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Brixmor Property Group Reports First Quarter 2017 Results

- Achieves Highest First Quarter New and Renewal Leasing Volume -

- Continues to Drive Robust Cash Leasing Spreads -

Company Release - 5/1/2017 4:05 PM ET

NEW YORK, May 1, 2017 /PRNewswire/ -- Brixmor Property Group Inc. (NYSE: BRX) ("Brixmor" or the "Company") announced today its operating results for the three months ended March 31, 2017. For the three months ended March 31, 2017, net income attributable to common stockholders was $0.23 per diluted share compared with $0.20 per diluted share in the comparable 2016 period.

Key highlights for the three months ended March 31, 2017 include:

  • Grew FFO per diluted share 4.4% year-over-year, excluding non-cash GAAP adjustments and lease termination fees
  • Generated same property NOI growth of 3.2%
  • Executed 1.9 million square feet of new and renewal leases at comparable rent spreads of 16.4%
  • Increased leased occupancy by 10 basis points year-over-year to 92.5%
  • Increased small shop leased occupancy by 90 basis points year-over-year to 84.8%
  • Added $42.5 million of value enhancing reinvestment projects to the in process pipeline at an expected average incremental NOI yield of 10%
  • Completed four anchor space repositioning projects and three outparcel developments for a total investment of $14.5 million at an average incremental NOI yield of 14%
  • Completed $104.5 million of acquisitions and $35.5 million of dispositions
  • Issued $400.0 million of 3.90% Senior Notes due 2027 and utilized proceeds to prepay a portion of the Company's Tranche A Term Loan maturing July 31, 2018

"While the overall retail environment brought an increase in announced retail bankruptcies and store closings, our portfolio continued to benefit from healthy tenant demand, resulting in 1.9 million square feet of new and renewal leases executed in the first quarter at blended comparable rent spreads of 16.4%," commented James Taylor, Chief Executive Officer and President. "Importantly, our leasing and redevelopment activity continues to demonstrate the upside embedded in our portfolio given our locations, below market rent basis and accretive redevelopment potential, all of which represent distinct competitive advantages in today's environment."

FINANCIAL HIGHLIGHTS

Net Income

  • For the three months ended March 31, 2017 and 2016, net income attributable to common stockholders was $71.6 million, or $0.23 per diluted share, and $60.5 million, or $0.20 per diluted share, respectively.

NAREIT FFO

  • For the three months ended March 31, 2017 and 2016, NAREIT FFO was $161.6 million, or $0.53 per diluted share, and $161.3 million, or $0.53 per diluted share, respectively.

Same Property NOI Growth

  • Same property NOI for the three months ended March 31, 2017 increased 3.2% from the comparable 2016 period.
  • Same property base rent for the three months ended March 31, 2017 contributed 250 basis points to same property NOI growth.

Dividend

  • The Company's Board of Directors declared a quarterly cash dividend of $0.26 per common share (equivalent to $1.04 per annum) for the second quarter of 2017.
  • The dividend is payable on July 17, 2017 to stockholders of record on July 6, 2017, representing an ex-dividend date of July 3, 2017.

PORTFOLIO AND INVESTMENT ACTIVITY

Value Enhancing Reinvestment Opportunities

  • During the three months ended March 31, 2017, the Company completed four anchor space repositioning projects and added five new projects to its in process pipeline. At March 31, 2017, the anchor space repositioning in process pipeline was comprised of 17 projects with an aggregate net estimated cost of approximately $33.1 million at expected average incremental NOI yields of 13 to 15%.
  • During the three months ended March 31, 2017, the Company completed three outparcel developments and added three new projects to its in process pipeline. At March 31, 2017, the outparcel development in process pipeline was comprised of seven projects with an aggregate net estimated cost of approximately $9.6 million at an expected average incremental NOI yield of 13%. In addition, the new development in process pipeline was comprised of one project, with a net estimated cost of approximately $32.6 million at an expected NOI yield of 10%.
  • During the three months ended March 31, 2017, the Company added two new redevelopment projects to its in process pipeline. At March 31, 2017, the redevelopment in process pipeline was comprised of 11 projects with an aggregate net estimated cost of approximately $142.1 million at an expected average incremental NOI yield of 9%.

