Fitch Upgr Urstadt Biddle Properties Preferred Stock Rating.

Business Editors

NEW YORK--(BUSINESS WIRE)--Jan. 4, 2001

Fitch has upgraded its rating for $35 million cumulative perpetual preferred stock issued by Urstadt Biddle Properties, Inc. (NYSE: UBP) from `BB-' to `BB'. The Rating Outlook is Stable.

Based in Greenwich, CT, Urstadt Biddle is a $212 million (undepreciated book capital) equity real estate investment trust (REIT) focused on grocery-anchored community shopping centers in the Northeast. Urstadt Biddle's core portfolio includes 14 retail properties (1.7 million square feet) and three professional office buildings located primarily in the greater New York City region. The company also owns seven non-core properties (1.5 million square feet), primarily single-tenant industrial properties, that are currently being marketed for sale.

Credit strengths for Urstadt Biddle include the stable cash flow characteristics of both the core and non-core portfolios, low debt leverage and refinancing requirements, and high 30% insider common equity ownership. The Fitch rating also acknowledges the company's ability to self-fund new acquisitions with proceeds from asset sales, offsetting its limited access to public capital markets. Credit strengths are balanced by the portfolio's concentration by location and within a small number of assets, and a small management team that creates a high level of dependence on senior executives.

Urstadt Biddle's core portfolio is characterized by in-fill locations with high barriers to new development and necessity-type supermarket and value-oriented anchor tenants, which mitigate concerns regarding a weakening retail environment. Cash flow stability is enhanced by an extended lease expiration schedule, with only 31% of leasable area subject to expiration prior to 2005, and recent repositioning of several centers with new anchor tenants. While the core portfolio is currently 96% leased and occupied, Fitch notes that leasing risks associated with potential anchor tenant vacancy are significantly higher for the several single-anchor properties owned by the company.

Fitch anticipates that Urstadt Biddle's capital recycling program will be credit neutral, with the stable cash attributes of targeted Greenwich area community centers balanced by negatives that include reduced geographic diversification and fewer long term corporate leases. Value of the non-core asset portfolio, estimated by management at approximately $45 million, has been enhanced by recent 7 and 10 year tenant renewals, most notably with Daimler-Chrysler. While management is currently in negotiations for the sale of each of the non-core properties, dispositions could be delayed until the company identifies candidates for reinvestment through tax deferred exchange.

Fitch's rating also reflects favorably on Urstadt Biddle's strong balance sheet and ability to meet fixed charge obligations. Debt leverage remains conservative at 24% of undepreciated book capital, with preferred stock representing an additional 17% of the capital structure. Fixed charge coverage, after adjustment for recurring capital expenditures, was strong at 2.2 times (x) for the quarter ended Oct. 31, 2000, and is expected to increase over the next several quarters with incremental rental income from new anchor tenants. Unencumbered properties represent a high 56% of total net operating income, and cover preferred dividends by nearly 3x.

Urstadt Biddle's financial flexibility also benefits from moderate near-term capital requirements and the self-funding opportunities discussed above. With the exception of $8 million of mortgages that management plans to repay at maturity in 2001 and 2002, remaining debt maturities do not occur until 2005 and beyond. Outstandings under the company's $20 million secured bank credit facility (expiring 2005) currently total a manageable $12 million. Bank debt is expected to be partially reduced with proceeds from non-core asset sales, offsetting incremental borrowings required to retire maturing mortgages and fund capital expenditures associated with recent leasing activity. Although leverage could increase with new mortgage borrowings, Fitch anticipates that proceeds from the sale of non-core assets, each of which is unencumbered of mortgage debt, will be reinvested on a similar free-and-clear basis.