Urban Edge Properties

NYSE:UE

Earnings Call Analysis

Urban Edge Raises 2024 FFO Outlook Amid Strong Leasing Activity

Urban Edge reported a solid third quarter with a 5.1% increase in same-property net operating income (NOI) and adjusted funds from operations (FFO) of $0.35 per share. The company raised its 2024 FFO guidance to $1.32-$1.35 per share, reflecting 7% growth. Strong leasing saw a 90.4% occupancy rate, up 500 basis points year-over-year, with 23 new leases signed at a 15% cash spread. Their recent acquisition of a grocery-anchored center is expected to generate annual NOI growth of 3%. Urban Edge continues to focus on growth through strategic acquisitions and portfolio optimization.

Strong Financial Performance and Growth Drivers

Urban Edge Properties reported a solid third quarter, achieving a Funds From Operations (FFO) as adjusted of $0.35 per share. This marks a year-over-year growth of 9%, driven by a 5.1% increase in same-property net operating income (NOI). Capital recycling, new lease commencements, and rental bumps contributed significantly to this growth. Notably, the company executed 45 leases, covering 683,000 square feet, with a remarkable same-space cash spread of 15%. The strong demand for retail spaces is underscored by the growth in shop occupancy, which increased by 500 basis points to 90.4% compared to last year.

Increased Guidance Reflects Positive Outlook

Given the better-than-expected performance and robust retail fundamentals, Urban Edge raised its FFO guidance for 2024 to a range of $1.32 to $1.35 per share, reflecting an increase of $0.03 per share at the midpoint. This adjustment signifies a projected 7% growth in FFO for the year. The company is optimistic about achieving its 2025 FFO target of $1.31 to $1.39 per share, expecting continued strength in same-property NOI growth, now projected at a midpoint of 5.4% for the upcoming quarters.

Strategic Acquisitions and Debt Management

In the past year, Urban Edge has successfully acquired $552 million in high-quality shopping centers at an average cap rate of 7%. Recent acquisitions include The Village at Waugh Chapel, a grocery-anchored shopping center estimated to yield an NOI growth of about 3% annually over the next decade. The company also maintains prudent debt management, with a net debt-to-EBITDA ratio of 5.8x, which is below its target of 6.5x, providing a strong foundation for future acquisitions.

Optimized Portfolio and Redevelopment Initiatives

Urban Edge is strategically focusing on optimizing its portfolio by selling lower-growth, single-tenant assets. The company anticipates selling assets worth $100 million to $200 million annually, allowing for reinvestment into higher-quality shopping centers. Additionally, a robust redevelopment pipeline worth $159 million is expected to generate a significant unlevered yield of 14%, showcasing the company’s commitment to enhancing asset value through redevelopment.

Market Dynamics and Competitive Position

The retail property market has become increasingly competitive, with the volume of property sales rising from $6 billion in 2023 to approximately $10 billion in 2024. Cap rates have compressed by 50 to 75 basis points over the last six to nine months, reflecting growing institutional interest in retail assets. Urban Edge leverages its local market expertise to capture off-market acquisitions effectively, securing a competitive edge in sourcing valuable retail properties.

Future Guidance and Strategic Focus

Looking ahead, Urban Edge is optimistic about its growth trajectory, driven by high-quality tenant demand, limited new supply, and strong rental increases. The company's proactive approach in managing its portfolio and capital allocation is expected to yield positive results. The same-property NOI growth, including redevelopment, is projected to grow by 8.6% in the fourth quarter, providing further confidence in the company's financial strength and strategic direction.

Earnings Call Transcript 2024-Q3

[Operator]

Ladies and gentlemen, good morning, and welcome to the Urban Edge Properties Third Quarter 2024 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. Please go ahead.

[Areeba Ahmed, executive]

Good morning, and welcome to Urban Edge Properties Third Quarter 2024 Earnings Conference Call. Joining me today are Jeff Olson, Chairman and Chief Executive Officer; Jeff Mooallem, Chief Operating Officer; Mark Langer, Chief Financial Officer; Rob Milton, 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, including reference to our 2025 FFO as adjusted target. Reconciliations of these measures to GAAP results are available in our earnings release, supplemental disclosure package and our April 2023 investor presentation in the Investors section of our website.

