Market Overview

Urstadt Biddle Properties Inc. Reports Third Quarter Operating Results for Fiscal 2018

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Urstadt
Biddle Properties Inc
. (NYSE:UBA), 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)

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 Ended
July 31,

Change Attributable to:
Revenues 2018       2017

Increase
(decrease)

      %

Change

Property
Acquisitions/Sales

     

Properties Held
In 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

Property
Acquisitions/Sales

     

Properties Held
In 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)

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

(in thousands, except per share data)

 

Reconciliation of Net Income
Available to Common
and Class A

Common Stockholders To Funds
From
Operations:

Nine Months Ended
July 31,

Three Months Ended
July 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)
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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