This real estate investment trust takes a slow-and-steady approach to tackling its market to ensure its shareholders see positive returns. In the late 1980s, the board of Connecticut-based Urstadt Biddle Properties put core principles in place to guide the trust’s operations. The first was that the real estate investment trust (REIT) invest in one property type, which is the grocery-anchored shopping center. The second was that the REIT invests in one market, which is the New York suburban area. For the past 20-plus years, Urstadt Biddle has continued to define its portfolio using both of those principles.
The trust currently owns 50 properties, 38 of which are shopping centers and most of which are grocery-anchored, ranging from 26,000 to 371,000 square feet. In addition to owning, leasing, and managing the properties, the trust handles the renovations, repairs, and upkeep of all of its properties.
“We also handle construction,” said Willing Biddle, president and COO. “We sometimes act as general contractor, whether to expand, build anew, or renovate existing space for a tenant. For larger jobs, we’ll contract out to a third-party GC or construction manager to oversee the job.”
Urstadt Biddle also offers third-party property management and manages and leases four properties in its market for other shopping center owners. Biddle said the company handles leasing inhouse but also cooperates with real estate brokers who represent tenants. “We act as an owner’s representative,” he said.
The Urstadt Biddle of today isn’t the same as it was when it was founded in 1969, however. It initially began as a diversified net lease company and owned industrial, office, and retail locations across the country. According to its book, Urstadt Biddle Properties: The History of a REIT 1969–2007, in 1981, the company’s annual report boiled down its new strategy to three points: to invest in operating properties where shorter leases can be rewritten at higher rents as they expire, to renegotiate fixed income leases where possible, and to sell some net leased properties.
By the late 1980s, the board had changed the trust’s focus to become an operating real estate company specializing in shopping centers. “We’ve sold probably 20 properties since then and reinvested the money in the 50 properties we have now,” said Biddle. “We used to be all over the country and had different property types in our portfolio, but we’re now all retail just around the New York City area.”
The company’s staffing complement also changed. Today, 33 people at Urstadt Biddle are split into teams such as management, leasing, finance, legal, and executive. There is also a nine-member board of directors. Biddle said employee longevity is a key to the firm’s success; its entire senior staff has been in place for at least 10 years. Biddle himself has been with the company since 1992, and CEO Charlie Urstadt has been with the company since the 1970s.
“We have a lot of inside ownership, so we run the company the way a long-term investor would,” Biddle said, “Other REITs in which the management doesn’t own as much stock might manage the company more for the short term than the long term, but that’s not our approach.”
A few factors differentiate Urstadt Biddle from other REITs. One is the trust’s low leverage; the trust’s debt-to-total asset is about 23% versus the industry average, which is more than 50%. This falls in line with the company’s third principle: keep the debt level low because it offers more flexibility.
“In tough times, we can buy when other people don’t have the money,” said Biddle. “We can afford to renovate or reconfigure a shopping center when someone with a high mortgage may not be permitted to by a lender.”
In addition, most of the properties the company handles are older as they were built in the ’60s, ’70s, and ’80s—decades when there was land available to build shopping centers in the New York Metro area.
“We tend to buy existing properties for which we can renovate, improve the appearance, or correct the leasing issues,” said Biddle. “We’re not a company that builds shopping centers in perceived growth areas like the Southwest.” This all coincides with the trust’s fourth principle: manage and lease all properties yourself because no one will take care of your property the way you will.
Fifth on the trust’s list of principles is to avoid partnerships whenever possible. Biddle said Urstadt Biddle has few partnerships and instead focuses on its shareholder’ best interests. “We don’t want to deal with a joint venture partner looking for a preferred return and constant reporting. We are better off keeping the whole pie for our shareholders,” he said.
Although all five principles are equally important, when acquiring four new properties over 2010, the trust did enter into partnerships where it made sense. All told, Urstadt Biddle invested approximately $46 million total, starting with the acquisition of a 231,000-square-foot Walmart and Stop & Shop-anchored shopping center in New Milford, Conn. called New Milford Plaza.
The next was a 193,000-square-foot shopping center called Putnum Plaza in Carmel, NY. Anchored by a Hannaford, the plaza is the main competition to another shopping center Urstadt Biddle owns. “It’s always good to own your competition,” Biddle said. “We obtained a loan of $21 million at closing for that and bought the property with a partner.”
The partner, someone Biddle has known for years, had a contract to buy Putnum Plaza and approached the company. Both parties share ownership, with Urstadt Biddle owning two-thirds and the partner one-third. The third property, Midway Shopping Center in Scarsdale, NY, was also bought with a partnership; Urstadt Biddle only owns 10% equity interest in the property but is the managing and leasing agent of the shopping center.
Finally, the Village Commons in Katonah, NY is a 28,000-square-foot shopping center near Bedford with a Mrs. Greene’s Supermarket as its anchor. “We paid between $7 million and $8 million in cash for that property,” said Biddle.
Despite the high price of purchasing these four properties, Urstadt Biddle remained true to its third principle of keeping its debt low. In September, it sold $45 million worth of common stock and paid its credit line back to zero. Biddle said the trust takes a slow and steady approach to its growth, hoping to grow on average 10% a year.
The result of the trust’s approach is a total ROI to shareholders of 56% in the last three years. Over the past three years, competitors have lost 15.5% of their shareholders’ money. Biddle said Urstadt Biddle has a few sayings by which it runs its business: “size is vanity, profits are sanity” and “a little is lovely,” which make such oversights practically impossible.
“On the front page of our annual report, it says ‘Stock prices are only opinions, but dividends are facts,’” said Biddle. “Our shareholders rely on a constant, safe dividend payment. That’s what we’re in business to do.”