Retail landlord Urban Edge Properties is in final negotiations to acquire several more shopping centers as it looks to expand its footprint along the corridor that stretches from Washington, D.C., to Boston.
The New York-based real estate investment trust discussed the potential purchases Wednesday during a second-quarter earnings call, saying it was in advanced negotiations to make the retail acquisitions in its core markets. The company now owns 75 properties totaling 17.2 million square feet of gross leasable space, primarily along the East Coast.
"The two biggest drivers of our growth are strong operating fundamentals and accretive acquisitions," Urban Edge Chairman and CEO Jeff Olson told Wall Street analysts.
To that end, in April the REIT closed on its $83 million acquisition of Ledgewood Commons, a 448,000-square-foot, grocery-anchored shopping center in Roxbury, New Jersey. But Urban Edge isn't done yet.
"We are in late-stage negotiations to acquire several high quality shopping centers in the D.C. to Boston corridor, which will likely be funded with a mix of capital sources, including low-cap rate, single-tenant asset dispositions, mortgage debt and equity," Olson said.
However, Urban Edge said none of those sales would be expected to close this year.
The REIT has been looking for properties that "overall would increase the quality of our portfolio, increase credit, increase our growth profile," according to Olson. The shopping centers that Urban Edge is eyeing and talking to are in markets the company is very familiar with and "many of these assets are in very close proximity to existing assets that we control," he said.
The shopping centers would most likely represent off-market deals, larger-format properties that include a grocer and also some discounters and off-price retailer, according to Urban Edge officials.
During the quarter, Urban Edge executed 166,000 square feet of of new leases, striking deals with BJ's Wholesale Club, Chipotle, Bank of America and First Watch.
As part of that activity, in June the REIT signed a 112,000-square-foot lease with BJ's at Bruckner Commons, a shopping center in the Bronx, New York. The warehouse club is taking over a portion of a former Kmart space. Urban Edge said it has entered into a lease termination agreement with Target at the same property. The pact releases Target from its obligations under its previously executed 10-year, 139,000-square-foot lease, providing Urban Edge "the opportunity to enter into the new 20-year lease with BJ's," the company said.
Urban Edge also reported that in late June the foreclosure process was completed for its Kingswood Center, an office-retail property in Brooklyn, New York. Under a settlement agreement, a lender took possession of the property and Urban Edge recognized a $21.7 million gain on debt extinguishment, eliminating a $68.6 million mortgage liability that was due to mature in February 2028.
Another retail REIT, Brixmor Property Group, on Tuesday described the strong demand it's seeing for stores being shuttered by troubled chains. Urban Edge had a similar story to tell. Grocer Stop & Shop is closing 32 under-performing locations, including one at an Urban Edge property. The REIT's officials said they had received multiple inquiries regarding that space. They identified the best replacement grocer, negotiated a deal with no capital and no downtime, and expect to have a lease executed in the next 30 days well before Stop & Shop's lease expiration early next year.