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Section 1: 8-K (8-K)

Document


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):
August 1, 2018

URBAN EDGE PROPERTIES
URBAN EDGE PROPERTIES LP
(Exact name of Registrant as specified in its charter)
Maryland (Urban Edge Properties)
 
001-36523 (Urban Edge Properties)

 
47-6311266
Delaware (Urban Edge Properties LP)
 
333-212951-01 (Urban Edge Properties LP)

 
36-4791544
(State or other jurisdiction of incorporation or organization)
 
(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))

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter). Emerging growth company o
 
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.   o






Item 2.02 Results of Operations and Financial Condition

On August 1, 2018, Urban Edge Properties (the "Company") announced its financial results for the three and six months ended June 30, 2018. 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 August 1, 2018, the Company announced its financial results for the three and six months ended June 30, 2018 and made available on its website the Earnings 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 August 1, 2018.
99.2 - Supplemental Disclosure Package of Urban Edge Properties as of June 30, 2018.






INDEX TO EXHIBITS

Exhibit Number
 
Document
 
 
 
 
 






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: August 1, 2018
By:
/s/ Mark Langer
 
 
Mark Langer, Executive Vice President and Chief Financial Officer




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Section 2: EX-99.1 (EXHIBIT 99.1)

Exhibit


 
394469998_image2a15.jpg
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 Second Quarter 2018 Results


                                    
NEW YORK, NY, August 1, 2018 - Urban Edge Properties (NYSE:UE) (the "Company") today announced its results for the quarter ended June 30, 2018.

Financial Results(1)(2) 
Generated net income of $59.8 million, or $0.47 per diluted share, for the quarter compared to net income of $14.9 million, or $0.13 per diluted share for the second quarter of 2017 and $82.8 million, or $0.65 per diluted share, for the six months ended June 30, 2018 compared to $69.7 million, or $0.63 per diluted share, for the six months ended June 30, 2017.
Generated Funds from Operations applicable to diluted common shareholders ("FFO") of $39.6 million, or $0.31 per share, for the quarter compared to $38.7 million, or $0.34 per share, for the second quarter of 2017 and $83.7 million, or $0.66 per share, for the six months ended June 30, 2018 compared to $112.1 million, or $1.01 per share, for the six months ended June 30, 2017.
Generated FFO as Adjusted of $41.6 million, or $0.33 per share, for the quarter compared to $38.3 million, or $0.33 per share, for the second quarter of 2017 and $82.9 million, or $0.65 per share, for the six months ended June 30, 2018 compared to $73.9 million, or $0.66 per share, for the six months ended June 30, 2017.
Operating Results(1) 
Same-property cash Net Operating Income (“NOI”) increased by 0.1% over the second quarter of 2017, and by 1.5% compared to the six months ended June 30, 2017. Second quarter results were negatively impacted by the following:
Las Catalinas in Puerto Rico - $0.6 million lower NOI primarily due to tenant vacancies and rent reductions, and
Bergen Town Center and The Shops at Bruckner - $0.5 million lower NOI due to expected vacancies on spaces planned for redevelopment.
Excluding these properties, same-property cash NOI would have increased by 3.2% for the quarter ended June 30, 2018.
Same-property cash NOI including properties in redevelopment increased by 0.4% compared to the second quarter of 2017 and by 1.8% compared to the six months ended June 30, 2017 and were impacted by the same factors noted above. Excluding the properties listed above, same-property cash NOI including properties in redevelopment would have increased by 3.3% for the quarter ended June 30, 2018.
Reported same-property retail portfolio occupancy of 98.5%, an increase of 20 basis points compared to June 30, 2017.
Reported consolidated retail portfolio occupancy of 96.6%, an increase of 70 basis points compared to June 30, 2017. Occupancy levels as of June 30, 2018 were not impacted by Toys "R" Us bankruptcies. Subsequent to the end of the quarter, five leases comprising 237,000 square feet (sf) were recaptured.
Executed 29 new leases, renewals and options totaling 435,000 sf during the quarter. Same-space leases totaled 355,000 sf and generated average rent spreads of 2.0% on a GAAP basis and (1.9)% on a cash basis. The negative cash spread was primarily driven by one new lease executed for a 36,000 sf building that was vacant for more than six years.


1



Toys "R" Us Bankruptcy
The Company had nine Toys “R” Us (“Toys”) leases comprising approximately 400,000 square feet which generated approximately $7.0 million in annual gross rents. Rents were paid in full through June 30, 2018.
The status of the nine Toys leases is as follows:
The Company paid $6.0 million to recapture the lease at Hudson Mall in Jersey City, NJ to accelerate the redevelopment of the property. The previous rent was well under-market at $0.43 per sf annually.
Raymour & Flanigan acquired the lease at Manalapan Commons in Manalapan, NJ.
Toys rejected its leases in Woodbridge, NJ, Union, NJ, Amherst, NY and Wilkes-Barre, PA in July 2018. Annual gross rent on these leases amounted to approximately $4.0 million. The Company is in active discussions to lease these spaces.
The remaining three leases are held in a separate Toys entity for which bankruptcy proceedings are ongoing and rent is current through July 2018. The three properties are located in the Bronx, NY, Cherry Hill, NJ, and Salem, NH.

Development, Redevelopment and Anchor Repositioning Activity
During the second quarter, the Company completed two redevelopment projects totaling $12.4 million at a blended yield of 13.6%, consisting of a 40,000 sf build-to-suit for Best Buy at Bergen Town Center and a new outparcel building at Marlton Commons for Shake Shack and honeygrow.

The Company has $207 million of active redevelopment projects underway expected to generate a 7% unleveraged yield of which $87 million remains to be funded.

The Company’s largest projects include Bergen Town Center and Bruckner Commons. At Bergen, construction is underway on a 47,000 sf Burlington expected to open in spring 2019. Enhanced food offerings include Cava Grill, Ruth’s Chris Steakhouse and a daytime café. At Bruckner, ShopRite opened in June and Burlington opened in July.

Disposition Activity
On April 26, 2018, the Company sold MacArthur Commons in Allentown, PA for $55.3 million consistent with its plan to dispose of assets in non-core markets. The Company recognized a $50.4 million gain in connection with the sale.
Balance Sheet Highlights at June 30, 2018(1)(3)(4) 
Total market capitalization of approximately $4.5 billion comprising 126.7 million, fully-diluted common shares valued at $2.9 billion and $1.6 billion of debt.
Net debt to total market capitalization of 24%.
Net debt to Adjusted Earnings before interest, tax, depreciation and amortization for real estate ("EBITDAre") of 4.6x.
$514.0 million of cash and cash equivalents, including restricted cash, and no amounts drawn on the $600 million revolving credit facility.















(1) Refer to "Non-GAAP Financial Measures" and "Operating Metrics" for definitions and additional detail.
(2) Refer to page 8 for a reconciliation of net income to FFO and FFO as Adjusted for the quarter and six months ended June 30, 2018.
(3) Refer to page 10 for a reconciliation of net income to EBITDAre and annualized Adjusted EBITDAre for the quarter and six months ended June 30, 2018.
(4) Net debt as of June 30, 2018 is calculated as total consolidated debt of $1.6 billion less total cash and cash equivalents, including restricted cash, of $514.0 million.