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

[Jeffrey Olson, executive]

Great. Thank you, Areeba, and good morning, everyone. We had another great quarter, generating 9% FFO per share growth as compared to the third quarter of last year and 7% growth year-to-date. Our growth was driven by a 5.1% increase in same-property net operating income and accretion from our capital recycling activity.

Over the past year, we have acquired $552 million of high-quality shopping centers at a 7% cap rate, mostly funded through $425 million of dispositions of noncore and single-tenant assets at a 5% cap rate. Yesterday, we acquired The Village at Waugh Chapel, a 382000-square-foot grocery-anchored shopping center located in Anne Arundel County, Maryland for $126 million at a cap rate of 6.6% in an off-market transaction.

The acquisition included the assumption of a $60 million mortgage with a significantly below market rate of 3.76% with approximately 7 years of term remaining, resulting in an expected first year leverage return of 9%. We expect NOI should grow by approximately 3% a year over the next 10 years. The property is anchored by Safeway, Marshalls, HomeGoods, T.J. Maxx and a good mix of shop users, including Chick-fil-A, Chipotle and Sephora.

The center attracts 6 million visitors a year, ranking in the 96 percentile of all shopping centers in Maryland. The acquisition was funded in part with proceeds from selling a freestanding Home Depot in Union, New Jersey for $71 million at a cap rate of 5.35%, which also closed yesterday. Home Depot's rent is flat for the next 14 years and contains another 50 years of term through options with minimal growth.

We are underwriting several assets in the D.C. to Boston corridor that would likely be funded in part through the disposition of lower growth single-tenant assets like the Home Depot property we just sold. Even though the acquisition market is more competitive, cap rates have also compressed on single-tenant assets, so we still expect to make a meaningful spread through future capital recycling.

Leasing activity remained strong. We matched last quarter's record volume with the execution of 23 new leases at a same-space cash spread of 15%. Shop occupancy increased by 500 basis points compared to the third quarter of 2023 and by 60 basis points sequentially to 90.4%. Our signed, but not open pipeline amounts to $24 million or 9% of net operating income.

Notably, in the third quarter, we commenced $6 million of annualized gross rent, a leading indicator for same-property NOI growth over the next several quarters. New rent commencements included Ralph's Supermarket at Montehiedra, Bath & Body and Crumbl Cookies at Bergen Town Center, CityMD and Starbucks at Bruckner and Starbucks at Heritage Square.

Based on our better-than-expected results, strong retail fundamentals and accretive capital recycling, we increased our 2024 FFO as adjusted guidance to $1.32 to $1.35 per share, up $0.03 per share at the midpoint, reflecting 7% expected FFO growth for the year. We continue to believe that we will reach the high end of our 2025 FFO target of $1.31 to $1.39 per share.

Our achievements to date are truly a testament to the quality of our real estate and the dedication and commitment of the Urban Edge team. We are excited about the growth opportunities we see ahead.

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

[Jeffrey Mooallem, executive]

Thanks, Jeff, and good morning, everyone. It was another strong quarter at Urban Edge, as we continued to execute on all 3 growth drivers of our business: leasing, redevelopment and acquisitions. We signed 45 deals in the third quarter for a total of 683,000 square feet, including 23 new leases at a same-space spread of 15% and 22 renewals at an 8% spread.

Our same-property leased occupancy of 96.3% increased 200 basis points compared to the prior year and is down 10 basis points compared to the prior quarter. The slight decrease was due to an expected lease termination at Hudson Mall, where we received a termination fee from a national tenant on a space that we are now in negotiations to backfill.

Anchor tenant occupancy is holding steady at a robust 97.4%. While we're constantly monitoring current or future potential bankruptcies such as Big Lots, as we've said in the past, often we don't even have an opportunity to get those leases back as our markets are highly coveted by other retailers in an auction process. To the extent we do get anchor spaces back, we believe any short-term exposure to a reduced occupancy is offset by longer-term opportunities to improve both rent and tenant mix.

