Urban Edge Properties Stock

Good evening, and welcome to Urban Edge Properties Second Quarter 2026 Earnings Conference Call. Joining me today are Jeff Olson, Chairman and Chief Executive Officer; Jeff Mooallem, Chief Operating Officer; Mark Langer, Chief Financial Officer; Heather Ohlberg, General Counsel; Scott Auster, EVP and Head of Leasing; and Andrea Drazin, Chief Accounting Officer.

Please note today's discussion may contain forward-looking statements about the company's views of future events and financial performance, which are subject to numerous assumptions, risks and uncertainties and which the company does not undertake to update. Our actual results, financial condition and business may differ. Please refer to our filings with the SEC, which are also available on our website for more information about the company.

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

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

Thank you, Areeba, and good evening, everyone. We had a great second quarter with results that exceeded our internal expectations. We reported record FFO as adjusted of $0.40 per share, a 10% increase over the second quarter of last year and 7% year-to-date. Same-property NOI, including redevelopment, grew 3.2% for the quarter and 3% year-to-date. Demand for high-quality space across our markets remains strong, and there continues to be limited availability of quality vacancies in our trade areas.

Traffic across our centers is up 3% in the second quarter versus the prior year, underscoring the strength of our value and necessity-oriented merchandise mix. Traffic increases were particularly noticeable at properties where we have upgraded our tenancy, including Bergen, Woodbridge, Hudson Mall and Totowa.

Our signed but not open pipeline represents $22 million of future annual gross rent or approximately 7% of current NOI and remains a meaningful and highly visible contributor to future earnings growth. We are most excited about the improvements we are making at Bruckner Commons in the Bronx with the addition of BJ's Wholesale Club, Ross, Chick-fil-A and Chipotle. These tenants are all under construction with rent commencement dates beginning throughout 2027 and totaling over $8 million in annual rent.

We continue to execute our capital recycling strategy focused on improving both asset quality and long-term growth. In July, we acquired The Shops at West Falls Church, an 85,000 square foot Safeway-anchored center in Falls Church, Virginia, for $40 million. The center sits in a densely populated and affluent submarket of Washington, D.C., with average annual household income of approximately $200,000 within a 3-mile radius and offers visible growth through lease-up, contractual annual rent increases and mark-to-market opportunities.

We also purchased a ground lease position at Shoppers World in Framingham, Massachusetts, for $10.5 million. Cap rate on these 2 purchases averaged 6% and should generate an unleveraged IRR of 9%.

We're also under contract to sell Briarcliff Commons, a Kohl's-anchored center in New Jersey for $60.5 million, which we expect to close this month.

The market for acquisitions remains highly competitive. We're seeing significant capital, both institutional and private chasing retail, which has compressed cap rates across the sector. However, given the fragmented nature of the market, we are still finding a handful of deals that meet our return thresholds. We expect to fund some of that activity by selling lower growth, high credit stabilized assets from our existing portfolio.

Based on our strong first half results, we raised our full year FFO as adjusted guidance by $0.02 per share at the midpoint to a new range of $1.50 to $1.54 per share, implying 6% growth over 2025. There are several factors that differentiate Urban Edge from our peers. Our portfolio is concentrated in the D.C. to Boston corridor, the most densely populated supply-constrained region of the country. We own 100% interest in nearly all of our properties financed with 31 individual nonrecourse mortgages with our remaining 44 assets unencumbered. On top of that, we have a differentiated redevelopment platform with an active pipeline of $155 million expected to yield 12%, and our signed but not open pipeline will grow our NOI by 7%.

And finally, our capital recycling program is having a meaningful impact on our portfolio quality and growth rate. Over the past 3 years, we have acquired approximately $700 million of high-quality shopping centers at a 7% cap rate and have sold approximately $500 million of noncore property at a 5.2% cap rate. Collectively, these differentiating factors give us multiple levers for durable visible growth.

Lastly, our condolences to Jim Taylor's family, colleagues and friends. He was my favorite adviser as a banker over 20 years ago and a formidable competitor as CEO of Brixmor. Rest in peace, Jim.

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

Thanks, Jeff, and good evening, everyone. The demand for high-quality retail space in 2026 has allowed us to become much more strategic in our leasing. In both anchor and shop leasing, we ask our team to be selective to identify the best long-term tenants for each asset and to push hard on both the initial rent and capital and the ongoing economics like rent increases and option terms. We are seeing the results of those efforts.

In the second quarter, we executed 26 leases, 13 new and 13 renewal, for a total of 199,000 square feet. New leases generated a same space cash spread of 13% with renewals and option exercises generating a same space cash spread of 10%. The new lease spread was lower than in the first quarter as this metric fluctuates quarter-to-quarter based on our size. New lease spreads year-to-date are nearly 30%. Based on leases in our pipeline, we are confident cash spreads on new leases will exceed 20% for the year, which would be the fifth consecutive year we attained that level.

Same-property leased occupancy ended the quarter at 96.3%, a decrease of 10 basis points versus the prior quarter and down 40 basis points from 2Q 2025. The decrease was mostly the result of the unexpected Wren Kitchens bankruptcy, which occupied 2 locations within our portfolio. We were able to collect a meaningful settlement on those leases and expect Wren's departure to allow for an improved merchandising mix at healthy spreads over what Wren was paying. More to come later this year on those efforts.

Shop occupancy in the quarter declined 70 basis points sequentially to 91.7%, in large part due to the greater emphasis we are placing on tenant quality. About half of the decrease in shop occupancy was tied to a handful of recapture opportunities where we did not wish to renew or retain the existing tenant.

Replacing weaker shop tenants almost always results in stronger assets in the long run. Over the balance of the year, we expect to backfill shop space at average rents in the $45 a square foot range, a mark-to-market of approximately 20% and push shop occupancy back to over 93%.

On the development front, we stabilized 1 project at Hudson Mall in Jersey City, New Jersey with the opening of a new Burlington Stores in May. Coupled with the addition of HomeGoods, which is under construction and scheduled to open later this year, this marks the beginning of our reinvention of Hudson Mall, a development we are really excited about and we'll be talking about more in the subsequent quarters.

We also activated a new anchor project at Ledgewood Commons and a new multi-tenant outparcel at Woodmore Towne Centre. In the last 12 months, we've invested $33 million in completed projects that are now generating an average yield of 25%.

Our active development pipeline comprised exclusively of projects emanating from signed leases now stands at $155 million with approximately $67 million remaining to fund and remains on track to generate an approximate 12% yield. But even more exciting is our shadow pipeline, projects we have not activated yet but expect to be meaningful contributors to NOI in future years. These include additional multi-tenant pad developments and new stores for some of our most important anchor tenants. With the current environment of rising rents and virtually no new supply, redevelopments are penciling out stronger than they have in many years and the capital demanded from landlords to move forward with new stores is on average lower than at any time I recall in the last 15 years. It is indeed a good time to be on this side of the table, and we're using that leverage to make the best deals we can.

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

Thank you, Jeff, and good evening, everyone. We were pleased to deliver another strong quarter, marked by solid earnings, progress on capital recycling and continued confidence in our ability to grow occupancy at attractive rents. FFO as adjusted was $0.40 per share, an increase of approximately 10% over the second quarter of last year. Same-property NOI, including redevelopment, increased 3.2% compared to the second quarter of 2025. NOI growth in the quarter exceeded our expectations and was driven by higher percentage rents, higher net recovery revenue, collections on prior period reserves and lower real estate taxes. FFO as adjusted also benefited from some one-time items, including lease termination income received from Wren Kitchens of approximately $0.02 per share and $0.01 a share from accelerated amortization of noncash revenue and the receipt of a multiyear real estate tax refund that each contributed about $500,000.

Turning to our balance sheet and liquidity position. We remain in excellent shape with total liquidity of approximately $960 million, including $82 million of cash on hand. We ended the quarter with $55 million drawn on our credit facility and no amount drawn on either of our 5-year or 7-year delayed draw term loans. Our net debt to adjusted EBITDA was 5.5x in the second quarter, positioning us well to capitalize on future growth opportunities.

Looking ahead to the remainder of 2026, we are increasing our FFO as adjusted guidance by $0.02 per share at the midpoint to a new range of $1.50 to $1.54 per share and projecting same-property NOI growth, including redevelopment, to be in the range of 3.25% to 3.75%, reflecting a 25 basis point increase to the low end of the range.

Bad debt came in better than expected in the quarter at approximately 40 basis points of gross rents, which benefited from collections on accounts reserved in the first quarter for tenants on a cash basis. It is worth noting that the multi-location franchise operator in Puerto Rico that contributed to elevated levels of uncollected rents in the first quarter, paid all rents due in the second quarter and is also current on payment plan obligations on past due rents.

Given current tenant trends and the lack of expected significant bankruptcies for the rest of the year, our updated assumption for credit losses in Q3 and Q4 is 60 to 75 basis points of gross rent. Our $22 million SNO pipeline continues to be a key growth driver. As shown in our supplement, we expect this pipeline to generate $1.7 million in new rents in the remainder of this year with the majority of that coming online in the fourth quarter, which represents about $7.7 million of rents on an annualized basis.

Our acquisition guidance of $95 million reflects activity completed to date and disposition activity of $60.5 million remains unchanged, reflecting the expected closing of Briarcliff Commons later this month.

In closing, we are encouraged by the continued strength of our leasing pipeline and the lack of new supply in our markets, which should enable us to achieve attractive rent growth as tenants fight for a decreasing level of available space in high-quality locations.

With that, I'll turn the call to the operator for Q&A.

And our first question will come from Michael Goldsmith with UBS.

Mark, on the guidance, it sounds like you benefited a little bit from termination income -- termination fees of $0.02 and then $0.01 from accelerated amortization and then you also took the same-property NOI guidance up, but the -- presumably, the collective impact of all of that was more than the $0.02 increase in the guidance. So can you just walk through the moving pieces there and if I'm missing anything?

Yes, Michael, the $0.03 one-timers that I highlight versus the $0.02 increase in guide, part of that, as you said, was termination income. So on a full year basis, some of that income was already baked into our plan in the form of rent. And so it's not truly incremental. And likewise, some of the beat this quarter I highlight from the timing of percentage rent elevated the second quarter, but would have normally come in later in the year. So that kind of reconciles the $0.03 onetimer versus the $0.02 bump.

Got it. And just on the capital recycling, you were an acquirer of a center this quarter. Can you talk a little bit about what cap rates are looking like for the type of centers that you're looking at and then also compared to the disposition, just trying to get a sense of the magnitude of accretion from the capital recycling as the market sits today.

Michael, I mean it is all over the board. But generally, cap rates are in the 5% to 7% range. The key is what is the NOI growth and how much capital. They're pricing to unleveraged IRRs in the 7% to 9% range. As far as our own capital recycling, I mean, generally, what we're doing is we're looking to sell our lower growth assets, but those assets that have high credit that can sell at pretty low cap rates and redeploy that capital into higher growth assets. So in principle, we're looking to sell like 1% to 2% growth assets and redeploying that into 3% to 4% growth assets at cap rates that are generally on par with what we're selling.