2



Non-GAAP Financial Measures
The Company uses certain non-GAAP performance measures, in addition to the primary GAAP presentations, as we believe these measures improve the understanding of the Company's operational results. We continually evaluate the usefulness, relevance, limitations, and calculation of our reported non-GAAP performance measures to determine how best to provide relevant information to the investing public, and thus such reported measures are subject to change. The Company's non-GAAP performance measures have limitations as they do not include all items of income and expense that affect operations, and accordingly, should always be considered as supplemental financial results. The following non-GAAP measures are commonly used by the Company and investing public to understand and evaluate our operating results and performance:
FFO: The Company believes FFO 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. FFO, as defined by the National Association of Real Estate Investment Trusts ("NAREIT") and the Company, is net income (computed in accordance with GAAP), excluding gains (or losses) from sales of depreciated real estate assets, real estate impairment losses, rental property depreciation and amortization expense. The Company believes that financial analysts, investors and shareholders are better served by the presentation of comparable period operating results generated from FFO primarily because it excludes the assumption that the value of real estate assets diminish predictably. FFO does not represent cash flows from operating activities in accordance with GAAP, should not be considered an alternative to net income as an indication of our performance, and is not indicative of cash flow as a measure of liquidity or our ability to make cash distributions.
FFO as Adjusted: The Company provides disclosure of FFO as Adjusted because it believes it is a useful supplemental measure of its core operating performance that facilitates comparability of historical financial periods. FFO as Adjusted is calculated by making certain adjustments to FFO to account for items the Company does not believe are representative of ongoing core operating results including non-comparable revenues and expenses. The Company's method of calculating FFO as Adjusted may be different from methods used by other REITs and, accordingly, may not be comparable to such other REITs.
Cash NOI: The Company uses cash NOI internally to make investment and capital allocation decisions and to compare the unlevered performance of our properties to our peers. The Company believes cash NOI is useful to investors as a performance measure because, when compared across periods, cash NOI reflects the impact on operations from trends in occupancy rates, rental rates, operating costs and acquisition and disposition activity on an unleveraged basis, providing perspective not immediately apparent from operating income or net income. The Company calculates cash NOI using net income as defined by GAAP reflecting only those income and expense items that are incurred at the property level, adjusted for the following items: lease termination fees, bankruptcy settlement income, non-cash rental income and ground rent expense and income or expenses that we do not believe are representative of ongoing operating results, if any.
Same-property Cash NOI: The Company provides disclosure of cash NOI on a same-property basis, which includes the results of properties that were owned and operated for the entirety of the reporting periods being compared totaling 77 properties for the three months ended June 30, 2018 and 2017 and 75 properties for the six months ended June 30, 2018 and 2017. Information provided on a same-property basis excludes properties under development, redevelopment or that involve anchor repositioning where a substantial portion of the gross leasable area ("GLA") is taken out of service and also excludes properties acquired, sold, or under contract to be sold during the periods being compared. As such, same-property cash NOI assists in eliminating disparities in net income due to the development, redevelopment, acquisition or disposition of properties during the periods presented, and thus provides a more consistent performance measure for the comparison of the operating performance of the Company's properties. While there is judgment surrounding changes in designations, a property is removed from the same-property pool when it is designated as a redevelopment property because it is undergoing significant renovation or retenanting pursuant to a formal plan that is expected to have a significant impact on its operating income. A development or redevelopment property is moved back to the same-property pool once a substantial portion of the NOI growth expected from the development or redevelopment is reflected in both the current and comparable prior year period, generally one year after at least 80% of the expected NOI from the project is realized on a cash basis. Acquisitions are moved into the same-property pool once we have owned the property for the entirety of the comparable periods and the property is not under significant development or redevelopment. The Company has also provided disclosure of cash NOI on a same-property basis adjusted to include redevelopment properties. Same-property cash NOI may include other adjustments as detailed in the Reconciliation of Net Income to cash NOI and same-property cash NOI included in the tables accompanying this press release.

3



EBITDAre and Adjusted EBITDAre: EBITDAre and Adjusted EBITDAre are supplemental, non-GAAP measures utilized by us in various financial ratios. The White Paper on EBITDAre, approved by NAREIT's Board of Governors in September 2017, defines EBITDAre as net income (computed in accordance with GAAP), adjusted for interest expense, income tax expense, depreciation and amortization, losses and gains on the disposition of depreciated property, impairment write-downs of depreciated property and investments in unconsolidated joint ventures, and adjustments to reflect the entity's share of EBITDAre of unconsolidated joint ventures. EBITDAre and Adjusted EBITDAre are presented to assist investors in the evaluation of REITs, 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 and because they approximate key performance measures in our debt covenants. Accordingly, the Company believes that the use of EBITDAre and Adjusted EBITDAre, as opposed to income before income taxes in various ratios, provides meaningful performance measures related to the Company's ability to meet various coverage tests for the stated periods. The Company also presents the ratio of net debt (net of cash) to annualized Adjusted EBITDAre as of June 30, 2018, and net debt (net of cash) to total market capitalization, which it believes is useful to investors as a supplemental measure in evaluating the Company's balance sheet leverage. The presentation of EBITDAre and Adjusted EBITDAre are consistent with EBITDA and Adjusted EBITDA as presented in prior periods.
The Company believes net income is the most directly comparable GAAP financial measure to the non-GAAP performance measures outlined above. Reconciliations of these measures to net income have been provided in the tables accompanying this press release.

Operating Metrics

The Company presents certain operating metrics related to our properties including occupancy, leasing activity and rental rates. Operating metrics are used by the Company and are useful to investors in facilitating an understanding of the operational performance for our properties.

Occupancy metrics represent the percentage of occupied gross leasable area based on executed leases (including properties in development and redevelopment) and includes leases signed, but for which rent has not yet commenced. Same-property retail portfolio occupancy includes shopping centers and malls that have been owned and operated for the entirety of the reporting periods being compared totaling 77 properties for the three months ended June 30, 2018 and 2017 and 75 properties for the six months ended June 30, 2018 and 2017. Occupancy metrics presented for the Company's same-property retail portfolio excludes properties under development, redevelopment or that involve anchor repositioning where a substantial portion of the gross leasable area is taken out of service and also excludes properties acquired within the past 12 months, properties sold, or under contract to be sold during the periods being compared.

Executed new leases, renewals and exercised options are presented on a same-space basis. Same-space leases represent those leases signed on spaces for which there was a previous lease with comparable gross leasable area.





4



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, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and amendments to those reports.

ABOUT URBAN EDGE
Urban Edge Properties is a NYSE listed real estate investment trust focused on managing, acquiring, developing, and redeveloping retail real estate in urban communities, primarily in the New York metropolitan region. Urban Edge owns 88 properties totaling 16.3 million square feet of gross leasable area.

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, redevelopment and anchor repositioning projects, the Company's ability to pursue, finance and complete acquisition opportunities, the Company's ability to engage in the projects in its planned expansion and redevelopment pipeline, the Company's ability to achieve the estimated unleveraged returns for such projects and acquisitions, the estimated remediation and repair costs related to Hurricane Maria at the affected properties. 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, 2017 and the other documents filed by the Company with the Securities and Exchange Commission.

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.


5



URBAN EDGE PROPERTIES
CONSOLIDATED BALANCE SHEETS
(In thousands, except share and per share amounts) 
 
June 30,
 
December 31,
 
2018
 
2017
ASSETS
 
 
 

Real estate, at cost:
 

 
 

Land
$
530,658

 
$
521,669

Buildings and improvements
2,060,960

 
2,010,527

Construction in progress
125,664

 
133,761

Furniture, fixtures and equipment
6,615

 
5,897

Total
2,723,897

 
2,671,854

Accumulated depreciation and amortization
(616,284
)
 
(587,127
)
Real estate, net
2,107,613

 
2,084,727

Cash and cash equivalents
500,930

 
490,279

Restricted cash
13,057

 
10,562

Tenant and other receivables, net of allowance for doubtful accounts of $6,176 and $4,937, respectively
23,017

 
20,078

Receivable arising from the straight-lining of rents, net of allowance for doubtful accounts of $562 and $494, respectively
84,378

 
85,843

Identified intangible assets, net of accumulated amortization of $39,770 and $33,827, respectively
76,310

 
87,249

Deferred leasing costs, net of accumulated amortization of $15,809 and $14,796, respectively
20,291

 
20,268

Deferred financing costs, net of accumulated amortization of $2,252 and $1,740, respectively
2,731

 
3,243

Prepaid expenses and other assets
12,228

 
18,559

Total assets
$
2,840,555

 
$
2,820,808

 
 
 
 
LIABILITIES AND EQUITY
 

 
 

Liabilities:
 
 
 
Mortgages payable, net
$
1,551,788

 
$
1,564,542

Accounts payable and accrued expenses
80,768

 
69,595

Identified intangible liabilities, net of accumulated amortization of $68,938 and $65,832, respectively
168,540

 
180,959

Other liabilities
17,527

 
15,171

Total liabilities
1,818,623

 
1,830,267

Commitments and contingencies
 
 
 
Shareholders’ equity:
 
 
 
Common shares: $0.01 par value; 500,000,000 shares authorized and 114,004,276 and 113,827,529 shares issued and outstanding, respectively
1,140

