Press Release. Many of the factors that will determine the outcome of these and our other forward-looking statements are beyond our ability to control or predict; these factors include, among others, the company's ability to complete its active development and redevelopment projects, the company's ability to engage in the projects in its planned expansion and redevelopment pipeline and the company's ability to achieve the estimated unleveraged returns for such projects. For further discussion of factors that could materially affect the outcome of our forward-looking statements, see “Risk Factors” in Part I, Item 1A, of our Annual Report on Form 10-K for the year ended December 31, 2014, as amended.

For these statements, we claim the protection of the safe harbor for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995. You are cautioned not to place undue reliance on our forward-looking statements, which speak only as of the date of this Press Release. All subsequent written and oral forward-looking statements attributable to us or any person acting on our behalf are expressly qualified in their entirety by the cautionary statements contained or referred to in this section. We do not undertake any obligation to release publicly any revisions to our forward-looking statements to reflect events or circumstances occurring after the date of this Press Release.



4



URBAN EDGE PROPERTIES
CONSOLIDATED AND COMBINED BALANCE SHEETS
(Amounts in thousands, except share and per share amounts) 
 
September 30,
 
December 31,
 
2015
 
2014
ASSETS
 
 
 

Real estate, at cost:
 

 
 

Land
$
374,543

 
$
378,096

Buildings and improvements
1,616,769

 
1,632,228

Construction in progress
53,209

 
8,545

Furniture, fixtures and equipment
3,879

 
3,935

Total
2,048,400

 
2,022,804

Accumulated depreciation and amortization
(500,654
)
 
(467,503
)
Real estate, net
1,547,746

 
1,555,301

Cash and cash equivalents
197,338

 
2,600

Cash held in escrow and restricted cash
9,832

 
9,967

Tenant and other receivables, net of allowance for doubtful accounts of $2,106 and $2,432, respectively
9,741

 
11,424

Receivable arising from the straight-lining of rents, net of allowance for doubtful accounts of $149 and $0, respectively
88,888

 
89,199

Identified intangible assets, net of accumulated amortization of $21,660 and $20,672, respectively
32,793

 
34,775

Deferred leasing costs, net of accumulated amortization of $13,057 and $12,121, respectively
17,674

 
17,653

Deferred financing costs, net of accumulated amortization of $7,394 and $6,813, respectively
11,702

 
10,353

Prepaid expenses and other assets
12,007

 
10,257

Total assets
$
1,927,721

 
$
1,741,529

 
 
 
 
LIABILITIES AND EQUITY
 

 
 

Liabilities:
 
 
 
Mortgages payable
$
1,246,155

 
$
1,288,535

Identified intangible liabilities, net of accumulated amortization of $63,373 and $62,395, respectively
154,507

 
160,667

Accounts payable and accrued expenses
38,008

 
26,924

Other liabilities
10,134

 
6,540

Total liabilities
1,448,804

 
1,482,666

Commitments and contingencies
 
 
 
Shareholders’ equity:
 
 
 
Common shares: $0.01 par value; 500,000,000 shares authorized and 99,291,161 shares issued and outstanding
993

 

Additional paid-in capital
478,314

 

Accumulated earnings (deficit)
(33,852
)
 

Noncontrolling interests:
 
 
 
Redeemable noncontrolling interests
33,104

 

Noncontrolling interest in consolidated subsidiaries
358

 
341

Vornado equity

 
258,522

Total equity
478,917

 
258,863

Total liabilities and equity
$
1,927,721

 
$
1,741,529


5



URBAN EDGE PROPERTIES
CONSOLIDATED AND COMBINED STATEMENTS OF INCOME
(Unaudited, in thousands, except per share data)
 
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
2015
 
2014
 
2015
 
2014
REVENUE
 

 
 

 
 
 
 
Property rentals
$
58,111

 
$
58,125

 
$
173,077

 
$
173,175

Tenant expense reimbursements
19,188

 
18,052

 
63,942

 
61,751

Management and development fees
551

 
133

 
1,779

 
398

Other income
1,975

 
106

 
3,525

 
544

Total revenue
79,825

 
76,416

 
242,323

 
235,868

EXPENSES
 

 
 

 
 
 
 
Depreciation and amortization
13,603

 
13,148

 
41,568

 
40,444

Real estate taxes
12,227

 
11,820

 
37,568

 
37,230

Property operating
10,494

 
11,074

 
38,002

 
38,973

General and administrative
6,385

 
4,606

 
25,503

 
14,275

Ground rent
2,527

 
2,593

 
7,606

 
7,803

Transaction costs
151

 
4,683

 
22,437

 
4,683

Provision for doubtful accounts
427

 
27

 
1,139

 
754

Total expenses
45,814

 
47,951

 
173,823

 
144,162

Operating income
34,011

 
28,465

 
68,500

 
91,706

Interest income
39

 
9

 
101

 
26

Interest and debt expense
(13,611
)
 
(14,303
)
 
(42,021
)
 
(40,571
)
Income before income taxes
20,439

 
14,171

 
26,580

 
51,161

Income tax expense
(394
)
 
(525
)
 
(1,399
)
 
(1,575
)
Net income
20,045

 
13,646

 
25,181

 
49,586

Less net income attributable to noncontrolling interests in:
 
 
 
 
 
 
 
Operating partnership
(1,179
)
 

 
(1,605
)
 

Consolidated subsidiaries
(6
)
 
(5
)
 
(17
)
 
(16
)
Net income attributable to common shareholders
$
18,860

 
$
13,641

 
$
23,559

 
$
49,570

 
 
 
 
 
 
 
 
Earnings per common share - Basic:
$
0.19

 
$
0.14

 
$
0.24

 
$
0.50

Earnings per common share - Diluted:
$
0.19

 
$
0.14

 
$
0.24

 
$
0.50

Weighted average shares outstanding - Basic
99,252

 
99,248

 
99,250

 
99,248

Weighted average shares outstanding - Diluted
99,286

 
99,248

 
99,272

 
99,248



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Reconciliation of Net Income Attributable to Common Shareholders to FFO and Recurring FFO

The following table reflects the reconciliation of FFO and Recurring FFO to net income attributable to common shareholders, the most directly comparable GAAP measure, for the three and nine months ended September 30, 2015.
 
Three Months Ended September 30, 2015
 
Nine Months Ended September 30, 2015
 
(in thousands)
 
(in thousands)
Net income attributable to common shareholders
$
18,860

 
$
23,559

Adjustments:
 
 
 
Rental property depreciation and amortization
13,452

 
41,102

Limited partnership interests in operating partnership
1,179

 
1,605

Funds From Operations
33,491

 
66,266

Funds From Operations per diluted share(1)
0.32

 
0.63

 
 
 
 
Transaction costs
151

 
22,437

One-time equity awards related to the spin-off

 
7,143

Environmental remediation costs

 
1,379

Tenant bankruptcy settlement income
(1,774
)
 
(3,034
)
Debt restructuring expenses

 
1,034

Recurring Funds From Operations
$
31,868

 
$
95,225

Recurring Funds From Operations per diluted share(1)
$
0.30

 
$
0.90

 
 
 
 
Weighted average diluted shares(1)
105,436

 
105,351


(1) Weighted average diluted shares used to calculate FFO per share and Recurring FFO per share for all periods presented is higher than the GAAP diluted weighted average shares as a result of the dilutive impact of the 6.1 million Operating Partnership and LTIP units which are redeemable into our common shares. These redeemable units are not included in the diluted weighted average share count for the periods presented for GAAP purposes because their inclusion is anti-dilutive.