Our small shop leased occupancy now stands at 90.4%, up 60 basis points from the prior quarter and our highest shop occupancy percentage ever. Around this time last year, with small shop occupancy sitting at 85.4%, we started calling 2024 our small shop leasing year, and we set a goal to be at 91% by the end of this year.

Based on new leases we're currently negotiating, we remain on track to hit 91%. And the quality is matching the quantity with retailers such as Sweetgreen, Sephora, CAVA and Mathnasium on that roster. Generating this kind of improvement in shop occupancy in a relatively short period of time, just 1 year, is a credit to our entire team, from the leasing team sourcing and negotiating the deals to the attorneys preparing them to the construction and development departments getting tenants open.

It's also further testament to the shift in fundamentals we've been seeing for the past couple of years, namely that retailer demand has remained resilient and that our assets are among the most sought-after shopping centers in our markets.

Like leasing, our low-risk redevelopment program remains a strong driver for our 2024 growth. This quarter, we stabilized projects at Kingswood Crossing and Burnside Commons, both in Metro New York City, and both with regional anchors on long-term leases. We have a $159 million redevelopment pipeline that is expected to generate a 14% unlevered yield on cost.

I want to close by spending some time discussing the acquisition market and how it has evolved this year for Urban Edge and for others. There is no doubt that in our core markets and for retail assets overall, there's been a notable increase in activity and a notable decrease in cap rates. The volume of retail property sales nationwide is up from $6 billion in 2023 to $10 billion year-to-date in 2024. Debt markets have also come back in a big way with both CMBS originations and traditional lending, well ahead of last year's pace.

What is driving this, we believe, is the recognition by institutional capital on both the private and the public side that retail's combination of stability and growth is outperforming many other asset classes. Rising occupancy rates, increasing market rents, stronger retailer balance sheets and the lack of any new meaningful supply gives us very good confidence that this trend will only continue.

The increased demand for retail properties, of course, has a dual effect of making our existing assets more valuable and making the acquisition of targeted properties more challenging. We were fortunate to get to the party early, buying over $550 million in the past year before prices rose. A significant 80% of that $550 million was in off-market deals sourced through our principal-to-principal relationships and our local market expertise. We continue to use those avenues to find deals, and we are underwriting several assets that we believe have the right balance of stability through credit tenants with strong sales on long-term leases and growth through vacancy or below-market leases with near-term roll.

Our recent acquisition of The Village at Waugh Chapel in Gambrills, Maryland, a highly educated and affluent trade area situated between Washington, D.C., Baltimore and Annapolis is a perfect example. We love the small shop exposure and the low anchor and outparcel rents at this asset, and we expect it to be an accretive contributor to FFO growth for a long time to come.

In sum, while the acquisition market is getting more competitive, we think our advantages as a highly credible and well-capitalized buyer will allow us to find and announce more opportunities like this one soon.

I will now turn it over to our Chief Financial Officer, Mark Langer.

[Mark Langer, executive]

Thanks, Jeff. Good morning. As you just heard, we had another excellent quarter and have good momentum as we move into the home stretch of 2024. We reported FFO as adjusted of $0.35 per share in the third quarter. Same-property NOI growth, including redevelopment, was up 5.1% compared to the third quarter of 2023.

The increase in FFO was primarily due to accretive capital recycling, new rent commencements and contractual rent bumps. We exceeded our internal forecast, in part due to the benefit of lease termination income and the acceleration of noncash revenue related to below-market amortization, which added $0.02 per share in the quarter.

NOI growth continues to benefit from the conversion of tenant leases that were previously executed, that are now rent paying. Our 5.1% NOI growth this quarter was driven by a 5% increase in minimum rent year-over-year. As a reminder, we do not include lease termination income in NOI. While uncollectible rental revenue was almost twice as high as the unusually low level we recorded in the third quarter of last year, it was 25 basis points lower than we had expected when measured as a percentage of rental revenues.

On the financing front, we closed on a new 5-year $31 million mortgage secured by Greenbrook Commons at a fixed rate of 6% and a new 10-year $30 million mortgage secured by Briarcliff Commons at a fixed rate of 5.5%. Both mortgages were executed at a spread of 180 basis points. We continue to see debt capital widely available from all primary sources, including life companies, CMBS and select regional and national banks.