 
1,138

Additional paid-in capital
950,958

 
946,402

Accumulated deficit
(33,307
)
 
(57,621
)
Noncontrolling interests:
 
 
 
Operating partnership
102,714

 
100,218

Consolidated subsidiaries
427

 
404

Total equity
1,021,932

 
990,541

Total liabilities and equity
$
2,840,555

 
$
2,820,808


6



URBAN EDGE PROPERTIES
CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except share and per share amounts)
 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
2018
 
2017
 
2018
 
2017
REVENUE
 
 
 
 
 
 
 
Property rentals
$
74,546

 
$
64,708

 
$
144,268

 
$
127,206

Tenant expense reimbursements
26,222

 
23,881

 
54,894

 
47,652

Management and development fees
347

 
351

 
689

 
830

Income from acquired leasehold interest

 

 

 
39,215

Other income
855

 
561

 
1,172

 
662

Total revenue
101,970

 
89,501

 
201,023

 
215,565

EXPENSES
 
 
 
 
 
 
 
Depreciation and amortization
30,441

 
23,701

 
51,711

 
39,529

Real estate taxes
15,587

 
14,711

 
31,362

 
28,103

Property operating
20,492

 
11,088

 
37,159

 
24,456

General and administrative
8,236

 
7,841

 
15,877

 
15,973

Casualty and impairment loss (gain), net
35

 
303

 
(1,306
)
 
3,467

Ground rent
2,752

 
2,436

 
5,488

 
5,106

Provision for doubtful accounts
1,273

 
906

 
2,509

 
1,099

Total expenses
78,816

 
60,986

 
142,800

 
117,733

Operating income
23,154

 
28,515

 
58,223

 
97,832

Gain on sale of real estate
50,440

 

 
50,440

 

Interest income
2,031

 
336

 
3,555

 
463

Interest and debt expense
(15,659
)
 
(13,627
)
 
(31,303
)
 
(26,742
)
Gain (loss) on extinguishment of debt

 

 
2,524

 
(1,274
)
Income before income taxes
59,966

 
15,224

 
83,439

 
70,279

Income tax expense
(192
)
 
(304
)
 
(626
)
 
(624
)
Net income
59,774

 
14,920

 
82,813

 
69,655

Less net income attributable to noncontrolling interests in:
 
 
 
 
 
 
 
Operating partnership
(6,025
)
 
(1,326
)
 
(8,353
)
 
(5,464
)
Consolidated subsidiaries
(12
)
 
(11
)
 
(23
)
 
(22
)
Net income attributable to common shareholders
$
53,737

 
$
13,583

 
$
74,437

 
$
64,169

 
 
 
 
 
 
 
 
Earnings per common share - Basic:
$
0.47

 
$
0.13

 
$
0.65

 
$
0.63

Earnings per common share - Diluted:
$
0.47

 
$
0.13

 
$
0.65

 
$
0.63

Weighted average shares outstanding - Basic
113,739

 
104,063

 
113,708

 
101,863

Weighted average shares outstanding - Diluted
113,942

 
104,260

 
114,151

 
111,224



7



Reconciliation of Net Income to FFO and FFO as Adjusted

The following table reflects the reconciliation of net income to FFO and FFO as Adjusted for the three and six months ended June 30, 2018. Net income is considered the most directly comparable GAAP measure. Refer to "Non-GAAP Financial Measures" on page 3 for a description of FFO and FFO as Adjusted.
 
Three Months Ended
June 30, 2018
 
Six Months Ended
June 30, 2018
 
(in thousands)
 
(per share)
 
(in thousands)
 
(per share)
Net income
$
59,774

 
$
0.47

 
$
82,813

 
$
0.65

Less net income attributable to noncontrolling interests in:
 
 
 
 
 
 
 
Operating partnership
(6,025
)
 
(0.05
)
 
(8,353
)
 
(0.07
)
Consolidated subsidiaries
(12
)
 

 
(23
)
 

Net income attributable to common shareholders
53,737

 
0.42

 
74,437

 
0.58

Adjustments:
 
 
 
 
 
 
 
Rental property depreciation and amortization
30,258

 
0.24

 
51,330

 
0.41

Gain on sale of real estate
(50,440
)
 
(0.40
)
 
(50,440
)
 
(0.40
)
Limited partnership interests in operating partnership
6,025

 
0.05

 
8,353

 
0.07

FFO applicable to diluted common shareholders
39,580

 
0.31

 
83,680

 
0.66

 
 
 
 
 
 
 
 
Tenant bankruptcy settlement income
(114
)
 

 
(278
)
 

Casualty gain, net(3)
(108
)
 

 
(688
)
 
(0.01
)
Impact of Toys "R" Us, Inc. lease terminations(2)
1,875

 
0.02

 
1,875

 
0.02

Environmental remediation costs
334

 

 
584

 

Tax impact from hurricane
58

 

 
226

 

Gain on extinguishment of debt

 

 
(2,524
)
 
(0.02
)
FFO as Adjusted applicable to diluted common shareholders
$
41,625

 
$
0.33

 
$
82,875

 
$
0.65

 
 
 
 
 
 
 
 
Weighted average diluted shares used to calculate EPS
113,942

 
 
 
114,151

 
 
Assumed conversion of OP and LTIP Units to common shares(1)
12,660

 
 
 
12,443

 
 
Weighted average diluted common shares - FFO
126,602

 
 
 
126,594

 
 
(1) Operating Partnership ("OP") and Long-Term Incentive Plan ("LTIP") Units are excluded from the calculation of earnings per diluted share for the three and six months ended June 30, 2018 because their inclusion is anti-dilutive. FFO includes earnings allocated to unitholders as the inclusion of these units is dilutive to FFO per share.
(2) Amount reflects a $6.0 million lease termination payment (classified within property operating expense) and $1.0 million of a provision for doubtful accounts for reserves recorded on straight-line rents, partially offset by the write-off of $5.1 million of below-market intangible liabilities (classified within property rental revenues).
(3) The following amount reflects insurance proceeds net of losses as a result of Hurricane Maria in Puerto Rico, in September 2017, and a tornado in Wilkes-Barre, PA, in June 2018:
(in thousands)
Three Months Ended
June 30, 2018
 
Six Months Ended
June 30, 2018
Insurance proceeds, net of casualty related expenses
$
(35
)
 
$
1,306

Reversal of provision for doubtful accounts on previously reserved balances
408

 
227

Property rental and tenant reimbursement losses
(265
)
 
(845
)
Casualty gain, net
$
108

 
$
688





8



Reconciliation of Net Income to Cash NOI and Same-Property Cash NOI

The following table reflects the reconciliation of net income to cash NOI, same-property cash NOI and same-property cash NOI including properties in redevelopment for the three and six months ended June 30, 2018 and 2017. Net income is considered the most directly comparable GAAP measure. Refer to "Non-GAAP Financial Measures" on page 3 for a description of cash NOI and same-property cash NOI.
 
Three Months Ended June 30,
 
Six Months Ended
June 30,
(Amounts in thousands)
2018
 
2017
 
2018
 
2017
Net income
$
59,774

 
$
14,920

 
$
82,813

 
$
69,655

Management and development fee income from non-owned properties
(347
)
 
(351
)
 
(689
)
 
(830
)
Other expense (income)
4

 
(22
)
 
(73
)
 
(86
)
Depreciation and amortization
30,441

 
23,701

 
51,711

 
39,529

General and administrative expense
8,236

 
7,841

 
15,877

 
15,973

Casualty and impairment loss (gain), net(5)
35

 
303

 
(1,306
)
 
3,467

Gain on sale of real estate
(50,440
)
 

 
(50,440
)
 

Interest income
(2,031
)
 
(336
)
 
(3,555
)
 
(463
)
Interest and debt expense
15,659

 
13,627

 
31,303

 
26,742

(Gain) loss on extinguishment of debt

 

 
(2,524
)
 
1,274

Income tax expense
192

 
304

 
626

 
624

Non-cash revenue and expenses
(6,792
)
 
(1,452
)
 
(9,081
)
 
(42,253
)
Cash NOI(1)
54,731

 
58,535

 
114,662

 
113,632

Adjustments:
 
 
 
 
 
 
 