[Operator Instructions] And our next question will come from Michael Griffin with Evercore ISI.

Maybe for Jeff Mooallem, I think you talked about new lease spreads maybe being at 20% on a full year basis. I know it was closer to 30% in the first half, down about 13% in the second quarter. So does that kind of imply we sort of stay in this mid-teens-ish re-leasing spread area? And then if you could expand more, it seems like there's really a lot of demand on the small shop side of things, too. Are you able to get tenants open quicker and paying rent quicker? And so that's going to help lift that small shop occupancy into the back half?

Yes. Michael, thanks for the question. Yes. I mean, look, in terms of spread, we've messaged this before. It's hard to look at any one quarter given our size. We were an outlier on the high end in the first quarter, a little bit of an outlier on the lower end on the second quarter. But as you said, blended for the first half of the year, we're around 30%. We're very confident we'll be over 20% for the year. We actually -- if you look at our pipeline right now, should exceed that pretty comfortably. We feel very good about the spreads. And again, I'll say it's not just the number, but it's the quality.

When I look at the tenants that we vacated in the second quarter and the pipeline list of the tenants who we hope are coming into those spaces, pretty much every one of the tenants that we vacated was a 1-or-2-off-single local tenant, and we're replacing them with names like CAVA and Starbucks and Mathnasium and Rally House and really good names. So if we're going to be able to achieve that quality spread and achieve much better tenancy, we'll take that downtime all day long.

As far as getting people open faster, that is rallying cry #1 around here. We're doing everything in our power. I would tell you, it's gotten a lot better because tenants have become a lot more flexible with this increased demand and limited supply for space. Tenants are having to do things they did not want to do in the past, like take existing HVAC systems or go in under one permit without the landlord having to do work first. And those things can really compress the time to RCD, but it still is a struggle wherever we go to get permits and get people open.

I certainly appreciate the context there. Maybe just one other one for Olson. Just as you look at the external growth opportunity set, particularly as it relates to potential acquisitions. Clearly, the bread and butter is along the Northeast corridor. But if there is this increased competition and maybe it is a conversation held in other markets nationally, could we see you guys maybe looking at opportunities in, I don't know, Florida, North Carolina, places like that if the opportunity presented itself? Or are you guys kind of going to stick to your knitting in terms of just the existing geographic footprint of the company?

I mean I do think the most natural extension for us is to go south. So yes, I think the Southeast is a market that we've been actively looking in. It is super competitive for sure. But we are hoping at some point that we'll be able to go into that market.

Our next question will come from Daniel Purpura with Green Street.

If I can ask another question on the transaction market. You mentioned in your prepared remarks that cap rates have compressed generally across the sector. I know you gave the range of, I think you said about 5% to 7% in your markets. But could you share if you've observed any compression in the cap rate spread between large community centers or power centers and the typical grocery-anchored center as well?

Daniel, it's Jeff Mooallem. I mean, the short answer is yes. Everything has compressed. So let's start with that. From when we were really able to buy a lot of stuff in late '23 and into all of '24 and some of '25, cap rates are down overall. And as more buyers enter the field and search for yield, they're looking at assets that maybe they wouldn't have looked at a year or 2 ago. So a power center asset where there might have been 5 to 10 names on the bid sheet now might have north of 10 and institutional names that previously might have turned their nose up at power. We're seeing more competition on pretty much everything, which is making us double down on our efforts to look for things off market. And when we do find assets that we really like, we dig in hard and we make sure the sellers know what our reputation is as a buyer, so we can get to the top of the list.

But if you're trying to buy assets today just by hoping that you can make offers on a bunch of things and nobody else will show up at the table, it's not working that way right now. There is a lot of activity on pretty much everything that gets marketed.

Got it. And then on the anchor side, could you elaborate on what types of anchors generally pay the highest net effective rents? Is it from a category perspective? Or is it more name driven more than category driven?

It's all across the board. I mean we are seeing real rent growth coming from everything from the big boxes, which I would say, like, sort of, the home improvement, the large-format stores like the Targets and the Walmart, the Warehouse Clubs and the large-format grocers like Wegmans. All of those folks have stepped up and are paying bigger rents. That's sort of one category of anchors.

And then you go to the discount group, the T.J. Maxx concepts, the Ross concepts, Burlington, competition is really rampant in that sector right now. And as you know, competition drives prices. So our ability to command better rents is just a function of 3 tenants for 2 spaces, and we hope that continues. But I'd even tell you that even going to the other stuff, let's call it more of the health and beauty or the smaller format anchors, J.Crew, Old Navy, Ulta, Skechers are all trying to get into centers and are having trouble finding great locations and they're having to pay more rent to do it. So I wouldn't organize it by either category or by size. I'd say that anchor tenants have woken up to what today's market rent realities are and they're stepping up.

[Operator Instructions] And our next question will come from Ronald Kamdem with Morgan Stanley.

This is Caroline on for Ron. I know you just talked a little bit about the more anchor tenants. So I was wondering if you could just speak a little more holistically and what you're seeing in terms of tenant health just so far and how it's trending. I know you mentioned it's been a little bit better than expected. And just are there any names that we need to look out for categories that are doing better or worse than last year?

Caroline, it's Jeff Mooallem. Thanks for the question. Yes, I mean, look, the shop tenant categories that we are sort of leaning into heavily right now or a lot of it is around fitness, around medical and around new kinds of concepts that have recently discovered the success they can have in these neighborhood and community-based locations. So we are constantly talking to some of these great fitness concepts and some of the newer sort of pseudo medical stuff that's out there. Veterinary practices have come out in a big way. Urgent care is still doing deals and certainly, all the different boutique fitness concepts that we all know are active.

Food QSRs continues to be looking. And in a lot of places, there are desired small shop tenants, but we are also being a little bit more cautious there and making sure we don't sort of overfood any of our properties. Those continue to be the big drivers. But even in things like apparel and service and other types of small shop uses, there's been a little bit of a pickup, and we hope it will continue.

Very helpful. And then in terms of occupancy, I know you saw some changes that you spoke on in terms of shop. Just going forward, how do you think about total portfolio occupancy and also shop occupancy, kind of, as like a natural level going forward?

Yes. So we've messaged, Caroline, 93% to 94% shop occupancy. And despite a little bit of a dip in 2Q, we're still on point with that message. When we look at our active pipeline, there's a lot of shop space that should be coming online in the third and fourth quarter. And we have a fair amount of the shop space that we have is temporary leased because it is mall space in Puerto Rico and Bergen. So if you look at our occupancy purely as a math equation of numerator and denominator, it doesn't necessarily tell the whole story. A lot of our shop vacancy is not the shop vacancy that is ever going to get to 99% or 100%. I think we'd be very happy to hit 93.5%, 94% this year, and we have a road map to get there on the shop side.

On the anchor side, we mentioned the Wren Kitchens bankruptcy gave us a couple of boxes back. We expect to get those leased up this year, and we should be back to around 97%, 98% and a blended 97% occupancy by the end of the year is our goal.

At this time, there are no further questions. I would like to turn the call back over to Jeff Olson for any additional or closing remarks.

Great. We appreciate everyone's interest in UE and look forward to seeing you soon.

Thank you, ladies and gentlemen. This brings us to the end of today's meeting. We appreciate your time and participation, and you may now disconnect.

Greetings, and welcome to the Urban Edge Properties First Quarter 2026 Earnings Call. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce Areeba Ahmed, Investor Relations. Please go ahead.

Good morning, and welcome to Urban Edge Properties First Quarter 2026 Earnings Conference Call. Joining me today are Jeff Olson, Chairman and Chief Executive Officer; Jeff Mooallem, Chief Operating Officer; Mark Langer, Chief Financial Officer; Heather Ohlberg, General Counsel; Scott Auster, EVP and Head of Leasing; and Andrew Drazin, Chief Accounting Officer. Please note, today's discussion may contain forward-looking statements about the company's views of future events and financial performance, which are subject to numerous assumptions, risks and uncertainties and which the company does not undertake to update.

Our actual results, financial condition and business may differ. Please refer to our filings with the SEC, which are also available on our website for more information about the company. In our discussion today, we will refer to certain non-GAAP financial measures. Reconciliations of these measures to GAAP results are available in our earnings release and our supplemental disclosure package.

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

Thank you, Areeba, and good morning. We had a great first quarter, delivering results that exceeded our internal expectations. We generated FFO as adjusted of $0.36 per share, a 3% increase over the first quarter of last year. Same-property net operating income, including redevelopment, increased by 2.8%, primarily due to rent commencements from our signed but not open pipeline.

Leasing fundamentals across our portfolio remains strong, reflecting continued demand from retailers seeking well-located, high-quality space. Our shopping centers, primarily anchored by grocers, discounters, off-price retailers and home improvement stores, along with shops comprised of quick service restaurants, health, fitness and service uses continue to generate increased traffic. During the quarter, we executed leases totaling 419,000 square feet, including 84,000 square feet of new leases at a strong 52% cash spread.

Our leasing pipeline remains robust and should result in record leasing activity over the coming quarters with leasing spreads expected to exceed 20%. Our signed but not open pipeline remains a meaningful contributor to future growth, representing $22 million of annual gross rent or approximately 7% of current net operating income. This provides us with strong visibility into earnings through 2027.

In March, we completed the acquisition of the Village at Bridgewater Commons, a 92,000 square foot shopping center located in Bridgewater, New Jersey for $54 million at a 7.7% cap rate. This property is situated in a highly traffic corridor within an affluent market. It attracts 2.2 million visitors per year, among the highest for its size. Tenants include Summit Health, Chipotle, Shake Shack, Millburn Deli, CAVA and Starbucks. We structured the acquisition of Bridgewater in an accretive 1031 transaction with the expected sale of a Kohl's-anchored property in New Jersey.

Looking ahead, based on the results we achieved in the first quarter, we increased our 2026 FFO as adjusted guidance by $0.01 per share on the low end to a new range of $1.48 to $1.52 per share, reflecting 5% growth over 2025 at the midpoint. Urban Edge is well positioned to continue delivering steady growth, supported by strong fundamentals, our $22 million SNO pipeline, our $157 million redevelopment pipeline and future acquisitions.

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

Thanks, Jeff, and good morning. From an operating standpoint, the first quarter reinforced what we have been consistently seeing across the portfolio. Demand for our space remains strong and leasing momentum has not slowed. During the first quarter, we executed 45 leases, comprising 13 new leases and 32 renewals for a total of 419,000 square feet. New leases were signed at a same-space cash rent spread of 52% and every new lease signed this quarter, including 2 new anchor leases, have contractual annual rent increases of 3% or higher. We continue to push not only starting rents but also contractual rent increases in all of our deals, and we are seeing the results of that effort.

