Urban Edge enters Florida as same-space new leases bring in 27% higher rents

Urban Edge Properties entered Florida on October 14 with a $90.3 million shopping center in Boca Raton, and reported that new leases on previously rented space in the third quarter carried cash rents 26.9% above the earlier leases, according to its quarterly results.

What happened

The New York-based shopping-center owner said it acquired Regency Court, a 140,000-square-foot grocery-anchored center in Boca Raton, for a gross purchase price of $90.3 million. The property is anchored by Publix and Walgreens, "both with in place rents significantly below market with limited remaining lease terms," the company said. It financed the purchase with a $63 million draw on its unsecured line of credit, which raised the outstanding balance to $138 million.

In the third quarter Urban Edge executed 37 new leases, renewals and options covering 463,000 square feet. New leases totaled 58,000 square feet, of which 43,000 square feet was on a same-space basis, meaning space that had a previous tenant, and generated an average cash spread of 26.9%. Across new leases, renewals and options, same-space leasing of 448,000 square feet produced an average cash spread of 13.2%.

New leases were therefore about 12.5% of the square footage leased in the quarter (computed from 58,000 and 463,000 square feet), so the 27% figure describes a small part of the leasing activity.

Same-property net operating income rose 4.5% in the quarter and 3.5% in the first nine months, which the company attributed mainly to rent commencements on new leases from its signed-but-not-open pipeline. Funds from operations as adjusted, which the company calculates by adjusting for items it does not see as representative of ongoing core results, was $0.38 per diluted share, up from $0.36 a year earlier.

Net income was $0.41 per diluted share against $0.12 a year earlier, driven by a $36 million gain on the sale of Briarcliff Commons in Morris Plains, New Jersey, which sold for $60.5 million on September 2.

Why it matters

Leased occupancy of the consolidated portfolio was 96.4% on September 30, up 10 basis points from a year earlier and down 20 basis points from June 30. The company said signed leases that have not yet started paying rent are expected to add $21.0 million of annual gross rent, about 7% of current annualized net operating income.

Chief Executive Jeff Olson said Florida "shares the dense, affluent demographics, high barriers to entry and limited new supply that exists in our D.C. to Boston portfolio." The Boca Raton purchase follows the July 17 acquisition of The Shops at West Falls Church in Virginia for $40.4 million.

Urban Edge raised its 2026 outlook for funds from operations as adjusted to $1.52 to $1.54 per diluted share from $1.50 to $1.54. It raised its same-property net operating income growth assumption, including properties in redevelopment, to 4.00% to 4.25% from 3.25% to 3.75%.

What to watch

The company said signed leases not yet paying rent include about $0.7 million of annual rent expected to be recognized in the fourth quarter of 2026. Its balance sheet showed $75 million drawn on its unsecured line of credit on September 30, before the October draw for the Boca Raton purchase. The $700 million line matures on June 28, 2030, with two six-month extension options.