UBA Urstadt Biddle Properties

Urstadt Biddle Properties Inc. (NYSE:UBA and UBP), a real estate investment trust, today reported its operating results for the three and nine month periods ended July 31, 2018.

Net income applicable to Class A Common and Common stockholders for the third quarter of fiscal 2018 was $5,579,000 or $0.15 per diluted Class A Common share and $0.13 per diluted Common share, compared to $6,061,000 or $0.16 per diluted Class A Common share and $0.14 per diluted Common share in last year’s third quarter. Net income attributable to Class A Common and Common stockholders for the first nine months of fiscal 2018 was $20,098,000 or $0.53 per diluted Class A Common share and $0.47 per diluted Common share, compared to $33,574,000 or $0.90 per diluted Class A Common share and $0.79 per diluted Common share in the first nine months of fiscal 2017. Net income for the three and nine month periods ended July 31, 2017 includes a loss on sale of properties of $688,000 and net income for the nine month period ended July 31, 2017 includes a net gain on sale of properties in the amount of $18.8 million.

Funds from operations (“FFO”) for the third quarter of fiscal 2018 was $13,410,000 or $0.35 per diluted Class A Common share and $0.32 per diluted Common share, compared with $13,815,000 or $0.37 per diluted Class A Common share and $0.33 per diluted Common share in last year’s third quarter. For the first nine months of fiscal 2018, FFO amounted to $42,610,000 or $1.13 per diluted Class A Common share and $1.01 per diluted Common share, compared to $35,384,000 or $0.94 per diluted Class A Common share and $0.84 per diluted Common share in the corresponding period of fiscal 2017.

Both FFO and net income for the nine month period ended July 31, 2018 include $3.7 million in lease termination income the company received from the grocery store tenant in the company’s Newark, NJ property when that tenant vacated the property prior to the end of its lease. Both FFO and net income for the three and nine month periods ended July 31, 2017 include lease termination income of $2.1 million relating to the termination of the only lease at the company’s Stratfield Road property located in Fairfield, CT, which was sold in the third quarter of fiscal 2017.

At July 31, 2018, the company’s consolidated properties were 91.9% leased (versus 92.7% at the end of fiscal 2017) and 90.2% occupied (versus 91.0% at the end of fiscal 2017).

Both the percentage of property leased and the percentage of property occupied referenced in the preceding paragraph exclude the company’s unconsolidated joint ventures. At July 31, 2018, the company had equity interests in seven unconsolidated joint ventures (751,000 square feet), which were 96.8% leased (versus 97.7% at the end of fiscal 2017).

Commenting on the quarter’s operating results, Willing L. Biddle, President and CEO of Urstadt Biddle Properties Inc., said “We had another strong operating quarter with FFO of $13.4 million or $0.35 per Class A Common share which provides strong coverage of our current dividend level, reflecting a 77% FFO payout ratio on a per Class A Common share basis. We are very pleased our FFO payout ratio continues to improve as we know our investors greatly value the safety and consistent growth of our dividend through all types of economic cycles. The strong operating results are a result of a number of positive transactions completed in fiscal 2017 as well as positive events thus far in fiscal 2018. We completed the sale of our vacant Westchester Pavilion property in March of fiscal 2017 for $57 million and re-invested those proceeds in several new properties and other investments, and we are continuing to see earnings improvement in our operating results as that capital is now fully deployed. In addition, we were able to complete two accretive financing transactions in fiscal 2017, which increased our operating results this quarter and will continue to have a positive impact going forward. In July 2017, the company refinanced its largest mortgage, reducing the interest rate from 5.52% to 3.398%, which is now saving the company over $1 million in interest expense per annum. Also, in October 2017, we redeemed all $129 million of our 7.125% Series F Cumulative Preferred Stock using proceeds from the sale of the Pavilion and the issuance of $115 million of 6.25% Series H Cumulative Preferred Stock. This reduction in preferred stock outstanding, along with the lower coupon, is now saving the company over $2 million per annum in preferred stock dividends.”