Non-same property cash NOI(1)(2)
(11,095
)
 
(9,073
)
 
(25,029
)
 
(19,099
)
Tenant bankruptcy settlement and lease termination income
(813
)
 
(486
)
 
(977
)
 
(513
)
Natural disaster related operating (gain) loss(3)
(128
)
 

 
178

 

Lease termination payment
6,000

 

 
6,000

 

Environmental remediation costs
334

 

 
584

 

Same-property cash NOI(6)
$
49,029

 
$
48,976

 
$
95,418

 
$
94,020

Cash NOI related to properties being redeveloped(4)
4,830

 
4,650

 
9,721

 
9,309

Same-property cash NOI including properties in redevelopment(6)
$
53,859

 
$
53,626

 
$
105,139

 
$
103,329

(1) Cash NOI is calculated as total property revenues less property operating expenses excluding the net effects of non-cash rental income and non-cash ground rent expense.
(2) Non-same property cash NOI includes cash NOI related to properties being redeveloped and properties acquired or disposed.
(3) Amount reflects rental and tenant reimbursement losses as well as provisions or reversal of provisions for outstanding amounts due from tenants at Las Catalinas and Wilkes-Barre, PA that are subject to reimbursement from the insurance company.
(4) The result for the six months ended June 30, 2018, excludes $0.5 million of rental and tenant reimbursement losses, partially offset by a $0.1 million reversal of provisions for payments received from tenants at Montehiedra that are subject to reimbursement from the insurance company.
(5) The results for the three and six months ended June 30, 2018 reflect insurance proceeds offset by hurricane-related expenses. The three and six months ended June 30, 2017 reflect real estate impairment losses recorded as a result of the sale of our property in Eatontown, NJ.
(6) Results for the second quarter of 2018 were negatively impacted by lower NOI at Las Catalinas Mall in Puerto Rico, primarily due to tenant vacancies and rent reductions, and lower NOI at Bergen Town Center and The Shops at Bruckner due to expected vacancies on spaces planned for redevelopment. Excluding these amounts, same-property cash NOI would have increased by 3.2% for the quarter and same-property cash NOI including properties in redevelopment would have increased by 3.3% for the quarter:
 
 
Three Months Ended June 30,
 
 
 
 
2018
 
2017
 
Percent Change
Same-property cash NOI
$
49,029

 
$
48,976

 
0.1%
Less: Cash NOI of Las Catalinas, Bergen Town Center, and The Shops at Bruckner
(10,190
)
 
(11,340
)
 
 
Same-property cash NOI excluding items above
38,839

 
37,636

 
3.2%
Cash NOI related to properties being redeveloped
4,830

 
4,650

 
 
Same-property cash NOI including properties in redevelopment excluding items above
$
43,669

 
$
42,286

 
3.3%

9



Reconciliation of Net Income to EBITDAre and Adjusted EBITDAre

The following table reflects the reconciliation of net income to EBITDAre and Adjusted EBITDAre for the three and six months ended June 30, 2018. Net income is considered the most directly comparable GAAP measure. Refer to "Non-GAAP Financial Measures" on page 3 for a description of EBITDAre and Adjusted EBITDAre.
 
Three Months Ended June 30,
 
Six Months Ended June 30,
(Amounts in thousands)
2018
 
2017
 
2018
 
2017
Net income
$
59,774

 
$
14,920

 
$
82,813

 
$
69,655

Depreciation and amortization
30,441

 
23,701

 
51,711

 
39,529

Interest and debt expense
15,659

 
13,627

 
31,303

 
26,742

Income tax expense
192

 
304

 
626

 
624

Gain on sale of real estate
(50,440
)
 

 
(50,440
)
 

Real estate impairment loss

 
303

 

 
3,467

EBITDAre
55,626

 
52,855

 
116,013

 
140,017

Adjustments for Adjusted EBITDAre:
 
 
 
 
 
 
 
Casualty gain, net(1)
(108
)
 

 
(688
)
 

Tenant bankruptcy settlement income
(114
)
 
(486
)
 
(278
)
 
(513
)
Impact of Toys "R" Us, Inc. lease terminations(2)
1,875

 

 
1,875

 

Environmental remediation costs
334

 

 
584

 

Transaction costs

 
132

 

 
183

(Gain) loss on extinguishment of debt

 

 
(2,524
)
 
1,274

Income from acquired leasehold interest

 

 

 
(39,215
)
Adjusted EBITDAre
$
57,613

 
$
52,501

 
$
114,982

 
$
101,746

(1) Refer to footnote 3 on page 8, Reconciliation of Net Income to FFO and FFO as Adjusted, for the adjustments included in this line item.
(2) Amount reflects a $6.0 million lease termination payment and a $1.0 million reserve against receivables from straight line rents, partially offset by the write-off of $5.1 million of below-market intangible liabilities.




10
(Back To Top)

Section 3: EX-99.2 (EXHIBIT 99.2)

Exhibit
Exhibit 99.2




 
 
URBAN EDGE PROPERTIES
 
SUPPLEMENTAL DISCLOSURE
PACKAGE
 
June 30, 2018
 
 



394469998_image3a14.jpg




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







URBAN EDGE PROPERTIES
SUPPLEMENTAL DISCLOSURE
June 30, 2018
(unaudited)
 
 
TABLE OF CONTENTS
 
Page
Press Release
 
Second Quarter 2018 Earnings Press Release
1
 
 
Overview
 
Summary Financial Results and Ratios
10
 
 
Consolidated Financial Statements
 
Consolidated Balance Sheets
11
Consolidated 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 for Real Estate (EBITDAre)
14
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 Schedules
20
 
 
Property Data
 
Property Status Report
22
Property Acquisitions and Dispositions
25
Development, Redevelopment and Anchor Repositioning Projects
26
 
 
Debt Schedules
 
Debt Summary
28
Mortgage Debt Summary
29
Debt Maturity Schedule
30
 
 








 
394469998_image2a17.jpg
 
 
 
 
 
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 Second Quarter 2018 Results


        
NEW YORK, NY, August 1, 2018 - Urban Edge Properties (NYSE:UE) (the "Company") today announced its results for the quarter ended June 30, 2018.

Financial Results(1)(2) 
Generated net income of $59.8 million, or $0.47 per diluted share, for the quarter compared to net income of $14.9 million, or $0.13 per diluted share for the second quarter of 2017 and $82.8 million, or $0.65 per diluted share, for the six months ended June 30, 2018 compared to $69.7 million, or $0.63 per diluted share, for the six months ended June 30, 2017.
Generated Funds from Operations applicable to diluted common shareholders ("FFO") of $39.6 million, or $0.31 per share, for the quarter compared to $38.7 million, or $0.34 per share, for the second quarter of 2017 and $83.7 million, or $0.66 per share, for the six months ended June 30, 2018 compared to $112.1 million, or $1.01 per share, for the six months ended June 30, 2017.
Generated FFO as Adjusted of $41.6 million, or $0.33 per share, for the quarter compared to $38.3 million, or $0.33 per share, for the second quarter of 2017 and $82.9 million, or $0.65 per share, for the six months ended June 30, 2018 compared to $73.9 million, or $0.66 per share, for the six months ended June 30, 2017.
Operating Results(1) 
Same-property cash Net Operating Income (“NOI”) increased by 0.1% over the second quarter of 2017, and by 1.5% compared to the six months ended June 30, 2017. Second quarter results were negatively impacted by the following:
Las Catalinas in Puerto Rico - $0.6 million lower NOI primarily due to tenant vacancies and rent reductions, and
Bergen Town Center and The Shops at Bruckner - $0.5 million lower NOI due to expected vacancies on spaces planned for redevelopment.
Excluding these properties, same-property cash NOI would have increased by 3.2% for the quarter ended June 30, 2018.
Same-property cash NOI including properties in redevelopment increased by 0.4% compared to the second quarter of 2017 and by 1.8% compared to the six months ended June 30, 2017 and were impacted by the same factors noted above. Excluding the properties listed above, same-property cash NOI including properties in redevelopment would have increased by 3.3% for the quarter ended June 30, 2018.
Reported same-property retail portfolio occupancy of 98.5%, an increase of 20 basis points compared to June 30, 2017.
Reported consolidated retail portfolio occupancy of 96.6%, an increase of 70 basis points compared to June 30, 2017. Occupancy levels as of June 30, 2018 were not impacted by Toys "R" Us bankruptcies. Subsequent to the end of the quarter, five leases comprising 237,000 square feet (sf) were recaptured.
Executed 29 new leases, renewals and options totaling 435,000 sf during the quarter. Same-space leases totaled 355,000 sf and generated average rent spreads of 2.0% on a GAAP basis and (1.9)% on a cash basis. The negative cash spread was primarily driven by one new lease executed for a 36,000 sf building that was vacant for more than six years.


