- Record Occupancy: Achieved record occupancy levels.
- Average Rents: $23.82 per square foot versus $17.25 average in place.
- Additional ABR: Commenced $17 million of ABR in the quarter.
- Signed but Not Commenced ABR: $65 million.
- Same-Store Performance: 5.5% growth in the quarter.
- FFO Growth: Nearly 6% excluding prior year gain on debt extinguishment.
- FFO Guidance: Raised to a range of $2.11 to $2.14 per share.
- Reinvestment Projects: $37 million delivered at an incremental return of 9%.
- Pre-Lease Reinvestment Projects: $100 million commenced.
- Grocery-Anchored Percentage: Over 80% of ABR.
- Debt to EBITDA: Reduced to 5.6 times.
- Liquidity: Over $1.7 billion.
- NAREIT FFO: $0.54 per share in Q2.
- Same-Property NOI Growth: 5.5% in Q2.
- Base Rent Growth Contribution: 380 basis points to same-property NOI growth.
- Net Expense Reimbursements Contribution: 140 basis points to same-property NOI growth.
- Revenue Deemed Uncollectible Contribution: 20 basis points to same-property NOI growth.
- Signed but Not Commenced Pool: $65 million, including $55 million of net new rent.
- Debt Repayment: $300 million of 3.65% bonds repaid.
- Same-Property NOI Growth Guidance: Increased to a range of 4.25% to 5%.
- Revenue Deemed Uncollectible Guidance: Expected to end the year at 50 to 75 basis points of total revenues.
Release Date: July 30, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Brixmor Property Group Inc (BRX, Financial) achieved record occupancy and record new and renewal spreads in the quarter.
- The company reported a significant increase in average rents, from $17.25 per square foot to $23.82 per square foot.
- Brixmor Property Group Inc (BRX) raised its FFO guidance to a range of $2.11 to $2.14, reflecting strong financial performance.
- The company continues to grow its grocery-anchored percentage to over 80% of ABR, enhancing portfolio stability.
- Brixmor Property Group Inc (BRX) has over $1.7 billion of liquidity, ensuring financial flexibility and stability.
Negative Points
- The company anticipates higher levels of bad debt and lower prior year recoveries, which could impact future financial performance.
- There is a potential risk associated with the exposure to tenants like Conn's and Big Lots, which may lead to store closures.
- Brixmor Property Group Inc (BRX) is experiencing elevated leasing costs, which could impact net effective rents.
- The company faces challenges in the broader economic environment, which could affect retailer demand and leasing activity.
- There is uncertainty surrounding the impact of the Kroger and Albertsons merger on Brixmor Property Group Inc (BRX)'s grocery-anchored centers.
Q & A Highlights
Q: I just wanted to ask about acquisitions. Is there any change in view around acquisitions and the company's position toward capital recycling and/or capital raising?
A: (James Taylor, CEO) The big change has been the opportunities we're seeing. We're always opportunistic and direct our activities to those that can create huge value. We're pleased with what we're seeing in the transaction market, particularly in our core markets where we've successfully clustered investments.
Q: Do you anticipate being a net acquirer in the second half of the year? And can you talk about the going-in yields for acquisitions you're underwriting today?
A: (Brian Finnegan, COO & President) We expect to be more acquisitive in the second half. The yields we've bought year-to-date are in the high 6s, and forward opportunities are in the same range. We look at assets we sold and see a significant spread between those IRRs and the IRRs for the assets we're acquiring.
Q: Can you give us a sense of any incremental G&A that may come along with the recent promotions?
A: (James Taylor, CEO) On balance, we don't expect incremental G&A as we look for other efficiencies.
Q: On Conn's and Big Lots, what key retailers have shown interest in those spaces and where may rent spreads pencil out?
A: (Brian Finnegan, COO & President) For Conn's, it's a low exposure, and we've already leased one box to Sprouts at triple the rent. For Big Lots, rents are around $7-$8 per foot, and we've been signing new anchor leases around $16 per foot, showing significant upside.
Q: How do you evaluate the productivity of specific boxes? Do you get sales information or use tools like Placer.ai?
A: (Brian Finnegan, COO & President) We get sales for about 70% of the portfolio and use traffic data from tools like Placer.ai. We also have strong relationships with tenants, allowing us to get sales volumes even where not reported.
Q: Are you seeing any slowdown in retail sales from your retailer base across the portfolio?
A: (James Taylor, CEO) We're not seeing any slowdown. Retailers are committed to their store opening plans out to '25 and '26, and our real-time traffic data shows continued improvement.
Q: What's your near- to medium-term expectation for build occupancy? Can the pace of openings and rent commencements continue or accelerate?
A: (Brian Finnegan, COO & President) Build occupancy should continue to trend higher in the back half of the year, particularly with anchors. The pipeline remains strong, and we expect occupancy to rise as we go through the balance of the year.
Q: Can you talk about the impact of occupancy improvements on earnings, particularly the difference between small shop and anchor spaces?
A: (Brian Finnegan, COO & President) Small shop tenants pay higher rent and have a higher contribution to recoveries than anchors. There's a greater multiplier effect from small shops in our signed but not commenced rent.
Q: Are you evaluating any new ground-up development opportunities?
A: (James Taylor, CEO) We've been approached by developers and tenants, but to date, they haven't penciled out. Higher risk and lower returns make it less favorable compared to reinvestment opportunities in our existing assets.
Q: What is the biggest risk to the portfolio or the sector at this time?
A: (James Taylor, CEO) We're well-positioned even for a slowdown given our low rent basis and strong balance sheet. General economic trends and cycles are always a risk, but our conservative capital structure and portfolio transformation position us well for any economic climate.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