Same-property leased occupancy at quarter end stood at 96.4%, a decrease of 30 basis points over the previous quarter and the first quarter of 2025. The decline was expected and was primarily driven by the recapture of the Saks box at Hanover Commons, where we are evaluating multiple potential uses, ranging from grocer to apparel to creating additional shop space. Based on the activity in our pipeline, we continue to believe that occupancy levels of 97% to 98% are achievable by the end of the year.

In addition to leasing our remaining vacancy, we also are working to proactively take back space that is under leased. At several of our properties, we've approached tenants with low rents and average performance in an attempt to convert those spaces to better uses at better rents. This will become a bigger part of our growth in the coming years as market rents have now increased to the point that landlords can accretively terminate leases to make way for a replacement tenant, something that was nearly impossible a few years ago. For example, in Framingham, Massachusetts, we negotiated an early recapture right on our Kohl's space and are in active negotiations with multiple users to lease the space at a significantly higher rent.

On the redevelopment front, we stabilized 4 projects totaling $7 million during the quarter with the rent commencement of Trader Joe's and Ross at The Plaza at Woodbridge, Lidl and Boot Barn at Totowa Commons, Texas Roadhouse at The Outlets at Montehiedra and Big Blue at Plaza at Cherry Hill.

These projects generate nearly a 50% yield, which speaks to the lower level of landlord contributions national retailers are now accepting. Our total active redevelopment pipeline is now $157 million with an expected yield of 13%. These projects are largely pre-leased, providing both visibility and attractive risk-adjusted returns.

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

Thank you, Jeff, and good morning, everyone. Our first quarter performance further highlights the stability and earnings strength of our portfolio, particularly in the current environment. FFO as adjusted for the quarter was $0.36 per share, reflecting 3% growth over prior year and was driven by the growth in same-property NOI, including redevelopment, which increased 2.8% compared to the first quarter of 2025.

NAREIT FFO this quarter benefited from an $8 million gain recorded in other income received from the state of New Jersey for environmental remediation costs incurred a number of years ago. On the financing front, in March, we obtained a $62.5 million 7-year nonrecourse mortgage secured by The Plaza at Woodbridge at a swapped fixed rate of 5%.

The debt markets remain highly liquid and competitive as evidenced from this recent transaction. We ended the quarter with total liquidity of nearly $1 billion, with $30 million drawn on our credit facility and no amounts drawn on either of the 5-year or 7-year delayed draw term loans. Our balance sheet is in excellent shape, which provides significant flexibility to pursue attractive growth opportunities that may arise.

Looking ahead to the remainder of 2026, we have increased our guidance for FFO as adjusted by $0.01 per share at the low end to a range of $1.48 to $1.52 per share, primarily due to the 25 basis point increase on the low end of our same-property NOI guidance, which now reflects a new range of 3% to 3.75%. In terms of some of the puts and takes driving NOI growth, let me start with the first quarter and then touch on future expectations.

Same-property NOI growth of 2.8% in the first quarter benefited from new rent commencements and better-than-expected recoveries, including $500,000 of out-of-period tax refunds related to appeals that got settled for multiple prior year periods. The better recoveries in tax refunds more than offset higher-than-expected bad debt this quarter. The elevated bad debt pertained to isolated cases of tenants we were negotiating payment plans with that got moved to a cash basis.

Going forward, we believe uncollected rent levels should trend near 75 basis points of gross rents for the remainder of the year. In terms of NOI growth going forward, I will note the point that I made last quarter when we gave initial guidance in regards to our SNO pipeline. We expect to recognize another $3.3 million of gross rents from our SNO pipeline in the remainder of the year. 90% of this amount is expected to be generated in Q3 and Q4.

In addition, recall that Q2 of last year benefited from $1 million of onetime tenant, CAM true-up billings. Therefore, same-property growth is expected to accelerate in the back half of the year as SNO rents commence. Our guidance now incorporates $60 million of disposition activity that Jeff mentioned.

In closing, we are encouraged by the continued momentum in fundamentals, the depth of our leasing pipeline and our ability to generate sector-leading FFO and cash flow growth. With that, I'll turn the call over to the operator for questions and answers.

[Operator Instructions] First question comes from Michael Goldsmith with UBS.

Mark, you mentioned a couple of isolated instances of bad debt in the quarter. Can you walk us through what you're seeing if you're able to identify the tenants or at least like the types of categories where maybe there's been a little bit more pressure than anticipated?

Sure Michael. What I would say is the most significant increase that I referred to in the quarter pertain to a franchise operator that has 6 different QSR locations in our Puerto Rico portfolio. The tenant was moved to a cash basis. So both the back rents and current rents were reserved for. I can tell you that since we've closed the quarter, we've executed a payment plan with this operator and the operator has fully paid April rent and started making payments on the arrears.

So this is why we think it is more isolated. It's not systemic of any other patterns. We did go through a deep dive of all of our other Puerto Rico tenants and receivables were normal. So as I said in my prepared remarks, I believe what you should expect for the rest of the year is closer to 75 basis points rather than what was incurred in Q1.

Got it. And then you mentioned 2 new anchor leases with escalators of 3%. Can you talk about just the demand on the anchor side? Obviously, you're backfilling the Saks box as well. So just trying to get a sense of overall demand and then your ability to get strong lease terms, right, like with escalators of 3%. Is that kind of the norm for your portfolio? Or is that kind of like an exceptional outcome?

Michael, it's Jeff Mooallem. I wouldn't say it's the norm that we're going to be getting 3% or better annual increases from anchor tenants going forward. There are certain tenants out there like Trader Joe's or T.J. Maxx who fight really hard on things like increases. We happen to have an outlier quarter where we did a couple of anchor deals where we were able to extract that. But I think the point is that the trend line on things like anchor leasing is -- continues to go up. And whether it's less options, fair market value options, annual increases in options, we're able to have conversations with anchor tenants today that we were not simply able to have a few years ago.

And we're pushing on not just starting rent and less capital, but pushing on increases as well. So while I wouldn't say that we expect to be able to do annual increases on every anchor deal we do, unfortunately, they're still not quite there yet as an industry. Certainly, the ability to extract better increases and better terms throughout the lease is there. And I would tell you that I think this is the strongest anchor leasing market we've seen in a really, really long time simply because of the imbalance between supply and demand.

Next question, Michael Griffin with Evercore ISI.

Jeff, maybe just on the leasing front, do you have a sense, are tenants starting to come to you earlier to renew given the dearth of available space out there? And do you think that gives you more leverage in the renegotiation process?

Yes, absolutely. We're seeing -- we're having conversations with tenants earlier in the process. And a lot of times now, what our leasing team is doing rather than going to a tenant who has a year or 2 left on their lease and saying, "Hey, do you want to renew?" they're starting by going to the market and really figuring out what we can do with that space so that the initial conversation with that existing tenant is more, "Hey, we have another option here for your space, you need to pay X to stay," and we can switch the leverage over a little bit.

There's certainly a lot of desire on the part of the national tenants to lock their space up for longer. Sometimes we'll go to a national tenant with a request for a waiver on something or something we're doing in the parking and they're saying, "Well, yes, we're happy to work with you guys on that. Can you give us another 5-year option?" So the anchors, the national tenants are very motivated to keep as much term and control as they can, and the landlords are savoring getting the opportunity to take space back.

If you think about the vintage of a lot of the leases in our portfolio, they were signed, maybe 20-year leases that were signed '08, '09, '10, '11 that time, not a great time in the anchor leasing world. So we're excited to get some of those rents back over these next several years.

That's some helpful context. And maybe just following up on the Bridgewater acquisition. Just wanted to clarify, is that 7.7% cap rate that you quote, that's a stabilized in-place cap rate? And if so, would you say that's indicative of the assets that you're targeting for acquisitions? Or there was something maybe about this that just stood out from a cap rate perspective as maybe more attractive for you to acquire?

Yes. I think we got lucky with this one, Michael. It's Jeff Olson. And I mean, it traded at a higher cap rate in part because the anchor was not a grocery store. The anchor was a medical user called Summit Health, which you may be familiar with, but a very high credit health care tenant. They have a long-term lease. I believe they have 11 years left of term.

And in addition to getting it at that 7.7%, I mean, our revised numbers expect to generate 2.75% NOI growth, so very good growth. And more than half of that growth is coming from contractual rent increases and option exercises. So yes, we think it was a great opportunity. I wish we had a pipeline to 10 more like it. We don't at the moment, but we're on the hunt for more.

Next question, Michael Gorman with BTIG.

Jeff, if we could just stick with Bridgewater for a second. I'm curious, as you underwrote it, how much of a role did the Bridgewater Commons adjacency play? How much does the performance of the mall play into the $2.2 million in annual visitors that you cited to The Village component there?

I don't think it's a huge component. Most of our customers are not using the mall as a cotenant. It is fairly far away. So I don't think it's a major component. Jeff, do you want to add anything to that?

Yes. I mean, Michael, The Village was actually built as a sort of a lifestyle center adjacent to the mall. But what's happened over time is it's become its kind of own ecosystem mostly of daytime population for lunch. So if you look at the roster of the QSR tenants there and the demand from some of the best names in food that want to come into it if we get vacancy, we've been turning space over there.

And really, what you're seeing at that property is there are some mall visitors who will go there for lunch, but mostly, it's the daytime population in and around Bridgewater. There's a very strong suburban office market population in that area and a lot of weekend visitors as well, a lot of tourism in that area for various conventions and hotels and weddings and bareboat mitzvah kind of traffic. So we were very happy when we really dug into this to see that the traffic is coming from a lot of places.

Great. That's helpful. And then maybe back to the same-store. Obviously, solid result in the quarter. I noticed when you kind of dig into the revenue and expense side of things, the property operating was up, I think, 25%. Was there anything atypical in that or onetime? Was that seasonal? I would expect that would normalize over the course of the year. Is that a fair assumption?

Yes, Michael, it's Mark. Absolutely. That was really driven by snow and snow-related costs in the quarter, which were up over -- to put in perspective, about $3.5 million just versus prior year. So that almost fully accounts for the driver. And you're right, it will level off and revert to more normalized levels for Q2 to Q4.

Great. And maybe just one more for me, Mark, on the mortgage that you put in place in the quarter, can you just remind us on the strategy there? Obviously, you stabilized a big chunk of redevelopment at that property, which I would imagine is a help. You still have a couple of phases there. So do those phases get carved out? Are they small enough that it doesn't factor into when you go for a mortgage on a property like that? Maybe just some context there would be helpful.

Yes. I'm glad you asked, Michael. It's actually a great story. The Woodbridge Center actually had a mortgage on it that we paid off last year. It was about a $50 million mortgage. And we paid it off knowing we had visibility with the re-leasing of space we had. This center had a Bed Bath and a buybuy BABY that was paying $17 in rent Fast forward gets re-tenanted with Trader Joe's and Ross that are paying a blended around $25 a foot, a karate studio that was paying $28 the rent more than doubles with CAVA. So we had line of sight for all of that upside in NOI.