1


Toys "R" Us Bankruptcy
The Company had nine Toys “R” Us (“Toys”) leases comprising approximately 400,000 square feet which generated approximately $7.0 million in annual gross rents. Rents were paid in full through June 30, 2018.
The status of the nine Toys leases is as follows:
The Company paid $6.0 million to recapture the lease at Hudson Mall in Jersey City, NJ to accelerate the redevelopment of the property. The previous rent was well under-market at $0.43 per sf annually.
Raymour & Flanigan acquired the lease at Manalapan Commons in Manalapan, NJ.
Toys rejected its leases in Woodbridge, NJ, Union, NJ, Amherst, NY and Wilkes-Barre, PA in July 2018. Annual gross rent on these leases amounted to approximately $4.0 million. The Company is in active discussions to lease these spaces.
The remaining three leases are held in a separate Toys entity for which bankruptcy proceedings are ongoing and rent is current through July 2018. The three properties are located in the Bronx, NY, Cherry Hill, NJ, and Salem, NH.

Development, Redevelopment and Anchor Repositioning Activity
During the second quarter, the Company completed two redevelopment projects totaling $12.4 million at a blended yield of 13.6%, consisting of a 40,000 sf build-to-suit for Best Buy at Bergen Town Center and a new outparcel building at Marlton Commons for Shake Shack and honeygrow.

The Company has $207 million of active redevelopment projects underway expected to generate a 7% unleveraged yield of which $87 million remains to be funded.

The Company’s largest projects include Bergen Town Center and Bruckner Commons. At Bergen, construction is underway on a 47,000 sf Burlington expected to open in spring 2019. Enhanced food offerings include Cava Grill, Ruth’s Chris Steakhouse and a daytime café. At Bruckner, ShopRite opened in June and Burlington opened in July.

Disposition Activity
On April 26, 2018, the Company sold MacArthur Commons in Allentown, PA for $55.3 million consistent with its plan to dispose of assets in non-core markets. The Company recognized a $50.4 million gain in connection with the sale.
Balance Sheet Highlights at June 30, 2018(1)(3)(4)(5) 
Total market capitalization of approximately $4.5 billion comprising 126.7 million, fully-diluted common shares valued at $2.9 billion and $1.6 billion of debt.
Net debt to total market capitalization of 24%.
Net debt to Adjusted Earnings before interest, tax, depreciation and amortization for real estate ("EBITDAre") of 4.6x.
$514.0 million of cash and cash equivalents, including restricted cash, and no amounts drawn on the $600 million revolving credit facility.














(1) Refer to "Non-GAAP Financial Measures" and "Operating Metrics" for definitions and additional detail.
(2) Refer to page 5 for a reconciliation of net income to FFO and FFO as Adjusted for the quarter and six months ended June 30, 2018.
(3) Refer to page 7 for a reconciliation of net income to EBITDAre and annualized Adjusted EBITDAre for the quarter and six months ended June 30, 2018.
(4) Net debt as of June 30, 2018 is calculated as total consolidated debt of $1.6 billion less total cash and cash equivalents, including restricted cash, of $514.0 million.
(5) Refer to page 16 for the calculation of market capitalization as of June 30, 2018.

2


Non-GAAP Financial Measures
The Company uses certain non-GAAP performance measures, in addition to the primary GAAP presentations, as we believe these measures improve the understanding of the Company's operational results. We continually evaluate the usefulness, relevance, limitations, and calculation of our reported non-GAAP performance measures to determine how best to provide relevant information to the investing public, and thus such reported measures are subject to change. The Company's non-GAAP performance measures have limitations as they do not include all items of income and expense that affect operations, and accordingly, should always be considered as supplemental financial results. The following non-GAAP measures are commonly used by the Company and investing public to understand and evaluate our operating results and performance:
FFO: The Company believes FFO 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. FFO, as defined by the National Association of Real Estate Investment Trusts ("NAREIT") and the Company, is net income (computed in accordance with GAAP), excluding gains (or losses) from sales of depreciated real estate assets, real estate impairment losses, rental property depreciation and amortization expense. The Company believes that financial analysts, investors and shareholders are better served by the presentation of comparable period operating results generated from FFO primarily because it excludes the assumption that the value of real estate assets diminish predictably. FFO does not represent cash flows from operating activities in accordance with GAAP, should not be considered an alternative to net income as an indication of our performance, and is not indicative of cash flow as a measure of liquidity or our ability to make cash distributions.
FFO as Adjusted: The Company provides disclosure of FFO as Adjusted because it believes it is a useful supplemental measure of its core operating performance that facilitates comparability of historical financial periods. FFO as Adjusted is calculated by making certain adjustments to FFO to account for items the Company does not believe are representative of ongoing core operating results including non-comparable revenues and expenses. The Company's method of calculating FFO as Adjusted may be different from methods used by other REITs and, accordingly, may not be comparable to such other REITs.
Cash NOI: The Company uses cash NOI internally to make investment and capital allocation decisions and to compare the unlevered performance of our properties to our peers. The Company believes cash NOI is useful to investors as a performance measure because, when compared across periods, cash NOI reflects the impact on operations from trends in occupancy rates, rental rates, operating costs and acquisition and disposition activity on an unleveraged basis, providing perspective not immediately apparent from operating income or net income. The Company calculates cash NOI using net income as defined by GAAP reflecting only those income and expense items that are incurred at the property level, adjusted for the following items: lease termination fees, bankruptcy settlement income, non-cash rental income and ground rent expense and income or expenses that we do not believe are representative of ongoing operating results, if any.
Same-property Cash NOI: The Company provides disclosure of cash NOI on a same-property basis, which includes the results of properties that were owned and operated for the entirety of the reporting periods being compared totaling 77 properties for the three months ended June 30, 2018 and 2017 and 75 properties for the six months ended June 30, 2018 and 2017. Information provided on a same-property basis excludes properties under development, redevelopment or that involve anchor repositioning where a substantial portion of the gross leasable area ("GLA") is taken out of service and also excludes properties acquired, sold, or under contract to be sold during the periods being compared. As such, same-property cash NOI assists in eliminating disparities in net income due to the development, redevelopment, acquisition or disposition of properties during the periods presented, and thus provides a more consistent performance measure for the comparison of the operating performance of the Company's properties. While there is judgment surrounding changes in designations, a property is removed from the same-property pool when it is designated as a redevelopment property because it is undergoing significant renovation or retenanting pursuant to a formal plan that is expected to have a significant impact on its operating income. A development or redevelopment property is moved back to the same-property pool once a substantial portion of the NOI growth expected from the development or redevelopment is reflected in both the current and comparable prior year period, generally one year after at least 80% of the expected NOI from the project is realized on a cash basis. Acquisitions are moved into the same-property pool once we have owned the property for the entirety of the comparable periods and the property is not under significant development or redevelopment. The Company has also provided disclosure of cash NOI on a same-property basis adjusted to include redevelopment properties. Same-property cash NOI may include other adjustments as detailed in the Reconciliation of Net Income to cash NOI and same-property cash NOI included in the tables accompanying this press release.

