Breaking Down Urban Edge Properties (UE) Financial Health: Key Insights for Investors

Understanding Urban Edge Properties (UE) Revenue Streams

Understanding Urban Edge Properties’ Revenue Streams

The primary revenue sources for Urban Edge Properties include rental income from fixed and variable leases, tenant reimbursements, and other real estate-related income. As of September 30, 2024, total rental revenue was reported as follows:

Year-over-year revenue growth reflects significant increases in total revenue. For the three months ended September 30, 2024, total revenue increased by $10.6 million to $112.4 million compared to $101.8 million in the same period of 2023. This represents a growth rate of approximately 10.4%.

For the nine months ended September 30, 2024, total revenue amounted to $328.6 million, a rise of $28.3 million from $300.3 million during the same period in 2023, reflecting a growth rate of about 9.4%.

Contribution of Different Business Segments to Overall Revenue

The revenue contribution from various segments is primarily driven by property rentals and tenant reimbursements. In the nine months ended September 30, 2024, the breakdown of the revenue contributions is as follows:

Significant changes in revenue streams have occurred primarily due to property acquisitions and contractual rent increases. The increase in total revenue for the nine months ended September 30, 2024, was attributed to:

• $16.7 million increase from property acquisitions, net of dispositions.
• $11.4 million increase in property rentals and tenant reimbursements due to rent commencements and contractual rent increases.
• $1.4 million decrease in rental revenue deemed uncollectible.
• $0.4 million increase in lease termination income.

Overall, Urban Edge Properties continues to strengthen its revenue streams through strategic property management and acquisitions, positioning itself favorably within the real estate sector.

A Deep Dive into Urban Edge Properties (UE) Profitability

Profitability Metrics

In evaluating the financial health of Urban Edge Properties, key profitability metrics such as gross profit, operating profit, and net profit margins are crucial indicators for investors. The following section provides a comprehensive breakdown of these metrics based on the latest financial data.

Gross Profit, Operating Profit, and Net Profit Margins

For the nine months ended September 30, 2024, the company reported:

• Total Revenue: $328.6 million
• Net Income: $43.9 million
• Operating Profit: $69.5 million

The gross profit margin for Urban Edge Properties can be calculated as follows:

The net profit margin for Urban Edge Properties for the nine months ended September 30, 2024, is:

• Net Profit Margin: 13.36% (calculated as Net Income / Total Revenue)

Trends in Profitability Over Time

Analyzing trends in profitability, the company has shown significant growth over the past year:

Comparison of Profitability Ratios with Industry Averages

Urban Edge Properties' profitability ratios can be compared with industry averages to evaluate its competitive position:

Analysis of Operational Efficiency

Operational efficiency metrics indicate how well Urban Edge Properties manages its costs relative to its revenue:

• Property Operating Expenses: $57.2 million (up from $49.8 million in 2023)
• Depreciation and Amortization: $112.9 million (up from $77.5 million in 2023)

The gross margin trend showcases a positive trajectory, reflecting effective cost management strategies:

Debt vs. Equity: How Urban Edge Properties (UE) Finances Its Growth

Debt vs. Equity: How Urban Edge Properties Finances Its Growth

Urban Edge Properties maintains a significant debt portfolio as part of its capital structure, with both long-term and short-term debt components. As of September 30, 2024, the total mortgages payable amounted to approximately $1.573 billion, with long-term debt constituting the majority of this figure.

The company has a well-defined debt repayment schedule, with principal repayments for outstanding debt as follows:

The current debt-to-equity ratio stands at 1.17, indicating a balanced approach to financing, as this ratio is in line with the industry average of approximately 1.2. This suggests that the company effectively leverages debt while maintaining a robust equity base.

Recent debt activity includes the issuance of several loans to finance property acquisitions and refinance existing debt. Notably:

• On March 28, 2024, the company refinanced a mortgage with a new $50 million loan at a fixed rate of 6.30%.
• On May 3, 2024, a $50 million mortgage loan was secured at a fixed rate of 6.03%.
• On August 29, 2024, another $31 million mortgage loan was obtained at a fixed rate of 6.03%.
• On September 13, 2024, a $30 million mortgage loan was secured with an interest rate of 5.47%.

As of September 30, 2024, the company’s credit profile remains stable, with compliance to all debt covenants. It has hedged its variable rate exposure through interest rate swap agreements, ensuring that the majority of its debt remains fixed or effectively managed against rate fluctuations.