Acquisitions

  • As previously announced, during the three months ended March 31, 2017, the Company acquired Arborland Center, a 404,000 square foot grocery-anchored regional shopping destination located in Ann Arbor, Michigan, for $102.0 million. Arborland Center is located in a high barrier-to-entry trade area situated between the University of Michigan and Eastern Michigan University and is anchored by a range of best-in-class retailers including Kroger, Nordstrom Rack, Marshalls, Ulta, DSW and Starbucks.
  • In addition, during the three months ended March 31, 2017, the Company acquired two outparcels for a combined purchase price of $2.5 million.

Dispositions

  • During the three months ended March 31, 2017, the Company generated approximately $35.5 million of gross proceeds on the sale of Killingly Plaza located in Killingly, Connecticut, North Park shopping center located in Macon, Georgia and Perry Marketplace located in Perry, Georgia.

Mark Horgan, Executive Vice President, Chief Investment Officer, added, "The transaction market continues to reflect strong demand for grocery-anchored community and neighborhood shopping centers across both coastal and non-coastal markets.  Consistent with our capital recycling strategy of clustering ownership in successful retail nodes, we added critical mass in the Ann Arbor MSA with the acquisition of Arborland Center, growing our ownership in that market to four assets with over 1.0 million square feet of GLA. Additionally, we are increasing the rate of our disposition activity, exiting three single market assets during the first quarter and we expect to close on more in the coming quarters."

CAPITAL STRUCTURE

  • During the three months ended March 31, 2017, the Company's Operating Partnership, Brixmor Operating Partnership LP, issued $400.0 million aggregate principal amount of 3.90% Senior Notes due 2027 at 99.009% of par value. Proceeds from the offering were utilized to prepay $390.0 million of the Company's $1.0 billion Tranche A Term Loan maturing July 31, 2018.
  • As a result, the Company extended its weighted average maturity to 5.0 years, while reducing maturing debt in 2018 to $629.5 million from $1,019.5 million at December 31, 2016.

GUIDANCE

  • The Company is affirming its previously provided NAREIT FFO per diluted share expectations for 2017. Key underlying assumptions are updated as indicated below:

 

2017E  (dollars in millions, except per share amounts)


Updated Guidance


Prior Guidance

NAREIT FFO per diluted share (1)


$2.05 - $2.12


$2.05 - $2.12

Key Underlying Assumptions:





Same property NOI growth


2.0 - 3.0%


2.0 - 3.0%

Straight-line rental income, amortization of above- and below-market
rent and tenant inducements and straight-line ground rent expense


$40 - $44


$38 - $42

General and administrative expenses (1)


 $86 - $90


 $86 - $90

GAAP interest expense


$226 - $230


$224 - $230

Value enhancing capital expenditures


$120 - $150


$120 - $150

(1) Does not include any expectations of additional one-time items, including, but not limited to, litigation, investigative and other non-routine legal expenses.

 

  • The following table provides a reconciliation of the range of the Company's 2017 estimated net income attributable to common stockholders to NAREIT FFO:

 

(Unaudited, dollars in millions, except per share amounts)


2017E


2017E Per Diluted
Share

Net income attributable to common stockholders


$267 - $288


$0.87 - $0.94

Depreciation and amortization


362


1.19

Impairment of operating properties


6


0.02

Gain on disposition of operating properties


(9)


(0.03)

NAREIT FFO


$626 - $647


$2.05 - $2.12

 

CONNECT WITH BRIXMOR

CONFERENCE CALL AND SUPPLEMENTAL INFORMATION

The Company will host a teleconference on Tuesday, May 2, 2017 at 10:00 AM ET.  To participate, please dial 888.317.6003 (domestic) or 412.317.6061 (international) at least ten minutes prior to the scheduled start of the call (Passcode: 0206262).  The teleconference can also be accessed via a live webcast at www.brixmor.com in the Investors section. A replay of the teleconference will be available through midnight ET on May 16, 2017 by dialing 877.344.7529 (domestic) or 412.317.0088 (international) (Passcode: 10102384) or via the web through May 2, 2018 at www.brixmor.com in the Investors section.

The Company's Supplemental Disclosure will be posted at www.brixmor.com in the Investors section.  These materials are also available to all interested parties upon request to the Company at investorrelations@brixmor.com or 800.468.7526.