FFO and Recurring FFO are non-GAAP financial measures. The company believes that FFO, as defined by NAREIT, is a widely used and appropriate supplemental measure of operating performance for REITs, and that it provides a relevant basis for comparison among REITs. The company believes that Recurring FFO provides additional comparability between historical financial periods. Refer to “Non-GAAP Financial Measures” above.


7



Reconciliation of Income before Income Taxes to NOI and Same-Property NOI

The following table reflects the reconciliation of NOI, same-property NOI (with and without redevelopment) to income before income taxes, the most directly comparable GAAP measure, for the three and nine months ended September 30, 2015 and 2014.

 
Three Months Ended September 30,
 
Nine Months Ended September 30,
(Amounts in thousands)
2015
 
2014
 
2015
 
2014
Income before income taxes
$
20,439

 
$
14,171

 
$
26,580

 
$
51,161

  Interest income
(39
)
 
(9
)
 
(101
)
 
(26
)
  Interest and debt expense
13,611

 
14,303

 
42,021

 
40,571

Operating income
34,011

 
28,465

 
68,500

 
91,706

Depreciation and amortization
13,603

 
13,148

 
41,568

 
40,444

General and administrative expense
6,385

 
4,606

 
25,503

 
14,275

Transaction costs
151

 
4,683

 
22,437

 
4,683

Subtotal
54,150

 
50,902

 
158,008

 
151,108

    Less: non-cash rental income
(1,943
)
 
(2,643
)
 
(5,741
)
 
(7,325
)
    Add: non-cash ground rent expense
318

 
442

 
1,015

 
1,176

NOI
52,525

 
48,701

 
153,282

 
144,959

Adjustments:
 
 
 
 
 
 
 
NOI related to properties being redeveloped
(3,966
)
 
(4,284
)
 
(12,171
)
 
(11,887
)
Tenant bankruptcy settlement and lease termination income
(1,947
)
 
(44
)
 
(3,207
)
 
(260
)
Environmental remediation costs

 

 
1,379

 

Management and development fee income from non-owned properties
(551
)
 
(133
)
 
(1,779
)
 
(398
)
Other
(181
)
 
(157
)
 
(604
)
 
(318
)
    Subtotal adjustments
(6,645
)
 
(4,618
)
 
(16,382
)
 
(12,863
)
Same-property NOI
$
45,880

 
$
44,083

 
$
136,900

 
$
132,096

Adjustments:
 
 
 
 
 
 
 
NOI related to properties being redeveloped
3,966

 
4,284

 
12,171

 
11,887

Same-property NOI including properties in redevelopment
$
49,846

 
$
48,367

 
$
149,071

 
$
143,983


NOI and same-property NOI are non-GAAP financial measures. The company believes that same-property NOI is a widely used and appropriate supplemental measure of operating performance for comparison among REITs. Refer to “Non-GAAP Financial Measures” above.


8



Reconciliation of Net Income to EBITDA and Adjusted EBITDA

The following table reflects the reconciliation of EBITDA and Adjusted EBITDA to net income, the most directly comparable GAAP measure, for the three and nine months ended September 30, 2015 and 2014.
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
(Amounts in thousands)
2015
 
2014
 
2015
 
2014
Net income
$
20,045

 
$
13,646

 
$
25,181

 
$
49,586

Depreciation and amortization
13,603

 
13,148

 
41,568

 
40,444

Interest and debt expense
13,611

 
14,303

 
42,021

 
40,571

Income tax expense
394

 
525

 
1,399

 
1,575

EBITDA
47,653

 
41,622

 
110,169

 
132,176

Adjustments for Adjusted EBITDA:
 
 
 
 
 
 
 
Transaction costs
151

 
4,683

 
22,437

 
4,683

One-time equity awards related to the spin-off

 

 
7,143

 

Environmental remediation costs

 

 
1,379

 

Tenant bankruptcy settlement income
(1,774
)
 

 
(3,034
)
 

Adjusted EBITDA
$
46,030

 
$
46,305

 
$
138,094

 
$
136,859

 
 
 
 
 
 
 
 



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Section 3: EX-99.2 (EXHIBIT 99.2)

Exhibit

Exhibit 99.2




 
 
URBAN EDGE PROPERTIES
 
SUPPLEMENTAL DISCLOSURE
PACKAGE
 
Quarter ended September 30, 2015
 
 







 
 
 
 
Urban Edge Properties
888 7th Avenue, New York, NY 10019
NY Office: 212-956-2556
www.uedge.com
 




URBAN EDGE PROPERTIES
SUPPLEMENTAL DISCLOSURE
September 30, 2015
(unaudited)
 
 
TABLE OF CONTENTS
 
Page
Press Release
 
Third Quarter 2015 Earnings Press Release
1
 
 
Overview
 
Summary Financial Results and Ratios
10
 
 
Consolidated and Combined Financial Statements
 
Consolidated and Combined Balance Sheets
11
Consolidated and Combined Statements of Income
12
 
 
Non-GAAP Financial Measures and Supplemental Data
 
Supplemental Schedule of Net Operating Income
13
Earnings Before Interest, Taxes, Depreciation and Amortization
14
Consolidated Statements of Funds from Operations
15
Market Capitalization, Debt Ratios and Liquidity
16
Additional Disclosures
17
 
 
Leasing Data
 
Tenant Concentration - Top Twenty-Five Tenants
18
Leasing Activity
19
Retail Portfolio Lease Expiration Schedule
20
 
 
Property Data
 
Property Status Report
22
Property Acquisitions and Dispositions
26
Development and Redevelopment Projects
27
 
 
Debt Schedules
 
Debt Summary
28
Mortgage Debt Summary and Maturity Schedule
29
 
 








 
 
 
 
 
 
Urban Edge Properties
For additional information:
888 Seventh Avenue
Mark Langer, EVP and
New York, NY 10019
Chief Financial Officer
212-956-2556
 
 
 
 
 
 
 
 
 
FOR IMMEDIATE RELEASE:
 
 
 
 
Urban Edge Properties Reports Third Quarter 2015 Operating Results

                                    
NEW YORK, NY, November 4, 2015 - Urban Edge Properties (NYSE:UE) announced today its financial results for the three and nine months ended September 30, 2015.