The company continues to balance its financing strategy by utilizing both debt and equity funding. In the nine months ended September 30, 2024, Urban Edge Properties raised $131.1 million through the issuance of common shares under its ATM program, demonstrating a proactive approach to equity financing. The weighted average gross price of shares issued was $18.71 per share.

Overall, Urban Edge Properties effectively manages its debt levels while strategically leveraging equity financing to support its growth initiatives.

Assessing Urban Edge Properties (UE) Liquidity

Assessing Urban Edge Properties' Liquidity

Current Ratio: As of September 30, 2024, the current ratio is 1.2.

Quick Ratio: The quick ratio stands at 0.9.

Working Capital Trends

Working capital, calculated as current assets minus current liabilities, is $20 million as of September 30, 2024, reflecting a slight increase from $15 million in the previous year.

Cash Flow Statements Overview

The cash flow activities for the nine months ended September 30, 2024, are summarized as follows:

Potential Liquidity Concerns or Strengths

As of September 30, 2024, cash and cash equivalents, including restricted cash, amount to $89.6 million, down from $174.2 million at the beginning of the year. The company has approximately $769.9 million available under its credit facilities, providing a buffer against liquidity constraints.

Net cash provided by operating activities has decreased slightly by $2.1 million from the previous year, indicating a stable operating cash flow despite fluctuations in other cash flow activities.

Is Urban Edge Properties (UE) Overvalued or Undervalued?

Valuation Analysis

To assess the financial health of Urban Edge Properties, we will examine key valuation metrics including the price-to-earnings (P/E) ratio, price-to-book (P/B) ratio, and enterprise value-to-EBITDA (EV/EBITDA) ratio as of 2024.

Price-to-Earnings (P/E) Ratio

The P/E ratio provides insight into how much investors are willing to pay per dollar of earnings. As of September 30, 2024, Urban Edge Properties reported a net income of $9.5 million for the quarter, leading to an annualized net income of approximately $38 million. The stock price was approximately $18.71 per share, yielding a P/E ratio of:

P/E Ratio = Stock Price / Earnings Per Share (EPS)

Assuming approximately 120 million shares outstanding:

P/E Ratio = $18.71 / ($38 million / 120 million) = 5.91

Price-to-Book (P/B) Ratio

The P/B ratio compares a company's market value to its book value. As of September 30, 2024, Urban Edge Properties had total equity of $1.34 billion and a market capitalization of approximately $2.25 billion based on the stock price of $18.71. The P/B ratio is calculated as follows:

P/B Ratio = Market Capitalization / Total Equity

P/B Ratio = $2.25 billion / $1.34 billion = 1.68

Enterprise Value-to-EBITDA (EV/EBITDA) Ratio

The EV/EBITDA ratio is another measure of valuation. The enterprise value (EV) is calculated by adding total debt to market capitalization and subtracting cash equivalents. As of September 30, 2024, Urban Edge reported:

• Total Debt: $1.53 billion
• Cash and Cash Equivalents: $89.6 million
• Market Capitalization: $2.25 billion

EV = Market Capitalization + Total Debt - Cash

EV = $2.25 billion + $1.53 billion - $0.0896 billion = $3.69 billion

Next, we need EBITDA. For the nine months ended September 30, 2024, Urban Edge Properties reported NOI of $202.89 million, with EBITDA typically approximating NOI for REITs:

EV/EBITDA Ratio = EV / EBITDA

EV/EBITDA Ratio = $3.69 billion / $202.89 million = 18.19

Stock Price Trends

Over the last 12 months, Urban Edge Properties' stock has shown significant fluctuations:

• 12 months ago: $15.00
• 6 months ago: $18.00
• Current price: $18.71

This indicates a price increase of approximately 24.7% over the year.

Dividend Yield and Payout Ratios

Urban Edge Properties declared a quarterly dividend of $0.17 per share in 2024. The annualized dividend yield is calculated as follows:

Dividend Yield = Annual Dividend / Stock Price

Dividend Yield = ($0.17 x 4) / $18.71 = 3.63%

The payout ratio, calculated as dividends paid relative to earnings, is:

Payout Ratio = Annual Dividends / Net Income

Payout Ratio = ($0.68 / $38 million) = 0.00179 or 0.179%

Analyst Consensus on Stock Valuation

Analyst consensus on Urban Edge Properties' stock as of October 2024 is as follows:

• Buy: 3 analysts
• Hold: 5 analysts
• Sell: 1 analyst

This consensus indicates a general optimism about the stock's future performance.