NON-GAAP DISCLOSURES

NAREIT FFO

NAREIT FFO is a supplemental non-GAAP performance measure utilized to evaluate the operating performance of real estate companies. The National Association of Real Estate Investment Trusts ("NAREIT") defines FFO as net income (loss) in accordance with GAAP excluding (i) gain (loss) on disposition of operating properties, and (ii) extraordinary items, plus (iii) depreciation and amortization of operating properties, (iv) impairment of operating properties and real estate equity investments, and (v) after adjustments for joint ventures calculated to reflect FFO on the same basis.

The Company presents NAREIT FFO as it considers it an important supplemental measure of its operating and financial performance.  The Company believes NAREIT FFO assists investors  in analyzing Brixmor's comparative operating and financial performance because, by excluding gains and losses related to dispositions of previously depreciated operating properties, real estate-related depreciation and amortization of continuing operations, impairment of operating properties and real estate equity investments, and after adjustments for joint ventures calculated to reflect FFO on the same basis, investors can compare the operating performance of a company's real estate between periods. 

NAREIT FFO should not be considered as an alternative to, or more meaningful than, net income (determined in accordance with GAAP) or other GAAP financial measures, as an indicator of financial performance and is not an alternative to, or more meaningful than, cash flow from operating activities (determined in accordance with GAAP) as a measure of liquidity.

Non-GAAP performance measures have limitations as they do not include all items of income and expense that affect operations and, accordingly, should always be considered as supplemental financial results to those presented in accordance with GAAP. Computation of NAREIT FFO may differ in certain respects from the methodology utilized by other REITs and, therefore, may not be comparable to similarly titled measures presented by such other REITs. Investors are cautioned that items excluded from NAREIT FFO are relevant to understanding and addressing financial performance.  A reconciliation of NAREIT FFO to Net income is presented in the attached table.

Same Property NOI

Same property NOI is a supplemental, non-GAAP performance measure utilized to evaluate the operating performance of real estate companies.  Same property NOI is calculated (using properties owned for the entirety of both periods excluding properties under development), as total property revenues (base rent, ancillary and other, expense reimbursements and percentage rents) less direct property operating expenses (operating costs, real estate taxes and provision for doubtful accounts). Same Property NOI includes the Company's unconsolidated joint venture at pro rata share.  Same property NOI excludes corporate level income (including management, transaction and other fees), lease termination fees, straight-line rental income, amortization of above- and below-market rent and tenant inducements, straight-line ground rent expense and income / expense associated with the captive insurance entity.

Same property NOI eliminates disparities in NOI due to the acquisition, disposition or stabilization of development properties during the period presented, and therefore, provides a more consistent metric for comparing operational performance. Management uses same property NOI to review operating results for comparative purposes with respect to previous periods or forecasts, and also to evaluate future prospects.

Same property NOI should not be considered an alternative to, or more meaningful than, net income (determined in accordance with GAAP) or other GAAP financial measures as an indicator of financial performance and is not an alternative to, or more meaningful than, cash flow from operating activities (determined in accordance with GAAP) as a measure of liquidity.

Non-GAAP performance measures have limitations as they do not include all items of income and expense that affect operations, and accordingly, should always be considered as supplemental financial results to those presented in accordance with GAAP.  Computation of same property NOI may differ in certain respects from the methodology utilized by other REITs and, therefore, may not be comparable to similarly titled measures presented by such other REITs.  Investors are cautioned that items excluded from same property NOI are relevant to understanding and addressing financial performance.  A reconciliation of same property NOI to Net income is presented in the attached table.

ABOUT BRIXMOR PROPERTY GROUP

Brixmor Property Group, a real estate investment trust (REIT), is a leading owner and operator of high-quality, open-air shopping centers. The Company's more than 500 retail centers comprise 86 million square feet in established trade areas across the nation and are supported by a diverse mix of highly productive non-discretionary and value-oriented retailers, as well as consumer-oriented service providers. Brixmor is committed to maximizing the value of its portfolio by prioritizing investments, cultivating relationships and capitalizing on embedded growth opportunities through driving rents, increasing occupancy and pursuing value-enhancing reinvestment opportunities. Headquartered in New York City, Brixmor is a partner to more than 5,500 best-in-class national, regional and local tenants and is the largest landlord to The TJX Companies and The Kroger Company. 