We are currently under contract to refinance our maturing loan at Brick Commons in the fourth quarter with a new 7-year $50 million mortgage at a fixed rate of 5.2%, locked at a spread of 155 basis points. That spread reflects the very high quality of Brick Commons with a grocer that is doing over $1,300 in sales per square foot. After the Brick mortgage financing is completed, we have no other debt maturities until December 2025, where we only have one $24 million mortgage that is maturing, which is easily refinanceable.

Given our recent acquisition activity, we issued about 4.4 million shares of common stock under our ATM, raising approximately $84 million of net proceeds during the quarter. We had $150 million drawn on our line of credit at the end of the second quarter, bearing interest at about 6.5% and fully repaid the balance in the third quarter using proceeds from the ATM along with those from the aforementioned mortgage financings.

We continue to make progress reducing our overall leverage levels with net debt-to-EBITDA of 5.8x using third quarter annualized income, excluding lease termination income. This level will fluctuate with new acquisitions and mortgage activity, but should remain in the low 6x range, which is below the 6.5x target we outlined at our April 2023 Investor Day.

Turning to our outlook for 2024. We increased our FFO as adjusted guidance by $0.03 per share, implying a fourth quarter FFO rate of $0.33 per share at the midpoint. This guidance increase is related to the $0.02 of benefit from lease termination and lease amortization income I previously described and $0.01 is due to favorable trends on the bad debt side and other expense improvements, including G&A.

Our updated guidance incorporates the acquisition and disposition activity we have announced today, but does not assume any other transactional activity in 2024. Same-property NOI growth, including redevelopment guidance has been increased to reflect our better-than-expected performance year-to-date, resulting in a new midpoint of 5.4%, up from the prior midpoint of 5.25%, implying 8.6% growth in the fourth quarter.

As Jeff mentioned, $6 million of annualized gross rents commenced in the third quarter from leases previously executed, which will help drive our NOI growth over the next several quarters. In terms of the SNO pipeline for 2025, we have disclosed in our supplement that we expect about $10 million of additional gross revenue to come online. We expect 1/3 of that will be realized in the first half of the year with 2/3 coming in the second half of the year.

In closing, we are very pleased to see the execution our team has achieved on the growth drivers we outlined at our Investor Day last year. Fundamentals in our business remain favorable, as there is limited space available, strong demand from our current core tenant base, a lack of new supply, strong mark-to-market rent spreads and favorable levels of attractively priced capital. We are seeing the benefits of our simplified portfolio while focusing on prudent capital allocation, both from accretive acquisitions and from the sale of high-value, low-growth assets.

The strength of our cash flow has been enhanced by the anchor repositioning efforts we have completed, and we expect further improvement as new tenants open and shop leasing follows. Our balance sheet is in excellent shape with limited maturities, abundant liquidity and growing free cash flow. We look forward to continuing our track record of generating strong earnings growth.

I will now turn the call over to the operator for questions.

[Operator]

[Operator Instructions] The first question comes from the line of Floris Van Dijkum from Compass Point.

[Floris Gerbrand van Dijkum, analyst]

Encouraging results. Maybe if you could -- particularly, I'm encouraged, and Jeff, maybe if you can touch on the shop occupancy and -- everybody in the sector appears to be setting new records in terms of occupancy levels. Where do you see that popping out? Or do you think -- I mean, is it -- some of your peers are getting 95% shop occupancy, is that feasible in your portfolio in your view?

[Jeffrey Mooallem, executive]

Floris, yes, it's certainly feasible. Let's talk a little bit about, we've gone now up about 500 basis points in this quarter with a goal of getting another 60 to 70 basis points by the end of the year to finish 2024 with 91% shop occupancy. We certainly would like to be in that 92%, 93% range next year.

But at this point, with where we are, we start really looking not just at vacant spaces and the ability to pop that occupancy up a little bit, but we start to look at underleased spaces and opportunities where we might have to, if not change out the occupancy, change out the tenant for a better quality and a better rent. So one of the things I'm talking to the leasing team about all the time is don't just lease the space that's vacant now, lease the space that we think might be coming up vacant one day or where we think we can get it back for a higher rent.