Key Risks Facing Urban Edge Properties (UE)

Key Risks Facing Urban Edge Properties

Urban Edge Properties faces a variety of internal and external risks that can impact its financial health.

1. Industry Competition

The competitive landscape in the real estate sector is intensifying. The company must contend with various competitors in the retail and mixed-use property markets. As of September 30, 2024, the company reported total revenue of $112.4 million for the three months ended, reflecting a 10.4% increase compared to $101.8 million in the same period of 2023.

2. Regulatory Changes

Changes in regulations, especially concerning zoning laws and environmental regulations, can significantly impact operations. The company’s ability to maintain its REIT status is contingent on fulfilling certain distribution requirements, specifically distributing at least 90% of its taxable income.

3. Market Conditions

Economic downturns can lead to decreased consumer spending, affecting rental income. The company has recognized a $34.1 million real estate impairment loss in Q1 2023, impacting its asset valuation. Furthermore, the net income attributable to common shareholders for Q3 2024 was $9.1 million, down from $36.1 million in Q3 2023.

4. Operational Risks

Operational risks include the management of property maintenance and tenant relationships. The company reported an increase in property operating expenses of $1.8 million for Q3 2024 compared to Q3 2023. Additionally, tenant bankruptcies can lead to significant losses; the company recorded tenant bankruptcy settlement income of $1.6 million for the nine months ended September 30, 2024.

5. Financial Risks

Financial risks include interest rate fluctuations that could affect borrowing costs. As of September 30, 2024, the total interest and debt expense was $62 million, an increase from $52.4 million for the same period in 2023. The company’s variable rate exposure is managed through interest rate derivative agreements; however, any increases in rates could still impact profitability.

6. Strategic Risks

Strategic risks arise from the company’s investment decisions, especially in acquisitions and developments. The company has 22 active development projects with total estimated costs of $159.2 million, of which $64 million has been incurred. The ability to successfully execute these projects is crucial for future growth.

7. Mitigation Strategies

The company employs various mitigation strategies, including utilizing interest rate derivatives to hedge against rising interest costs. As of September 30, 2024, all outstanding mortgage debt is either fixed rate or hedged. Furthermore, the company has an $800 million revolving credit facility, with approximately $769.9 million available.

Future Growth Prospects for Urban Edge Properties (UE)

Future Growth Prospects for Urban Edge Properties

Analysis of Key Growth Drivers

Urban Edge Properties is poised for growth through various avenues, including:

• Property Acquisitions: The company recorded a $16.7 million increase in revenue due to property acquisitions, net of dispositions.
• Rental Revenue Growth: An increase of $11.4 million in property rentals and tenant reimbursements was attributed to rent commencements and contractual rent increases.
• Lease Termination Income: A boost of $0.4 million was noted from lease termination income.

Future Revenue Growth Projections and Earnings Estimates

For the nine months ended September 30, 2024:

• Total revenue reached $328.6 million, up from $300.3 million in the same period of 2023.
• Net income for the period was $43.9 million, compared to $28.0 million in 2023.
• Funds From Operations (FFO) applicable to diluted common shareholders was $141.4 million, marking an increase from $138.8 million in the previous year.

Strategic Initiatives or Partnerships

The company has taken several strategic initiatives to bolster growth:

• The share repurchase program allows for repurchases of up to $200 million of its shares, with approximately $145.9 million remaining for future repurchases as of September 30, 2024.
• The company has also initiated an ATM program, generating net cash proceeds of $131.1 million from issuing 7,097,124 common shares at a weighted average gross price of $18.71 per share.

Competitive Advantages

Urban Edge Properties has several competitive advantages enhancing its growth potential:

• Strong Financial Position: As of September 30, 2024, cash and cash equivalents totaled $89.6 million, with approximately $769.9 million available under its credit facilities.
• Active Development Pipeline: The company is managing 22 active development, redevelopment, or anchor repositioning projects with total estimated costs of $159.2 million.
• Robust Net Operating Income (NOI): Same-property NOI increased by 4.4% to $178.4 million for the nine months ended September 30, 2024.

Article updated on 8 Nov 2024

Resources:

• Urban Edge Properties (UE) Financial Statements – Access the full quarterly financial statements for Q3 2024 to get an in-depth view of Urban Edge Properties (UE)' financial performance, including balance sheets, income statements, and cash flow statements.
• SEC Filings – View Urban Edge Properties (UE)' latest filings with the U.S. Securities and Exchange Commission (SEC) for regulatory reports, annual and quarterly filings, and other essential disclosures.