And fast forward, as you saw, we extracted $12 million more in this new mortgage. And so really, the phases you're talking about in terms of any other outparcel work, we still have the ability to add even more income from that. It isn't that it's carved out, but there's some potential more lift that we could get upon refinancing it again. But that puts into context, I think the story, the asset management strategy, and we were really delighted with that execution to lock that in with more proceeds at 5%.

Next question, Floris Van Dijkum with Ladenburg.

Like the acquisition, I know you mentioned something about a Kohl's sale. Is that -- presumably that's a pending Kohl's anchored sale that you have in the pipeline?

Yes, Floris. We're in diligence with the buyer right now. So we're hoping to complete that deal soon.

And presumably, that would be at a lower cap rate than where you're acquiring it at as well besides the fact that you're also obviously improving your credit profile?

Yes. You got it. That is the game at the moment.

Great. And then the Kohl's at Shoppers World in Framingham, talk a little bit about the upside potentially that you could see there. I know it's a little bit early, but maybe you could give people on the line a little bit of a flavor of what kind of demand you have for that space.

Floris, it's Jeff Mooallem. Yes, I mean, we're super excited about this one. We were able to negotiate an option to get that space back from Kohl's about a year ago, and that option will be coming up in first or second quarter of 2027. So we've been sort of out testing the market and the demand has exceeded our expectations. We have several national retailers that have submitted LOIs on it. We've looked at cutting up the space, adding shops, doing a full-fledged demolition and redevelopment.

But ultimately, what I think you're going to see us do is re-tenant the box at a very healthy spread, 75% to 150%, I would say, over the existing rent with a much better user, much better credit. This will enhance the overall Shoppers World profile and experience and really make that parcel within Shoppers World kind of its own little really strong asset. So we're very excited for what that's going to turn into in the next 12 months here or so.

Maybe last question. Can you guys give us a little bit of an update on what's happening in Puerto Rico? I know it's not that big part of your portfolio, but I believe that you're seeing some really strong demand. Can you talk us through some of the retailer demand and what kind of upside in NOI you see for that portion of your portfolio?

Yes. Puerto Rico continues to grow. We've done a lot of re-tenanting work there, as you know, over the last couple of years. And we're now adding names like Sephora, which will open, I think, this week or next week at Caguas, Coach, Bath & Body Works, national names coming over from the mainland to the property. We opened a T.J. Maxx last year that opened extremely strong. So we're very happy with the way the 2 Puerto Rico assets are performing.

I think the next step for us in Puerto Rico is to really dig in more on some of the ancillary income opportunity that we're able to generate in other places like signage, carts and kiosks. We're looking to grow on all those areas as well. But if you look at our model and our forecast, Puerto Rico should continue to grow at comparable growth rates to the rest of the portfolio. We've done a lot of the heavy lifting. So I don't think it's going to be a 10% annual growth story going forward over the next few years, but it's certainly going to be positive growth.

It should be in that 3.5% to 4% range.

Next question, Ronald Kamdem with Morgan Stanley.

Great. Maybe I'll start on sort of any update on sort of Sunrise Mall and what sort of the development prospects. I know you were contemplating different things. Just any update there?

Look, the entitlement process is advancing on schedule. We had disclosed previously that Amazon is going to occupy about 1/3 of the property, Ron, and we're finalizing our plans to develop the remaining land for retail and other uses. So we're super excited about our progress, and we really look forward to delivering a great result for the town of Massapequa and also for our investors.

The only other update, Ron, is that our last tenant at the mall which was Dick's Sporting Goods, will be giving the keys back to us tomorrow actually. So we are now fully unencumbered the mall from tenancy, and that will allow us to advance our plans rapidly into later this year.

Great. And then on the -- going back to the 97% to 98%, I think you mentioned sort of occupancy target for the portfolio as you sort of sit through. I mean I think what are some of the sort of tactics that you guys are using to sort of drive that number? And what has been sort of the biggest sort of sticking points or barriers to sort of getting there historically?

I think the biggest tactic is simply that retailers are seeking high-quality space, and they're coming to us proactively. So for the first time in a very long time, we have multiple tenants going after the same vacancy. And so it's more a function of the market than it is a specific tactic that we have. Our tactic, obviously, is to create the best merchandise mix that we can at our shopping centers balanced with receiving good rent terms, good lease terms, et cetera. So we feel very good about the fact that the majority of our vacancy will be leased up, and that's what gives us the confidence of being in that 97% to 98% range.

[Operator Instructions] Next question comes from Paulina Rojas with Green Street.

Given that your portfolio is concentrated in the Northeast corridor and recognizing that local trade area dynamics can vary meaningfully in retail. I'm curious how you think about market differentiation within the region? Are you seeing any meaningful and consistent differentiation, for example, in terms of cap rates, rent growth or even tenant demand between, let's say, New Jersey, Boston or D.C. or even smaller pockets within the corridor where you're seeing something that stands out?

Yes. I mean it is very submarket driven. I think in general, we're most pleased with what we're seeing in Boston at the moment, Paulina. And that may be a function of simply having new ownership on some of the properties in addition to a very strong and tight market. But our assets in Northern New Jersey are doing very well. There's very little vacancy in Northern New Jersey.

I guess if there's one market that sort of has been an average market over the years in the Northeast for us, it would be Philadelphia. D.C. is a strong market for us. We don't own that much there. But overall, we're very pleased with our markets. The underlying theme behind virtually everything that we own in the D.C. to Boston corridor is just having a massive population base around our centers. And that doesn't change submarket to submarket to submarket. We have a couple of hundred thousand people on average around our properties within 3 miles, and those customers need areas to shop.

And then you have characterized the demand and supply backdrop in your markets as supportive of sustained long-term growth. So I would like to push a little bit on what that means in practice. And when you use that language, are you thinking about, for example, rent growth that is in line with inflation, above or even substantially above inflation? I'm trying to frame it a little even in broad terms.

I mean given the tightness of the market, I would expect rent growth would be above inflation. And it's really being driven by these larger anchors that are looking for space that are losing out on opportunities to their competitors. And as they lose more deals, they're realizing that they have to pay more. So I would expect more than inflationary type growth, particularly for boxes that are 10,000 square feet and greater.

Thank you. I would like to turn the floor over to Jeff Olson for closing remarks.

Great. We look forward to seeing many of you at the upcoming NAREIT conference, and we will see you then. Please call if you have any questions. Thank you.

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

Greetings, and welcome to the Urban Edge Properties Fourth Quarter and Full Year 2025 Earnings Call. [Operator Instructions] As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Areeba Ahmed, Investor Relations Associate. Please go ahead.

Good morning, and welcome to Urban Edge Properties 2025 Year-end Earnings Conference Call. Joining me today are Jeff Olson, Chairman and Chief Executive Officer; Jeff Mooallem, Chief Operating Officer; Mark Langer, Chief Financial Officer; Heather Ohlberg, General Counsel; Scott Auster, EVP and Head of Leasing; and Andrea Drazin, Chief Accounting Officer.

Please note today's discussion may contain forward-looking statements about the company's views of future events and financial performance, which are subject to numerous assumptions, risks and uncertainties in which the company does not undertake to update our actual results, financial condition and business may differ. Please refer to our filings with the SEC, which are also available on our website for more information about the company. In our discussion today, we will refer to certain non-GAAP financial measures. Reconciliations of these measures to GAAP results are available in our earnings release and our supplemental disclosure package. At this time, it is my pleasure to introduce our Chairman and Chief Executive Officer, Jeff Olson.

Great. Thank you, Areeba, and good morning. 2025 was another strong year for Urban Edge. We generated FFO as adjusted of $1.43 per share, representing 6% growth driven by the continued execution on our signed but not open pipeline and 5% same-property NOI growth. During the year, we continued to set new leasing records. We executed 58 new leases at a record same-space cash rent spread of 32% and achieved record shop occupancy of 92.6%. I new lease spreads have now exceeded 20% for 4 consecutive years. reflecting strong demand and limited availability of high-quality retail spaces throughout our market. Given these dynamics, we expect new lease spreads will remain above 20% in 2026. We Leverage has clearly shifted to owners of high-quality shopping centers. Our infill densely populated portfolio continues to attract leading retailers, especially for anchor space.

Nearly all our national retailers are telling us how difficult it is to expand in our markets due to limited supply supporting our expectation for healthy rent growth in the coming years. Our signed but not open pipeline continues to be a key driver of growth. In 2025, we commenced over $16 million of new annualized gross rent including openings from Trader Joe's, Burlington, Ross, Nordstrom Rack, Atlantic Health, Tesla and many high-performing shop tenants like Cava, Shake Shack, First Watch, Starbucks and Club Pilates. Remaining signed but not open pipeline is expected to generate an additional $22 million of annual gross rent, representing 8% of current NOI. Our development and construction teams continue to be key drivers of value creation. During the year, we completed 14 projects totaling $55 million, generating unlevered yields of 19%. We currently have $166 million of redevelopment projects underway expected to generate a 14% unlevered return. Over the past 3 years, FFO as adjusted has grown at an average annual rate of 6% to $1.43 per share in 2025. This exceeds our 2023 Investor Day target of $1.35 per share and ranks among the highest growth rates in our peer group.

This outperformance is a testament to several factors, including our best-in-class team, favorable shopping center fundamentals and accretive capital recycling. During this period, we acquired nearly $600 million of high-quality shopping centers at an average 7% cap rate while disposing of approximately $500 million of noncore lower growth assets at a 5% cap rate. Looking ahead to 2026, our goals include achieving FFO as adjusted growth of at least 4.5%, same-property NOI growth above 3% and returning leased occupancy toward our historical high of approximately 98%. Our acquisition guidance includes a $54 million shopping center under contract. While we have not included additional acquisitions or dispositions in our guidance, we remain on the hunt for growth opportunities and have several deals in early stages of underwriting.

Looking to 2027 and beyond, we expect to increase FFO by at least 4% annually. Our growth outlook is highly visible with a significant portion coming from 6 anchor repositioning projects, including Bruckner, Bergen, Cherry Hill, Hudson, Plaza Woodbridge and Yonkers. These projects will include new retailers, including BJ's, Trader Joe's, Burlington, HomeGoods and Ross and high-quality shop tenants such as Chipotle, Chick-fil-A, T-Mobile and Cava. Through 2027, more than 80% of our same property NOI growth is expected to come from executed leases, LOIs and contractual rent increases. Based on the expected timing of rent commencements, we believe 2027 NOI growth will be approximately 5%. We are proud of our sector-leading performance over the past 3 years and remain well positioned to build on this momentum in 2020. I will now turn it over to our Chief Operating Officer, Jeff Mooallem.