Third Quarter 2015 Highlights:
Generated Recurring Funds from Operations of $0.30 per diluted share for the quarter, and $0.90 per diluted share for the nine months ended September 30, 2015
Generated Funds from Operations ("FFO") of $0.32 per diluted share for the quarter and $0.63 per diluted share for the nine months ended September 30, 2015. FFO for the three months ended September 30, 2015 includes $0.02 per diluted share of tenant bankruptcy settlement income. FFO for the nine months ended September 30, 2015 includes $0.28 per diluted share in transaction costs and one-time equity awards associated with our spin-off from Vornado Realty Trust, offset by $0.01 per diluted share from other items
Increased same-property Net Operating Income (“NOI”) by 4.1% (3.1% including properties in redevelopment) as compared to the third quarter of 2014, and by 3.6% (3.5% including properties in redevelopment) for the nine months ended September 30, 2015 as compared to the same period in 2014
Increased same-property retail portfolio occupancy 80 basis points to 96.6% as compared to September 30, 2014 which was unchanged as compared to June 30, 2015
Consolidated retail portfolio occupancy increased 70 basis points to 96.1% as compared to September 30, 2014 and by 10 basis points compared to June 30, 2015
Executed 32 new leases, renewals, and options during the quarter totaling 506,600 square feet. Same-space leases totaled 192,700 square feet at an average rent spread of 0.8%.
Increased active development and redevelopment projects by $26.2 million to $105.7 million due to the addition of new projects at Garfield, NJ and Walnut Creek, CA
Shadow development and redevelopment pipeline consists of approximately $175.0 million of additional projects to be completed over the next several years
Ended the quarter with $197.3 million cash and cash equivalents and no amounts drawn on the $500.0 million revolving credit facility

Financial Highlights:
Recurring FFO was $31.9 million, or $0.30 per diluted share, for the third quarter of 2015. Recurring FFO was $95.2 million, or $0.90 per diluted share, for the nine months ended September 30, 2015.

FFO was $33.5 million, or $0.32 per diluted share, for the third quarter of 2015 which includes $1.8 million of tenant bankruptcy settlement income and $0.2 million of nonrecurring transaction costs. FFO was $66.3 million, or $0.63 per diluted share, for the nine months ended September 30, 2015. FFO for the nine months ended September 30, 2015 includes $29.6 million of non-recurring transaction costs and one-time equity awards primarily associated with our spin-off from Vornado Realty Trust, $1.4 million of environmental remediation costs, and $1.0 million of debt restructuring costs, partially offset by $3.1 million of tenant bankruptcy settlement income.

Net income attributable to common shareholders was $18.9 million, or $0.19 per diluted share, for the quarter ended September 30, 2015, and $23.6 million, or $0.24 per diluted share, for the nine months ended September 30, 2015.

1


A reconciliation of net income attributable to common shareholders to FFO and the reconciling components of FFO to Recurring FFO are provided in the tables accompanying this press release.

Operating Highlights:
Same-property NOI increased 4.1% for the third quarter of 2015 as compared to the third quarter of 2014 due to higher occupancy, new rent commencements, contractual rent increases, higher recoveries and lower landlord expenses. Same-property NOI increased 3.6% for the nine months ended September 30, 2015 as compared to the same period of 2014. Same-property NOI including properties under redevelopment increased 3.1% for the third quarter of 2015 as compared to the third quarter in 2014. Same-property NOI including properties under redevelopment increased 3.5% for the nine months ended September 30, 2015 as compared to the same period of 2014. A reconciliation of income before income taxes to same-property NOI is provided in the tables accompanying this press release.

As of September 30, 2015, occupancy for the company’s consolidated retail portfolio was 96.1%, up 70 basis points compared to September 30, 2014, and up 10 basis points compared to June 30, 2015. On a same-property basis, retail portfolio occupancy was 96.6%, up 80 basis points compared to September 30, 2014, and unchanged as compared to June 30, 2015.

During the third quarter of 2015, the company executed 32 new leases, renewals and options totaling 506,600 square feet. The vast majority of leasing activity pertained to non same-space leases for assets in redevelopment and new pad expansions. The company executed 9 new leases on a non same-space basis during the quarter totaling 313,800 square feet at an average rental rate of $9.15 per square foot, including two warehouse leases totaling 218,400 square feet at an average rental rate of $5.15 per square foot.

On a same-space basis, 8 new leases were executed in the third quarter totaling 14,400 square feet at an average rental rate of $34.49 per square foot, representing a 16.5% decrease from prior cash rents (excluding the impact of straight-line rents). The limited number of same-space leases executed this quarter is not expected to be indicative of future activity. For the nine months ended September 30, 2015, 23 same-space leases were executed at an average rental rate of $27.63 per square foot, representing a 14.7% increase from prior cash rents.

During the third quarter of 2015, the company executed 15 lease renewals and options on a same-space basis totaling 178,400 square feet at an average rental rate of $17.62 per square foot, representing a 4.2% increase from prior cash rents. The total same-space leasing activity in the third quarter (new leases, renewals and options) aggregated 192,700 square feet at an average rental rate of $18.87 per square foot, a 0.8% increase from prior cash rents.

Development and Redevelopment Activities:
The company had approximately $105.7 million of active development and redevelopment projects underway of which $80.1 million remains to be funded as of September 30, 2015. Estimated unleveraged returns on these projects are approximately 9%. Active development and redevelopment projects increased $26.2 million during the quarter ended September 30, 2015 due to two additional projects at Garfield, NJ and Walnut Creek, CA.

The renovation of warehouses at East Hanover is ahead of schedule and the stabilization date has been moved up from 2018 to 2017. The conversion of Montehiedra Town Center, a 542,000 square-foot mall in Puerto Rico, into an outlet-focused retail mall remains on schedule for completion in late 2016. We recently executed leases with Polo and Gap.

The company continues to focus on its redevelopment pipeline, which includes approximately $175.0 million of planned expansions and renovations that the company expects to complete over the next several years.

Balance Sheet Highlights:
At September 30, 2015, the company’s total market capitalization (including debt and equity) was $3.5 billion comprised of 105.4 million shares of common shares outstanding (on a fully diluted basis) valued at approximately $2.3 billion and approximately $1.2 billion of debt. The company's ratio of net debt (net of cash) to total market capitalization was 29.8%. The company's net debt to annualized Adjusted EBITDA was 5.7x as of September 30, 2015. At September 30, 2015, the company had approximately $197.3 million of cash and cash equivalents on hand and nothing drawn on its $500.0 million revolving credit facility.


2


Non-GAAP Financial Measures
The company believes FFO (combined with the primary GAAP presentations) is a useful, supplemental measure of its operating performance that is a recognized metric used extensively by the real estate industry and, in particular REITs. The National Association of Real Estate Investment Trusts ("NAREIT") stated in its April 2002 White Paper on FFO, "Historical cost accounting for real estate assets implicitly assumes that the value of real estate assets diminishes predictably over time. Since real estate values instead have historically risen or fallen with market conditions, many industry investors have considered presentations of operating results for real estate companies that use historical cost accounting to be insufficient by themselves." The company also believes that Recurring FFO is a useful supplemental measure of its core operating performance that facilitates comparability of historical financial periods. FFO, as defined by NAREIT and the company, is net income (computed in accordance with GAAP), excluding gains (or losses) from sales of, or impairment charges related to, depreciable operating properties, plus depreciation and amortization, and after adjustments for unconsolidated partnerships and joint ventures. The company makes certain adjustments to FFO, which it refers to as Recurring FFO, to account for items it does not believe are representative of ongoing operating results, including transaction costs associated with acquisition and disposition activity and non-recurring revenue and expenses. The company believes that financial analysts, investors and stockholders are better served by the presentation of comparable period operating results generated from its FFO and Recurring FFO measures. The company's method of calculating FFO and Recurring FFO may be different from methods used by other REITs and, accordingly, may not be comparable to such other REITs.
 