Mr. Biddle continued………“In June 2018, we purchased a 75.3% equity interest in a newly formed DownREIT joint venture, UB New City I, LLC, in which the company is the managing member. Our initial investment was $2.4 million. New City owns a single tenant retail real estate property leased to Putnam County Savings Bank. In addition, New City rents certain parking spaces on the property to the owner of the adjacent grocery anchored shopping center. The property is located in New City, NY. The property was contributed to the new entity by the former owners who received units of ownership in New City equal to the value of this contributed property. This investment provides a strong yield on our invested capital and we believe it improves our chances of acquiring the adjacent grocery anchored shopping center in the future. Our portfolio’s leased rate for properties we consolidate has fallen 0.8% since the end of fiscal 2017 to 91.9%, primary due to the vacancy in this third quarter of our 31,000 square foot grocery store tenant in our Passaic, NJ property. This vacancy represents 0.7% of our consolidated portfolio square footage, and we are currently working with several prospective new tenants for this space. As reported last quarter, we signed a new 40,000 square foot lease with Whole Foods Market to anchor our Wayne, NJ property. Although we have a signed lease, at quarter end we still have not accounted for this space as leased due to some approval contingencies, which include obtaining municipal site plan approval. We expect to receive this approval in the next month. Once we receive site plan approval, we will include this lease in our leasing metrics and the percentage of our consolidated properties leased will increase 0.9%. In addition, the Seabra Supermarket Group is currently making good progress renovating the 62,000 square foot anchor supermarket space they leased in our Ferry Plaza property in the Ironbound section of Newark, and hopes to open in early 2019. We also have five other spaces over 10,000 square feet that are vacant in our consolidated portfolio, which represent 36% of our current vacant square footage, however we do have several prospects for some of this vacant space and hope to have new leasing to announce on these spaces in the months to come.”

Urstadt Biddle Properties Inc. is a self-administered equity real estate investment trust which owns or has equity interests in 84 properties containing approximately 5.1 million square feet of space. Listed on the New York Stock Exchange since 1970, it provides investors with a means of participating in ownership of income-producing properties. It has paid 194 consecutive quarters of uninterrupted dividends to its shareholders since its inception and has raised total dividends to its shareholders for the last 24 consecutive years.

Certain statements contained herein may constitute “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of the company to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. Such factors include, among other things, risks associated with the timing of and costs associated with property improvements, financing commitments and general competitive factors.

(Table Follows)

             

URSTADT BIDDLE PROPERTIES INC. (NYSE: UBA AND UBP)

NINE MONTHS AND THREE MONTHS ENDED JULY 31, 2018 AND 2017 RESULTS (UNAUDITED)

(in thousands, except per share data)

  Nine Months Ended Three Months Ended July 31, July 31, 2018       2017 2018       2017   Revenues Base rents $72,162 $64,863 $24,668 $22,074 Recoveries from tenants 23,390 20,979 7,074 6,753 Lease termination income 3,790 2,431 36 2,148 Other income 3,467 2,558 1,031 899 Total Revenues 102,809 90,831 32,809 31,874   Operating Expenses Property operating 16,850 14,635 4,804 3,989 Property taxes 15,604 14,474 5,300 4,891 Depreciation and amortization 21,287 19,442 7,370 6,678 General and administrative 7,024 6,893 2,322 2,226 Provision for tenant credit losses 674 429 302 69 Directors' fees and expenses 267 240 79 74 Total Operating Expenses 61,706 56,113 20,177 17,927   Operating Income 41,103 34,718 12,632 13,947   Non-Operating Income (Expense): Interest expense (10,178) (9,800) (3,439) (3,284) Equity in net income from unconsolidated joint ventures 1,710 1,478 483 439 Interest, dividends and other investment income 246 568 104 199 Income Before Gain (Loss) on Sale of Properties 32,881 26,964 9,780 11,301 Gain (loss) on sale of properties - 18,772 - (688) Net Income 32,881 45,736 9,780 10,613   Noncontrolling interests: Net income attributable to noncontrolling interests (3,595) (1,451) (1,138) (982) Net income attributable to Urstadt Biddle Properties Inc. 29,286 44,285 8,642 9,631 Preferred stock dividends (9,188) (10,711) (3,063) (3,570)   Net Income Applicable to Common and Class A Common Stockholders $20,098 $33,574 $5,579 $6,061   Diluted Earnings Per Share: Per Common Share: $0.47 $0.79 $0.13 $0.14 Per Class A Common Share: $0.53 $0.90 $0.15 $0.16   Weighted Average Number of Shares Outstanding (Diluted): Common and Common Equivalent 9,147 8,998 9,233 9,061 Class A Common and Class A Common Equivalent 29,538 29,485 29,590 29,509  

Results of Operations

The following information summarizes the company's results of operations for the nine month and three month periods ended July 31, 2018 and 2017 (amounts in thousands):

                 

Nine Months EndedJuly 31,

Change Attributable to: Revenues 2018       2017

Increase(decrease)

      %

Change

PropertyAcquisitions/Sales

     

Properties HeldIn Both Periods(Note 1)

Base rents $72,162 $64,863 $7,299 11.3% $5,313 $1,986 Recoveries from tenants 23,390 20,979 2,411 11.5% 1,241 1,170 Lease termination income 3,790 2,431 1,359 55.9% (2,148) 3,507 Mortgage interest and other income 3,467 2,558 909 35.5% (178) 1,087   Operating Expenses Property operating expenses 16,850 14,635 2,215 15.1% 800 1,415 Property taxes 15,604 14,474 1,130 7.8% 670 460 Depreciation and amortization 21,287 19,442 1,845 9.5% 1,879 (34) General and administrative expenses 7,024 6,893 131 1.9% n/a n/a   Other Income/Expenses Interest expense 10,178 9,800 378 3.9% 617 (239) Interest, dividends and other investment income 246 568 (322) -56.7% n/a n/a         Three Months Ended