Thanks, Jeff, and good morning. Our fourth quarter results capped an exceptional 3-year run at Urban Edge characterized by continued leasing momentum, disciplined redevelopment, accretive capital recycling and ongoing enhancements to our tenant roster. Let's get into some of the details as well as the reasons why we are so bullish that this run will continue. During the fourth quarter, we signed 47 new leases totaling more than 200,000 square feet, including 14 new leases at an 11% same space spread and 33 renewals at a 17% spread. That brought our total for the year to 58 new leases for over 360,000 square feet at a same space spread of 32% and 104 renewals for over 1 million square feet at a spread of 11%. On a portfolio our size, any given quarter can have an outlier or two, but a 32% spread on new leases across the entire year is direct evidence of the competitive tenant demand and increased pricing power that we've seen across our portfolio. Year-end, same-property lease occupancy was 96.7%. Anchor occupancy ended the year at 97.5%, down 50 basis points from last year, while small shop occupancy rose to a record 92.6%, up 170 basis points from last year.

The decline in anchor occupancy is a result of taking back on space at home at Ledgewood Commons, which we expect to re-tenant soon at a strong overall spread. Nationally, shopping center vacancy remains near historic lows. Supply constraints are especially pronounced in the Northeast, where new construction represents only 0.2% of total supply. Finding land and securing entitlements is extremely difficult in our markets. And even if you do, current market rents do not support today's ground-up development costs. We believe the current supply imbalance will continue, allowing us to negotiate even better lease terms, both economic and noneconomic. As it relates to our Shakes exposure, we had 2 Shakes office locations at the end of 2025. Our location in East Hanover, New Jersey was paying about $800,000 a year of gross rent and closed in January. The space has excellent visibility in a strong submarket, so we expect to re-tenant it accretively in short order. Our location at Bergen town Center is one of only 12 off Fifth stores that will remain open at full rent. That list includes some of the best retail assets in the entire country. Woodbury Commons in New York, Bucket Station in Atlanta, the Gallery at Westbury Plaza in Long Island and Sawgrass Mills in Florida, just to name a few further testament to how special an asset Bergen Town Center is.

Turning to development. We stabilized 3 projects in the fourth quarter, totaling $12 million of investment as rent commenced for Tesla at Total Commons, Dave's Hot Chicken at Yonkers Gateway and First Watch at Bergen Town Center. These projects will generate about a 26% yield. We also activated 4 new projects totaling $28 million, bringing our redevelopment pipeline to $166 million with a projected unlevered yield of 14%. As usual, nearly all of our active redevelopment projects are tied to executed leases. At Sunrise Mall in Massapequa, New York, we executed a lease termination with DICK's Sporting Goods in the fourth quarter. the last tenant remaining at the mall. This clears one of the final hurdles needed to advance the project, and it will enable our application for an Amazon distribution center on approximately 1/3 of the Sunrise land to advance quickly through the entitlement process. While the Amazon approvals remain our focus, we are in discussions with a variety of users for the remainder of the site, and we hope to have more to announce later this year.

And finally, on the capital recycling side, we have executed an agreement to acquire a property in New Jersey for approximately $54 million. The asset is located in a dense high-income submarket is 95% leased, and it will generate an accretive yield for us from day 1. We Closing is expected by the end of the first quarter, so we should have further details on this property on our next call. With that, I'll turn it over to our CFO, Mark Langer.

Thank you, Jeff, and good morning, everyone. We delivered another excellent quarter, capping off a very successful 2025. FFO as adjusted was $0.36 per share for the fourth quarter and $1.43 per share for the full year representing 6% growth over 2024. Same-property NOI, including redevelopment, increased 2.9% for the fourth quarter and 5% for the full year. This growth was driven primarily by rents commencing from our signed but not open pipeline and higher net recovery income, partially offset by higher snow removal expenses which had a 110 basis point negative impact to same-property NOI growth in the quarter. Full year FFO as adjusted benefited from lower recurring G&A as we continued to make progress reducing costs and extracting operational efficiencies. Our balance sheet remains very well positioned with total liquidity of $849 million and no amounts drawn on our line of credit.

During the quarter, we paid off the $23 million mortgage at Weston Commons at maturity using cash on hand. We have no debt maturing until December 2026 with 3 mortgages aggregating $114 million coming due at a blended 4% interest rate, which we expect to refinance or repay. We ended 2025 with net debt to annualized EBITDA of 5.8x, below our target of 6.5x, which provides us with flexibility to seek growth opportunities. Subsequent to the quarter, we amended our line of credit with a new $700 million facility maturing in June 2030 with 2 6-month extension options and simultaneously executed two $125 million 12-month delayed draw term loans with a 5-year and 7-year maturity. While we do not have immediate plans to draw on the term loans, the delayed draw feature allows us to do so for 12 months from closing and provides us with added flexibility as we pursue our growth plans.

Turning to our outlook for 2026. Our initial FFO as adjusted per share guidance range is $1.47 to $1.52 per share, reflecting 4.5% growth at the midpoint. Key assumptions within guidance include same-property NOI, including redevelopment growth of 2.75% to 3.75%. Our NOI guidance reflects the full year fallout from Shack at East Hanover and assumes credit losses of 50 to 75 basis points. On the revenue side, our NOI growth assumes $6 million of gross rent is recognized in 2026 from our SNO pipeline of which 75% is expected to come online in the second half of the year. Therefore, year-over-year NOI growth is expected to build in the second half of the year with lower growth rates in the first 2 quarters. As I noted, we continue to carefully manage G&A expenses. In 2025, our total recurring G&A was $34.5 million, a decrease of 4% from the prior year. In 2026, we expect recurring G&A to be $34.5 million to $36.5 million, an increase of 3% at the midpoint.

As for capital spending, we have $166 million of active redevelopment projects with $86 million remaining to fund. We expect to spend about $70 million to $80 million during 2026 on these projects and have also budgeted $20 million in maintenance CapEx. As announced in our press release, our board recently approved an 11% increase in our dividend to an annualized rate of $0.84 per share reflecting an FFO payout ratio of about 56%. We expect the dividend to grow as earnings and taxable income grow while we focus on preserving free cash flow to fund our active redevelopment pipeline that is generating healthy returns. This new dividend reflects the projected growth in our taxable income in 2026. In closing, we are well positioned to continue driving earnings growth by delivering redevelopment and anchor repositioning projects, obtaining attractive economics on new leases, sourcing new acquisitions and maintaining a strong balance sheet. With that, I'll turn the call over to the operator for Q&A. Thank you.

[Operator Instructions] Our first question comes from the line of Michael Kamdem -- I'm sorry, Ronald Kamdem with Morgan Stanley.

Just 2 quick ones. Starting with the shop occupancy. You obviously a pretty strong year, 170 basis points year-over-year. Just hoping you could give some comments on sort of what your expectations going forward in terms of how much more upside is there in that number?

Ron, it's Jeff Mooallem. Yes, we've messaged pretty consistently that we think that we can get to a steady state somewhere in that 94% range. Once you start getting above 94%, you're really looking at maybe -- are you not being strategic enough with some of your shop space. There's always going to be some static vacancy that comes from turning over vacancies from tenant A to tenant B. And there's always going to be some functionally obsolete back-of-house storage type space that sits there on our report. When you start backing those out, we feel like 94%, 95%, 96% is really about as much as we want to push it. This has been an opportunity for our leasing team now that we're into this rarified air on shop occupancy to actually go back around to some of the existing tenants and look at -- is this a tenant we can get out and we can replace at a really healthy spread. So it's not just what's vacant today, but it's also about over -- better improving the leasing on what's actually occupied. So 93%, 94% is probably a good safe bet for us in '26.

Helpful. My second question was just -- I think capital recycling has been a big theme for you guys. Just maybe talk a little bit more about sort of the acquisition pipeline and some of the cap rates? And then on the disposition side, sort of what are you sort of willing to put on the table this year in the portfolio?

Ron, it's Jeff Olson. I mean the acquisition market is maybe as competitive as I've seen it. So cap rates are continuing to come down. There's been a lot of increased interest in the space from institutions. There are a lot of lenders out there, the banks, the insurance companies that are lending at very attractive rates. So the good news is that it makes our existing assets more valuable and will probably allow us to do more capital recycling than we had originally intended because we should be able to get better cap rates on what we're selling, finding properties at attractive valuations is hard. This property that we found in Bridgewater we're super excited about that one. I think we're getting that at a cap rate that's north of 7.5% and it has decent growth attached to it. The tenants include the likes of Chipotle, Shake Shack Cava and there's also a health and wellness component to it. I'm hoping that we're going to be able to use the proceeds from that asset to serve as a 1031 exchange for a center that is Kohl's anchored in New Jersey that would actually be accretive on a cap rate basis first year as well. And if so, it would take Kohl's from being our #3 rank 10 by revenue down to 7. And then we also have a space in Framingham, Massachusetts that will take back from Kohl's that would reduce their exposure even further. So that is the plan as of the moment.

Our next question comes from the line of Michael Goldsmith with UBS.

Can you walk us through the same property NOI growth path over the next couple of years? You did a healthy growth in 2025 or 5%. You're pointing to 2026 midpoint of 3.25%, and then mentioned earlier, Jeff, that 2027 will be approximately 5%. So can you kind of walk through what are the puts and takes that drive the deceleration in '26 and then should drive the reacceleration in '27?

Sure. Michael, it's Mark. So let's just talk from 25% to 26%, your first question about the deceleration. Really, 2 things I would point to that are behind that. First is just fallout from at home last year as well as Shack's that we talked about this year, that's a little under $2 million of NOI headwind there. And then I think it was actually -- you had asked even on our last call, whether there was any onetime benefits that came through in '25, and we talked about 125 basis points of lift for some pretty sizable out-of-period collections that we got in '25 as well as some prior year can bills. And so those items, we put more in the onetime bucket. And look, it's not unreasonable to think that we could have other onetime benefits this year. But unless we have visibility of them, we don't bake them into guide. So between some of the tenant fallout and those one-timers that will get you to the decel.

The second question regarding how do we then pick up in '27, that's really the beauty of what Jeff talked about with our visibility from just the SNO pipeline that we can see 80% of NOI growth coming from stuff that's already executed that we have to deliver and that maps, Michael, to what we disclosed kind of in our SNO bridge. So those would be the 2 big factors.

Mark, really helpful. And then just as a follow-up, I think last year, you started with a bad debt guidance of 75 to 100 basis points. I believe in the prepared remarks, you talked about 50 to 75 basis points. So can you talk about what changes this year? And does that reflect just kind of those in the watch list that the names that you kind of talked about just in the prior response coming out and that gives you a cleaner portfolio based on what you see right now for '26.

Yes, Michael. Look, I think it's a function just of some of the changes in the environment. When we sat here last year, the names that we were worried about between Party City and Michaels and Joannes and At Home, which did file, but took longer than we thought. So really the bad debt guidance this year is lower just because when we look through our portfolio tenant by tenant, and really think about where is the most elevated risk of someone that's really going to fall out. We just feel better about the environment with our tenancy today than we did last year, a little bit on the margin, as you said, the 50% to 75%. So it's really just a function of our assessment looking through the tenancy of the portfolio today.