The company uses NOI, which is a non-GAAP financial measure, internally as a performance measure and believes NOI provides useful information to investors regarding the company’s financial condition and results of operations because it reflects only those income and expense items that are incurred at the property level and when compared across periods, reflects the impact on operations from trends in occupancy rates, rental rates and operating costs on an unleveraged basis, providing perspective not immediately apparent from our operating income or net income. In this release, the company has provided NOI on a same-property basis. Information provided on a same-property basis includes the results of properties that were owned and operated for the entirety of the reporting periods being compared and excludes properties that were under development/redevelopment and properties acquired, sold, or in the foreclosure process during the periods being compared. The company has also provided NOI on a same-property basis adjusted to include redevelopment properties.

Earnings before interest, tax, depreciation and amortization ("EBITDA") and Adjusted EBITDA are supplemental, non-GAAP measures utilized in various financial ratios. EBITDA and Adjusted EBITDA are presented to assist investors in the evaluation of REITs and as a measure of the company's operational performance as they exclude various items that do not relate to or are not indicative of our operating performance. Accordingly, the company's use of EBITDA and Adjusted EBITDA in various ratios provides a meaningful performance measure as it relates to our ability to meet various coverage tests for the stated period.

FFO, Recurring FFO, NOI, same-property NOI, EBITDA and Adjusted EBITDA are presented to assist investors in analyzing the company’s operating performance. Neither FFO nor Recurring FFO (i) represents cash flow from operations as defined by GAAP, (ii) is indicative of cash available to fund all cash flow needs, including the ability to make distributions, (iii) is an alternative to cash flow as a measure of liquidity, or (iv) should be considered as an alternative to net income (which is determined in accordance with GAAP) for purposes of evaluating the company’s operating performance. The company believes net income attributable to common shareholders is the most directly comparable GAAP financial measure to FFO and Recurring FFO while income before income taxes is the most directly comparable GAAP financial measure to NOI and same-property NOI and net income (loss) is the most directly comparable GAAP financial measure to EBITDA and Adjusted EBITDA. Reconciliations of these measures to their respective comparable GAAP measures have been provided in the tables accompanying this press release.


3


Reconciliation of Net Income Attributable to Common Shareholders to FFO and Recurring FFO

The following table reflects the reconciliation of FFO and Recurring FFO to net income attributable to common shareholders, the most directly comparable GAAP measure, for the three and nine months ended September 30, 2015.
 
Three Months Ended September 30, 2015
 
Nine Months Ended September 30, 2015
 
(in thousands)
 
(in thousands)
Net income attributable to common shareholders
$
18,860

 
$
23,559

Adjustments:
 
 
 
Rental property depreciation and amortization
13,452

 
41,102

Limited partnership interests in operating partnership
1,179

 
1,605

Funds From Operations
33,491

 
66,266

Funds From Operations per diluted share(1)
0.32

 
0.63

 
 
 
 
Transaction costs
151

 
22,437

One-time equity awards related to the spin-off

 
7,143

Environmental remediation costs

 
1,379

Tenant bankruptcy settlement income
(1,774
)
 
(3,034
)
Debt restructuring expenses

 
1,034

Recurring Funds From Operations
$
31,868

 
$
95,225

Recurring Funds From Operations per diluted share(1)
$
0.30

 
$
0.90

 
 
 
 
Weighted average diluted shares(1)
105,436

 
105,351


(1) Weighted average diluted shares used to calculate FFO per share and Recurring FFO per share for all periods presented is higher than the GAAP diluted weighted average shares as a result of the dilutive impact of the 6.1 million Operating Partnership and LTIP units which are redeemable into our common shares. These redeemable units are not included in the diluted weighted average share count for the periods presented for GAAP purposes because their inclusion is anti-dilutive.

FFO and Recurring FFO are non-GAAP financial measures. The company believes that FFO, as defined by NAREIT, is a widely used and appropriate supplemental measure of operating performance for REITs, and that it provides a relevant basis for comparison among REITs. The company believes that Recurring FFO provides additional comparability between historical financial periods. Refer to “Non-GAAP Financial Measures” above.
 


4


Reconciliation of Income before Income Taxes to NOI and Same-Property NOI

The following table reflects the reconciliation of NOI, same-property NOI (with and without redevelopment) to income before income taxes, the most directly comparable GAAP measure, for the three and nine months ended September 30, 2015 and 2014.

 
Three Months Ended September 30,
 
Nine Months Ended September 30,
(Amounts in thousands)
2015
 
2014
 
2015
 
2014
Income before income taxes
$
20,439

 
$
14,171

 
$
26,580

 
$
51,161

  Interest income
(39
)
 
(9
)
 
(101
)
 
(26
)
  Interest and debt expense
13,611

 
14,303

 
42,021

 
40,571

Operating income
34,011

 
28,465

 
68,500

 
91,706

Depreciation and amortization
13,603

 
13,148

 
41,568

 
40,444

General and administrative expense
6,385

 
4,606

 
25,503

 
14,275

Transaction costs
151

 
4,683

 
22,437

 
4,683

Subtotal
54,150

 
50,902

 
158,008

 
151,108

    Less: non-cash rental income
(1,943
)
 
(2,643
)
 
(5,741
)
 
(7,325
)
    Add: non-cash ground rent expense
318

 
442

 
1,015

 
1,176

NOI
52,525

 
48,701

 
153,282

 
144,959

Adjustments:
 
 
 
 
 
 
 
NOI related to properties being redeveloped
(3,966
)
 
(4,284
)
 
(12,171
)
 
(11,887
)
Tenant bankruptcy settlement and lease termination income
(1,947
)
 
(44
)
 
(3,207
)
 
(260
)
Environmental remediation costs

 

 
1,379

 

Management and development fee income from non-owned properties
(551
)
 
(133
)
 
(1,779
)
 
(398
)
Other
(181
)
 
(157
)
 
(604
)
 
(318
)
    Subtotal adjustments
(6,645
)
 
(4,618
)
 
(16,382
)
 
(12,863
)
Same-property NOI
$
45,880

 
$
44,083

 
$
136,900

 
$
132,096

Adjustments:
 
 
 
 
 
 
 
NOI related to properties being redeveloped
3,966

 
4,284

 
12,171

 
11,887

Same-property NOI including properties in redevelopment
$
49,846

 
$
48,367

 
$
149,071

 
$
143,983


NOI and same-property NOI are non-GAAP financial measures. The company believes that same-property NOI is a widely used and appropriate supplemental measure of operating performance for comparison among REITs. Refer to “Non-GAAP Financial Measures” above.