In some cases, we're even combining some shop spaces for really better tenants and larger anchor spaces, and that requires us to maybe get out of a couple of leases and combine them with a couple of vacancies. So you wouldn't see a lot of shop occupancy pickup, but we're enhancing the asset. I think 92% to 93% is realistic. 94% would be nice, but we're trying not to manage to the number. If we get to 93% with the quality we've been getting, I'll be very happy.

[Floris Gerbrand van Dijkum, analyst]

And maybe another question, and this may be is more in Mark's wheelhouse. You issued some equity during the quarter. As you look at the market, you talked about the fact that cap rates are probably heading lower in your markets. Are you seeing in the investment side greater assets on the market today, maybe portfolios on the market today? And how would they be partially funded?

It sounds like that you would consider partially funding some of these things with equity as well, obviously, as incremental asset sales, as you've been doing over the last couple of years. Maybe if you can touch on your funding sources and how you look at your equity today relative to asset sales.

[Mark Langer, executive]

Yes, Floris, I'll take the capital side and let Jeff comment on your question on what -- any other portfolios that we might be seeing. But we -- I think you hit it and answered it really, and that is we look at a blend. We have very good quality assets that you saw again today with the Home Depot. So asset sales, especially at the cap rates that we're commanding is definitely one of the primary targeted sources.

And the debt spreads, I've given you the price of debt, which is probably 5.5% to 6%. And so then when we think about equity, it would really be earmarked towards growth initiatives like acquisitions where we can look at what our implied cap rate is relative to what we're buying and the growth of those assets. So it's really a blend of all of that. But I'll let Jeff comment on what we might be seeing on the portfolio side.

[Jeffrey Olson, executive]

I mean we're definitely on the hunt for more acquisitions, Floris, and there are a number of assets that we're underwriting in the D.C. to Boston corridor. I think one of our main competitive advantages is that we are the local sharpshooter. And so we actually know which centers within the D.C. to Boston corridor we want to own. We also mostly know those owners and have principal-to-principal relationships with them.

Jeff had mentioned during his comments that 80% of the over $500 million that we've acquired have been off-market transactions, and our pipeline contains a blend of off-market deals and then some marketed deals. Generally, we'd rather go with the off-market deal. But because we've been one of the largest buyers in this area for a long time, but in particular, over the last year, deals beget more deals. So sellers want to come to us. They have great comfort that we're going to end up closing and that we're relatively easy to work with.

And then the last point on our competitive advantage in terms of being a local sharpshooter is we move very quickly. It's very easy for us just to jump in the car and see a potential acquisition and then actually come home and sleep in our bed that same night. So we're constantly looking at deals.

And our deal team, and there are 9 of us around this conference room right now, I think every one of us saw this acquisition early on and saw -- and department heads saw it early on to make sure that there weren't any surprises later through our due diligence. So I would love the fact that we're -- we have this local sharpshooter mentality. I do believe that allows us to source deals more effectively.

[Operator]

The next question comes from the line of Samir Khanal from Evercore ISI.

[Samir Khanal, analyst]

Jeff or Mark, can you provide a bit more color on the space you got back? I think you said from a national tenant. Just trying to -- I'm sure over time, you'll be able to re-tenant that space at a much higher rent. But just how should we think about maybe the drag it can create or maybe even into revenues, earnings over the next 12 to 18 months? I just want to make sure I get that right.

[Jeffrey Mooallem, executive]

Samir, it's Jeff Mooallem. Yes, I mean, we've got some confidentiality provisions in that termination agreement with that tenant. So I can't give you a whole lot of information about who it was. What we can tell you is they had not RCD-ed yet. So there was no existing revenue coming from that box at the time we did the termination. And it is a national tenant that had been looking to get out of several leases in several locations around the country. This was not a unique outlier situation.

When we first started talking to them about a possible termination, our leasing team felt very comfortable that we would have good demand on the space, and we reached out to a few people and had conviction that we could do something accretive there. And the conversations progressed, and we ended up agreeing to a termination. So we did receive a fee there that we were very happy with, and we expect to have that re-tenanted probably in the next couple of quarters and announce, but it was not an RCD tenant. They had not started paying rent or open for business yet. So it's a little bit easy to take off the list.