Our next question comes from the line of Michael Gorman with BTIG.

Mark, if I could just go back to the same store for a second. You mentioned the tenant fallout, you also mentioned snow removal costs in the fourth quarter, I thought I heard. And I'm just wondering what you might have baked into the 2026 guidance for the winter storms that have already gone through the Northeast that might be having an impact there.

Yes. I mean January was certainly off to a tough start. So what I can tell you, Michael, is our guidance range this year accounts for estimate of what we incurred in January, we're still going through and closing the books for that. Luckily, February, while brutally cold here in the Northeast, knock on wood hasn't had additional snowfall. So we feel that we've appropriately provisioned for snow in our guidance.

And then maybe just to the redevelopment pipeline. You talked about it a bit in the prepared remarks. 14 projects completed successfully last year. I think another 13 are going to complete this year. You have a few listed out as potential starts. Can you just talk about additional opportunities, especially if acquisitions are going to remain challenging to maybe accelerate starting new redevelopment projects in the existing portfolio?

Mike, it's Jeff Mooallem. Yes, I think you can think about our redevelopment program in 2 buckets, one of which is really the kind of blocking and tackling stuff that we consistently get these double-digit yields on where we're re-tenanting and anchor space. We're adding a pad or maybe expanding a building somewhere. The sort of the day-to-day for lack of a better term development work that we do here, where we're repositioning our portfolio and constantly trying to improve it and enhance it. And if we can do that with better tenancy, maybe add some GLA, maybe turn a vacant old bank pad into a new restaurant pad and do that in that 15%, 16% yield range, we're doing that all day long, and that comprises our $166 million redevelopment pipeline. The second component of it is what we would call sort of the bigger undertakings that frankly don't get reported every quarter because they don't come along every quarter.

So things like Sunrise Mall, Jersey City, New Jersey, Hudson Mall, Yonkers, Bruckner, some of our bigger projects where we are maybe having to go through a year or 2 of entitlement work in order to get to where we want to get to, and they might involve some demolition. They likely will involve an anchor tenant like Amazon or like Walmart, those projects take longer and are more complex and cost more money, but they add significant growth to us when they do come online. The perfect example being in 2027 when we'll see a lot of our heavy lifting at Bruckner come online. So we generally like to play in those 2 fields. I don't think you're going to see us buying a lot of vacant land and building ground up. As I mentioned in my remarks, it doesn't really pencil out for anybody these days. And when we have the opportunity to add to the portfolio in either a small bucket or a large bucket, that's what we're trying to do.

Our next question comes from the line of Michael Griffin with Evercore ISI.

Three Michael Gs a row, got to love it. A question to you. Jeff, my question to you is just on the leasing on the quarter for new lease spreads came in at about 11%. I know that these seems to be choppy quarter-over-quarter, and it seems like you're projecting 20% new lease spreads for the year ahead. But mean any kind of puts and takes or things just on the quarterly number that maybe came in a little bit lighter. Can you give us some context around that?

It was just a low number overall. There's only on 37,000 square feet of space. So I think you have to look at it more on a 4-quarter rolling basis.

Great. That's some helpful context. And then maybe just going back to kind of the capital recycling theme. Is there an opportunity, I guess, within your centers to potentially carve out and dispose of the anchor tenant that might be there for a while, but as flat lease escalators, right? I think about like the Home Depot at Hanover Commons, right, high-quality tenant in a great center, but probably doesn't have a lot of growth there. Is that, I guess, a capital recycling avenue that you can then redeploy those proceeds into higher growth opportunities while still maintaining some of the other tenants within the center.

Yes. I mean I think it is. What we don't want to do is chop up the center. So in East Hanover because Home Depot shares a parking lot with other tenants. It just makes it more complicated, and we want to be in control. But we absolutely have freestanding Home Depots and Costcos and Lowe's that operate independently where the land is subdivided or it will be yes, we do think that's an attractive source of capital, and we've been using that over the last several years. So we have sold some spaces back to Home Depot and others.

[Operator Instructions] Our next question comes from the line of Floris Gerbrand Van Dijkum with Ladenburg Thalman.

I'm definitely not a Michael G. So getting maybe a little bit more into the capital recycling which you guys have done incredibly well over the last couple of years, mind you. But as cap rates have compressed in your core markets, maybe talk about the cap rates and the spread that you've historically achieved, how is that -- it looks like it's shrinking, if I look at what you did the assets you sold last year and the asset you bought in Massachusetts, there's a 50 basis point spread there still positive, but you used to be able to get significantly higher spreads on your capital recycling. How do you see that transpiring going forward? Maybe if you can talk a little bit about that and what you think is happening to cap rates?

Yes. I mean the spreads clearly have narrowed. So I think achieving a 200 basis point spread as we've done is unlikely, but I think what's highly likely is that, that spread of 50 basis points, call it, that we did last year, when you look at the growth rate on what we're buying versus what we're selling, I think there may be a 200 to 300 basis point spread in growth on an annual basis. So we are looking to use capital recycling to accelerate our internal growth by selling some high quality, good credit assets that might have 1% growth and exchanging those in an accretive manner initially with assets that might be growing at 2.5% to 3% and might have some opportunities for redevelopment in the future.

And maybe my follow-up. If you could talk a little bit about 2 assets, in particular, one Gateway, which has very low rents curious as to what you're doing to optimize rents and growth in that asset? And then Bruckner, which obviously you're spending a lot of capital, which should be one of your best assets when it's fully completed. And do you think you can do something like what you've done in Bruckner at Gateway going? I guess what's my question?

It's Jeff. Yes, let's take gateway first. I mean, as you're right, big piece of property sitting in Everett, Massachusetts, Boston skyline in the horizon right next to the on core hotel and soon to be right next to the new Major League Soccer Stadium in New England. So it's just a fantastic piece of land. Unfortunately, it's got a lot of tenants with a lot of long-term leases. So if we could snap our fingers and get space back, I think you'd see us be able to meaningfully move the needle on what that asset could look like and the rents that we could achieve on it. But like a lot of these types of power centers, it will be a longer, slower one as we get space back, we're able to retenant it would love to add a Trader Joe's or a Sprouts or a high-end grocer there. We just don't have a space for them. So that will be something we continue to talk about internally. But right now, it's pretty much fully leased. There's one small vacancy that we have a lot of interest on. But until we can get some of the anchor and junior anchor space back, there's not a lot more we can do there.

Bruckner is a perfect example though of what happens when an opportunity does present itself losing the Kmart there gave us the opportunity to really rethink not just the Kmart and the Toys "R" Us that was in front of it, but the whole shopping center. And if you look -- if you were to go out to Bruckner today, you would see a pretty heavy construction site. And if you go out to Bruckner a year from now, you would see a Chick-fil-A on the corner open for business, a Chipotle open for business and hopefully a BJ's Brewhouse and a [indiscernible] open for business. So when you add those kinds of tenants, you're adding effectively 1/3 grocer with BJ's the shop right and the Aldi that are already there. When you add those kinds of tenants and you bring in more soft goods, we have Marshalls, we've got Burlington. Now we'll be adding Ross and another soft goods tenant next to Ross. And then, of course, you add food offerings like we'll be able to put in, anchored by Chipotle and Chick-fil-A, like that asset really does become a complete redevelopment and one that we're incredibly proud of. Jeff likes to say that when he started Urban Edge, it was the ugly shopping center he ever saw. And then now we all kind of think it's one of the nicest shopping centers, certainly in the 5 Boroughs. So Bruckner is a good litmus test for where we'd like to get to, but we have to have the space back first to get it.

And to put Bruckner in context, I think our NOI was around $7 million last year at Bruckner and in 2028, we're expecting it will increase by $8 million to $15 million. So it's driving a lot of growth over the next several years.

Thank you. Ladies and gentlemen, that concludes our question-and-answer session. I'll turn the floor back to Mr. Olson for any final comments.

Great. We appreciate your interest in our company and look forward to seeing you soon. Thank you.

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

Greetings, and welcome to the Urban Edge Properties' Third Quarter 2025 Earnings Call. [Operator Instructions] As a reminder, this conference is being recorded.

It is now my pleasure to introduce your host, Areeba Ahmed, Investor Relations Associate. Thank you. You may begin.

Good morning, and welcome to Urban Edge Properties' Third Quarter 2025 Earnings Conference Call. Joining me today are Jeff Olson, Chairman and Chief Executive Officer; Jeff Mooallem, Chief Operating Officer; Mark Langer, Chief Financial Officer; Heather Ohlberg, General Counsel; Scott Auster, EVP and Head of Leasing; and Andrea Drazin, Chief Accounting Officer.

Please note, today's discussion may contain forward-looking statements about the company's views of future events and financial performance, which are subject to numerous assumptions, risks and uncertainties, and which the company does not undertake to update. Our actual results, financial condition and business may differ. Please refer to our filings with the SEC, which are also available on our website for more information about the company.

In our discussion today, we will refer to certain non-GAAP financial measures. Reconciliations of these measures to GAAP results are available in our earnings release and our supplemental disclosure package. At this time, it is my pleasure to introduce our Chairman and Chief Executive Officer, Jeff Olson.

Great. Thank you, Areeba, and good morning. We delivered another strong quarter with FFO as adjusted increasing 4% over the third quarter of last year, bringing our year-to-date growth to 7% compared to the first 9 months of last year. Same-property net operating income increased by 4.7% for the quarter and 5.4% year-to-date.

Last week, we completed the $39 million acquisition of Brighton Mills, a 91,000 square foot grocery-anchored shopping center located less than 1 mile from Harvard Business School. The property is situated in a highly desirable infill neighborhood of Boston that has experienced significant growth driven by new multifamily developments.

The 3-mile trade area comprises 449,000 people with average household incomes of $170,000. The purchase was funded with proceeds from the sales of Kennedy Commons and McDade Commons, both structured as 1031 exchange transactions. Those 2 properties were sold at a 5.4% cap rate with a 5-year forecasted NOI growth of only 0.4%. We acquired Brighton Mills for a similar cap rate in the mid-5s, but we expect annual NOI growth will exceed 3%, primarily through contractual rent increases. The property also has tremendous demand for residential and commercial development, as several parcels with the same zoning have been approved or are already under construction. It is one of the few shopping centers in the market with surface parking.

Our price of approximately $5 million per acre is well below the $9 million to $10 million per acre land values in the immediate area, making this a textbook covered land play that delivers solid current returns and meaningful growth as we wait for the leases to expire so that we can eventually extract even more value from the land.

Our Boston portfolio now includes 7 properties with the value approaching $500 million, representing about 10% of our company's value. Five years ago, this region accounted for less than 2% of our value. Over the last 2 years, our capital recycling strategy has resulted in nearly $600 million of acquisitions of high-quality shopping centers at an average 7% cap rate, while disposing of approximately $500 million of noncore assets at a 5% cap rate, a disciplined approach that has meaningfully upgraded our portfolio quality and long-term growth rate.