3


EBITDAre and Adjusted EBITDAre: EBITDAre and Adjusted EBITDAre are supplemental, non-GAAP measures utilized by us in various financial ratios. The White Paper on EBITDAre, approved by NAREIT's Board of Governors in September 2017, defines EBITDAre as net income (computed in accordance with GAAP), adjusted for interest expense, income tax expense, depreciation and amortization, losses and gains on the disposition of depreciated property, impairment write-downs of depreciated property and investments in unconsolidated joint ventures, and adjustments to reflect the entity's share of EBITDAre of unconsolidated joint ventures. EBITDAre and Adjusted EBITDAre are presented to assist investors in the evaluation of REITs, 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 and because they approximate key performance measures in our debt covenants. Accordingly, the Company believes that the use of EBITDAre and Adjusted EBITDAre, as opposed to income before income taxes in various ratios, provides meaningful performance measures related to the Company's ability to meet various coverage tests for the stated periods. The Company also presents the ratio of net debt (net of cash) to annualized Adjusted EBITDAre as of June 30, 2018, and net debt (net of cash) to total market capitalization, which it believes is useful to investors as a supplemental measure in evaluating the Company's balance sheet leverage. The presentation of EBITDAre and Adjusted EBITDAre are consistent with EBITDA and Adjusted EBITDA as presented in prior periods.
The Company believes net income is the most directly comparable GAAP financial measure to the non-GAAP performance measures outlined above. Reconciliations of these measures to net income have been provided in the tables accompanying this press release.

Operating Metrics

The Company presents certain operating metrics related to our properties including occupancy, leasing activity and rental rates. Operating metrics are used by the Company and are useful to investors in facilitating an understanding of the operational performance for our properties.

Occupancy metrics represent the percentage of occupied gross leasable area based on executed leases (including properties in development and redevelopment) and includes leases signed, but for which rent has not yet commenced. Same-property retail portfolio occupancy includes shopping centers and malls that have been owned and operated for the entirety of the reporting periods being compared totaling 77 properties for the three months ended June 30, 2018 and 2017 and 75 properties for the six months ended June 30, 2018 and 2017. Occupancy metrics presented for the Company's same-property retail portfolio excludes properties under development, redevelopment or that involve anchor repositioning where a substantial portion of the gross leasable area is taken out of service and also excludes properties acquired within the past 12 months, properties sold, or under contract to be sold during the periods being compared.

Executed new leases, renewals and exercised options are presented on a same-space basis. Same-space leases represent those leases signed on spaces for which there was a previous lease with comparable gross leasable area.









4


Reconciliation of Net Income to FFO and FFO as Adjusted

The following table reflects the reconciliation of net income to FFO and FFO as Adjusted for the three and six months ended June 30, 2018. Net income is considered the most directly comparable GAAP measure. Refer to "Non-GAAP Financial Measures" on page 3 for a description of FFO and FFO as Adjusted.
 
Three Months Ended
June 30, 2018
 
Six Months Ended
June 30, 2018
 
(in thousands)
 
(per share)
 
(in thousands)
 
(per share)
Net income
$
59,774

 
$
0.47

 
$
82,813

 
$
0.65

Less net income attributable to noncontrolling interests in:
 
 
 
 
 
 
 
Operating partnership
(6,025
)
 
(0.05
)
 
(8,353
)
 
(0.07
)
Consolidated subsidiaries
(12
)
 

 
(23
)
 

Net income attributable to common shareholders
53,737

 
0.42

 
74,437

 
0.58

Adjustments:
 
 
 
 
 
 
 
Rental property depreciation and amortization
30,258

 
0.24

 
51,330

 
0.41

Gain on sale of real estate
(50,440
)
 
(0.40
)
 
(50,440
)
 
(0.40
)
Limited partnership interests in operating partnership
6,025

 
0.05

 
8,353

 
0.07

FFO applicable to diluted common shareholders
39,580

 
0.31

 
83,680

 
0.66

 
 
 
 
 
 
 
 
Tenant bankruptcy settlement income
(114
)
 

 
(278
)
 

Casualty gain, net(3)
(108
)
 

 
(688
)
 
(0.01
)
Impact of Toys "R" Us, Inc. lease terminations(2)
1,875

 
0.02

 
1,875

 
0.02

Environmental remediation costs
334

 

 
584

 

Tax impact from hurricane
58

 

 
226

 

Gain on extinguishment of debt

 

 
(2,524
)
 
(0.02
)
FFO as Adjusted applicable to diluted common shareholders
$
41,625


$
0.33

 
$
82,875

 
$
0.65

 
 
 
 
 
 
 
 
Weighted average diluted shares used to calculate EPS
113,942

 
 
 
114,151

 
 
Assumed conversion of OP and LTIP Units to common shares(1)
12,660

 
 
 
12,443

 
 
Weighted average diluted common shares - FFO
126,602

 
 
 
126,594

 
 
(1) Operating Partnership ("OP") and Long-Term Incentive Plan ("LTIP") Units are excluded from the calculation of earnings per diluted share for the three and six months ended June 30, 2018 because their inclusion is anti-dilutive. FFO includes earnings allocated to unitholders as the inclusion of these units is dilutive to FFO per share.
(2) Amount reflects a $6.0 million lease termination payment (classified within property operating expense) and $1.0 million of a provision for doubtful accounts for reserves recorded on straight-line rents, partially offset by the write-off of $5.1 million of below-market intangible liabilities (classified within property rental revenues).
(3) The following amount reflects insurance proceeds net of losses as a result of Hurricane Maria in Puerto Rico, in September 2017, and a tornado in Wilkes-Barre, PA, in June 2018:
(in thousands)
Three Months Ended
June 30, 2018
 
Six Months Ended
June 30, 2018
Insurance proceeds, net of casualty related expenses
$
(35
)
 
$
1,306

Reversal of provision for doubtful accounts on previously reserved balances
408

 
227

Property rental and tenant reimbursement losses
(265
)
 
(845
)
Casualty gain, net
$
108

 
$
688


5


Reconciliation of Net Income to Cash NOI and Same-Property Cash NOI

The following table reflects the reconciliation of net income to cash NOI, same-property cash NOI and same-property cash NOI including properties in redevelopment for the three and six months ended June 30, 2018 and 2017. Net income is considered the most directly comparable GAAP measure. Refer to "Non-GAAP Financial Measures" on page 3 for a description of cash NOI and same-property cash NOI.
 
Three Months Ended
June 30,
 
Six Months Ended
June 30,
(Amounts in thousands)
2018
 
2017
 
2018
 
2017
Net income
$
59,774

 
$
14,920

 
$
82,813

 
$
69,655

Management and development fee income from non-owned properties
(347
)
 
(351
)
 
(689
)
 
(830
)
Other expense (income)
4

 
(22
)
 
(73
)
 
(86
)
Depreciation and amortization
30,441

 
23,701

 
51,711

 
39,529

General and administrative expense
8,236

 
7,841

 
15,877

 
15,973

Casualty and impairment loss (gain), net(5)
35

 
303

 
(1,306
)
 
3,467

Gain on sale of real estate
(50,440
)
 

 
(50,440
)
 

Interest income
(2,031
)
 
(336
)
 
(3,555
)
 
(463
)
Interest and debt expense
15,659

 
13,627

 
31,303

 
26,742

(Gain) loss on extinguishment of debt

 

 
(2,524
)
 
1,274

Income tax expense
192

 
304

 
626

 
624

Non-cash revenue and expenses
(6,792
)
 
(1,452
)
 
(9,081
)
 
(42,253
)
Cash NOI(1)
54,731


58,535


114,662


113,632

Adjustments:
 
 
 
 
 
 
 
Non-same property cash NOI(1)(2)
(11,095
)
 
(9,073
)
 
(25,029
)
 
(19,099
)
Tenant bankruptcy settlement and lease termination income
(813
)
 
(486
)
 
(977
)
 
(513
)
Natural disaster related operating (gain) loss(3)
(128
)
 

 
178

 

Lease termination payment
6,000

 

 
6,000

 

Environmental remediation costs
334

 

 
584

 