5


Reconciliation of Net Income to EBITDA and Adjusted EBITDA

The following table reflects the reconciliation of EBITDA and Adjusted EBITDA to net income, the most directly comparable GAAP measure, for the three and nine months ended September 30, 2015 and 2014.
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
(Amounts in thousands)
2015
 
2014
 
2015
 
2014
Net income
$
20,045

 
$
13,646

 
$
25,181

 
$
49,586

Depreciation and amortization
13,603

 
13,148

 
41,568

 
40,444

Interest and debt expense
13,611

 
14,303

 
42,021

 
40,571

Income tax expense
394

 
525

 
1,399

 
1,575

EBITDA
47,653

 
41,622

 
110,169

 
132,176

Adjustments for Adjusted EBITDA:
 
 
 
 
 
 
 
Transaction costs
151

 
4,683

 
22,437

 
4,683

One-time equity awards related to the spin-off

 

 
7,143

 

Environmental remediation costs

 

 
1,379

 

Tenant bankruptcy settlement income
(1,774
)
 

 
(3,034
)
 

Adjusted EBITDA
$
46,030

 
$
46,305

 
$
138,094

 
$
136,859

 
 
 
 
 
 
 
 


6


ADDITIONAL INFORMATION
For a copy of the company’s supplemental disclosure package, please access the "Investors" section of UE’s website at www.uedge.com. Our website also includes other financial information, including our Annual Report on Form 10-K, Form 10-Q, Current Reports on Form 8-K, and amendments to those reports.

ABOUT URBAN EDGE
Urban Edge Properties is a real estate investment trust that owns, operates and develops retail properties in high barrier-to-entry markets. At September 30, 2015, the portfolio comprises 79 shopping centers, three malls and a warehouse park adjacent to one of the centers, and aggregates 14,831,000 square feet.

FORWARD-LOOKING STATEMENTS
Certain statements contained in this Press Release constitute forward-looking statements as such term is defined in Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Forward-looking statements are not guarantees of future performance. They represent our intentions, plans, expectations and beliefs and are subject to numerous assumptions, risks and uncertainties. Our future results, financial condition and business may differ materially from those expressed in these forward-looking statements. You can find many of these statements by looking for words such as “approximates,” “believes,” “expects,” “anticipates,” “estimates,” “intends,” “plans,” “would,” “may” or other similar expressions in this Press Release. Many of the factors that will determine the outcome of these and our other forward-looking statements are beyond our ability to control or predict; these factors include, among others, the company's ability to complete its active development and redevelopment projects, the company's ability to engage in the projects in its planned expansion and redevelopment pipeline and the company's ability to achieve the estimated unleveraged returns for such projects. For further discussion of factors that could materially affect the outcome of our forward-looking statements, see “Risk Factors” in Part I, Item 1A, of our Annual Report on Form 10-K for the year ended December 31, 2014, as amended.

For these statements, we claim the protection of the safe harbor for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995. You are cautioned not to place undue reliance on our forward-looking statements, which speak only as of the date of this Press Release. All subsequent written and oral forward-looking statements attributable to us or any person acting on our behalf are expressly qualified in their entirety by the cautionary statements contained or referred to in this section. We do not undertake any obligation to release publicly any revisions to our forward-looking statements to reflect events or circumstances occurring after the date of this Press Release.


7



URBAN EDGE PROPERTIES
 
 
 
DISCLOSURES
 
 
 
As of September 30, 2015
 
 
 
 
 
 
 

Forward Looking Statements
Certain statements contained in this Supplemental Disclosure Package constitute forward-looking statements as such term is defined in Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Forward-looking statements are not guarantees of future performance. They represent our intentions, plans, expectations and beliefs and are subject to numerous assumptions, risks and uncertainties. Our future results, financial condition and business may differ materially from those expressed in these forward-looking statements. You can find many of these statements by looking for words such as “approximates,” “believes,” “expects,” “anticipates,” “estimates,” “intends,” “plans,” “would,” “may” or other similar expressions in this Supplemental Disclosure Package. Many of the factors that will determine the outcome of these and our other forward-looking statements are beyond our ability to control or predict; these factors include, among others, the company's ability to complete its active development and redevelopment projects, the company's ability to engage in the projects in its planned expansion and redevelopment pipeline and the company's ability to achieve the estimated unleveraged returns for such projects. For further discussion of factors that could materially affect the outcome of our forward-looking statements, see “Risk Factors” in Part I, Item 1A, of our Annual Report on Form 10-K for the year ended December 31, 2014, as amended.

For these statements, we claim the protection of the safe harbor for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995. You are cautioned not to place undue reliance on our forward-looking statements, which speak only as of the date of this Supplemental Disclosure Package. All subsequent written and oral forward-looking statements attributable to us or any person acting on our behalf are expressly qualified in their entirety by the cautionary statements contained or referred to in this section. We do not undertake any obligation to release publicly any revisions to our forward-looking statements to reflect events or circumstances occurring after the date of this Supplemental Disclosure Package.
Basis of Presentation
The information contained in the Supplemental Disclosure Package does not purport to disclose all items required by GAAP and is unaudited information. This Supplemental Disclosure Package should be read in conjunction with the company's most recent Form 10-K and Form 10-Q. The results of operations of any property acquired are included in the Company's financial statements since the date of its acquisition, although such properties may be excluded from certain metrics disclosed in this Supplemental Disclosure Package.
Use of Funds from Operations, Net Operating Income and Earnings Before Interest, Taxes, Depreciation and Amortization as a Non-GAAP Financial Measure
Urban Edge Properties ("we", "our", the "Company") believes Funds From Operations (FFO) (combined with the primary GAAP presentations) is a useful supplemental measure of its operating performance that is a recognized metric used extensively by the real estate industry and, in particular REITs. The National Association of Real Estate Investment Trusts (“NAREIT”) stated in its April 2002 White Paper on FFO, “Historical cost accounting for real estate assets implicitly assumes that the value of real estate assets diminishes predictably over time. Since real estate values instead have historically risen or fallen with market conditions, many industry investors have considered presentations of operating results for real estate companies that use historical cost accounting to be insufficient by themselves.” The Company also believes that Recurring FFO is a useful supplemental measure of its core operating performance that facilitates comparability of historical financial periods. FFO, as defined by NAREIT, is net income (computed in accordance with GAAP), excluding gains (or losses) from sales of, or impairment charges related to, depreciable operating properties, plus depreciation and amortization, and after adjustments for unconsolidated partnerships and joint ventures. The Company makes certain adjustments to FFO, which it refers to as Recurring FFO, to account for items it does not believe are representative of ongoing operating results, including transaction costs associated with acquisition and disposition activity and non-recurring revenue and expenses. The Company believes that financial analysts, investors and stockholders are better served by the presentation of comparable period operating results generated from its FFO and Recurring FFO measures. The Company's method of calculating FFO and Recurring FFO may be different from methods used by other REITs and, accordingly, may not be comparable to such other REITs.

The Company uses Net Operating Income (NOI), which is a non-GAAP financial measure, internally as a performance measure and believes NOI provides useful information to investors regarding the Company’s financial condition and results of operations because it reflects only those income and expense items that are incurred at the property level and, when compared across periods, reflects the impact on operations from trends in occupancy rates, rental rates and operating costs on an unleveraged basis. In this Supplemental Disclosure Package, the Company has provided NOI information on a same-property basis. Information provided on a same-property basis includes the results of properties that were owned and operated for the entirety of the reporting periods being compared and excludes properties for which significant redevelopment occurred or are in the foreclosure process during the periods being compared.