The acquisition market remains highly competitive, driven by more institutional capital on the equity side and tighter spreads from traditional banks on the debt side. Given our better-than-expected results, we are raising our 2025 FFO as adjusted guidance by $0.01 per share at the midpoint to a new range of $1.42 to $1.44 per share, representing 6% growth over 2024 at the midpoint.

Looking ahead, we expect shopping center fundamentals to remain strong, driven by favorable supply-demand dynamics and record-low vacancy rates. This strength is already evident in our year-to-date leasing spreads, which averaged 40% on new leases and nearly 10% on renewals. In closing, I want to recognize our exceptional team. Their dedication and focus continue to drive our success. I'm grateful for their commitment to delivering another quarter of strong results. I will now turn it over to our Chief Operating Officer, Jeff Mooallem.

Thanks, Jeff, and good morning, everyone. We continue to make meaningful progress across leasing and development, reinforcing the strength of our portfolio and our ability to drive long-term value creation. Leasing activity in the quarter totaled 31 deals aggregating 347,000 square feet. This included 20 renewals totaling 265,000 square feet at a 9% spread and 11 new leases totaling 82,000 square feet at an outsized 61% spread. That spread was primarily driven by new anchor leases with HomeGoods and Ross.

These national retailers took spaces that were previously leased to now bankrupt companies, reinforcing what we have been saying for the past several quarters. When we have an opportunity to get boxes back in our portfolio, we are usually able to generate very strong rent spreads. Our overall same-property lease rate now stands at 96.6%, a 20 basis point decline from last quarter, and our anchor lease rate is at 97.2%, also a 20 basis point decline.

We anticipated this decrease due to the lease rejection of our at-home store at Ledgewood Commons. The at-home vacancy alone had a 60 basis point impact on leased occupancy, but its impact on NOI is much less, as it was a single-digit rent that we expect to replace with a strong renewal spread.

To put it another way, the deals with HomeGoods and Ross signed in the third quarter will contribute almost twice as much base rent as at-home did from this box in 60% of the square footage. We also executed 9 new shop leases in the third quarter, totaling 27,000 square feet, achieving a same-space cash spread of 42%. Our shop occupancy rate remained flat from the prior quarter at 92.5%, in part because we continue to look for ways to create new shop space where economics justify it. For example, this quarter, we split a vacant 11,000 square foot space in Millburn, New Jersey, and turned an underperforming anchor space into more desirable shop space.

We've already executed a lease on about 40% of this space at a very healthy spread, and we expect a similar return on the remainder of the space. On the development front, we stabilized one project with the opening of Bob's Discount Furniture at Newington Commons 2 quarters ahead of schedule, bringing our rolling 12-month total to $49 million of projects stabilized at a blended yield of 17%.

We also activated 3 new redevelopments this quarter with a gross investment of $8.4 million. Our active redevelopment pipeline now totals $149 million with a strong 15% projected yield. We continue to convert our signed not open pipeline, which now stands at $21.5 million and represents 7% of NOI into rent commencements.

This quarter, we commenced $5.6 million of annualized gross rents from tenants like Starbucks, Sweetgreen, Dave's Hot Chicken and our first Tesla Service Center. Today, we are adding to the rent roll our second Trader Joe's location in Woodbridge, New Jersey, which opened for business this morning.

I want to wrap up by sharing some insight into the overall leasing market and the health of our national retailers. In the past 45 days, Scott Auster and I have been out on the road. We have visited 8 different national retailers in their offices to discuss overall sales trends, capital plans, store performance and opportunities to do more together. The takeaway has been extremely positive. We heard good news about operating metrics and good news about the strength of our Northeast corridor market versus other parts of the country.

Nearly all are in clear expansion mode and are prepared to pay the rents needed to make that happen. With a shortage of good space available for these retailers in our markets, they are encouraging us to take back space that may be under-leased, where we can, and we're busy studying the best ways to do this at some of our bigger properties like Bergen, Yonkers and Cherry Hill. This has always been and continues to be a business of both short-term results and long-term value creation. We believe today's economic climate allows us to achieve both.

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

Thank you, Jeff, and good morning, everyone. We're pleased to report another excellent quarter, underscored by strong earnings growth and sustained leasing momentum. And the third quarter FFO as adjusted was $0.36 per share and same-property NOI, including redevelopment, increased 4.7% year-over-year. This growth was driven by rent commencements from new tenants, higher net recoveries and higher collections on past due receivables. FFO as adjusted, also benefited from lower recurring G&A.

On the financing front, we secured a new $123.6 million 4-year nonrecourse mortgage on Shoppers World at a fixed rate of 5.1%. A portion of the proceeds were used to pay off our $90 million line of credit, which carried an interest rate of 5.5%. The remaining proceeds are expected to be used towards capital investments and general corporate purposes.

Debt markets for retail assets continue to strengthen as capital flows from CMBS, life companies and especially banks have increased, which has resulted in spreads compressing 30 to 40 basis points since the first quarter. That is in addition to the 20 to 30 basis point decline in base rates.

Our liquidity position remains very strong at over $900 million, including $145 million in cash and no amounts drawn on our line of credit. Outstanding indebtedness consists of 100% nonrecourse fixed-rate mortgage debt. Our net debt-to-annualized EBITDA was 5.6x at the end of the quarter, which provides us with the flexibility to capitalize on future growth opportunities.

Looking ahead to the remainder of 2025, we are raising our FFO as adjusted guidance by $0.01 a share at the midpoint, implying fourth quarter FFO of $0.36 per share. This guidance increase reflects better-than-expected results year-to-date from new tenant rent commencements, year-end CAM reconciliations and lower G&A. Our expectations for same-property NOI growth, including redevelopment guidance, have also been increased to a new midpoint of 5.25%, up from the prior midpoint of 4.6%, implying growth in the fourth quarter of approximately 4.5%.

As Jeff mentioned, our $21.5 million SNO pipeline will continue to contribute to future growth with $5.6 million in annualized gross rent already commenced in the third quarter and another $300,000 expected in the fourth quarter.

In summary, we are pleased with the track record of execution we have generated over the past 3 years. We now expect that our FFO as adjusted CAGR will be nearly 6% during this time, driven by generating average same-property NOI growth of 4.3%. This growth was achieved while improving our balance sheet as acquisitions were funded primarily with the sale of low cap rate, low-growth assets.

We have significantly improved the quality and durability of our cash flow as the addition of strong credit, highly desired anchor tenants have come online, and we have increased shop occupancy to nearly 93%. As we look ahead, we remain focused on driving long-term growth while maintaining a strong track record of prudent capital allocation.

With that, I'll turn the call over to the operator for Q&A.

The first question is from Michael Goldsmith from UBS.

Maybe starting with this acquisition, it sounds like there's some better opportunity for growth and then also opportunity for redevelopment over time. So just to get a better sense of the time line for that, are you able to kind of size when the leases expire or so that you could start to monetize some of the opportunities at that site?

Yes. I mean, literally, we see over the next 10 years, there's term on a lot of the leases. I think all the leases expire in 22 years. So we definitely have some time. But over that 22-year time period, we feel very confident that we'll exceed 3% NOI growth based on everything in place. And maybe we'll get to it sooner, if we're able to negotiate a deal with the current tenants, but I think I said in my comments, it's a textbook covered land play. Indeed, it is. If we could own 72 properties like this, I think we'd all be very happy here. By the way, I'm very happy to see you covering the stock, Michael. When I read the report this morning, UBS, as you know, I was a former analyst at UBS. I was looking for my name on the report. But I have to chuckle because my name tied to a neutral rating on Urban Edge properties wouldn't. Anyway, we hope to get you there someday.

We'll work on that. And then, as a follow-up, just as we look forward, can you provide a breakdown of some of the onetime items you recognized in 2025 so that we could strip that out of the 2026 run rate? And then also, I think real estate tax and G&A have been benefits this year. So how can we think about those as we look forward?

Yes. I think, Michael, the things that we've talked about on some prior calls and to answer your question, in terms of some items that we don't see recurring at the same levels, we had some onetime collections that related to some very old receivables, including, as you heard in my prepared remarks, this quarter, we had some. So I think for the full year, we believe that's about $2 million and then probably about $1.5 million related to some of the CAM recovery billings that we've had that related to some old prior periods as well. So I think those are the 2 biggest things I would highlight.

Yes. Anything on real estate taxes and G&A going forward?

No, real estate taxes, I feel good. Our run rate, we have a repetitive process in place where we challenge and appeal those where we believe it's warranted. And to the extent we had anything that was really material or outsized, Michael, we would call your attention to it, but I don't see that.

On the G&A front, I can tell you, we've worked very hard over the last few years to continue to do everything we can, whether it's rightsizing the enterprise, looking at efficiencies. And so you are seeing a downward trend that is what's tied to our guidance. There will be some reversion next year just because headcount will stabilize, we'll have normal inflationary increases, but I don't see it having any material move.

The next question is from Michael Griffin from Evercore ISI.

Jeff, maybe you can talk about the opportunity set within Shoppers World. I know you recently got the mortgage refinance there. If I remember correctly, there's a Kohl's box that you could be looking to do something with, whether it's redevelopment into other uses or things like that. But maybe give us a sense of what the opportunity is there and what we could be seeing in the hopper for that property.

Michael, it's Jeff Mooallem. I'm going to try to take that one, if I can. Yes, I mean, Shoppers World, we acquired it in October of 2023. It was our first sort of really meaningfully large acquisition in Boston. We were very excited to get our hands on it. As you know, it's kind of one of the most unique and irreplaceable properties in that trade area. And we acquired it all cash at the time, which was a wise move because 2 years later or a little less than 2 years later, we were able to secure the financing that Mark referenced.

Important to note that in that financing, the Kohl's parcel is not included. So we do have some flexibility to work with the Kohl's parcel alone without impacting the mortgage that we took on the main Shoppers World parcel. As we get into the Kohl's conversation, we'll let you know. We do have an agreement with Kohl's, where we have the ability to get that back early if we want to. So we have been studying some different ways to work with the building.

We've looked at some mixed-use opportunities. We've looked at retenanting it to other tenants. We feel confident that we're going to be able to do something accretive and positive there, not just economically, but for the overall benefit of the asset. So I would say that we're very excited for this sort of next generation of Shoppers World. There's good demand for some of the other space as well. We don't have any more space left at the moment, but we're trying to find ways to increase the main Shoppers World parcel as well. And on the Kohl's piece itself, stay tuned, but I think hopefully, early next year, we'll have something cool to announce there.

Jeff, that's some helpful context there. And then maybe you can give a little bit of color around the rent spreads in the quarter, particularly as it relates to the new leases. It looks like it was up about 60% year-over-year. Was one lease skewing that, that maybe absent that, it's probably in the 20% or 30% range? Or is that really indicative of, I guess, the demand that you're seeing within the new lease part of the leasing pipeline?