July 31,

            Change Attributable to: Revenues 2018       2017

Increase(decrease)

     

%Change

PropertyAcquisitions/Sales

     

Properties HeldIn Both Periods(Note 1)

Base rents $24,668 $22,074 $2,594 11.8% $1,644 $950 Recoveries from tenants 7,074 6,753 321 4.8% 216 105 Lease termination income 36 2,148 (2,112) -98.3% (2,148) 36 Mortgage interest and other income 1,031 899 132 14.7% (101) 233   Operating Expenses Property operating expenses 4,804 3,989 815 20.4% 165 650 Property taxes 5,300 4,891 409 8.4% 186 223 Depreciation and amortization 7,370 6,678 692 10.4% 586 106 General and administrative expenses 2,322 2,226 96 4.3% n/a n/a   Other Income/Expenses Interest expense 3,439 3,284 155 4.7% 158 (3) Interest, dividends and other investment income 104 199 (95) -47.7% n/a n/a

Note 1 – Properties held in both periods include only properties owned for the entire periods of 2017 and 2018. All other properties are included in the property acquisition/sales column. There are no properties excluded from the analysis.

 

Revenues

Base rents increased by 11.3% to $72.2 million for the nine month period ended July 31, 2018 as compared with $64.9 million in the comparable period of 2017. Base rents increased by 11.8% to $24.7 million for the three month period ended July 31, 2018 as compared with $22.1 million in the comparable period of 2017. The change in base rent and the changes in other income statement line items analyzed in the tables above were attributable to:

Property Acquisitions and Properties Sold:

In fiscal 2017, the company purchased four properties totaling 114,700 square feet of GLA, invested in two joint ventures that own four properties totaling 173,600 square feet, whose operations the company consolidates, and sold two properties totaling 203,800 square feet. In the first nine months of fiscal 2018, the company purchased three properties totaling 53,700 square feet. These properties accounted for all of the revenue and expense changes attributable to property acquisitions and sales in the nine months ended July 31, 2018 when compared with fiscal 2017.

Properties Held in Both Periods:

Revenues

Base Rent

The increase in base rents for both the nine month and three month periods ended July 31, 2018, when compared to the corresponding prior periods, was predominantly caused by new leasing activity at several properties held in both periods that created a positive variance in base rent. This increase was accentuated by the company writing off $633,000 in accrued but unpaid straight-line rent in the third quarter of fiscal 2017 relating to a tenant who occupied the 36,000 square foot grocery store space at the company’s Valley Ridge property. This tenant failed to perform under its lease and the lease was terminated in the third quarter of fiscal 2017.

In fiscal 2018, the company leased or renewed approximately 417,000 square feet (or approximately 9.5% of total consolidated property leasable area). At July 31, 2018, the company’s consolidated properties were 91.9% leased (92.7% leased at October 31, 2017).

Tenant Recoveries

In the nine month and three month periods ended July 31, 2018, recoveries from tenants (which represent reimbursements from tenants for operating expenses and property taxes) increased by $1.2 million and $105,000, respectively, when compared with the corresponding prior periods. These increases were the result of an increase in both property operating expenses and property tax expense in the consolidated portfolio for properties owned in both the three months and nine months of fiscal 2018 when compared with the corresponding prior periods. The increases in property operating expenses were related to an increase in snow removal costs, roof repairs and parking lot repairs at the company’s properties and the increase in property tax expenses were related to an increase in property tax assessments.

Lease Termination Income

In April 2018, the company reached agreement with the grocery tenant at the company’s Newark, NJ property to terminate its 63,000 square foot lease in exchange for a one-time $3.7 million lease termination payment, which the company received and recorded as revenue in the nine months ended July 31, 2018. Also, in March 2018, the company leased that same space to a new grocery store operator who took possession in May 2018. While the rental rate on the new lease is 30% less than the rental rate on the terminated lease, the company hopes that part of this decreased rental rate will be recaptured with the receipt of percentage rent in subsequent years as the store matures and its sales increase. The new lease required no tenant improvements or tenant allowances.

Expenses

Operating Expenses

In the nine month and three month periods ended July 31, 2018, property operating expenses increased by $1.4 million and $650,000, respectively, when compared with the corresponding prior periods, predominantly as a result of an increase in snow removal costs, roof repairs and parking lot repairs at the company’s properties.