8


Earnings before interest, taxes, depreciation and amortization (EBITDA) is a widely used performance measure and is provided as a supplemental measure of operating performance. The Company makes certain adjustments to EBITDA, which it refers to as Adjusted EBITDA, to account for items it does not believe are representative of ongoing operating results. Given the nature of the Company's business as a real estate owner and operator, it believes that the use of EBITDA and Adjusted EBITDA as opposed to earnings in various financial ratios is helpful to investors as a measure of its operational performance because these computations exclude various items included in earnings that do not relate to or are not indicative of its operating performance, such as gains and losses on sales of real estate and depreciation and amortization, and includes the results of operations of real estate properties that were sold either during or subsequent to the end of a particular reporting period, which are included in earnings on a net basis. Accordingly, the Company believes that the use of EBITDA and Adjusted EBITDA as opposed to earnings in various ratios, provides a meaningful performance measure as it relates to the Company's ability to meet various coverage tests for the stated periods.

EBITDA and Adjusted EBITDA should not be considered as an alternative to earnings as an indicator of the Company's financial performance, or as an alternative to cash flow from operating activities as a measure of its liquidity. The Company's computation of EBITDA and Adjusted EBITDA may differ from the methodology utilized by other companies. Investors are cautioned that items excluded from EBITDA and Adjusted EBITDA are significant components in understanding and assessing the Company’s financial performance.

FFO, Recurring FFO, NOI, same-property NOI, EBITDA and Adjusted EBITDA are presented to assist investors in analyzing the Company’s operating performance. Neither FFO nor Recurring FFO (i) represents cash flow from operations as defined by GAAP, (ii) is indicative of cash available to fund all cash flow needs, including the ability to make distributions, (iii) is an alternative to cash flow as a measure of liquidity, or (iv) should be considered as an alternative to net income (which is determined in accordance with GAAP) for purposes of evaluating the Company’s operating performance. The Company believes net income attributable to common shareholders is the most directly comparable GAAP financial measure to FFO and Recurring FFO while income before income taxes is the most directly comparable GAAP financial measure to NOI and same-property NOI and net income (loss) is the most directly comparable GAAP financial measure to EBITDA and adjusted EBITDA. Reconciliations of these measures to their respective comparable GAAP measures have been provided in the accompanying tables.


9



URBAN EDGE PROPERTIES
 
 
SUMMARY FINANCIAL RESULTS AND RATIOS
 
 
For the three and nine months ended September 30, 2015 (unaudited)
 
(in thousands, except per share, sf, rent psf and financial ratio data)
 
 
 
 
 
 
 
Three months ended
 
Nine months ended
 
 
September 30, 2015
 
September 30, 2015
Summary Financial Results
 
 
 
 
Total revenue
 
$
79,825

 
$
242,323

General & administrative expenses (G&A) - Adjusted(1)
 
$
6,385

 
$
18,360

Adjusted EBITDA(9)
 
$
46,030

 
$
138,094

Net income attributable to common shareholders
 
$
18,860

 
$
23,559

Earnings per diluted share
 
$
0.19

 
$
0.24

Funds from operations (FFO)
 
$
33,491

 
$
66,266

FFO per diluted share
 
$
0.32

 
$
0.63

Recurring FFO
 
$
31,868

 
$
95,225

Recurring FFO per diluted share
 
$
0.30

 
$
0.90

Total dividends paid per share
 
$
0.20

 
$
0.60

Stock trading price low-high range
 
$20.12 to $23.06

 
$20.12 to $24.67

Weighted average diluted shares used in EPS computations(2)
 
99,286

 
99,272

Weighted average diluted shares used in FFO computations(2)
 
105,436

 
105,351

 
 
 
 
 
Summary Property, Operating and Financial Data
 
 
 
 
# of Total properties / # of Retail properties
 
83 / 82

 
 
Gross leasable area (GLA) sf - retail portfolio(4)(6)
 
13,889,000

 
 
Weighted average annual in-place rent psf - retail portfolio(4)(6)(8)
 
$
16.57

 
 
Consolidated occupancy at end of period
 
95.0
%
 
 
Consolidated retail portfolio occupancy at end of period(6)
 
96.1
%
 
 
Same-property retail portfolio occupancy at end of period(6)(3)
 
96.6
%
 
 
Same-property retail portfolio physical occupancy at end of period(5)(6)(3)
 
95.9
%
 
 
Same-property NOI growth - cash basis(3)
 
4.1
%
 
3.6
%
Same-property NOI growth, including redevelopment properties
 
3.1
%
 
3.5
%
Cash NOI margin - Total portfolio
 
67.2
%
 
64.5
%
Expense recovery ratio - Total Portfolio, including redevelopment
 
93.9
%
 
93.8
%
New, renewal and option rent spread - cash basis
 
0.8
%
 
8.2
%
Net debt to total market capitalization(7)
 
29.8
%
 
29.8
%
Net debt to Adjusted EBITDA(7)
 
5.7
x
 
5.7
x
Adjusted EBITDA to interest expense(9)
 
3.6
x
 
3.5
x
Adjusted EBITDA to fixed charges(9)
 
2.6
x
 
2.6
x
 
 
 
 
 
(1) G&A expenses excludes $1.7 million and $5.0 million reclassified to property operating expenses for the three and nine months ended September 30, 2015, respectively, and an additional $7.1 million for one-time equity expenses associated with the spin-off for the nine months ended September 30, 2015.
(2) Weighted average diluted shares used to calculate FFO per share and Recurring FFO per share for the periods presented is higher than the GAAP diluted weighted average shares as a result of the dilutive impact of the 6.1 million units of limited partnership interests in the operating partnership which are redeemable for our common shares. These redeemable units are not included in the diluted weighted average share count for GAAP purposes for the periods presented because their inclusion is anti-dilutive.
(3) The same-property pool for both NOI and occupancy includes retail properties the company consolidated, owned and operated for the entirety of both periods being compared and excludes properties for which significant redevelopment occurred during either of the periods being compared, or properties in foreclosure.
(4) GLA - retail portfolio excludes 942,000 square feet of warehouses. Weighted average annual rent per square foot for our retail portfolio and warehouses was $16.04.
(5) Physical occupancy includes tenants that have access to their leased space and includes dark and paying tenants.
(6) Our retail portfolio includes shopping centers and malls and excludes warehouses.
(7) See computation on page 16.
(8) Excludes signed leases that have not commenced for all retail properties.
(9) See computation on page 14.