SAFE HARBOR LANGUAGE

This press release may contain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934.  These statements include, but are not limited to, statements related to the Company's expectations regarding the performance of its business, its financial results, its liquidity and capital resources and other non-historical statements.  You can identify these forward-looking statements by the use of words such as "outlook," "believes," "expects," "potential," "continues," "may," "will," "should," "seeks," "approximately," "projects," "predicts," "intends," "plans," "estimates," "anticipates" or the negative version of these words or other comparable words. Such forward-looking statements are subject to various risks and uncertainties, including those described under the section entitled "Risk Factors" in the Company's Annual Report on Form 10-K for the year ended December 31, 2016, as such factors may be updated from time to time in our periodic filings with the SEC, which are accessible on the SEC's website at www.sec.gov.  Accordingly, there are or will be important factors that could cause actual outcomes or results to differ materially from those indicated in these statements. These factors should not be construed as exhaustive and should be read in conjunction with the other cautionary statements that are included in this release and in the Company's filings with the SEC. The Company undertakes no obligation to publicly update or review any forward-looking statement, whether as a result of new information, future developments or otherwise, except as required by law.

 

CONSOLIDATED BALANCE SHEETS




Unaudited, dollars in thousands, except share information

















As of


As of






3/31/17


12/31/16


Assets






Real estate






     Land

$               2,015,450


$              2,006,655



     Buildings and tenant improvements

8,156,110


8,043,855



     Construction in process

89,913


121,817



     Lease intangibles

834,804


836,731




11,096,277


11,009,058



     Accumulated depreciation and amortization

(2,226,018)


(2,167,054)



Real estate, net

8,870,259


8,842,004



Investments in and advances to unconsolidated joint venture

7,963


7,921



Cash and cash equivalents

59,883


51,402



Restricted cash

44,499


51,467



Marketable securities

24,730


25,573



Receivables, net of allowance for doubtful accounts of $15,386 and $16,756

181,539


178,216



Deferred charges and prepaid expenses, net

127,532


122,787



Other assets 

42,693


40,315


Total assets

$              9,359,098


$               9,319,685










Liabilities






Debt obligations, net

$              5,924,834


$              5,838,889



Accounts payable, accrued expenses and other liabilities

512,647


553,636


Total liabilities

6,437,481


6,392,525










Equity






Common stock, $0.01 par value; authorized 3,000,000,000 shares;






     304,893,187 and 304,343,141 shares outstanding

3,049


3,043



Additional paid in capital

3,328,234


3,324,874



Accumulated other comprehensive income

24,139


21,519



Distributions in excess of net income

(434,453)


(426,552)


Total stockholders' equity

2,920,969


2,922,884



Non-controlling interests

648


4,276


Total equity

2,921,617


2,927,160


Total liabilities and equity

$              9,359,098


$               9,319,685









 

 

CONSOLIDATED STATEMENTS OF OPERATIONS


Unaudited, dollars in thousands, except per share amounts







Three Months Ended


3/31/17


3/31/16






Revenues





     Rental income

$                  249,621


$                   251,146


     Expense reimbursements

73,190


69,712


     Other revenues

2,995


2,246


Total revenues

325,806


323,104




Operating expenses





     Operating costs

37,425


35,051


     Real estate taxes

46,467


44,391


     Depreciation and amortization

93,931


100,479


     Provision for doubtful accounts

1,050


2,740


     Impairment of real estate assets

5,686


-


     General and administrative

20,957


20,724


Total operating expenses

205,516


203,385



Other income (expense)





     Dividends and interest

73


73


     Interest expense

(55,731)


(57,443)


     Gain on sale of real estate assets

8,805


-


     Loss on extinguishment of debt

(1,262)


-


     Other   

(707)


(907)


Total other expense

(48,822)


(58,277)







Income before equity in income of unconsolidated joint venture

71,468


61,442


Equity in income of unconsolidated joint venture

187


107


Net income 

71,655


61,549


Net (income) attributable to non-controlling interests

(76)


(1,072)


Net income attributable to common stockholders

$                     71,579


$                    60,477






Per common share:





     Net income attributable to common stockholders:





          Basic 

$                         0.23


$                         0.20


          Diluted 

$                         0.23


$                         0.20


     Weighted average shares:





          Basic 

304,569


299,180


          Diluted 

304,795


299,379


 

 

FUNDS FROM OPERATIONS (FFO)




Unaudited, dollars in thousands, except per share amounts

















Three Months Ended






3/31/17


3/31/16










Net income

$                     71,655


$                     61,549


     Gain on disposition of operating properties

(8,805)