I would love to tell you that 60% rent spreads are a consistent run rate going forward, but we did have a unique situation. I mean, first of all, with our size, the data set is somewhat limited. So you got to take that into account. In the third quarter, though, we did sign anchor leases with one with HomeGoods and one with Ross in spaces that were previously occupied by Big Lots and buybuy Baby. So they were sort of the byproducts of those bankruptcies.

And if you recall, we've been saying now for a couple of years, boy, if we get some of the space back, we're pretty sure we can make a lot of money on it. And that's the proof right there. I mean, you're talking about rent spreads on those 2 boxes alone that really drove that 60% number. There were some positive shop leasing spreads as well, but those 2 deals, in particular, were what got us into that 60% range. Going forward, I think it's reasonable to assume that we'll be comfortably in the double digits, and we like to be north of 20%, but probably not 60% every quarter.

And Jeff, just real quick, what is the expected time frame between executing those leases on those backfilled anchor boxes versus when the new tenant is going to commence occupancy?

That's part of the reason, Scott and I were out on the road the last 45 days, was to try to reiterate to our retailers how much we'd like to get them open as fast as possible. And what I would tell you is when two -- both parties are motivated, it can happen pretty quick. We'd love to get HomeGoods and Ross in those cases, both open for business in 2026. We're confident that one of them will open probably in the first half of the year and the other one, hopefully, in the second half of the year.

The next question is from Floris Van Dijkum from Ladenburg.

Jeff, Jeff Mooallem, that is. I had a question on the comments you made about splitting an anchor box. Can you talk about the opportunity to create more shop space in your portfolio? How many more opportunities are there available to take anchor and split it? And what are the returns for that kind of capital?

Floris, it's a great question. I mean it's something we're studying all the time. In this particular case, it was a relatively small box, only 11,000 feet, but it qualifies as an anchor under our 10,000 square foot threshold. And it was a fairly logical and easy split, and we were able to get a great national tenant, a fitness user to take the corner piece and that will really drive the leasing of the rest of it.

If we had half a dozen or a dozen more of those, we would be doing them right now. A lot of the anchor space that we have left, given our high anchor occupancy is somewhat more challenged space, whether it's single or mid-teen rent kind of space. And if it's deep, it does make it challenging to turn it into shop space. So a lot of our anchor space, like if you look at the at-home in Ledgewood, for example, which we talked about, probably gets cut up into 2 or 3 anchor tenants and not into a lot of shop space.

Having said that, this is something we talk about literally every week in our development and our leasing meetings, where else can we create more shop space? We have great demand for shop space across the portfolio. I mentioned some of the names of some of the shop tenants we've opened this quarter, Sweetgreen, Starbucks, Cava, the fitness deal we just signed in Melbourne, these are tenants who can pay rents in the 40s, 50s, 60s, and the economics start to make sense to create shop space when we can.

It's not just shop space, too, right? It's also pad space, which...

And pads, yes.

They were valuable. The rents are so much higher.

Right. So we're creating a pad, maybe two pads at two different shopping centers. We think that there's an opportunity set there, maybe 4 or 5 of our assets could get additional pads for multi-tenant shops or even for a single-tenant food user.

Great. Maybe a follow-up question. Talk a little bit about the acquisition environment, and also maybe the ability to fund acquisitions as well. I know that New York and Boston are pretty competitive markets. I would imagine it's pretty tough to find a product that fits your criteria. Maybe talk a little bit about what you're seeing, what's out there, and your appetite for transactions going forward?

Look, Floris, it's a very competitive market. There are a lot of new players in the market, whether it's private equity, family offices or institutions. And their recent interest is really driven by more and cheaper debt availability. And then as you know, shopping centers also offer higher cap rates than some of the other product types, including resi, industrial and data centers. So what's attractive to so many is that out of the gate, shopping centers offer attractive leverage returns when you buy the asset and then durable and growing cash flows over time. So the sector has a lot of interest from a lot of people, and it's been building up over the last year or so, and now we're starting to see that in the bids.

We're underwriting about $200 million of assets right now. We have nothing under control. I think we've lost 3 shopping centers in the last 90 days that we liked, but we were maybe the #2, #3 or #4 bidder. And we ended up losing probably by 25-ish basis points, which we're happy to do because we're going to be disciplined.

We're also in the market with certain centers that we own, trying to test that market to see if we can achieve our pricing. And if we do better in that regard, then maybe we're willing to pay up a little bit more for something else, but we really want to pair most of our acquisition activity with disposition activity. I think we've been the leader in capital recycling within the space over the last 24 months, and we hope to continue that to the extent that we can.

The next question is from Michael Gorman from BTG Pactual.

Jeff, maybe kind of continuing on with that right now. I'm kind of interested when you think about Brighton and some of the other deals that you've done, they're a little bit nontraditional, right, whether it's covered land play, redevelopment opportunity. And I'm curious, do you see the same level of institutional competition for those maybe nontraditional shopping center assets that have additional upside for a sophisticated operator? Or is that kind of the niche where you're finding more success right now because the institutional capital can't go there as easily?

I think it depends on the deal. I mean, at Brighton, there were lots of people that were interested, I think at least a dozen. So -- because that one was fairly easy to understand. There are only 5 tenants there and the land values are what they are, but yes, we do have a platform that is seeking value-add opportunities that does limit the buyer pool out there. I do think we're differentiated in that regard. Is it helping? Yes, I think it's helping on the margin.

Okay. Great. That's helpful. And then maybe just on the tenant environment for a minute. Jeff, you highlighted some of the small shop tenant demand and rattled off 3 food concepts. We saw a stat recently floating around that almost 50% of food spending now is outside of the home.

I'm wondering how you balance the demand you're seeing from the restaurant side of the business with what you're seeing from your grocers, which also continue to have strong sales. I mean, how does that dynamic play out? Is there any end to the demand for the food concepts? I'm just curious how you see that trending in your portfolio.

Michael, good to hear you on this call. Yes, this is something we're constantly thinking about and talking about like at what point is too much with restaurant space. I'll give you an example of Bergen Town Center, which you know we have a restaurant space that was a sticky fingers that went Chapter 11 about 6 months ago, and we have lots of great conversation about how to retenant that space, and we're actually thinking about re-tenanting it with a boutique fitness operator who's stepping up to a very aggressive rent because we are adding so many more restaurants at that center that we are sensitive to over fooding our properties, it's something we're worried about.

As it relates to the grocers, I can just tell you that when you talk to Trader Joe's, when you talk to Wegmans, when you talk to Walmart, when you talk to Sprouts or Aldi, so really all ends of the spectrum from traditional grocers to big box and discounters to the more specialty guys, they are still looking for stores, and they're still in expansion mode.

So we're not seeing a lot of push-pull tension between adding grocers versus adding QSRs. What we are seeing and what we're very sensitive to is modifying and limiting the amount of QSRs to give everybody a chance to be successful. If you look at the data that's come out of Cava and Sweetgreen and Chipotle and companies like that, we probably will see that business maybe slow down a little bit. I don't think they'll be opening stores at the same velocity they have in the last 3 years, but we're still very comfortable doing deals with all of those tenants.

Great. That's helpful. And then maybe just last one for me. Whether it's on the investment side or the discussions with tenants, has there been any shift in tone or demand or preference around the D.C. Metro area, understanding it's a long-term business, but with some of the volatility here in the near term that could continue for a couple of years, has there been any shift there, like I said, either on the institutional capital demand side or on the tenant side in that MSA?

I mean, I can tell you from the tenant side, there has not been any shift. Our centers in D.C. are performing, and we continue to see demand and good opportunities to add there. We recently added a Cava at our property in Towson, Maryland. We don't have a ton of assets in D.C., but we'd like to have more, but the ones that we have are all performing very well. We have a safely anchored center outside of Annapolis that we could probably lease 2x over if everybody vacated. So I haven't seen it on the tenant side. As far as institutional capital, are you talking more about like the buyer market for D.C. assets? Or are you talking about lenders?

The buyer side, yes.

Yes. I mean those deals are frothy. I would say Boston and New York are probably more in demand, but that's not a new thing. Boston, because there's such a supply-constrained market and New York because of all of the challenges with buying assets around here are always generating a higher level of institutional interest than maybe Philly or D.C. traditionally have. So I don't think that's necessarily a sign of where we are in the political cycle, more so just the way those markets trade.

Next question is from Paulina Rojas from Green Street.

The industry is really highly leased. So what do you think the retailers are seeing that is different and will allow perhaps to sustain these high levels of occupancy for some time, instead of -- as it has been more frequently the case of peaks following almost like an inevitable slowdown in occupancy, another metric?

Paulina, it's Jeff Mooallem. I mean, the biggest thing is the supply and demand metrics are not changing anytime soon. This country built 60 million, 70 million square feet of new retail a year up until 2008, 2009, 2010, and it has leveled off to the 10 million to 20 million square feet of retail a year being built, and a lot of retail coming offline. And eventually, that lack of supply, the demand catches up. We are in that moment right now.

Traditionally, in most businesses, the way to change that moment and send it back towards a higher supply, lower demand market is to build more space, and that's going to be very difficult to do in our product type and in our markets. And we've talked about this before, but surface park single-level retail centers, especially in the Northeast, there's just not going to be a whole lot more of them, so we think we have pricing power with the ones we do own.

Now will there be short-term fluctuations as certain tenants who have outdated concepts come out and other new tenants come in? Will some centers become functionally obsolete and turn into other things over time? Sure. But the greatest tailwind we have as an industry, and what gives us the most conviction as an industry is that the supply and demand metric should continue to stay in our favor for a long time.

Do you think you're able to single out anchors that are leading the expansion in the Northeast? Or it's really too dispersed to highlight a few names?

Yes. I mean, I think it is very dispersed. But certainly, Ross is a new entrant to the market. And they're being very flexible. They're paying the rent that's required that will give us a good return for putting them in our centers. So that's helpful, but all the TJX concepts are expanding widely in the Northeast. And you have to remember, the Northeast market is so densely populated that most national retailers are generating the highest sales in these locations just because of supply constraints, and they've run out of opportunities to find high-quality spaces.

So there's almost an inverse relationship taking place, where if you can provide a retailer with a high-quality 25,000 or 35,000 square foot box that rent can be pushed a lot more than it used to just because there aren't many of those available as compared to the thousands of shop spaces that are out there that are more fungible.

And my last question is, you still clearly have a path of growth coming from the signed not open pipeline. But looking past that, what do you think is Urban Edge's same-property NOI growth on an occupancy-neutral basis, given all these positive background that you have described?

Look, I mean, we still have a few years left of getting to this SNO pipeline, which, as you know, represents 7% of our NOI. So we have some tailwind there. We will certainly look to do some more capital recycling, too. I think this small deal, but an important one of selling $40 million, $50 million of assets with relatively flat growth, replacing it with 3% NOI growth. I think as a goal, we're going to look to be a company that can generate sustainable 3% plus growth. And I think we have some time to get there, same property growth.

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

Great. Thank you for your time and attention this morning. We look forward to seeing you soon.

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