10



URBAN EDGE PROPERTIES
 
 
CONSOLIDATED AND COMBINED BALANCE SHEETS
 
 
As of September 30, 2015 (unaudited) and December 31, 2014
 
 
(in thousands)
 
 
 
 
 
 
September 30,
 
December 31,
 
2015
 
2014
ASSETS
 
 
 

Real estate, at cost:
 

 
 

Land
$
374,543

 
$
378,096

Buildings and improvements
1,616,769

 
1,632,228

Construction in progress
53,209

 
8,545

Furniture, fixtures and equipment
3,879

 
3,935

Total
2,048,400

 
2,022,804

Accumulated depreciation and amortization
(500,654
)
 
(467,503
)
Real estate, net
1,547,746

 
1,555,301

Cash and cash equivalents
197,338

 
2,600

Cash held in escrow and restricted cash
9,832

 
9,967

Tenant and other receivables, net of allowance for doubtful accounts of $2,106 and $2,432, respectively
9,741

 
11,424

Receivable arising from the straight-lining of rents, net of allowance for doubtful accounts of $149 and $0, respectively
88,888

 
89,199

Identified intangible assets, net of accumulated amortization of $21,660 and $20,672, respectively
32,793

 
34,775

Deferred leasing costs, net of accumulated amortization of $13,057 and $12,121, respectively
17,674

 
17,653

Deferred financing costs, net of accumulated amortization of $7,394 and $6,813, respectively
11,702

 
10,353

Prepaid expenses and other assets
12,007

 
10,257

Total assets
$
1,927,721

 
$
1,741,529

 
 
 
 
LIABILITIES AND EQUITY
 

 
 

Liabilities:
 
 
 
Mortgages payable
$
1,246,155

 
$
1,288,535

Identified intangible liabilities, net of accumulated amortization of $63,373 and $62,395, respectively
154,507

 
160,667

Accounts payable and accrued expenses
38,008

 
26,924

Other liabilities
10,134

 
6,540

Total liabilities
1,448,804

 
1,482,666

Commitments and contingencies
 
 
 
Shareholders’ equity:
 
 
 
Common shares: $0.01 par value; 500,000,000 shares authorized and 99,291,161 shares issued and outstanding
993

 

Additional paid-in capital
478,314

 

Accumulated earnings (deficit)
(33,852
)
 

Noncontrolling interests:
 
 
 
Redeemable noncontrolling interests
33,104

 

Noncontrolling interest in consolidated subsidiaries
358

 
341

Vornado equity

 
258,522

Total equity
478,917

 
258,863

Total liabilities and equity
$
1,927,721

 
$
1,741,529


11



URBAN EDGE PROPERTIES
 
 
CONSOLIDATED AND COMBINED STATEMENTS OF INCOME
 
 
For the three and nine months ended September 30, 2015 and 2014 (unaudited)
 
(in thousands, except per share amounts)
 
 
 
 
 

 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
2015
 
2014
 
2015
 
2014
REVENUE
 

 
 

 
 
 
 
Property rentals
$
58,111

 
$
58,125

 
$
173,077

 
$
173,175

Tenant expense reimbursements
19,188

 
18,052

 
63,942

 
61,751

Management and development fees
551

 
133

 
1,779

 
398

Other income
1,975

 
106

 
3,525

 
544

Total revenue
79,825

 
76,416

 
242,323

 
235,868

EXPENSES
 

 
 

 
 
 
 
Depreciation and amortization
13,603

 
13,148

 
41,568

 
40,444

Real estate taxes
12,227

 
11,820

 
37,568

 
37,230

Property operating
10,494

 
11,074

 
38,002

 
38,973

General and administrative
6,385

 
4,606

 
25,503

 
14,275

Ground rent
2,527

 
2,593

 
7,606

 
7,803

Transaction costs
151

 
4,683

 
22,437

 
4,683

Provision for doubtful accounts
427

 
27

 
1,139

 
754

Total expenses
45,814

 
47,951

 
173,823

 
144,162

Operating income
34,011

 
28,465

 
68,500

 
91,706

Interest income
39

 
9

 
101

 
26

Interest and debt expense
(13,611
)
 
(14,303
)
 
(42,021
)
 
(40,571
)
Income before income taxes
20,439

 
14,171

 
26,580

 
51,161

Income tax expense
(394
)
 
(525
)
 
(1,399
)
 
(1,575
)
Net income
20,045

 
13,646

 
25,181

 
49,586

Less net income attributable to noncontrolling interests in:
 
 
 
 
 
 
 
Operating partnership
(1,179
)
 

 
(1,605
)
 

Consolidated subsidiaries
(6
)
 
(5
)
 
(17
)
 
(16
)
Net income attributable to common shareholders
$
18,860

 
$
13,641

 
$
23,559

 
$
49,570

 
 
 
 
 
 
 
 
Earnings per common share - Basic:
$
0.19

 
$
0.14

 
$
0.24

 
$
0.50

Earnings per common share - Diluted:
$
0.19

 
$
0.14

 
$
0.24

 
$
0.50

Weighted average shares outstanding - Basic
99,252

 
99,248

 
99,250

 
99,248

Weighted average shares outstanding - Diluted
99,286

 
99,248

 
99,272

 
99,248



12



URBAN EDGE PROPERTIES
 
 
SUPPLEMENTAL SCHEDULE OF NET OPERATING INCOME
 
 
For the three and nine months ended September 30, 2015 and 2014 (unaudited)
 
(in thousands)
 
 
 
 
 
 
Three Months Ended September 30,
 
Percent Change
 
Nine Months Ended September 30,
 
Percent Change
 
2015
 
2014
 
 
2015
 
2014
 
Total cash NOI(1)
 
 
 
 
 
 
 
 
 
 
 
Total revenue
$
77,331

 
$
73,640

 
5.0%
 
$
234,803

 
$
228,145

 
2.9%
Total property operating expenses
(25,357
)
 
(25,072
)
 
1.1%
 
(83,300
)
 
(83,584
)
 
(0.3)%
Cash NOI - total portfolio
$
51,974

 
$
48,568

 
7.0%
 
$
151,503

 
$
144,561

 
4.8%
 
 
 
 
 
 
 
 
 
 
 
 
NOI margin (NOI / Total revenue)
67.2
%
 
66.0
%
 
 
 
64.5
%
 
63.4
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Same-property cash NOI(2)

 

 
 
 
 
 
 
 
 
Property rentals
$
50,950

 
$
50,152

 
 
 
$
151,809

 
$
149,601

 
 
Tenant expense reimbursements
17,808

 
16,302

 
 
 
59,418

 
57,062

 
 
Other income
62

 
55

 
 
 
249

 
231

 
 
Total revenue
68,820

 
66,509

 
3.5%
 
211,476

 
206,894

 
2.2%
Real estate taxes
(11,518
)
 
(10,998
)
 
 
 
(35,380
)
 
(34,542
)
 
 
Property operating
(8,924
)
 
(9,367
)
 
 
 
(31,894
)
 
(33,175
)
 
 
Ground rent
(2,211
)
 
(2,141
)
 
 
 
(6,591
)
 
(6,579
)
 
 
Provision for doubtful accounts(4)
(287
)
 
80

 
 
 
(711
)
 
(502
)
 
 
Total property operating expenses
(22,940
)
 
(22,426
)
 
2.3%
 
(74,576
)
 
(74,798
)
 