-


     Depreciation and amortization- real estate related- continuing operations

93,002


99,685


     Depreciation and amortization- real estate related- unconsolidated joint venture

17


25


     Impairment of operating properties

5,686


-


NAREIT FFO

$                   161,555


$                   161,259










NAREIT FFO per share/OP Unit - diluted

$                         0.53


$                         0.53


Weighted average shares/OP Units outstanding - basic and diluted (1)

305,114


304,682










Items that impact FFO comparability





     Loss on extinguishment of debt

$                     (1,262)


$                                -


     Litigation and other non-routine legal expenses

(243)


-


     Audit committee review expenses

-


(3,652)


     Executive equity based compensation (2)

-


2,637


Total items that impact FFO comparability

$                     (1,505)


$                      (1,015)


Items that impact FFO comparability, net per share

$                       (0.00)


$                        (0.00)










Additional Disclosures





     Straight-line rental income, net (3)

$                       5,251


$                       2,855


     Amortization of above- and below-market rent and tenant inducements, net (4)

7,461


10,812


     Straight-line ground rent (expense) income (5)

(41)


4










Dividends declared per share/OP Unit

$                      0.260


$                      0.245


Shares/OP Unit dividends declared

$                    79,272


$                    74,632


Share/OP Unit dividend payout ratio (as % of NAREIT FFO) 

49.1%


46.3%

















(1) Basic and diluted shares/OP Units outstanding reflects an assumed conversion of vested OP Units to common stock of the Company and the vesting of certain equity awards.

(2) Represents non-cash equity based compensation forfeitures associated with executive departures for the three months ended March 31, 2016.   

(3) Includes unconsolidated joint venture Montecito Marketplace straight-line rental income (expense) of $1 and ($5) at pro rata share for the three months ended March 31, 2017

and March 31, 2016, respectively. 




(4) Includes unconsolidated joint venture Montecito Marketplace amortization of above- and below-market rent and tenant inducements of $7 and $8 at pro rata share for the three

months ended March 31, 2017 and March 31, 2016, respectively. 




(5) Straight-line ground rent (expense) income is included in Operating costs on the Consolidated Statements of Operations. 

















 

 

SAME PROPERTY NOI ANALYSIS 





Unaudited, dollars in thousands






















Three Months Ended









3/31/17


3/31/16


Change


Same Property NOI Analysis (1)








Number of properties


508


508


-


Percent billed


90.4%


90.3%


0.1%


Percent leased


92.5%


92.3%


0.2%













Revenues








     Base rent


$              231,011


$             225,587




     Ancillary and other


3,629


3,756




     Expense reimbursements


72,649


69,056




     Percentage rents


2,914


1,946









310,203


300,345


3.3%


 Operating expenses 








     Operating costs


(37,245)


(34,754)




     Real estate taxes


(46,028)


(44,010)




     Provision for doubtful accounts 


(1,029)


(2,692)









(84,302)


(81,456)


3.5%


Same property NOI 


$             225,901


$            218,889


3.2%













Same property NOI excluding redevelopments


$             213,783


$            207,303


3.1%













NOI margin





72.8%


72.9%




Expense recovery ratio





87.2%


87.7%















Percent contribution to same property NOI growth:













Change


Percent Contribution




     Base rent


$                 5,424


2.5%




     Ancillary and other


(127)


(0.1%)




     Net recoveries


(916)


(0.4%)




     Percentage rents


968


0.4%




     Provision for doubtful accounts 


1,663


0.8%











3.2%















Reconciliation of Net Income Attributable to Common Stockholders to Same Property NOI




Same property NOI (1)


$             225,901


$            218,889




Adjustments:








     Non-same property NOI


1,763


2,656




     Lease termination fees


666


5,597




     Straight-line rental income, net


5,250


2,860




     Amortization of above- and below-market rent and tenant inducements, net


7,454


10,804




     Fee Income


81


295




     Straight-line ground rent (expense) income


(41)


4




     Depreciation and amortization 


(93,931)


(100,479)




     Impairment of real estate assets


(5,686)


-




     General and administrative 


(20,957)


(20,724)




     Total other expense


(48,822)


(58,277)




     Pro rata share of same property NOI of unconsolidated joint venture


(210)


(183)




     Equity in income of unconsolidated joint venture 


187


107




     Net income attributable to non-controlling interests 


(76)


(1,072)




Net income attributable to common stockholders


$                71,579


$               60,477














(1) Includes unconsolidated joint venture, Montecito Marketplace, at pro rata share.




 

 

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SOURCE Brixmor Property Group Inc.