Real Estate Tax

In the nine month and three month periods ended July 31, 2018, property taxes increased by $460,000 and $223,000, respectively, when compared with the corresponding prior periods, as a result of an increase in property tax assessments for a number of the company’s properties owned in both periods.

Interest

In the nine month period ended July 31, 2018, interest expense decreased by $239,000, when compared with the corresponding prior period as a result of the refinancing of the company’s largest mortgage (secured by the company’s Ridgeway property) after the second quarter of fiscal 2017 and the reduction of mortgage principal from normal amortization. The Ridgeway mortgage interest rate was reduced from 5.52% to 3.398% on a principal balance of approximately $44 million. This decrease was partially offset by an increase in the mortgage principal on the Ridgeway mortgage from $44 million to $50 million as a result of the refinancing. Interest expense was relatively unchanged for the three month period ended July 31, 2018, when compared to the corresponding prior period.

Depreciation and Amortization

Depreciation and amortization was relatively unchanged in both the nine month and three month periods ended July 31, 2018, when compared with the corresponding prior periods.

General and Administrative Expenses

General and administrative expense was relatively unchanged in the nine month and three month periods ended July 31, 2018 when compared to the corresponding prior periods. The company had a small reduction in state and local taxes paid, which reduction was offset by normal salary increases for employees of the company.

Non-GAAP Financial Measure

Funds from Operations (“FFO”)

The company considers FFO to be an additional measure of the company’s operating performance. The company reports FFO in addition to net income applicable to common stockholders and net cash provided by operating activities. Management has adopted the definition suggested by The National Association of Real Estate Investment Trusts (“NAREIT”) and defines FFO to mean net income (computed in accordance with GAAP) excluding gains or losses from sales of property, plus real estate-related depreciation and amortization and after adjustments for unconsolidated joint ventures.

Management considers FFO a meaningful, additional measure of operating performance because it primarily excludes the assumption that the value of the company’s real estate assets diminishes predictably over time and industry analysts have accepted it as a performance measure. FFO is presented to assist investors in analyzing the performance of the company. It is helpful as it excludes various items included in net income that are not indicative of the company’s operating performance, such as gains (or losses) from sales of property and depreciation and amortization. However, FFO:

• does not represent cash flows from operating activities in accordance with GAAP (which, unlike FFO, generally reflects all cash effects of transactions and other events in the determination of net income); and
• should not be considered an alternative to net income as an indication of the company’s performance.

FFO as defined by the company may not be comparable to similarly titled items reported by other real estate investment trusts due to possible differences in the application of the NAREIT definition used by such REITs. The table below provides a reconciliation of net income applicable to Common and Class A Common Stockholders in accordance with GAAP to FFO for the nine and three month periods ended July 31, 2018 and 2017:

           

URSTADT BIDDLE PROPERTIES INC. (NYSE: UBA AND UBP)

NINE MONTHS AND THREE MONTHS ENDED JULY 31, 2018 AND 2017

(in thousands, except per share data)

 

Reconciliation of Net IncomeAvailable to Common and Class ACommon Stockholders To FundsFrom Operations:

Nine Months EndedJuly 31,

Three Months EndedJuly 31,

2018       2017 2018       2017 Net Income Applicable to Common and Class A Common Stockholders $20,098 $33,574 $5,579 $6,061   Real property depreciation 16,558 15,105 5,562 5,238 Amortization of tenant improvements and allowances 3,046 3,240 967 996 Amortization of deferred leasing costs 1,618 1,028 820 423 Depreciation and amortization on unconsolidated joint ventures 1,290 1,209 482 409 (Gain)/Loss on sale of asset - (18,772) - 688 Funds from Operations Applicable to Common and Class A Common Stockholders $42,610 $35,384 $13,410 $13,815   Funds from Operations (Diluted) Per Share: Common $1.01 $0.84 $0.32 $0.33 Class A Common $1.13 $0.94 $0.35 $0.37   Urstadt Biddle Properties Inc. (NYSE: UBA AND UBP) Balance Sheet Highlights (in thousands)             July 31, October 31, 2018 2017 (Unaudited) Assets Cash and Cash Equivalents $10,744 $8,674   Real Estate investments before accumulated depreciation $1,116,445 $1,090,402   Investments in and advances to unconsolidated joint ventures $37,642 $38,049   Total Assets $1,016,475 $996,713   Liabilities Revolving credit line $25,595 $4,000   Mortgage notes payable and other loans $295,351 $297,071   Total Liabilities $351,034 $328,122   Redeemable Noncontrolling Interests $81,882 $81,361   Preferred Stock $190,000 $190,000   Total Stockholders’ Equity $583,559 $587,230  

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Urstadt Biddle Properties Inc.Willing L. Biddle, CEOorJohn T. Hayes, CFO203-863-8200