(0.3)%
Same-property cash NOI(3)
$
45,880

 
$
44,083

 
4.1%
 
$
136,900

 
$
132,096

 
3.6%
 
 
 
 
 
 
 
 
 
 
 
 
NOI related to properties being redeveloped
$
3,966

 
$
4,284

 
 
 
$
12,171

 
$
11,887

 
 
Same-property cash NOI including properties in redevelopment
$
49,846

 
$
48,367

 
3.1%
 
$
149,071

 
$
143,983

 
3.5%
 
 
 
 
 
 
 
 
 
 
 
 
Same-property physical occupancy(3)
95.9
%
 
95.0
%
 
 
 
 
 
 
 
 
Same-property leased occupancy(3)
96.6
%
 
95.8
%
 
 
 
 
 
 
 
 
Number of properties included in same-property analysis
79

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(1) Total revenues and property operating expense amounts have been adjusted to exclude management and development fee income and non-cash amounts. Revenue includes cash received from tenant bankruptcy settlements and lease termination fees.
(2) Excludes the effects of straight-line rent, above/below-market rents, lease termination fees and other items that affect the comparability of the same-property results, if any.
(3) The same-property pool for both NOI and occupancy includes retail properties the company consolidated, owned and operated for the entirety of both periods being compared and excludes properties for which significant redevelopment occurred during either of the periods being compared, or properties in foreclosure. Same-property occupancy includes dark and paying tenants.
(4)  
Excludes $0.1 million and $0.4 million of bad debt expense related to non-cash straight-line rents for the three and nine months ended September 30, 2015, respectively. No such reserve was recorded in 2014.

13



URBAN EDGE PROPERTIES
 
 
EARNINGS BEFORE INTEREST, TAXES, DEPRECIATION and AMORTIZATION (EBITDA)
For the three and nine months ended September 30, 2015 and 2014 (unaudited)
 
(in thousands)
 
 
 
 
 

 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
2015
 
2014
 
2015
 
2014
Net income
$
20,045

 
$
13,646

 
$
25,181

 
$
49,586

Depreciation and amortization
13,603

 
13,148

 
41,568

 
40,444

Interest expense
12,952

 
13,867

 
39,942

 
39,355

Amortization of deferred financing costs
659

 
436

 
2,079

 
1,216

Income tax expense
394

 
525

 
1,399

 
1,575

EBITDA
47,653

 
41,622

 
110,169

 
132,176

Adjustments for Adjusted EBITDA:
 
 
 
 
 
 
 
Transaction costs
151

 
4,683

 
22,437

 
4,683

One-time equity awards related to the spin-off

 

 
7,143

 

Environmental remediation costs

 

 
1,379

 

Tenant bankruptcy settlement income
(1,774
)
 

 
(3,034
)
 

Adjusted EBITDA
$
46,030

 
$
46,305

 
$
138,094

 
$
136,859

 
 
 
 
 
 
 
 
Interest expense
$
12,952

 
$
13,867

 
$
39,942

 
$
39,355

 
 
 
 
 
 
 
 
Adjusted EBITDA to interest expense
3.6
x
 
3.3
x
 
3.5
x
 
3.5
x
 
 
 
 
 
 
 
 
Fixed charges
 
 
 
 
 
 
 
Interest and debt expense(1)
$
13,611

 
$
14,303

 
$
42,021

 
$
40,571

Scheduled principal amortization
3,969

 
3,524

 
11,606

 
10,809

Total fixed charges
$
17,580

 
$
17,827

 
$
53,627

 
$
51,380

 
 
 
 
 
 
 
 
Adjusted EBITDA to fixed charges
2.6
x
 
2.6
x
 
2.6
x
 
2.7
x
 
 
 
 
 
 
 
 
(1) Includes amortization of deferred financing costs


14



URBAN EDGE PROPERTIES
 
 
CONSOLIDATED STATEMENTS OF FUNDS FROM OPERATIONS
 
For the three and nine months ended September 30, 2015 and 2014 (unaudited)
 
(in thousands, except per share data)
 
 
 
 
 
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
2015
2014
 
2015
2014
Net income attributable to common shareholders
$
18,860

$
13,641

 
$
23,559

$
49,570

Adjustments:
 
 
 
 
 
Rental property depreciation and amortization
13,452

13,036

 
41,102

40,107

Limited partnership interests in operating partnership(1)
1,179


 
1,605


Funds From Operations
33,491

26,677

 
66,266

89,677

FFO per diluted share(2)
0.32

0.25

 
0.63

0.85

Adjustments for Recurring FFO:
 
 
 
 
 
Transaction costs
151

4,683

 
22,437

4,683

One-time equity awards related to the spin-off


 
7,143


Environmental remediation costs


 
1,379


Tenant bankruptcy settlement income
(1,774
)

 
(3,034
)

Debt restructuring expenses


 
1,034


Recurring Funds From Operations
$
31,868

$
31,360

 
$
95,225

$
94,360

Recurring FFO per diluted share(2)
$
0.30

$
0.30

 
$
0.90

$
0.90

 
 
 
 
 
 
Weighted Average Diluted Shares(2)
105,436

105,436

 
105,351

105,351

(1) Represents earnings allocated to LTIP and OP unit holders for unissued common shares which have been excluded for purposes of calculating earnings per diluted share for the periods presented. FFO and Recurring FFO calculations include earnings allocated to LTIP and OP unit holders and the respective weighted average share totals include the redeemable shares outstanding as their inclusion is dilutive.
(2) Weighted average diluted shares used to calculate FFO per share and Recurring FFO per share for the periods presented are higher than the GAAP diluted weighted average shares as a result of the dilutive impact of the 6.1 million OP and LTIP units which are redeemable into our common stock. These redeemable units are not included in the diluted weighted average share count for GAAP purposes because their inclusion is anti-dilutive.








15



URBAN EDGE PROPERTIES
 
 
MARKET CAPITALIZATION, DEBT RATIOS, AND LIQUIDITY
 
 
As of September 30, 2015 (unaudited)
 
 
(in thousands, except share data)
 
 
 
 
 

 
September 30, 2015
Closing market price of common stock
$
21.59

Common stock shares
 
Basic common shares
99,255,701

Diluted common shares:
 
Unvested restricted common shares (treasury method, closing price)
35,460

LTIP units (redeemable into common shares)
433,040

OP units (redeemable into common shares)
5,717,184

Diluted common shares
105,441,385

 
 
Equity market capitalization
$
2,276,480

 
 
 
 
Total consolidated debt
$
1,246,155

Cash and cash equivalents
(197,338
)
Net debt
$
1,048,817

 
 
Net Debt to Adjusted EBITDA(1)
5.7
x
 
 
Total consolidated debt
$
1,246,155

Equity market capitalization
2,276,480

Total market capitalization
$
3,522,635

 
 
Net debt to total market capitalization at applicable market price
29.8
%
 
 
 
 
Gross real estate investments, at cost
$
2,044,521

 
 
Net debt to gross real estate investments
51.3
%
 
 
 
 
(1) Adjusted EBITDA for the period has been annualized.


16



URBAN EDGE PROPERTIES
 
 
ADDITIONAL DISCLOSURES
 
(in thousands)