[Samir Khanal, analyst]

Okay. Got it. And I guess, Mark, on the same-store guide here, I mean, still -- it's late into the year now and the range is still pretty wide, that 4.75% to 6%. I know you took it up a little bit, but help us kind of understand kind of what's driving that, kind of achieve the low end or the high end of that range.

[Mark Langer, executive]

Yes, Samir, happy to. It really is a function kind of the size of our portfolio relative to what risk. The downside is really tied to the potential on any tenant fallout and elevated bad debt in light of the filings from Big Lots, Blink, buybuy and some of the lumber liquidators that you had seen. All those headlines is noise for us.

If all of them were to stop paying and go out, then you can hit the high end because those tenants alone are about $3 million of gross rent. And the high end is really the opposite that if we don't have that, we get a little bit lucky on some of the RCDs, and we don't have the bad debt that we've contemplated, you get to the high end. So those are really the big drivers. At this point, new leasing isn't really -- as you said, that's going to hit next year. So it's really more a function of what the tenant risk list hits.

[Samir Khanal, analyst]

Okay. Got it. And one last one for me on -- Mark, you reduced G&A guidance. Help us think through -- I mean, you've kind of reduced G&A in the past as well. And as we think about 2025, how much more is there you can do from a modeling perspective as we think about that?

[Mark Langer, executive]

Yes. We'll give formal guidance on that when we do our year-end reporting. But I can say I would not want to set the expectation. As you pointed out, over the last 2 years, we have really chipped away, examined, I mean, every element, every line item that we could. So I don't think that there's going to be declines. We'll have cost of living and inflationary increases on the one end for sure. So I would not set an expectation that this would continue to decline.

[Operator]

The next question is from the line of Ronald Kamdem from Morgan Stanley.

[Ronald Kamdem, analyst]

2 quick ones from me. Just on the acquisition and disposition front, just focusing on the disposition side. As you sort of look at the portfolio, how much more opportunity is there to sort of sell out of these lower cap rate assets in these 1031 fashions? Just are we through that pool? Is there more to come and so forth?

[Jeffrey Olson, executive]

Yes. Look, Ron, my guess is that in any given year, we're going to be selling $100 million to $200 million of assets just across the board. We're definitely focused now on these single-tenant properties. If you look at our supplement, you'll see that we own 21 Home Depot, Lowe's, Walmart and Target. Those tenants generate about $33 million a year in total rent. Not all of them are separately subdivided, but that's the pool that we're focused on to generate some of the lower cap rate sales. But I'm hoping that you'll see over the next 4 to 5 years, $100 million to $200 million of dispositions pretty consistently. And hopefully, we'll earn a decent spread on that as we redeploy that capital into higher quality shopping centers.

[Ronald Kamdem, analyst]

Got it. That's helpful. And then my second question was just, obviously, you reiterated the 2025 target at the high end. So kudos to the team to getting there. But how does -- what the assumptions -- what's the same-store NOI assumption that's baked into that, that was assumed into that? And how does that compare to the 5% you did this quarter?

[Mark Langer, executive]

Yes, Ron, the NOI growth, each of the assumptions that's embedded in that, we're going to break down and guide and share the assumptions just like we did this year. But you can kind of take our SNO pipeline, roll it in. Obviously, on a year-over-year basis, as you get through the year, there's less growth. But I think healthy numbers that we outlined in our investor deck of 5% type numbers are certainly achievable.

[Operator]

[Operator Instructions] The next question comes from the line of Paulina Rojas from Green Street.

[Paulina Rojas Schmidt, analyst]

You mentioned in your prepared remarks that the market has become more competitive, that you have seen cap rates compressed. Can you talk about the magnitude of the compression you have observed? What time period you have in mind when you say they have compressed and whether you have seen this across formats?

[Jeffrey Olson, executive]

The last part -- the format, yes, my guess, Paulina, is cap rates are down 50 to 75 basis points over the last 6 to 9 months. And in terms of format, I mean, we're definitely seeing more demand from some of the larger centers than we have in the past. But there is still a spread between buying a center that might have a grocery store and a couple of boxes than simply buying a neighborhood center that's only the grocery store. There's still a decent spread there. And those are the types of assets that we're focused on acquiring because we think we can get them at a decent spread relative to our cost of capital and also relative to some of the disposition activity that's taking place.