Same-property cash NOI(6)
$
49,029

 
$
48,976


$
95,418


$
94,020

Cash NOI related to properties being redeveloped(4)
4,830

 
4,650

 
9,721

 
9,309

Same-property cash NOI including properties in redevelopment(6)
$
53,859

 
$
53,626


$
105,139


$
103,329

(1) Cash NOI is calculated as total property revenues less property operating expenses excluding the net effects of non-cash rental income and non-cash ground rent expense.
(2) Non-same property cash NOI includes cash NOI related to properties being redeveloped and properties acquired or disposed.
(3) Amount reflects rental and tenant reimbursement losses as well as provisions or reversal of provisions for outstanding amounts due from tenants at Las Catalinas and Wilkes-Barre, PA that are subject to reimbursement from the insurance company.
(4) The result for the six months ended June 30, 2018, excludes $0.5 million of rental and tenant reimbursement losses, partially offset by a $0.1 million reversal of provisions for payments received from tenants at Montehiedra that are subject to reimbursement from the insurance company.
(5) The results for the three and six months ended June 30, 2018 reflect insurance proceeds offset by hurricane-related expenses. The three and six months ended June 30, 2017 reflect real estate impairment losses recorded as a result of the sale of our property in Eatontown, NJ.
(6) Results for the second quarter of 2018 were negatively impacted by lower NOI at Las Catalinas Mall in Puerto Rico, primarily due to tenant vacancies and rent reductions, and lower NOI at Bergen Town Center and The Shops at Bruckner due to expected vacancies on spaces planned for redevelopment. Excluding these amounts, same-property cash NOI would have increased by 3.2% for the quarter and same-property cash NOI including properties in redevelopment would have increased by 3.3% for the quarter:
 
 
Three Months Ended June 30,
 
 
 
 
2018
 
2017
 
Percent Change
Same-property cash NOI
$
49,029

 
$
48,976

 
0.1%
Less: Cash NOI of Las Catalinas, Bergen Town Center, and The Shops at Bruckner
(10,190
)
 
(11,340
)
 
 
Same-property cash NOI excluding items above
38,839

 
37,636

 
3.2%
Cash NOI related to properties being redeveloped
4,830

 
4,650

 
 
Same-property cash NOI including properties in redevelopment excluding items above
$
43,669

 
$
42,286

 
3.3%

6


Reconciliation of Net Income to EBITDAre and Adjusted EBITDAre

The following table reflects the reconciliation of net income to EBITDAre and Adjusted EBITDAre for the three and six months ended June 30, 2018. Net income is considered the most directly comparable GAAP measure. Refer to "Non-GAAP Financial Measures" on page 3 for a description of EBITDAre and Adjusted EBITDAre.
 
Three Months Ended June 30,
 
Six Months Ended June 30,
(Amounts in thousands)
2018
 
2017
 
2018
 
2017
Net income
$
59,774

 
$
14,920

 
$
82,813

 
$
69,655

Depreciation and amortization
30,441

 
23,701

 
51,711

 
39,529

Interest and debt expense
15,659

 
13,627

 
31,303

 
26,742

Income tax expense
192

 
304

 
626

 
624

Gain on sale of real estate
(50,440
)
 

 
(50,440
)
 

Real estate impairment loss

 
303

 

 
3,467

EBITDAre
55,626


52,855


116,013


140,017

Adjustments for Adjusted EBITDAre:
 
 
 
 
 
 
 
Casualty gain, net(1)
(108
)
 

 
(688
)
 

Tenant bankruptcy settlement income
(114
)
 
(486
)
 
(278
)
 
(513
)
Impact of Toys "R" Us, Inc. lease terminations(2)
1,875

 

 
1,875

 

Environmental remediation costs
334

 

 
584

 

Transaction costs

 
132

 

 
183

(Gain) loss on extinguishment of debt

 

 
(2,524
)
 
1,274

Income from acquired leasehold interest

 

 

 
(39,215
)
Adjusted EBITDAre
$
57,613

 
$
52,501


$
114,982


$
101,746

(1) Refer to footnote 3 on page 5, Reconciliation of Net Income to FFO and FFO as Adjusted, for the adjustments included in this line item.
(2) Amount reflects a $6.0 million lease termination payment and a $1.0 million reserve against receivables from straight line rents, partially offset by the write-off of $5.1 million of below-market intangible liabilities.

7


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, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and amendments to those reports.

ABOUT URBAN EDGE
Urban Edge Properties is a NYSE listed real estate investment trust focused on managing, acquiring, developing, and redeveloping retail real estate in urban communities, primarily in the New York metropolitan region. Urban Edge owns 88 properties totaling 16.3 million square feet of gross leasable area.

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, redevelopment and anchor repositioning projects, the Company's ability to pursue, finance and complete acquisition opportunities, the Company's ability to engage in the projects in its planned expansion and redevelopment pipeline, the Company's ability to achieve the estimated unleveraged returns for such projects and acquisitions, the estimated remediation and repair costs related to Hurricane Maria at the affected properties. 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, 2017 and the other documents filed by the Company with the Securities and Exchange Commission.

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.


8



URBAN EDGE PROPERTIES
 
 
 
ADDITIONAL DISCLOSURES
 
 
 
As of June 30, 2018
 
 
 
 
 
 
 

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.
Non-GAAP Financial Measures and Forward-Looking Statements
For additional information regarding non-GAAP financial measures and forward-looking statements, please see pages 3 and 8 of this Supplemental Disclosure Package.




9



URBAN EDGE PROPERTIES
 
 
SUMMARY FINANCIAL RESULTS AND RATIOS
 
 
For the three and six months ended June 30, 2018 (unaudited)
 
(in thousands, except per share, sf, rent psf and financial ratio data)
 
 
 
 
 
 
 
Three months ended
 
Six months ended
 
 
June 30, 2018
 
June 30, 2018
Summary Financial Results
 
 
 
 
Total revenue
 
$
101,970

 
$
201,023

General & administrative expenses (G&A)
 
$
8,236

 
$
15,877

Net income attributable to common shareholders
 
$
53,737

 
$
74,437

Earnings per diluted share
 
$
0.47

 
$
0.65

Adjusted EBITDAre(7)
 
$
57,613

 
$
114,982

Funds from operations (FFO)
 
$
39,580

 
$
83,680

FFO per diluted common share
 
$
0.31

 
$
0.66

FFO as Adjusted
 
$
41,625

 
$
82,875

FFO as Adjusted per diluted common share
 
$
0.33

 
$
0.65

Total dividends paid per share
 
$
0.22

 
$
0.44

Stock closing price low-high range (NYSE)
 
$19.83 to $23.00

 
$19.83 to $25.59

Weighted average diluted shares used in EPS computations(1)
 
113,942

 
114,151

Weighted average diluted common shares used in FFO computations(1)
 
126,602

 
126,594

 
 
 
 
 
Summary Property, Operating and Financial Data
 
 
 
 
# of Total properties / # of Retail properties
 
88 / 87

 
 
Gross leasable area (GLA) sf - retail portfolio(3)(5)
 
15,381,000

 
 
Weighted average annual rent psf - retail portfolio(3)(5)
 
$
17.57

 
 
Consolidated occupancy at end of period
 
96.8
 %
 
 
Consolidated retail portfolio occupancy at end of period(5)
 
96.6
 %
 
 
Same-property retail portfolio occupancy at end of period(5)(2)
 
98.5
 %
 
 
Same-property retail portfolio physical occupancy at end of period(4)(5)(2)
 
98.0
 %
 
 
Same-property cash NOI growth(2)
 
0.1
 %
 
1.5
%
Same-property cash NOI growth, including redevelopment properties
 
0.4
 %
 
1.8
%
Cash NOI margin - total portfolio
 
58.3
 %
 
60.4
%
Expense recovery ratio - total portfolio
 
97.5
 %
 
97.9
%
New, renewal and option rent spread - cash basis(8)
 
(1.9
)%
 
2.3
%
New, renewal and option rent spread - GAAP basis(9)
 
2.0
 %
 
7.0
%
Net debt to total market capitalization(6)
 
23.5
 %
 
23.5
%
Net debt to Adjusted EBITDAre(6)
 
4.6
x
 
4.6
x
Adjusted EBITDAre to interest expense(7)
 
3.9
x
 
3.9
x
Adjusted EBITDAre to fixed charges(7)
 
3.6
x
 
3.6
x
 
 
 
 
 
(1) Weighted average diluted common shares used to calculate FFO per share and FFO as Adjusted per share for the periods presented include OP and LTIP Units, which are excluded from the calculation of earnings per diluted share for the periods presented because their inclusion is anti-dilutive. FFO includes earnings allocated to unit holders as the inclusion of these units is dilutive to FFO per share.
(2) The same-property pool for both cash NOI and occupancy includes retail properties the Company consolidated, owned and operated for the entirety of both periods being compared and excludes properties under development and redevelopment, acquired, sold, or under contract to be sold during the periods being compared.
(3) GLA - retail portfolio excludes 942,000 square feet of warehouses. Weighted average annual rent per square foot for our retail portfolio and warehouses was $16.83.
(4) Physical occupancy includes tenants that have access to their leased space and includes dark and paying tenants.
(5) Our retail portfolio includes shopping centers and malls and excludes warehouses.
(6) See computation on page 16. Adjusted EBITDAre is annualized for purposes of calculating net debt to Adjusted EBITDAre.
(7) See computation on page 14.
(8) Rents have not been calculated on a straight-line basis. Previous/expiring rent is the rent at expiry and includes any percentage rent paid. New rent is the rent paid at commencement.
(9) Rents are calculated on a straight-line ("GAAP") basis. See computation on page 19.