[Jeffrey Mooallem, executive]

And Paulina, this is Jeff. I would just add, a year ago or so for $100 million North assets, there was not a very extensive buyer pool. And I think to what our earlier comments were, some of the institutional capital has really aggregated around retail. It's not just that interest rates have caused cap rates to compress. It's also that there's more buyer demand for larger type assets because people are more comfortable now with the risk profile of retail. And certainly, the growth profile has gotten a lot better. So we're seeing the competition, not just from our REIT competitors and peers, but also from institutional capital that, in some cases, is new to the product type.

[Paulina Rojas Schmidt, analyst]

And then a follow-up on the -- your intention to potentially sell some single stores. You mentioned Home Depot. So it sounded like you would be willing to sell basically any of these stores. And I wonder if it is a consideration at all, the impact that it could have not controlling the entire center in some situations. So, yes, and even though...

[Jeffrey Olson, executive]

Paulina, let me correct you. I mean we would not sell one of these anchors in the middle of a shopping center. The centers that -- I mean, the one we just sold, it was a freestanding Home Depot. We do own some separately subdivided freestanding anchor tenants. Like, for example, we own a Lowe's across the street from Bergen Town Center that would be a prime example of another disposition candidate. So -- but no, we would not break up a shopping center. But would we sell a shopping center that has both a Home Depot and a Costco and maybe a couple of shops at a low cap rate? Absolutely.

[Paulina Rojas Schmidt, analyst]

Okay. Okay. So probably the ideal candidate is a Home Depot that doesn't have a lot of cross shopping with the rest of the center and that it's physically a little more isolated. Is that a good way to phrase it or not necessarily?

[Jeffrey Mooallem, executive]

Yes, Paulina, you should think of it as 2 separate categories. One is the single tenant asset like the one we just sold yesterday, where it's really just that one single big box credit tenant. And then we have several shopping centers, which effectively trade like a big box credit tenant would because it is 1 or 2 or in some cases 3 big box tenants on long-term leases with very good sales and low rents. So whether we were to sell those shopping centers or we were to sell the single-tenant assets, we think they both are sub-6 cap kind of stuff that would allow us to accretively trade into some of the shopping centers we're now targeting.

[Paulina Rojas Schmidt, analyst]

Okay. Perfect. Understood. And if I may, the last one. I know that shopping center construction has been very, very sparse, but we have seen landlords pursue some outparcel developments. So like the typical single-store breakthrough to capitalize on the great demand that we're seeing. So is this something that you can do more aggressively in your portfolio? And is it something that would interest you given the economics behind that?

[Jeffrey Mooallem, executive]

Absolutely. And we are doing it. I mean we've got several of those kinds of deals in the pipeline right now, some that are in development right now. We don't talk about them as much because the single tenant drive-through or bank or facility doesn't move the needle a whole lot on the numbers. But I can think of off the top of my head, at least 5 of those that we have in some of our better shopping centers, whether they're ground leases or build-to-suit for single tenants or in a couple of cases even small strips and that they are accretive.

I think when we talk about construction and development being hard to add meaningful supply in the future, we're talking about the 100,000 to 300000-square-foot shopping centers where you're building around an anchor tenant and the math just doesn't seem to work with what those in-line type tenants are paying. But to the extent we can get at outparcel opportunities, whether it's ground lease or build-to-suit, we're all over those, and we have a lot of them in the queue.

[Jeffrey Olson, executive]

That redevelopment pipeline is really generating that 14% return.

[Operator]

[Operator Instructions] As there are no further questions, I now hand the conference over to Jeff Olson for his closing comments. Jeff?

[Jeffrey Olson, executive]

Thank you. We look forward to seeing many of you at the upcoming NAREIT Conference in Las Vegas, and we'll speak to you soon. Please call if you have any questions.

[Operator]

The conference of Urban Edge Properties has now concluded. Thank you for your participation. You may now disconnect your lines.