10



URBAN EDGE PROPERTIES
 
 
CONSOLIDATED BALANCE SHEETS
 
 
As of June 30, 2018 (unaudited) and December 31, 2017
 
 
(in thousands, except share and per share amounts)
 
 
 
 
 
 
June 30,
 
December 31,
 
2018
 
2017
ASSETS
 
 
 

Real estate, at cost:
 

 
 

Land
$
530,658

 
$
521,669

Buildings and improvements
2,060,960

 
2,010,527

Construction in progress
125,664

 
133,761

Furniture, fixtures and equipment
6,615

 
5,897

Total
2,723,897

 
2,671,854

Accumulated depreciation and amortization
(616,284
)
 
(587,127
)
Real estate, net
2,107,613

 
2,084,727

Cash and cash equivalents
500,930

 
490,279

Restricted cash
13,057

 
10,562

Tenant and other receivables, net of allowance for doubtful accounts of $6,176 and $4,937, respectively
23,017

 
20,078

Receivable arising from the straight-lining of rents, net of allowance for doubtful accounts of $562 and $494, respectively
84,378

 
85,843

Identified intangible assets, net of accumulated amortization of $39,770 and $33,827, respectively
76,310

 
87,249

Deferred leasing costs, net of accumulated amortization of $15,809 and $14,796, respectively
20,291

 
20,268

Deferred financing costs, net of accumulated amortization of $2,252 and $1,740, respectively
2,731

 
3,243

Prepaid expenses and other assets
12,228

 
18,559

Total assets
$
2,840,555

 
$
2,820,808

 
 
 
 
LIABILITIES AND EQUITY
 

 
 

Liabilities:
 
 
 
Mortgages payable, net
$
1,551,788

 
$
1,564,542

Accounts payable and accrued expenses
80,768

 
69,595

Identified intangible liabilities, net of accumulated amortization of $68,938 and $65,832, respectively
168,540

 
180,959

Other liabilities
17,527

 
15,171

Total liabilities
1,818,623

 
1,830,267

Commitments and contingencies
 
 
 
Shareholders’ equity:
 
 
 
Common shares: $0.01 par value; 500,000,000 shares authorized and 114,004,276 and 113,827,529 shares issued and outstanding, respectively
1,140

 
1,138

Additional paid-in capital
950,958

 
946,402

Accumulated deficit
(33,307
)
 
(57,621
)
Noncontrolling interests:
 
 
 
Operating partnership
102,714

 
100,218

Consolidated subsidiaries
427

 
404

Total equity
1,021,932

 
990,541

Total liabilities and equity
$
2,840,555

 
$
2,820,808


11



URBAN EDGE PROPERTIES
 
 
CONSOLIDATED STATEMENTS OF INCOME
 
 
For the three and six months ended June 30, 2018 and 2017 (unaudited)
 
(in thousands, except share and per share amounts)
 
 
 
 
 

 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
2018
 
2017
 
2018
 
2017
REVENUE
 
 
 
 
 
 
 
Property rentals
$
74,546

 
$
64,708

 
$
144,268

 
$
127,206

Tenant expense reimbursements
26,222

 
23,881

 
54,894

 
47,652

Management and development fees
347

 
351

 
689

 
830

Income from acquired leasehold interest

 

 

 
39,215

Other income
855

 
561

 
1,172

 
662

Total revenue
101,970

 
89,501

 
201,023

 
215,565

EXPENSES
 
 
 
 
 
 
 
Depreciation and amortization
30,441

 
23,701

 
51,711

 
39,529

Real estate taxes
15,587

 
14,711

 
31,362

 
28,103

Property operating
20,492

 
11,088

 
37,159

 
24,456

General and administrative
8,236

 
7,841

 
15,877

 
15,973

Casualty and impairment loss (gain), net
35

 
303

 
(1,306
)
 
3,467

Ground rent
2,752

 
2,436

 
5,488

 
5,106

Provision for doubtful accounts
1,273

 
906

 
2,509

 
1,099

Total expenses
78,816

 
60,986

 
142,800

 
117,733

Operating income
23,154

 
28,515

 
58,223

 
97,832

Gain on sale of real estate
50,440

 

 
50,440

 

Interest income
2,031

 
336

 
3,555

 
463

Interest and debt expense
(15,659
)
 
(13,627
)
 
(31,303
)
 
(26,742
)
Gain (loss) on extinguishment of debt

 

 
2,524

 
(1,274
)
Income before income taxes
59,966

 
15,224

 
83,439

 
70,279

Income tax expense
(192
)
 
(304
)
 
(626
)
 
(624
)
Net income
59,774

 
14,920

 
82,813

 
69,655

Less net income attributable to noncontrolling interests in:
 
 
 
 
 
 
 
Operating partnership
(6,025
)
 
(1,326
)
 
(8,353
)
 
(5,464
)
Consolidated subsidiaries
(12
)
 
(11
)
 
(23
)
 
(22
)
Net income attributable to common shareholders
$
53,737

 
$
13,583

 
$
74,437

 
$
64,169

 
 
 
 
 
 
 
 
Earnings per common share - Basic:
$
0.47

 
$
0.13

 
$
0.65

 
$
0.63

Earnings per common share - Diluted:
$
0.47

 
$
0.13

 
$
0.65

 
$
0.63

Weighted average shares outstanding - Basic
113,739

 
104,063

 
113,708

 
101,863

Weighted average shares outstanding - Diluted
113,942

 
104,260

 
114,151

 
111,224



12



URBAN EDGE PROPERTIES
 
 
SUPPLEMENTAL SCHEDULE OF NET OPERATING INCOME
 
 
For the three and six months ended June 30, 2018 and 2017
 
(in thousands)
 
 
 
 
 
 
Three Months Ended June 30,
 
Percent Change
 
Six Months Ended June 30,
 
Percent Change
 
2018
 
2017
 
 
2018
 
2017
 
Total cash NOI(1)
 
 
 
 
 
 
 
 
 
 
 
Total revenue
$
93,904

 
$
87,379

 
7.5%
 
$
189,953

 
$
171,740

 
10.6%
Total property operating expenses
(39,173
)
 
(28,844
)
 
35.8%
 
(75,291
)
 
(58,108
)
 
29.6%
Cash NOI - total portfolio
$
54,731

 
$
58,535

 
(6.5)%
 
$
114,662

 
$
113,632

 
0.9%
 
 
 
 
 
 
 
 
 
 
 
 
NOI margin (NOI / Total revenue)(4)
58.3
%
 
67.0
%
 
 
 
60.4
%
 
66.2
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Same-property cash NOI(2)
 
 
 
 
 
 
 
 
 
 
 
Property rentals
$
54,624

 
$
53,182

 
 
 
$
104,294

 
$
101,691

 
 
Tenant expense reimbursements
21,312

 
20,920

 
 
 
43,178

 
40,770

 
 
Total revenue
75,936


74,102

 

 
147,472

 
142,461

 

Real estate taxes
(13,179
)
 
(12,958
)
 
 
 
(25,208
)
 
(24,215
)
 
 
Property operating
(10,234
)
 
(8,934
)
 
 
 
(21,070
)
 
(18,996
)
 
 
Ground rent
(2,578
)
 
(2,556
)
 
 
 
(4,546
)
 
(4,500
)
 
 
Provision for doubtful accounts
(916
)
 
(678
)
 
 
 
(1,230
)
 
(730
)
 
 
Total property operating expenses
(26,907
)
 
(25,126
)
 

 
(52,054
)
 
(48,441
)
 

Same-property cash NOI(3)(5)
$
49,029

 
$
48,976

 
0.1%
 
$
95,418